PREMKUMAR KHURANA, MUMBAI V. ASST CIT CEN CIR 20, MUMBAI

ITA 6995/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62516 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 29-05-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 08-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: GO VIND AGGARWAL
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 6995 TO 6998/MUM/2010 ASSESSMENT YEARS 2001-02, 2002-03, 2004-05 & 2005-0 6 SHRI PREMKUMAR KHURANA, 501, REHEJA CENTRE, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 400 021. PAN : AGGPK 6149Q VS. THE ASST. COMMISSIONER OF INCOME TAX CENT. CIRCLE 20, M.K. ROAD, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GOVIND AGGARWAL REVENUE BY : SHRI C.G.K. NAIR DATE OF HEARING 29-5-2012 DATE OF PRONOUNCEMENT 06-06-2012 O R D E R PER BENCH. ALL THESE APPEALS PREFERRED BY THE ASSESSEE ARE DI RECTED AGAINST THE SEPARATE ORDERS 19-7-2010 PASSED BY THE LD. CIT (A) -- 39, MUMBAI FOR THE ASSESSMENT YEARS 2001-02, 2002-03, 2004-05 & 20 05-06. SINCE THE FACTS ARE IDENTICAL AND THE ISSUE INVOLVED IS COMMO N, ALL THESE 4 APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A. O. WHILE GIVING EFFECT TO THE ORDER DTD. 11-9-2001 PASSED BY THE LD. SETTL EMENT COMMISSION U/S 245D(4) OF THE INCOME TAX ACT, 1961 (THE ACT) I NTER ALIA OBSERVED THAT NO EXPENDITURE U/S 14A OF THE ACT RELATED TO T HE INVESTMENT, INCOME ITA NO. 6995 TO 6998/MUM/2010 SHRI PREMKUMAR K HURANA 2 FROM WHICH SHALL NOT FORM PART OF THE TOTAL INCOME, HAS BEEN DISALLOWED IN THE COMPUTATION OF INCOME. ACCORDINGLY THE A.O. FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) [SB] MADE DI SALLOWANCE U/S 14-A READ WITH RULE 8D, AS PER WORKING GIVEN IN THE ASSESSMENT ORDER, AMOUNTING TO RS. 4,20,440/-, RS. 6,20,747/-, RS. 12 ,39,970/- & RS. 30,46,560/- FOR THE ASSESSMENT YEARS 2001-02, 2002 -03, 2004-05 & 2005-06 RESPECTIVELY. 3. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT T HE ESTIMATION MADE BY THE A.O. IS ON THE HIGHER SIDE AND RULE 8-D OF T HE INCOME TAX RULES CANNOT BE APPLIED, DIRECTED THE A.O. TO ALLOCATE TH E EXPENSES IN THE RATIO OF DIVIDEND INCOME EARNED FROM THESE SECURITIES HEL D AS STOCK IN TRADE AND PROFIT/LOSS EARNED FROM THE TRADING ACTIVITY AN D TO RE-WORK THE DISALLOWANCE ACCORDINGLY. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOWING COMMON GROUND S OF APPEAL:- 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE AO MAKING DISALLOWANCE U/S 14A RWR 8D ALTHOUGH THE INVESTMENT IN SHARES WERE OUT OF ASSESSEES OWN FUNDS. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND O N THE FACTS OF THE CASE IN CONFIRMING THE ORDER OF THE AO APPLYING RULE 8D WHICH IS AGAINST THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE VS. DCIT WHERE IT WAS HELD THAT RULE 8D CAN BE APPLIED ONLY FROM A.Y. 200 8-09 ONWARDS. ITA NO. 6995 TO 6998/MUM/2010 SHRI PREMKUMAR K HURANA 3 3. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND O N THE FACTS OF THE CASE IN DIRECTING THE AO TO DISALLOW E XPENSES RELATING TO EARNING OF DIVIDEND WHICH WAS INCIDENTA L TO THE TRADING ACTIVITY IN SHARES CARRIED OUT BY THE ASSES SEE. 5. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGREE D THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. V S. DCIT AND OTHERS [2010] 328 ITR 81 (BOM), THEREFORE, THE SAME MAY BE SET ASIDE TO THE FILE OF THE A.O. THE LEARNED COUNSEL FOR THE AS SESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT AT BAN GALORE IN THE CASE OF M/S. CCI LTD. VS. JCIT IN ITA NO.359 OF 2011 DATED 28.02.2010, WHEREIN IT HAS BEEN HELD THAT WHEN NO EXPENDITURE IS INCURR ED BY THE ASSESSEE IN EARNING THE DIVIDEND INCOME, NO NOTIONAL EXPENDITUR E COULD BE DEDUCTED FROM THE SAID INCOME. HE ALSO PLACED ON RECORD THE COPY OF THE SAID JUDGMENT. 6. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE QUESTION OF MAKING THE DISALLOWANCE U/S.14A IS NO MORE RESINTEG RA IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA) HOLDING TH AT THE PROVISION OF SECTION 14A ARE APPLICABLE AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE A.O. ON SOME REASONABLE BASIS AND NOT UNDER RUL E 8D. SINCE THE A.O. WHILE CALCULATING THE DISALLOWANCE U/S.14A HAS ALSO APPLIED RULE 8D ITA NO. 6995 TO 6998/MUM/2010 SHRI PREMKUMAR K HURANA 4 OF THE INCOME TAX RULES, 1962, WHICH IS APPLICABLE FROM THE A.Y. 2008- 09, THEREFORE, WE RESPECTFULLY FOLLOWING THE DECISI ON OF THE HON'BLE JURISDICTIONAL HIGH COURT (SUPRA) DIRECT THE A.O. T O MAKE DISALLOWANCE, IF ANY, IN THE LIGHT OF THE ABOVE DECISIONS, AFTER ALL OWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 7. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06-06-2012. SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 6 TH JUNE, 2012. RK ITA NO. 6995 TO 6998/MUM/2010 SHRI PREMKUMAR K HURANA 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 39,MUMBAI 4. COMMISSIONER OF INCOME TAX CENTRAL -II, MUMBA I 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI