PIEM HOTELS LTD, MUMBAI V. DCIT RG 3(2), MUMBAI

ITA 7151/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75519 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: DHARMESH SHAH SHRI ANAND MEHTA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI N.K. SAINI , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7151 /M/2012 ASSESSMENT YEAR: 200 9 - 10 PIEM HOTELS LIMITED, TAJ PRESIDENT 90, CUFFE PARADE, COLABA, MUMBA I - 400 005 PAN NO.AAACP 8376 M VS. ADCIT RANGE - 3(2), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DHARMESH SHAH : SHRI ANAND MEHTA REVENUE BY : SHRI M.L.PERUMAL DATE OF HEARING : 1 3 .02. 201 4 DATE OF PRONOUNCEMENT : 13.02.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) DATED 5.9.2012 R ELEVANT TO ASSESSMENT YEAR 2009 - 10. 2. IN ITS SOLE GROUN D OF APPEAL, THE ASSESSEE HAS AGITATED THE CONFIRMATION OF ENHANCEMENT /ADDITIONAL DISALLOWANCE MADE BY THE AO AGAINST THE D ISALLOWANCE ALREADY OFFERED BY THE ASSESSEE. 3 . THE BRIEF FACTS ARE THAT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD EAR NED CERTAIN EXEMPT INCOME. THE ASSESSEE OFFERED THE DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT AS PER ITS OWN CALCULATION/ COMPUTATION. HOWEVER THE AO DETERMINED THE AMOUNT OF EXPENDITURE AS PER THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES AND AS SUCH ENHANCED AMOUNT OF DISALLOWANCE. ITA NO. 7151 /M/2012 PIEM HOTELS LTD . 2 4 . BEFORE THE LD. CIT(A) , THE CONTENTION OF THE ASSESSEE HAS BEEN THAT THE DISALLOWANCE OFFERED BY IT WAS CORRECTLY MADE AS PER THE CALCULATION/ COMPUTATION SUBMITTED BY THE ASSESSEE AND THAT THE AO HAD INVOK ED THE PROVISION OF RULE 8D WITHOU T GIVING ANY REASON FOR REJECTING THE CALCULATIONS SUBMITTED BY THE ASSESSEE. 5. THE LD. CIT(A) , HOWEVER , OBSERVED THAT RULE 8D OF THE INCOME TAX RULES WAS APPLICABLE FOR THE ASSESSMENT YEAR IN QUESTION IN VIEW OF THE LA W LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. VS. DCIT [(2010) 234 CTR (BOM) 1 , WHEREIN IT HAS BEEN HELD THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM ASSESSMENT YEAR 2008 - 09 ONWARDS . HE , THEREFORE , CONFIRMED THE ORDE R OF THE AO. 6 . 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 NO T 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. 7 . IT MAY BE OBSERVED IN THE CASE IN HAN D, THAT THE ASSESSEE ITSELF HAD NOT ONLY OFFERED THE DISALLOWANCE BUT ALSO GAVE WORKING AND THE BASIS OF ITS CALCULATION. HOWEVER, THE AO TOTALLY IGNORED THE WORKING GIVEN BY THE ASSESSEE AND APPLIED RULE 8D IN A MECHANICAL MANNER. IT MAY BE FURTHER OBSERVED THAT UNDER SECTION 14A OF THE INCOME TAX ACT , RESORT CAN BE MADE TO RULE 8D (2) 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 E XPENDITURE. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO WITHOUT RECORDING ANY DISSATISFACTION WITH REGARD TO THE CALCULATIONS AND COMPUTATION ITA NO. 7151 /M/2012 PIEM HOTELS LTD . 3 MADE BY THE ASSESSEE, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SEC TION 14A OF THE INCOME TAX ACT. 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 COMPUTATION/CALCULATION MADE IN THIS REGARD BY THE AS SESSEE. 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 ISSUE UNDER CONSIDERATION. AFTER GOING THROUGH THE DETAILS PROVIDED BY THE ASSESSEE, IF THE AO WILL BE SATISFI ED WITH THE OBJECTION/CALCULATION 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, T HEN HE WILL BE AT LIBERTY TO RESORT TO THE P ROVISIONS 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 . I N THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 3 TH FEB.2014. SD/ - SD/ - ( N.K.SAINI ) (SANJAY GARG) ACCOUNTANT ME MBER JUDICIAL MEMBER MUMBAI, DATED: 1 3 .02.2014 PKM COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI.