DCIT CC 38, MUMBAI V. JIGAR COMMODITIES & DERIVATIVES P.LTD, MUMBAI

ITA 7070/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8875 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 04-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. : 7070/MUM/2010 ASSESSMENT YEAR : 2007-08 DCIT, CC - 38, ROOM NO.32(1), GROUND FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. JIGAR COMMODITIES & DERIVATIVES PVT. LTD. 301-308 BHAGWATI HOUSE, PLOT A/19, VEERA DESAI ROAD, ANDHERI (WEST), MUMBAI-400 058 PAN NO: AAACJ 1728 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CH ANDRAJIT SINGH RESPONDENT BY : SHRI VIJAY MEHTA DATE OF HEARING : 04.09.2012 DATE OF PRONOUNCEMENT : 12.09.2012 ORDER PER RAJENDRA SINGH, A.M. : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 18.08.2010 OF CIT(A) FOR THE A.Y. 2007-08. THE ONL Y DISPUTE RAISED IS REGARDING THE DISALLOWANCE OF EXPENSES IN RELATION TO THE EXEMPT INCOME U/S.14A OF THE ACT. 2. THE FACTS IN BRIEF ARE THAT THE A.O. DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAIN FROM THE SALE OF SHARES AMOUNTING TO `. 4,92,65,340/- WHICH WAS EXEMPT FROM TAX. THE ASSESSEE HAD HOWEVER, NOT MADE ANY D ISALLOWANCE OF ITA NO : 7070/MUM/2010 M/S. JIGAR COMMODITIES & DERIVATIVES PVT. LTD. 2 EXPENSES IN RELATION TO SUCH EXEMPT INCOME. THE A. O., THEREFORE, PROCEEDED TO COMPUTE THE DISALLOWANCE AS PER RULE 8 D WHICH WAS CALCULATED AT `. 5,99,065/- WHICH INCLUDED THE DISALLOWANCE OF INTER EST AND OTHER EXPENSES. IN APPEAL, THE CIT(A) NOTED TH AT THE RULE 8D WAS APPLICABLE ONLY FROM THE A.Y. 2008-09 IN VIEW OF TH E JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT REPORTED IN 328 ITR 81. IN R ESPECT OF PRIOR YEARS, THE HON'BLE HIGH COURT HAS HELD THAT THE DISALLOWAN CE OF EXPENSES U/S.14A BOTH DIRECT AND INDIRECT HAS TO BE MADE AT A REASONABLE BASIS AFTER ALLOWING AN OPPORTUNITY OF HEARING TO THE ASS ESSEE. THE CIT(A), THEREFORE, DIRECTED THE A.O. TO COMPUTE THE DISALLO WANCE IN THE LIGHT OF THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY (SUPRA ). AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E MATTER CAREFULLY. THE DISPUTE IS REGARDING THE DISALLOWAN CE OF EXPENSES RELATING TO EXEMPT INCOME U/S.14A OF THE I.T. ACT. UNDER TH E PROVISIONS OF SECTION 14A(2) AND 14A(3), THE EXPENSES DISALLOWABL E IN RELATION TO THE EXEMPT INCOME ARE REQUIRED TO BE COMPUTED AS PER TH E METHODS PRESCRIBED BY THE GOVERNMENT. THE GOVERNMENT HAVE S INCE NOTIFIED RULE 8D PRESCRIBING THE METHOD FOR COMPUTATION OF DISALL OWANCE OF EXPENSES. RULE 8D IS, HOWEVER, APPLICABLE ONLY FROM THE A.Y. 2008-09 AS HELD BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GOD REJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA). IN RESPECT OF PRIOR YEARS, THE HON'BLE HIGH COURT HAS HELD THAT THE DISALLOWANCE O F EXPENSES BOTH DIRECT AND INDIRECT HAS TO BE MADE ON A REASONABLE BASIS AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THIS CA SE, THE CIT(A) HAS DIRECTED THE A.O. TO COMPUTE THE DISALLOWANCE IN TH E LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY (SUPRA). WE, T HEREFORE, SEE NO ITA NO : 7070/MUM/2010 M/S. JIGAR COMMODITIES & DERIVATIVES PVT. LTD. 3 INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS CONFO RMITY WITH THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT ON THE SUB JECT. THE ORDER OF THE CIT(A) IS, THEREFORE, UPHELD. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2012. SD/- - SD/- ( VIJAY PAL RAO ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 12.09.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI