LAVINO KAPUR COTTONS P. LTD, MUMBAI V. DCIT 3(2), MUMBAI

ITA 7918/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3772 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 16-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR DR
• Keywords: Earning of tax free income; Condonation of delay
• Section: 143(3); 14A

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT & SHRI D. KARUNA KARA RAO, AM ' ./I.T.A. NO.7918/M/2010 ( %& ' / ASSESSMENT YEAR : 2006-2007) M/S. LAVINO KAPUR COTTONS PVT. LTD., 121/122, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI 400 021. & / VS. DCIT - 3(2), AAYAKAR BHAVAN, MARINE LINES, MUMBAI. $( ! ' ./PAN : AAACL 0824 C ( () /APPELLANT) .. ( *+() / RESPONDENT) () , - ' / APPELLANT BY : SHRI SURINDER MEHRA *+() , - ' / RESPONDENT BY : SHRI MANOJ KUMAR, DR ' & , .! /DATE OF HEARING : 8.5.2013 /0' , .! /DATE OF PRONOUNCEMENT :15.5.2013 #1 #1 #1 #1 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 16.11.2010 IS AGAINST THE ORDER OF CIT(A)-7, MUMBAI DATED 13.5.2010 FOR THE ASSESSMEN T YEAR 2006-2007. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1.A) THAT THE ASSESSING OFFICER HAS ERRED IN MAKING DISALLOWANCE OF RS. 3,66,808/- UNDER RULE-8D AND THE CIT (A) HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. B) THAT IT HAS BEEN HELD BY THE BOMBAY HIGH COURT I N THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT REPORTED IN 328 ITR 81 (MUM) THAT RULE-8D WAS INSERTED W.E.F 24 TH MARCH, 2008 AND WOULD APPLY ONLY FROM AY 2008-2009. C) THAT THE DISALLOWANCE OF RS. 3,66,808/- UNDER RU LE-8D MAY BE CANCELLED. 3. DURING THE PROCEEDINGS BEFORE US AND AT THE OUTS ET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT ASSESSEE FILED A LETTER REQ UESTING FOR CONDONATION OF DELAY OF 15 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL VIDE THE L ETTER DATED 12.11.2010 GIVING THE REASON WHICH READS AS UNDER: 2 THE SAID JUDGMENT OF BOMBAY HIGH COURT IS PRINTED I N 328 ITR 81 WHICH WAS PUBLISHED ON 25.10.2010 AND WAS RECEIVED BY THE CHARTERED ACCOUNTANT OF TH E APPELLANT COMPANY FEW DAYS LATER. THEREAFTER, THERE WERE DIWALI HOLIDAYS AND SOON THEREAFTER THE APPEAL HAS BEEN FILED. THE ORDER OF THE CIT (A) WAS RECEIVED ON 28.8.2010 AND THE LAST DATE FOR FILING THE APPEAL W AS 27.10.2010. THUS, THERE HAS BEEN NOMINAL DELAY OF 15 DAYS OR SO ONLY WHICH MAY BE CONDONED. 4. LD COUNSEL PRAYED FOR CONDONATION OF THE DELAY I N VIEW OF THE REASONS MENTIONED ABOVE AND ALSO THE SMALLNESS OF DELAY. LD DR OPPOSED THE SAME DUTIFULLY. CONSIDERING THE ABOVE AS WELL AS THE SMALLNESS OF D ELAY OF 15 DAYS, WE ARE OF THE OPINION THAT THE CONDONATION OF DELAY SHOULD BE GRA NTED AND APPEAL SHOULD BE HEARD. HAVING DECIDED THE PRELIMINARY ISSUE, WE SHA LL TAKE UP THE GROUNDS ON MERITS. 5. RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ABSORBENT COTTON AND FINISHED PROD UCTS THERE FROM AND EXPORT OF THE SAME. ASSESSEE FILED THE RETURN OF INCOME DECLA RING THE INCOME AT RS. 1,26,54,532/-. THE SAME WAS SCRUTINIZED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 1,28,20,200/-. THE INC REASE IN THE ASSESSED INCOME WAS ON ACCOUNT OF THE ADDITION U/S 14A OF THE ACT AMOUNTING TO RS. 3,66,808/-. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS. 24,21,063/- AS WELL AS EXEMPT INCOME BY WAY OF LONG TERM CAPITAL GAINS OF RS. 22,60,611/-. ASSESSEE CLAIMS THAT NO E XPENDITURE WHATSOEVER WAS INCURRED FOR EARNING OF THE SAID EXEMPT INCOME. REJ ECTING THE SAME, AO PROPOSED TO INVOKE THE PROVISIONS OF SECTION 14A READ WITH RULE -8D OF THE ACT AND THE DISALLOWANCE WAS QUANTIFIED BY THE AO AT RS. 3,66,8 08/-. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE THE FIRST APPELLATE AU THORITY. DURING THE PROCEEDINGS BEFORE THE CIT (A), ASSESSEE FILED A LETTER DATED 11 TH MAY, 2010 STATING THAT THE ASSESSEE DESIRES TO WITHDRAW THE APPEAL FILED BY IT BEFORE THE CIT (A). CONSIDERING THE WRITTEN REQUEST OF THE ASSESSEE, TH E CIT (A) DISMISSED THE APPEAL AS WITHDRAWN . SUBSEQUENTLY, ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE DELAY OF 15 DAYS BY RAISING THE ABOVE MENT IONED GROUNDS. 6. DURING THE PROCEEDINGS BEFORE US, SHRI SURINDER MEHRA, LD COUNSEL FOR THE ASSESSEE BRING OUT ATTENTION TO THE GROUNDS, MENTIO NED THAT THE ASSESSEE WITHDREW THE APPEAL BEFORE THE CIT(A) IN VIEW OF THE EXISTIN G SB DECISION IN THE CASE OF DAGA 3 CAPITAL MANAGEMENT LTD (312 ITR (AT) 1 AND NOW DESIRES THE TRIBUNAL ADJUDICATE THE GROUNDS ON MERITS IN VIEW OF THE EXISTING RULING OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD VS. DCIT REPORTED IN 328 ITR 81 (BOM). IN THIS REGARD, LD COUNSEL MENTIONED THAT THE PROVISIONS OF RULE-8D OF INCOME TAX RULES, 1962 DO NOT APPLY TO THE ASSESSMEN T YEARS PRIOR TO AY 2008- 2009. IN CONNECTION WITH THE ASSESSEES LETTER DAT ED 11.5.2010 FILED BEFORE CIT (A) FOR WITHDRAWING THE APPEAL, LD COUNSEL MENTIONED TH AT THE ISSUES RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IS LEGAL IN NATURE, TH EREFORE, WITHOUT PREJUDICE TO THE SAID LETTER OF THE ASSESSEE, THE GROUNDS RAISED IN THIS APPEAL NEEDS TO BE ADJUDICATED ON THEIR MERITS. 7. ON THE OTHER HAND, LD DR ARGUED STATING THAT IT IS AN AFTER THOUGH THAT THE ASSESSEE NOW WANTS TO REVIVE THE APPEAL DISMISSED B Y THE CIT (A) AS WITHDRAWN. HE ALSO MENTIONED THAT THE SAID LETTER WHICH IS AVA ILABLE ON RECORD DOES NOT CONTAIN ANY REFERENCE TO THE CONDITION THAT THE SAME SHALL BE AGITATED BEFORE THE TRIBUNAL IN CASE THE CITED SPECIAL BENCH DECISION IS REVERSED. FURTHER, LD DR MENTIONED THAT THE CIT (A) DISMISSED THE APPEAL OF THE ASSESSEE AS WITHDRAWN ON BONA FIDE BELIEF. THE ASSESSEE CANNOT NOW RAISE THE SAME ISSUE, WHICH REACHED THE FINALITY BEFORE THE CIT (A). FURTHER, REFERRING TO THE HONBLE HIGH CO URT JUDGMENT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD (SUPRA), LD DR MENTIONED THAT SU CH JUDGMENT DOES NOT INDICATE THAT RULE-8D IS INOPERATIVE COMPLETELY FOR THE YEAR S PRIOR TO THE AMENDMENT OF RULE- 8D OF THE IT RULE, 1962. AS PER THE SAID HIGH COUR T JUDGMENT, IN THE EARLIER ASSESSMENT YEARS ALSO, THE AO IS UNDER OBLIGATION T O MAKE DISALLOWANCE ON REASONABLE BASIS AFTER REJECTING THE METHOD / BAS IS ADOPTED BY THE ASSESSEE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE PAPERS MADE AVAILABLE BE FORE US. TO START WITH, WE HAVE PERUSED THE CONTENTS OF THE ASSESSEES LETTER DATED 11.5.2010 AND THE SAME READS AS UNDER: THE ABOVE APPEAL STANDS FIXED FOR HEARING FOR 13.5. 2010. THE ONLY GROUND OF APPEAL RAISED IN THE SAID APPEAL IS REGARDING DISALLOWANCE MADE U/S 14A READ WITH RULE-8D. IN VIEW OF THE SPECIAL BENCH DECISION OF THE TRIBUN AL IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT LTD. 312 ITR (AT) 1, MUMBAI, THE A PPELLANT COMPANY CRAVES LEAVE TO WITHDRAW THE SAID APPEAL. 4 UNDISPUTEDLY, THE ABOVE LETTER INDICATES THE ASSESS EE DESIRE TO NOT TO PRESS THE APPEAL AND THEREFORE, THE CIT(A) DISMISSED THE APPEAL AS WITHDRAWN. 9. FURTHER, ON MERITS, IT IS AN UNDISPUTED FACT THA T THE ASSESSEE DEBITED VARIOUS EXPENSES TO THE PROFIT & LOSS ACCOUNT AMOUNTING TO RS. 48.14 CRS . IT IS THE CLAIM OF THE ASSESSEE THAT NONE OF THE SAID EXPENDITURE I S INCURRED FOR EARNING OF THE EXEMPT INCOME AMOUNTING TO RS. 46.82 LACS NAMELY (A) DIVIDEND INCOME AND (B) LONG TERM CAPITAL GAINS. ALTHOUGH, IT IS A FACT TH AT THE SAID HIGH COURT JUDGMENT, IN CASE OF GODREJ BOYCE MFG. CO. LTD (SUPRA) HELD THAT THE PROVISIONS OF RULE-8D APPLIES TO THE AY 2008-2009 ONWARDS ONLY, IT NEVER BARRED THE ASSESSING OFFICER TO MAKE DISALLOWANCES IN THE SAME SPIRIT OF RULE-8D FO R THE ASSESSMENT YEARS PRIOR TO THE SAID AY 2008-2009. HOWEVER, REGARDING AY 2006- 07 WHICH IS UNDER CONSIDERATION, AO IS EQUALLY UNDER OBLIGATION TO MA KE DISALLOWANCE OF RELATABLE EXPENDITURE BUT AFTER REJECTING THE BASIS ADOPTED B Y THE ASSESSEE BEFORE OTHER REASONABLE BASIS IS ADOPTED FOR QUANTIFYING THE R EQUISITE DISALLOWANCES U/S 14A, WHICH EXISTS AT THE RELEVANT POINT OF TIME. THIS I S THE CASE WHERE ASSESSEE HOLDS NO EXPENDITURE WHATSOEVER WAS INCURRED FOR EARNING OF THE ABOVE SAID EXEMPT INCOME OF RS. 46.82 LACS. THEREFORE, THE QUESTION OF REJEC TING THE ASSESSEES BASIS DOES NOT ARISE IN THIS CASE. CONSIDERING THE PECULIAR POSIT ION OF THIS CASE, THE DISALLOWANCE U/S 14A AMOUNTING TO RS. 3,66,808/- OUT OF RS 48.14 CR OF EXPENDITURE, IN OUR OPINION, IS REASONABLE. FURTHER, WE FIND THAT THE ASSESSEE HAS NOT RAISED A SPECIFIC GROUND BEFORE US OBJECTING TO THE ORDER OF THE CIT (A) ON THE REASON FOR DISMISSING OF THE ASSESSEES APPEAL ON THE GROUND OF WITHDRAWA L BY THE ASSESSEE. IN FACT, THE ISSUES RAISED IN THE GROUNDS OF APPEAL FACTUALLY DO NOT EMANATE FROM THE IMPUGNED ORDER. THEREFORE, WE ARE OF THE OPINION THAT THE AP PEAL WHICH IS DISMISSED BY THE CIT (A) AS WITHDRAWN IS PROPER AND THE SAME DOES NO T CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED . 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . 2 .3 %& 2. , !24 , 4. 56 5 ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. . #1 , /0' ! 7#&3 15.5.2013 0 , 8 SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBAI MUMBAI; 7#& DATED 15 /05/2013 . %& . ' ./ OKK , SR. PS #1 #1 #1 #1 , ,, , *%.9: *%.9: *%.9: *%.9: ;:'. ;:'. ;:'. ;:'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. :=8 *%.%& , , / DR, ITAT, MUMBAI 6. 8 > / GUARD FILE. '+:. *%. //TRUE COPY// #1& ' #1& ' #1& ' #1& ' / BY ORDER, ? ?? ? / '5 '5 '5 '5 4 4 4 4 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI