DCIT CC 38, MUMBAI V. PURVAG COMMODIITTIES & DERIVATIVES P. LTD, MUMBAI

ITA 7068/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9261 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . !'# , $ %& BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BI LLAIYA, AM ./I.T.A. NO.7068/MUM/2010 ( ' ' ' ' / ASSESSMENT YEAR : 2007-08 THE DCIT, CENTRAL CIRCLE-38, AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. PURVAG COMMODITIES & DERIVATIVES PVT. LTD., 301-308 BHAGWATI HOUSE, PLOT A/19 VEERA DESAI ROAD, ANDHERI (W), MUMBAI-400 058 &( $ ./ )* ./PAN/GIR NO.AAACS 5626H ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY: SHRI RAJARSHI DWIVEDY ,-(+ / . / RESPONDENT BY SHRI VIJAY MEHTA / 01$ / DATE OF HEARING : 20.12.2012 23' / 01$ /DATE OF PRONOUNCEMENT :20.12.2012 %4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-41, MUMBAI DT.18.8.2010 PERTAINING TO A.Y. 2 007-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: ITA NO. 7068/MUM/2010 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT RULE 8 D FRAMED BY THE CBDT INSERTED WITH EFFECT FROM 24.3.2008 WAS NOT RETROSPECTIVE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO RECOMPUTED THE DISALLOWANCE U/S. 14A BY ADOPTING REASONABLE BASIS FOR EFFECTING APPORTIONMENT OF THE EXPENDITURE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS RECEIVED TAX FREE INCOME IN THE FORM OF DIVIDEN D AT RS. 1,96,814/- AND AT THE SAME TIME THE ASSESSEE HAS PAID INTEREST AMO UNTING TO RS. 22,03,513/-. THE AO WAS OF THE OPINION THAT THE AS SESSEE OUGHT TO HAVE ALLOCATED CERTAIN EXPENDITURE TOWARDS EARNING OF EX EMPT INCOME. INVOKING PROVISIONS OF SEC. 14A R.W.R 8D, THE AO DI SALLOWED A SUM OF RS. 9,72,532/-. 4. THE ASSESSEE CARRIED THIS MATTER BEFORE THE LD. CIT(A) AND SUBMITTED THAT RULE 8D IS PROSPECTIVE AND IS W.E.F . 1.4.2008 AND THEREFORE THE AO HAS GROSSLY ERRED IN INVOKING THE PROVISIONS OF SEC. 14A R.W.R 8D OF THE ACT. THE LD. CIT(A) WAS CONVINCED T HAT RULE 8D IS APPLICABLE FROM A.Y. 2008-09 AND DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE MADE U/S. 14A. 5. REVENUE IS AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) AND IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ASSESSMENT ORDER. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPO N THE DECISION OF LD. CIT(A). ITA NO. 7068/MUM/2010 3 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. IT IS NOW SETTLED BY THE DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURIN G CO. LTD., VS DCIT 328 ITR 81 THAT APPLICATION OF RULE 8D IS PROSPECTIVE AND IS W.E.F. A.Y. 2008-09 AND HENCE IT IS NOT APPLICABLE IN THE YEAR UNDER CONSIDERATION. HOWEVER, AT THE SAME TIME IT CANNOT BE RULED OUT THAT CERTAIN EXPENSES OUGHT TO HAVE BEEN ALLOCATED FOR E ARNING EXEMPT INCOME. THEREFORE, WE RESTORE THIS ISSUE BACK TO THE FILE O F THE AO. THE AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCES MADE U/S. 1 4A BY ADOPTING REASONABLE BASIS FOR APPORTIONING THE EXPENSES TO T HE EXEMPT INCOME AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. 5 06 )& / 7 8/ 9:; &<0 / )0 =' ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 20.12.2012. %4 / 3' $ 7 >%6 3 / ? (H.L. KARWA) (N.K. BILLAIYA) /PRESIDENT $ %& / ACCOUNTANT MEMBER MUMBAI; >% DATED . . ./ RJ , SR. PS ITA NO. 7068/MUM/2010 4 %4 / ,0 A '0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. C? ,0 , , / DR, ITAT, MUMBAI 6. ?D E / GUARD FILE. %4 / BY ORDER, - 0 ,0 //TRUE COPY// 9 / = ) DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI