ELEGANT MARBLES & GRANI INDUSTRIES LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 7612/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75684 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: DEVENDRA A MEHTA
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 7612/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ELEGANT MARBLES & GRANI INDUSTRIES LTD. C/O. M/S. RAVI & DEV, CHARTERED ACCOUNTANTS, 601, A WING, AURUS CHAMBERS, BEHIND MAHINDRA TOWERS, S. S. AMRUTWAR MARG, WORLI, MUMBAI-400 013 / VS. ASST. CIT, CIRCLE 6(2), MUMBAI # ./$ ./PAN/GIR NO. AAACE 1584 C ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #% ( ) / APPELLANT BY : SHRI DEVENDRA A. MEHTA &'#% ( ) / RESPONDENT BY : SHRI ASHOK SURI *+ ( , / DATE OF HEARING : 10.03.2014 - ./ ( , / DATE OF PRONOUNCEMENT : 10.03.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI (CIT(A) FOR SH ORT) DATED 10.10.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 11.11.2011. 2 ITA NO. 7612/MUM/2012 (A.Y. 2009-10) ELEGANT MARBLES & GRANI INDUSTRIES LTD. VS. ASST. C IT 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE VALIDITY IN LAW OF THE DISALLOWANCE U/S. 14A EFFECTED BY ASSESSING OFFICER (A.O.) IN THE SUM OF RS.19,04,503/- FOLLOWING RULE 8D(2) OF THE INCOME TAX RULES, 1962, SINCE CONFIRMED BY THE LD. CIT(A), I.E., AS AGAINST AT RS.3,26,745/- SUO MOTU BY THE ASSESSEE. 3. OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), ASSESSEES COUN SEL, THAT THE ASSESSEE, AS IN THE PAST, FURNISHED DETAILS OF THE WORKING OF THE DISALLOWANC E U/S. 14A AS MADE BY IT, AND WHICH WAS ONLY IN CONFORMITY WITH THE PAST; THE DISALLOWA NCE UNDER THE SAID SECTION OBTAINING IN ITS CASE FOR YEARS EVEN PRIOR TO ASSESSMENT YEAR 20 08-09, I.E., THE YEAR SINCE WHICH RULE 8D BECOMES OPERATIVE. HOWEVER, RATHER THAN REBUTTING T HE SAME, THE AO PROCEEDED WITH THE DISALLOWANCE BY ADOPTING THE PROPORTIONATE FORMULA AS PRESCRIBED UNDER THE SAID RULE. THE SAME IS NOT CONSISTENT WITH THE LAW AS EXPLAINED BY THE HON'BLE COURTS AS IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT [2012] 347 ITR 272(DEL). IN FACT, THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING YEAR, I.E., A.Y. 2008-09, IN THE ASSESSEES OWN CASE (IN ITA NO.6825/MUM/12 DATED 22/01/2014/PB PGS. 51 TO 56), NOTING THIS ANOMALY, RESTORED THE DISALLOWANCE TO THAT AS MADE BY THE ASSESSE ITSELF. THE SAME MAY BE FOLLOWED FOR THE CURRENT YEAR AS WELL. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. AS DISCUSSED IN DETAIL BY THE TRIBUNAL IN THE CASE OF AFL (P.) LTD. VS. ASST. CIT [2013] 28 ITR (TRIB) 263 (MUM), AND WITH REFERENCE TO THE AFORE-CITED DECISION AS WELL AS BY THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DY. CIT [2010] 328 ITR 81 (BOM), THE INITIAL AND THE PRIMAR Y ONUS TO SHOW THAT R. 8D, WHICH IS ONLY A RULE OF APPORTIONMENT, WHICH WILL APPLY IN D EFAULT, IS ON THE ASSESSEE. ONCE, HOWEVER, THE ASSESSEE EXHIBITS THE EXPENDITURE CLAI MED AS BEARING NO RELATION WITH THE INCOME NOT FORMING PART OF THE TOTAL INCOME, OR HAS ALLOCATED THE EXPENDITURE RELATED THEREWITH, AS, FOR EXAMPLE, THE COMMON, ADMINISTRAT IVE EXPENDITURE, THE SAME, OR THE BASIS THEREOF, AS THE CASE MAY BE, WOULD HAVE TO BE NECESSARILY VERIFIED BY THE ASSESSING 3 ITA NO. 7612/MUM/2012 (A.Y. 2009-10) ELEGANT MARBLES & GRANI INDUSTRIES LTD. VS. ASST. C IT OFFICER (A.O.) IN TERMS OF SECTIONS 14A(2) AND 14A( 3) OF THE ACT, AND HE CANNOT PROCEED TO MECHANICALLY APPLY R.8D. THE DECISIONS IN THE CA SE OF GODREJ & BOYCE MFG. CO. LTD . (SUPRA) AND MAXOPP INVESTMENT LTD . (SUPRA) ARE EXPLICITLY CLEAR IN THE MATTER. THE S AID ONUS, THOUGH, IS ONEROUS INASMUCH AS THE EXPENDITUR E STANDS INCURRED IN THE REGULAR COURSE OF BUSINESS, AND THE ACCOUNTS ARE GENERALLY NOT ALIGNED ACTIVITY-WISE. EVEN SO, THE RESOURCES MAY NOT BE DEDICATED SOLELY FOR INVESTMEN T ACTIVITY, WHICH INVOLVES DECISION- MAKING, LOCATED GENERALLY AT THE HIGHER ECHELONS OF THE MANAGEMENT, SO THAT EXPENSES ON VARIOUS COMMON ACTIVITIES, VIZ. SALARY, RENT, TELEP HONE, ELECTRICITY, CONVEYANCE, ET. AL. SHALL HAVE TO BE NECESSARILY APPORTIONED ON SOME DE FINED BASIS, AND THAT IS THE PREMISES OF R.8-D, SEEKING TO LEND UNIFORMITY TO, AND ELIMIN ATE ARBITRARINESS FROM, THE SAID PROCESS, I.E., ACROSS ALL ASSESSMENTS UNDER THE ACT. REFERE NCE IN THIS CONTEXT MAY ALSO BE MADE TO THE DECISION IN THE CASE OF ASST. CIT V . CITICORP . FINANCE (INDIA) LTD .[2007] 108 ITD 457. IT IS NOT CLEAR TO US ON A PERUSAL OF THE RECORD I F THE SAID INITIAL ONUS HAS BEEN, AS CLAIMED, DISCHARGED IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN-AS-MUCH AS THE SAME IS TO BE WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSE E (REFER S/. 14A(2)). WE ARE ACCORDINGLY UNABLE TO, DESPITE THE ASSESSEES RELIANCE ON THE O RDER BY THE TRIBUNAL IN ITS CASE FOR THE IMMEDIATELY PRECEDING YEAR, ISSUE ANY DEFINITE FIND ING ON FACTS, I.E., QUA THE MERITS OF THE DISALLOWANCE, AS WAS THE CASE FOR THAT YEAR; THE DE CISION BY THE TRIBUNAL RESTING ON FINDINGS OF FACT ISSUED BY IT. THE ORDERS BY BOTH T HE AUTHORITIES BELOW BEING SANS THE SAME, IT WOULD EVEN OTHERWISE BE PROPER TO REFRAIN FROM DOING SO. IT NEEDS TO BE APPRECIATED THAT THE SATISFACTION OR OTHERWISE OF T HE A.O. IS NOT SUBJECTIVE BUT IS TO BE WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSEE, SO THAT ANY FINDING BY HIM COULD ONLY BE UPON THEIR EXAMINATION, INCLUDING CONSIDERATION OF THE MATERIALS/EXPLANATIONS IN SUPPORT. BE THAT AS IT MAY, WE, IN THE FITNESS OF THINGS, ON LY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. FOR FRESH CONSIDERATION AS WELL AS TO EXTEND OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS C ASE BEFORE HIM. THERE IS NO ESTOPPEL AGAINST LAW, AND BOTH THE PARTIES ARE BOUND TO DISC HARGE THE ONUS CAST ON THEM U/S.14A OF THE ACT. IN OTHER WORDS, CONSIDERATIONS BOTH OF MER IT AS WELL AS PROCEDURE INFORM OUR SAID DECISION FOR THE CURRENT YEAR. THE A.O. SHALL ADJUD ICATE THE MATTER AFRESH PER A SPEAKING 4 ITA NO. 7612/MUM/2012 (A.Y. 2009-10) ELEGANT MARBLES & GRANI INDUSTRIES LTD. VS. ASST. C IT ORDER, RECORDING CLEARLY HIS FINDING/S QUA SS. 14A(2)/(3) OF THE ACT. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 0/ 1 *2 30 ( 4( 567 8 + 9 ( :; ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 10, 201 4 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER < MUMBAI; =* DATED : 10.03.2014 +.*../ JV , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. @+A B &*C2 , , C2/ , < / DR, ITAT, MUMBAI 6. B D3 E / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , < / ITAT, MUMBAI