Vimal Fiscal Pvt. Ltd., Mehsana V. The Dy.CIT.,Cent.Circle-1(2), Ahmedabad

ITA 682/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6853 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 03-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Assessee Lawyers: P M MEHTA
• Keywords: Earning of tax free income; Source of fund; Commercial expediency; Onus to prove
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BE NCH : AHMEDABAD (BEFORE HONBLE SHRI T. K. SHARMA, J.M .) I.T.A. NO. 682 TO 684/AHD./2009 ASSESSMENT YEARS : 1999-2000, 2000-2001 & 2002-2003 VIMAL FISCAL PVT. LTD., MEHSANA -VS- DCIT, CENTRAL CIRCLE-1(2), AHMEDABAD (PAN : AABCV 6748E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.M.MEHTA, A.R. RESPONDENT BY : SHRI VIMALENDU VERMA, D .R. O R D E R THESE THREE APPEALS FILED BY THE ASSESSEE ARE AGAI NST THE COMMON ORDER DATED 12.12.2008 PASSED BY THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS)-II, AHMEDABAD FOR THE ASSESSMENT YEARS 1999-2000, 2000-2001 & 200 2-2003 RESPECTIVELY. AS THESE APPEALS WERE HEARD ON THE SAME DAY AND ARGUED BY THE SAME R EPRESENTATIVE, ALL ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE RAISED IN THESE APPEALS IS REGARD ING DISALLOWANCE OF INTEREST EXPENDITURE MADE BY THE ASSESSING OFFICER BY APPLYI NG THE PROVISIONS OF SECTION 14A OF THE I.T. ACT, 1961 AS UNDER: ASSESSMENT YEAR DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT, 19 61 1999-2000 RS.3,62,715 2000-2001 RS.4,75,357 2002-2003 RS.4,50,000 3. BRIEFLY STATED THE FACTS ARE THAT IN THE ASSESSM ENT ORDER FOR THE ASSESSMENT YEAR 1999- 2000, THE ASSESSING OFFICER OBSERVED THAT THE ASSES SEE HAD BORROWED LOANS AND ADVANCES OF RS.20,17,935/- AND HUGE SUMS IN EARLIER YEARS AND C LAIMED INTEREST TO THE EXTENT OF RS.3,62,715/- ON SUCH LOANS AND ADVANCES AGAINST TH E BROKERAGE INCOME. THE ASSESSING 2 ITA NO. 682 TO 684-AHD-2009 OFFICER ALSO MENTIONED THAT AGAINST THE ABOVE BORRO WINGS OF RS.20,17,935/-, THE ASSESSEE HAS INVESTED AN AMOUNT OF RS.25 LAKHS IN SHARES AT VIMA L DAIRY LTD. AND EARNED DIVIDEND INCOME OF RS.2 LAKHS WHICH IS EXEMPT UNDER SECTION 10(13) OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED INTEREST P AID AMOUNTING TO RS.3,62,715/- UNDER SECTION 14A OF THE I.T. ACT, 1961. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS CONTENDED THAT IN THE ASSESSMENT YEAR 2002-03, THE ASSESSING OFFICER OBSERVED THAT INTEREST PAID IS RS.10,38,831/- AND OUT OF WHICH HE DISALLOW ED RS.4,50,000/- IN THE ASSESSMENT YEAR 2001-02, ON SIMILAR BASIS, HE DISALLOWED THE ENTIRE INTEREST PAID AMOUNTING TO RS.4,75,357/-. 4.1 THE OBSERVATIONS OF THE ASSESSING OFFICER, SUMM ARIZED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IN THE IMPUGNED ORDER, ARE AS UNDER: I) DIVIDEND RECEIVED FROM INVESTMENT IN SHAR ES OF VIMAL DAIRY LTD. IS EXEMPT UNDER SEC.10(33) OF THE ACT. HENCE, EXPENDITURE IN CURRED RELATED TO SUCH INVESTMENT IS LIABLE TO BE DISALLOWED. (II) SECTION 14A HAS BEEN RETROSPECTIVELY EFFECT ED BY THE FINANCE ACT, 2001, HENCE, SAME APPLIES TO CURRENT ASSESSMENT YEAR. (III) ASSESSEE ITSELF HAS ADMITTED THAT IN ASSES SMENT YEAR 1995-96 THAT WHEN SUCH INVESTMENT IN SHARES WERE MADE, SAME WERE OUT OF B ORROWED FUNDS OF RS. 1,47,97,924/-. HAD THE BORROWED FUND NOT REALISE D IN VIMAL DAIRY LTD. , THERE HAD BEEN NO REQUIREMENT OF THE FUNDS TO THE ASSESSSEE AND THE ASSESSEE COULD HAVE AVOIDED BORROWING OF INTEREST BEARING FUNDS AND IN TEREST BURDEN TO THAT EXTENT (IV) IN ASSESSMENT YEAR 2001-02, SIMILAR ADDITIO N WAS MADE BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY THE HONOURABLE COMMISSIONER OF INCOME-TAX (APPEALS) IN HIS ORDER DATED 1 ST AUGUST, 2005. ( V) EVEN OTHERWISE, THE BURDEN TO PROVE THE NEXUS B ETWEEN INVESTMENTS MADE IN SHARES OF VIMAL DAIRY LTD. AND ITS BUSINESS USE IS ON ASSESSEE. HENCE, INTEREST CANNOT BE ALLOWED UNDER SECTION 36(1)(III) OF THE ACT ON FOLLOWING JUDICIAL PRONOUNCEMENTS: (1) CIT VS MOTOR GENERAL FINANCE LIMITED 254 ITR 449 (2) CIT VS H R SUGAR FACTORY LIMITED 187 ITR 363 3 ITA NO. 682 TO 684-AHD-2009 4.2 BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS), THE ASSESSEE SUBMITTED AS UNDER: 'WITH REGARDS TO OBSERVATION OF THE ASSESSING OFFI CER THAT ASSESSEE ITSELF HAD ADMITTED THAT INVESTMENT IN SHARES OF VIMAL DAIRY LIMITED W AS MADE OUT OF BORROWED FUNDS TAKEN IN ASSESSMENT YEAR 1995-96, APPELLANT STATE S THAT IN ASSESSMENT YEAR 1995-96, IT HAD TAKEN A LOAN OF RS. 1,47,97, 924/- WHICH WA S UTILISED FOR MAKING ADVANCES TO VIMAL OIL & FOODS LIMITED FOR RS.1,22,95,900/- AND IN INVESTMENT OF VIMAL DAIRY LIMITED FOR RS.25,00,000/-. IT IS FURTHER STATED T HAT DURING THE ASSESSMENT YEAR 1996- 97, IT HAS RECEIVED INTEREST FREE FUND IN FORM OF SHARE CAPITAL OF RS 23,01,495/- AND UNSECURED LOAN FROM SHRI UMESHKUMAR S. PATEL FOR R S 1,00,000/ -. THE AMOUNT ADVANCED TO VIMAL OIL & FOODS LTD WAS RECEIVED BAC K TO ASSESSEE AND A AGGREGATE AMOUNT OF INTEREST FREE FUND REFERRED TO HEREIN AB OVE AND AMOUNT RECEIVED BACK FROM VIMAL OIL & FOODS LTD. WAS UTILISED FOR MAKING REP AYMENT OF UNSECURED LOAN OF RS.1,47,97,924/- TAKEN IN ASSESSMENT YEAR 1995-96 AND PARTIALLY UTILISED FOR MAKING INVESTMENT IN SHARES. THE FACTUAL POSITION OF SOURCE OF FUNDS AND APPLICATION OF FUNDS IN THE ASSESSMENT YEARS 1995- 96 AND 1996-97, AS SUBMITTED BEFORE THE ASSESSING OFFICER IS AS UNDER: PARTICULARS AMOUNT AS ON 31/3/1995 AMOUNT AS ON 31/3/1996 SOURCES OF FUND RS. RS. SHARE CAPITAL INCLUDING RESERVES & SURPLUS 15,505/- 23,59,290/- UNSECURED LOAN (INTEREST BEARING) 1,47,97,924/- - INTEREST FREE UNSECURED LOAN - 1,00,000/- TOTAL FUNDS 1,48,13,429/- 24,59,290/- APPLICATION OF FUND INVESTMENT 25,01,000/- 25,00,000/- FIXED ASSETS - 41,000/- LOANS GRANTED TO VIMAL OIL & FOODS LIMITED 1,22,95,900/- - OTHER NET CURRENT ASSETS 9,729/- (-) 87,660/- MISCELLANEOUS EXPENDITURE 6,800/- 5,959/- TOTAL 1,48,13,429/- 24,59,290/- IN VIEW OF WHAT IS STATED HEREIN ABOVE, APPELLANT STATES THAT THERE IS NO INTEREST BEARING UNSECURED LOAN AS ON 31/03/1996 AND THE EN TIRE AMOUNT OF SHARE CAPITAL OF RS.23,59,290/- AND INTEREST FREE UNSECURED LOAN OF RS.1,00,000/- STOOD APPLIED TOWARDS INVESTMENT IN SHARES OF VIMAL DAIRY LTD. H ENCE, IT CANNOT BE SAID THAT ASSESSEE HAS UTILIZED INTEREST BEARING FUNDS FOR M AKING INVESTMENT IN SHARES, YIELDING EXEMPT INCOME. IT IS A FACT THAT ENTIRE INVESTMENT OF VIMAL DAIRY LTD. ARE OUT OF 4 ITA NO. 682 TO 684-AHD-2009 INTEREST FREE FUND AND HENCE DISALLOWANCE UNDER SE C. 14A OF THE ACT MADE BY THE ASSESSING OFFICER MAY BE DELETED. THE APPELLANT STATES THAT ENTIRE INVESTMENT IN SHA RES OF GROUP COMPANY OF VIMAL DIARY LIMITED WAS OUT OF COMMERCIAL EXPEDIENCY HEN CE DISALLOWANCE OF INTEREST IS NOT JUSTIFIED. 3.2 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE D ISALLOWANCES MADE FOR ALL THE THREE ASSESSMENT YEARS UNDER APPEAL FOR THE DETAILED REAS ONS GIVEN IN PARA 4.3 OF THE IMPUGNED ORDER, WHICH READS AS UNDER: 4 3. I HAVE CONSIDERED THE FACTS AND THE SUBMISSI ONS. I DO NOT AGREE WITH THE APPELLANT'S VIEW. AS PER DECISION OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF HARISH KRISHNAKANT BHATT VS ITO 85 TTJ 872 IT IS HELD THA T 'INCOME FROM OTHER SOURCES-DEDUCTION U/S.57(III)- INTEREST ON BORROWINGS TO EARN DIVIDEND WHICH IS EXEMPT U/S.10(33)- DIVIDEND INC OME BEING EXEMPT U/S.10(33), INTEREST ON CAPITAL BORROWED FOR ACQUISITION OF RE LEVANT SHARES CANNOT BE ALLOWED DEDUCTION BY OPERATION OF SECTION 14A- SUCH AN INT ENTION HAS BEEN CLARIFIED IN THE PROVISIONS OF SECTION 14A AS WELL AS IN THE MEMORA NDUM EXPLAINING THE PROVISIONS, NOTES ON CLAUSES RELATING TO THE FINANCE BILL, 200 1 AND IN THE BOARD'S CIRCULAR NO.14 OF 2001 DT.22 ND NOV.,2001 AND CIRCULAR NO.8 OF 2002 DTD. 27 TH AUG.,2002- FACT THAT DIVIDEND INCOME WAS TAXABLE IN THE HANDS OF SHAREH OLDER AT THE TIME OF BORROWING OF MONEY AND THE INTEREST WAS PAID FOR EARNING TAXABL E INCOME AT THAT TIME IS OF NO AVAIL IN THE CHARGED STATE OF PROVISIONS. IN THIS CASE, THE INVESTMENT WAS MADE IN F.Y. 1994 -95 WREN THE APPELLANT HAD ONLY SHARE CAPITAL OF RS.15,505/- AND HAD TAKEN INTERES T BEARING LOAN OF RS 1,47,97,924/-. THUS, THE INVESTMENTS OF RS.25,00,000/- IN SHARES WERE MADE FROM INTEREST BEARING FUNDS AND NOT FROM OWN INTEREST FREE FUNDS. IN THE PRESENT ASSESSMENT YEAR INVOLVED, THE APPELLANT IS ALSO NOT HAVING INTEREST FREE FUN DS TO THIS EXTENT. HENCE, THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE INTEREST U/S.14A OF THE ACT, IS UPHELD. THE FACT THAT IN F.Y 1995-96 OR IN OTHER YEARS, THE APPELLA NT HAD INTEREST FREE FUNDS, IS OF NO RELEVANCE AS IN THE ORIGINAL YEAR, INVESTMENT WAS MADE FROM INTEREST BEARING FUNDS AND IN THE CURRENT YEAR ALSO, THE APPELLANT IS NOT HAVING SUFFICIENT INTEREST FREE FUNDS. THUS, THIS GROUND OF APPEAL IS REJECTED. 4. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 ITA NO. 682 TO 684-AHD-2009 5. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, SHRI P.M.MEHTA, A.R. APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE REC EIVED DIVIDEND INCOME OF RS. 2 LAKHS ONLY IN ONE YEAR I.E. ASSESSMENT YEAR 1999-2000 WHICH IS EXEMPT UNDER SECTION 10(33) OF THE I.T. ACT, 1961. FOR THE SUBSEQUENT ASSESSMENT YEARS I.E. 2000-2001 AND 2002-2003, THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME. 5.1 IT WAS ALSO CONTENDED THAT BOTH THE DEPARTMENTA L AUTHORITIES BELOW HAD MADE THE ASSUMPTION THAT FOR ALL THE THREE ASSESSMENT YEARS INVOLVED, THE ASSESSEE HAS RECEIVED DIVIDEND INCOME AND INVOKED THE PROVISIONS OF SECTI ON 14A. SINCE THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME FOR THE ASSESSMENT YEA RS 2000-01 AND 2002-03, THE QUESTION OF DISALLOWANCE OF INTEREST BY INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T. ACT DOES NOT ARISE. THEREFORE, ON THIS GROUND ALONE, THE DISALLO WANCE OF INTEREST AMOUNTING TO RS.4,75,357/- AND RS.4,50,000/- MADE BY THE ASSESSI NG OFFICER FOR THE ASSESSMENT YEARS 2000-01 AND 2002-03 BE DIRECTED TO BE DELETED. 5.2 WITH REGARD TO ASSESSMENT YEAR 1999-2000, THE C OUNSEL OF THE ASSESSEE CONTENDED THAT DIVIDEND INCOME RECEIVED IS ONLY RS. 2 LAKHS. AS AGAINST THIS, THE ASSESSEE COMPANY ITSELF DISALLOWED RS.1,80,013/-. THEREFORE, THERE I S NO QUESTION OF MAKING FURTHER DISALLOWANCE AS HELD BY THE ASSESSING OFFICER OF RS .3,62,715/-. WITH REGARD TO DIVIDEND OF RS.2 LAKHS RECEIVED ON THE INVESTMENT IN SHARES OF VIMAL DAIRY LTD. OF RS.25 LAKHS, IT WAS ALSO CONTENDED THAT THIS INVESTMENT WAS MADE FIRST TIME IN THE ASSESSMENT YEAR 1995-96 OUT OF BORROWED FUNDS BUT IN IMMEDIATELY SUCCEEDING ASS ESSMENT YEAR I.E. IN THE ASSESSMENT YEAR 1996-97, THE ASSESSEE HAD REPAID THE BORROWING WHIC H WAS MADE FOR MAKING THE INVESTMENT IN SHARES OF VIMAL DAIRY LTD. THIS FACTUAL POSITION IS EVIDENT FROM THE BALANCE-SHEET AS ON 31.03.1996, WHICH IS AVAILABLE AT PAGE NO.68 OF THE PAPER BOOK. ON THIS BASIS, IT WAS CONTENDED THAT IN THE ASSESSMENT YEAR 1999-2000, IN VESTMENT MADE IN SHARES OF VIMAL DAIRY LTD. IS ULTIMATELY OUT OF THE ASSESSEES OWN SHARE CAPITAL AND RESERVES AND SURPLUS. THEREFORE, THE QUESTION OF MAKING ANY DISALLOWANCE OF INTEREST IN THE ASSESSMENT YEAR UNDER APPEAL BY INVOKING THE PROVISIONS OF SECTION 14A DOES NOT ARI SE. 6 ITA NO. 682 TO 684-AHD-2009 5.3 WITHOUT PREJUDICE TO THE AFORESAID CONTENTION, IT WAS CONTENDED THAT IN VIEW OF JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. VS- DCIT REPORTED IN 328 ITR 81, IT WAS CONTENDED THAT SOME REASONABLE AMOUNT CAN BE DISALLOWED, AS THE RULE 8D PRESCRIBES FOR MAKING DISALLOWANCE IS A PPLICATION ONLY FROM THE ASSESSMENT YEAR 2007-08 AND THE SAID RULE IS NOT RETROSPECTIVE. SIN CE IN THE ASSESSMENT YEAR 1999-2000, THE ASSESSEE ITSELF HAS DISALLOWED RS.1,80,013/-, NO FU RTHER DISALLOWANCE IS REQUIRED TO BE MADE ON ACCOUNT OF SECTION 14A AND AS SUCH THE ENTIRE AD DITION MADE OF RS.3,62,715/- BE DELETED. 6. ON THE OTHER HAND, SHRI VIMALENDU VERMA, D.R., A PPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS). THE LD. D.R. FURTHER POINTED OUT THAT ITAT, DELHI SPECI AL BENCH IN THE CASE OF CHEMI INVEST LTD. VS- ITO REPORTED IN 124 TTJ 577 (DEL.)(SB) RELYING ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT-VS- RAJENDRA PRASAD MOODI REPORTED IN 115 ITR 519 (SC) HELD THAT DISALLOWANCE UNDER SECTION 14A CAN BE MADE EVEN IF THE ASSESSEE HAS NO EXEMPT INCOME. HE ACCORDINGLY SUBMITTED THAT THE PLEA OF THE ASSESSEE THAT IN THE ASSESSMENT YEARS 2000-01 AND 2002-03, THE ASSESSEE HAS NO DIVIDEND INCOME, ON TH AT GROUND, NO DISALLOWANCE UNDER SECTION 14A SHOULD BE MADE, CANNOT BE ACCEPTED. WITH REGARD TO JUSTIFICATION OF LD. COUNSEL OF THE ASSESSEE THAT SOME REASONABLE ESTIMATE IS TO BE MAD E, IN VIEW OF THE RATIO OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE MANUFACTURING CO. LTD.-VS- DCIT REPORTED IN 328 ITR 81, HE POINTED OUT THAT FOR THI S PURPOSE, THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER. 7. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1999-2000, THE ASSESSEE COMPANY ITSELF DISALLOWED R S.1,80,013/- UNDER SECTION 14A. THE WORKING OF THIS IS NOT FURNISHED BEFORE ME. THE PLE A OF THE ASSESSEE THAT IN SUBSEQUENT TWO ASSESSMENT YEARS I.E. IN THE ASSESSMENT YEARS 2000- 01 AND 2002-03, NO DISALLOWANCE SHOULD BE MADE, BECAUSE THERE IS NO EXEMPT INCOME, CANNOT BE ACCEPTED, IN VIEW OF THE RATIO OF THE JUDGMENT OF DELHI SPECIAL BENCH IN THE CASE OF CHEM I INVEST LTD. ( SUPRA ). 7.1 7 ITA NO. 682 TO 684-AHD-2009 7.1 IT IS PERTINENT TO NOTE THAT INVESTMENT IN SHAR ES OF VIMAL DAIRY LTD. WAS MADE IN THE ASSESSMENT YEAR 1995-96 OUT OF BORROWED FUNDS BUT T HE ASSESSEE HAS CLAIMED THAT IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR I.E. 1996-97 , THE ASSESSEE HAS REPAID THE BORROWINGS WHICH WERE MADE FOR MAKING INVESTMENT IN SHARES OF VIMAL DAIRY LTD. IT WAS POINTED OUT THAT THIS IS EVIDENT FROM THE BALANCE-SHEET AS ON 3 1.03.1996 WHICH IS COMPLIED AT PAGE NO.68. IN THE ASSESSMENT YEAR 1999-2000, INVESTMENT MADE I N SHARES OF VIMAL DAIRY LTD. IS ULTIMATELY OUT OF ASSESSEES OWN SHARE AND RESERVES AND SURPLUS THEREOF. THEREFORE, THE QUESTION OF MAKING ANY DISALLOWANCE OF INTEREST IN THE ASSESSMENT YEAR 1999-2000 BY INVOKING SECTION 14A DOES NOT ARISE. IT APPEARS THA T NO CLEAR-CUT FINDING IS RECORDING BY ANY OF THE DEPARTMENTAL AUTHORITIES BELOW ON THIS CONTE NTION OF THE ASSESSEE. FOR THIS PURPOSE, I AM OF THE OPINION THAT THE ASSESSEE SHOULD FURNISH THE FUND FLOW OF THE SUBSEQUENT ASSESSMENT YEARS. THE ASSESSING OFFICER MAY VERIFY THE SAME AND IN CASE THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT, IN THAT EVENT, NO DISALLOWANCE SHOULD BE MADE. 7.2 WITHOUT PREJUDICE TO THE ABOVE, IT WAS MENTIONE D THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE & MANUFACTURING C O. LTD. ( SUPRA ) HELD THAT THE PROVISIONS OF SUB-SECTION (2) AND (3) OF SECTION 14A AND RULE 8 ARE PROSPECTIVE AND NOT RETROSPECTIVE, IN NATURE AND THEREFORE, WOULD APPLY FROM THE ASSESSME NT YEAR 2007-08. FOR EARLIER YEARS, THE ASSESSING OFFICER CAN MAKE DISALLOWANCE ON REASONAB LE BASIS. 7.3 IN VIEW OF THE ABOVE, THE ORDER OF LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) FOR ALL THE THREE ASSESSMENT YEARS IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT HE WILL R E-CONSIDER THE DISALLOWANCE UNDER SECTION 14A, KEEPING IN VIEW THE AFORESAID DIRECTION AND RA TIO OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE & MANUFACTURING C O. LTD. ( SUPRA ). NEEDLESS TO ADD THAT THE ASSESSING OFFICER WILL ALLOW ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EALS OF THE ASSESSEE ARE TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20. 04.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 20/04/2011 8 ITA NO. 682 TO 684-AHD-2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, I TAT, AHMEDABAD TALUKDAR/SR.P.S.