JIK INDISTRIES LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 7088/MUM/2011

• Counselvise Citation: 708819914 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 09-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE S/SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SANJAY GARG, JUDICIAL MEMBER [ . , [ , ./ I.T.A. NO. 7088 /MUM/20 11 ( [ [ / ASSESSMENT YEA R : 2008 - 2009 ) M/S JIK INDUSTRIES LTD., 16, GUNDECHA CHAMBERS, NAGINDAS MASTER ROAD, FORT, MUMBAI - 400023 / VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(2), 545, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AABCJ2982J / APPELLANT BY : SHRI AJAY R SINGH / RESPONDENT BY : SHRI D K SI NHA / DATE OF HEARING : 9.4.2014 / DATE OF PRONOUNCEMENT : 9.4.2014 / O R D E R P ER SANJAY GARG , JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 21.7.2011 . 2 . THE SOLE GROUND RAISED IN THE APPEAL IS WITH REGARD TO THE CONFIRMATION OF DISALLOWANCE OF RS .29,84,949/ - U/S 14A OF THE INCOME TAX ACT. 3 . THE ASSE SSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT T HE ASSESSEE - COMPANY HAD MADE INVESTMENTS OF RS.19.43 CRORES FOR EARNING EXEMPT INCOME. HE THEREFORE MADE A DISALLOWANCE U/S.14A OF THE I NCOME TAX ACT, 1961 (THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES) WHICH WAS WORKED OUT AT RS.29 , 84 ,949/ - I.T.A. NO.7088/MUM/2011 2 4. IN APPEAL BEFORE THE CIT(A), THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR MAKING INVESTMENTS TO EARN THE DIVIDEND INCOME AND FURTHER THAT THE AO HAD NOT GIVEN ANY FINDING FOR REJECTING THE ASSESSEES CLAIM THAT NO DISALLOWANCE WAS REQUIRED U/S.14A. 5 . HOWEVER THE LD. CIT(A) HELD THAT THE PROVISIONS OF SECTION 14A HAD RIGHTLY BEEN INVOKED BY T HE AO. HE THEREFORE CONFIRMED THE DISALLOWANCE SO MADE BY THE AO. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 6 . BEFORE US , THE LD. REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT NEITHER THE ASSESSEE HAD EARNED ANY EXEMPT INCOME NOR ANY EXPENDITURE HAD BEEN INCURRED FOR EARNING OF THE EXEMPT INCOME. MOREOVER THE ASSESSEE HAD HIS OWN SUFFICIENT FUNDS FOR MAKING THE INVESTMENTS. HE HAS FURTHER CONTENDED THAT THE INVESTMENTS WERE INCIDENTAL TO THE BUSINESS OF THE A SSESSEE. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 , THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A(2) IS NOT ARBITRARY OR UNREASONABLE BUT CAN BE APPLIED ONLY IF THE ASSESSEE'S METHOD IS NOT SATISFACTORY. IT HAS BEEN FURTHER HELD THAT RULE 8D IS NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008 - 09. IT MAY BE FURTHER OBSERVED THAT UNDER SECTION 14A OF THE INCOME TAX A CT, RESORT CAN BE MADE TO RULE 8D OF THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, IF, THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO WITHOUT RECORDING ANY DISSATISFACTION WITH REGARD TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MAND ATE OF THE PROVISIONS OF SECTION 14A OF THE ACT. THE LD. CIT(A) ALSO IGNORED THE CONTENTIONS RAISED BY THE ASSESSEE WHILE CONFIRMING THE DISALLOWANCE. I.T.A. NO.7088/MUM/2011 3 8. SO KEEPING IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO WILL EXAMINE THE CONTENTIONS OF THE ASSESSEE MADE IN THIS REGARD. THE AO WILL BE AT LIBERTY TO CALL FOR ANY RECORD/EVIDENCES OR STATEMENT ETC. FROM THE ASSESSEE AS MAY BE REQUIRED BY HIM FOR DECIDING THE ISS UE UNDER CONSIDERATION. AFTER GOING THROUGH THE DETAILS PROVIDED BY THE ASSESSEE, IF THE AO WILL BE SATISFIED WITH THE CONTENTIONS OR WORKING, IF ANY, MADE BY THE ASSESSEE THEN HE WILL ASSESS THE INCOME ACCORDINGLY. HOWEVER, IF THE AO DOES NOT AGREE WITH THE COMPUTATION MADE BY THE ASSESSEE AND IN THAT EVENT, HE WILL HAVE TO RECORD HIS DISSATISFACTION WITH REASONING FOR THE SAME BY WAY OF A SPEAKING ORDER, THEN HE WILL BE AT LIBERTY TO RESORT TO THE PROVISIONS OF RULE 8D. NEEDLESS TO SAY, THE ASSESSEE WILL CO - OPERATE AND PROMPTLY SUPPLY THE NECESSARY DETAILS ETC. TO THE AO FOR DECIDING THE ISSUE UNDER CONSIDERATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH APRIL, 201 4 9TH APRIL, 2014 SD SD ( D. KARUNAKARA RAO/ . ) ( SANJAY GARG/ [ ) JUDI CIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; DATED : 9 /04/ 201 4 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI