GUJARAT GEMS P. LTD, MUMBAI V. ASST CIT 5(1), MUMBAI

ITA 6761/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8654 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 27-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Assessee Lawyers: VINAY SHETHY
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 6761/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S. GUJARAT GEMS PRIVATE LIMITED, 11-A, EMBASSY APARTMENTS, 46, NEPEANSEA ROAD, MUMBAI -400 036 PAN: AABCG 4831 B VS ASST. COMMISSIONER OF INCOME-TAX - 5(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINAY SHETHY RESPONDENT BY : SHRI AMAR DEEP DATE OF HEARING: 27-09-2012 DATE OF PRONOUNCEMENT: 10-10-2012 O R D E R PER VIVEK VARMA, JM: THE APPEAL ARISES FROM THE ORDER OF THE CIT (A) 9, MUMBAI, DATED 02.08.2010, WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN R AISED BY THE ASSESSEE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HONBLE CIT (A) ERRED IN CONFIRMING THE DISALLOWANC E MADE BY THE ASSESSING OFFICER OF A SUM OF RS. 3,31,472/- U/S 14 A BY HOLDING THAT THE RULE 8D IS APPLICABLE IN THE APPELLANTS CASE. THE APPELLANT PRAYS THAT THE DISALLOWANCE U/S 14A MAY KINDLY BE DELETED . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND WITHOUT PREJUDICE TO THE GROUND NO. 1 ABOVE, THE HO NBLE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER IN MAKING ADDITION OF RS. 3,31,472 (DISALLOWANCE U/S 14A) TO THE INCOME ASSESSED AS PER THE PROVISIONS OF SECTION 115JB. THE APPELLA NT PRAYS THAT THE ACTION OF THE AO IN ADDING THE AMOUNT DISALLOWED U/ S 14A TO THE BOOK PROFITS COMPUTED UNDER PROVISIONS OF THE ACT IS BAD IN LAW AND ANY SUCH ADDITION MADE TO THE BOOK PROFITS SHOULD BE DELETED . 2. AT THE TIME OF HEARING, THE AR POINTED OUT THAT AGAINS T THE EXEMPT DIVIDEND INCOME OF RS. 15,463, THE REVENUE AUTHORITIE S HAVE M/S. GUJARAT GEMS PRIVATE LIMITED ITA NO. 6761/MUM/2010 2 DISALLOWED RS. 3,31,472, AS ARRIVED AT BY APPLICATION OF RULE 8D . THE AR ALSO POINTED OUT THAT SINCE THE RELEVANT ASSESSMENT YEAR IS 2007- 08, IT IS BEYOND THE SCOPE OF APPLICATION OF RULE 8D AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOY CEE MFG. CO. LTD., REPORTED IN 328 ITR 81 (BOMBAY). 3. THE AR, HOWEVER CONCEDED THAT CERTAIN EXPENSE NEED TO BE DISALLOWED WHICH SHOULD BE REASONABLE. HE, THEREFORE, ACCEPTE D THAT IN THE PARTICULAR INSTANCE, WHERE THE EXEMPTION CLAIMED IS OF IN COME AMOUNTING TO RS. 15,463, AT THE MOST, REASONABLE ALLOCATION OF EXPENSES CAN BE TAKEN TO BE RS. 15,463, WHICH IS EQUAL T O THE EXEMPT INCOME. 4. THE DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. AFTER HEARING THE AR, THE CONCESSION OF THE AR CAN B E TAKEN TO BE ACCEPTABLE IN THIS PARTICULAR CASE ONLY , WHERE THE EXEMPT INCOME IS ONLY RS. 15,463. 6. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRE CT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A AT RS. 15,463. 7. THE GROUND IS THUS PARTLY ALLOWED. 8. ON THE SECOND GROUND, WE FIND THAT SECTION 115JB(F) IS VE RY PARTICULAR WITH REGARD TO THE SCHEME OF ALLOCATION OF CHAP TERS IN THE INCOME TAX ACT, WHEN IT SAYS THAT CHAPTER III IS OUTSID E THE SCOPE OF PROVISIONS PERTAINING TO MAT, BUT DOES NOT OUST THE OTHE R CHAPTERS, WHICH INCLUDES CHAPTER IV, TO WHICH SECTION 14A PERTAINS T O. THEREFORE, IN THE LIGHT OF THESE OBSERVATIONS, WE HAVE TO HOLD THAT MAT PROVISIONS DO APPLY ON SECTION 14A, THEREFORE, EXPENSE HA S TO BE ALLOCATED. BUT SINCE, AS PER GROUND NO. 1, WE HAVE ALREADY RESTRICTED M/S. GUJARAT GEMS PRIVATE LIMITED ITA NO. 6761/MUM/2010 3 THE DISALLOWANCE TO THE AMOUNT EQUAL TO EXEMPT INCOME AT RS. 15,463, THIS GROUND BECOMES ACADEMIC AND HENCE, IT IS REJECTED A S INFRUCTUOUS. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 10/10/2012. SD/- (P.M. JAGTAP) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 10/10/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-9, MUMBAI. 4) THE CIT -5, MUMBAI, 5) THE D.R. G BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN