DCIT CC 35, MUMBAI V. MAHARASHTRA STEEL ROLLING MILLS P. LTD, MUMBAI

ITA 7302/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3951 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: PROMOD KUMAR PARIDA
• Keywords: Opportunity of being heard; Earning of tax free income; Retrospective amendment
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , & ./I.T.A. NO.7302/MUM/2010 ( / ASSESSMENT YEAR:2007-08) DY. COMMISSIONER OF INCOME TAX CC-35, ROOM NO.108A, 1 ST FLOOR, AYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S MAHARASHTRA STEEL ROLLING MILLS PVT. LTD., 190, LAL BAHADUR SHASTRI MARG, OPPOSITE ASIAN PAINTS, BHANDUP (W), MUMBAI-400078 ./ ./PAN/GIR NO. : AABCM6109Q ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI O.P.SINGH /RESPONDENT BY : SHR I PROMOD KUMAR PARIDA ' / DATE OF HEARING : 25.7.2013 ' /DATE OF PRONOUNCEMENT : 25.07.2013 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST ORDER DATED 20.8.2010 OF LD CIT(A)-41, MUMBAI ON THE FOL LOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE AO TO RECOMPUTE THE DISALLOWANCE MADE U/S 14A RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF M/S GODREJ & BOYCE V/S DCIT WITHOUT CONSIDERING THE FACT, THAT THE DEP ARTMENT HAS NOT ACCEPTED THE DECISION OF THE BOMBAY HIGH COURT. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS) ON THE ABOVE GROUND BE SET ASIDE AND THE MATTER MAY BE REFERRED TO THE AO FOR THE FRESH ADJUDICATION. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OF ADD A NEW GROUND WHICH MAY BE NECESS ARY. 2. ASSESSEE IS A COMPANY FILED ITS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS.2,19,80,206/-. ASSESSEE IS ENGAGED I N THE MANUFACTURING OF HIGH TENSILE I.T.A. NO.7302/MUM/2010 2 AND MILD STEEL ANGLES. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTIONS 143(2) AND 142(1) DATED 16.9.2008 AND 22.7.2009 RE SPECTIVELY ALONG WITH QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE EARNED DIVIDEND INCOME OF RS.42,537/-. HOWEVER, T HE ASSESSEE CLAIMED THAT NO EXPENSES WERE CLAIMED BY IT WHILE EARNING DIVIDEND INCOME. THE AO BY INVOKING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 19 61 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 DISALLOWED EXPENSES @ 0.5% ON THE A VERAGE INVESTMENT OF RS.10,00,70,000/- WHICH COMES TO RS.22,02,004/- AN D ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESS EE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE LD. CIT(A), ASSESSEE MADE SAME SUBMISSI ONS AS MADE BEFORE THE AO AND RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS DCIT (2010) 328 ITR 81 (BOM). 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES AND PERUSAL OF THE RECORD OBSERVED THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.42,537/- WHICH ACCORDING TO ASSESSEE IS AN EXEMPT INCOME. THE ASS ESSEE HAS ALSO NOT DEBITED ANY EXPENDITURE TO THE PROFIT AND LOSS ACCOUNT RELATING TO THE EARNING OF THIS DIVIDEND INCOME. THE LD. CIT(A) OBSERVED THAT THE AO HAS M ADE DISALLOWANCE OF RS.22,02,004/- AS PER THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES AND RELIED ON THE DECISION OF M/S DAGA CAPIT AL MANAGEMENT SERVICES (26 SOT 603). THE LD. CIT(A) AFTER CONSIDERING THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE (SUPRA), WHEREIN IT HAS BEEN HELD THAT RULE 8D IS APPLICABLE FROM AY 2008-09 AND NOT WITH RETROSPECTIVE EFFECT, HAS RES TORED THE ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION AS PER OBSERVATION MADE BY THE HONBLE HIGH COURT IN THE CASE OF GODREJ & BOYCE(SUPRA) AFTER GIVING FAIR AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE PARTIES. HENCE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD.DR REITERATED THE FACTS OF THE CASE AS SUBMIT TED BEFORE LD., CIT(A) AND SUPPORTED THE ORDER OF AO. 7. LD. AR REITERATED THE FACTS AS SUBMITTED BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT LD.CIT(A) HAS RESTORED THE ISSUE T O AO TO DECIDE AFRESH AS PER DECISION HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE (SUPRA). I.T.A. NO.7302/MUM/2010 3 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS A FACT THAT RULE 8D OF THE INCOME TAX RULES, 1962 IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND WHEREAS, THE AO MADE DISALLOWANCE UNDER SECTIO N 14A OF THE ACT R.W.RULE 8D OF THE RULES. THEREFORE, THERE IS NO INFIRMITY IN TH E ORDER OF LD. CIT(A) TO RESTORE THE MATTER TO THE AO TO RECOMPUTE THE DISALLOWANCE TO BE MADE U/S 14A ON THE BASIS OF MATERIAL AS MAY BE FURNISHED ON ACCOUNT OF EXEMPT D IVIDEND INCOME SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION . HENCE, WE UPHOLD THE ORDER OF LD. CIT(A) AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2013 . ' ) * 25TH, JULY 2013 SD SD ( /SANJAY ARORA) ( . . / /B.R.MITTAL) / ACCOUNTANT MEMBER ' / JUDICIAL MEMBER MUMBAI; * DATED 25/ 07/2013 . . ./ PARIDA , SR. PS ) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , ' 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , / ITAT, MUMBAI