DCIT 8(2), MUMBAI V. MONSANTO INDIA LTD, MUMBAI

ITA 6670/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84646 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 04-12-2014
• Assessment Year: misc
• Appeal Filed On: 02-11-2012
• Court: TRIBUNAL
• Department Lawyers: VIVEKANAND PREMPURNA SR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO. 6670/M/2012 ( AY: 2005 - 2006 ) DCIT - 8(2), R.NO.216 - A, AAYAKAR BHAVAN, MUMBAI 400 020. / VS. M/S. MONSANTO INDIA LTD., AHURA CENTRE, 5 TH FLOOR, 96, MAHAKALI CAVES ROAD, ANDHERI(E), MUMBAI - 400093. ./ PAN : AAACM 2875 L ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIVEKANAND PREMPURNA, SR. AR / RESPONDENT BY : SHRI KIRIT KAMDAR / DATE OF HEARING : 04.12.2014 / DATE OF PRONOUNCEMENT : 19 .12.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 2.11.2012 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 14.8.2012 FOR THE ASSESSMENT YEAR 2005 - 2006. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 14A TO 2% OF DIVIDEND INCOME WITHOUT ASSIGNING ANY COGENT REASONS THEREFOR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 14A TO 2% OF DIVIDEND INCOME WITHOUT APPRECIATING THAT IN THE CASE OF GODREJ & BOYCE MFG. CO. 328 ITR 81, THEIR LORDSHIPS HAVE HELD THAT RULE 8D IS REASONABLE IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 14A TO 2% OF DIVIDEND INCOME WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS PREFERRED AN SLP APROPOS THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO 328 ITR 81. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE 2 DISALLOWANCE U/S 14A OF THE ACT. IN THIS REGARD, LD COUNSEL BRIEFED THE FACTS THAT THE ASSESSING OFFICER VIDE HIS ORDER DATED 15.12.2011 , IN LIEU OF GIVING EFFECT TO THE ORDER OF THE ITAT VIDE ITS ORDER DATED 28.1.2011 IN ITA NO.1075/M/2010, WORKED OUT THE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND DISALLOWED AN AMOUNT OF RS. 1,09,62,000/ - . MATTER TRAVELLED TO THE CIT (A). 4. DURING THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) RESTRICTED THE DISALLOWANCE TO 2% OF THE DIVIDEND INC OME PLUS DIRECT EXPENSES, IF ANY. PARA 4.1 OF THE CIT (A)S ORDER IS RELEVANT IN THIS REGARD. AGGRIEVED WITH THE SAID ORDER OF THE CIT (A), REVENUE IS IN APPEAL BEFORE US BY RAISING THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, LD COU NSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A). 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IT IS A SETTLED PROPOSITION IN LAW THAT THE RELEVANT ASSESSMENT YEAR 2005 - 06 IS OUTSIDE THE SCOPE OF PROVISIONS OF NEWLY INSERTED RULE 8D AS THEY APPLY PROSPECTIVELY FROM THE AY 2008 - 2009 ONWARDS. IT IS SO HELD BY THE HONBLE BOMBAY HI GH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, REPORTED IN (2010) 328 ITR 81(BOM) . THE HONBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 , HAS HELD THAT PERCE NTAGE OF THE EXEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLOWANCE FOR THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008 - 09. THE RELEVANT PORTION OF THE SAID JUDGMENT OF THE BOMBAY HIGH COURT (SUPRA) READS AS UNDER: '4. SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNAL IN ITS IMPUGNED ORDER DATED 17.9.2010 WHILE APPLYING THE DECISION OF THIS COURT IN THE MATTER OF GODREJ (SUPRA) HAS DISALLOWED THE EXPENDITURE ONLY TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE RESPONDENT - ASSE SSEE ON THE BASIS ITS ORDER DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2002 - 2003 AND ORDER DATED 10.9.2009 FOR THE ASSESSMENT YEARS 2003 - 2004 AND 2004 - 2005 WHEREIN DISALLOWANCE WAS RESTRICTED TO 2% OF THE EXEMPT INCOME. FURTHER; THE TRIBUNAL HAS REMANDED THE MATTER TO THE AO TO VERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL. ' 3 8 . CONSIDERING THE BINDING NATURE OF THE JUDGMENT IN THE CASE OF GODREJ AGROVET (SUPRA) AND ALSO THE OVERALL FACTUAL MATRIX OF THE PRESENT CASE, WE RESTRICT THE DISALLOWANCE TO 3% OF THE TOTAL DIVIDEND INCOME PLUS DIRECT EXPENSES, IF ANY . ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 1 9 T H DECEMBER, 2014. S D / - S D / - ( AMIT SHUKLA ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 9 /12/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI