LAMBODAR SUGARS PVT. LTD., MUMBAI V. DCIT 8(3), MUMBAI

ITA 794/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6609 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 10-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, VKBZ VKBZ VKBZ VKBZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. , ! ! ! ! , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & VIVEK VAR MA,JUDICIAL MEMBER /. ITA NO.794/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2007-08 M/S LAMBODAR SUGARS PVT. LTD. 2 ND FLOOR, BUILDING NO.2, SOLITARE CORPORATE PARK, 167, GURU HARGOVIND MARG, ANDHERI GHATKOPAR LINK ROAD, CHAKALA, MUMBAI-400093 VS DCIT 8(3), MUMBAI-400020 PAN: AAACL8650D ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : NONE + * / REVENUE BY : SHRI D.K.SINHA ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 10-04-2014 -.# + ), / DATE OF PRONOUNCEMENT : 10-04-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ' ' ' ' : CHALLENGING THE ORDER DT.30.09.2010 OF THE CIT(A)-1 7,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1) IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN ASSESSING TOTAL LOSS OF RS. 1,85,43,113/- AS AGA INST RETURNED LOS OF RS. 1,94,80,980/- AND THEREBY MAKING ADDITION U/S. 14A R.W. RULE 8D AMOUN TING TO RS. 9,37,867/-. 2) IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION U/S. 14A R.W. RULE 8D AMOUNTING TO RS. 9,37,867/- WITHOUT RECORDING SATISFACTION U/S. 14A. 3) IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN CONFIRMING THE ADDITION U/S. 14A R.W. RULE 8D AM OUNTING TO RS. 9,37,867/- EVEN THOUGH RULE 8D WAS INTRODUCED ON 24.03.2008 AND IS NOT RETROSPE CTIVE FOR AY. 2007-08. 4) IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN CONFIRMING THE ADDITION U/S. 14A R.W. RULE 8D AM OUNTING TO RS. 9,37,867/- BUT HOLDING THAT THE FORMULA PRESCRIBED UNDER RULE 8D IS REASONABLE EVEN FOR AY. 2007-08 BY DISREGARDING INVESTMENT IN SUBSIDIARIES MADE FOR THE PURPOSE OF BUSINESS. 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF TRADIN G IN SUGAR,FILED ITS RETURN OF INCOME ON 30.10.2007, DECLARING TOTAL LOSS AT RS. (-) 1.94 CR ORES.INITIALLY THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON CASE WAS SELECTED FOR SCRUTINY AND ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ON 10.11.2009, U/S. 143(3) OF THE ACT DE TERMINING THE INCOME OF THE ASSESSEE AT RS. (-) 1,85,43,13/-. 3. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED DIVIDEND INCOME OF RS. 1 LAC AS EXEMPT INCOME U/S. 10(34) OF THE ACT. HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE 2 ITA NO. 794/MUM/2011 M/S LAMBODAR SUGARS PVT. LTD. EXPENDITURE INCURRED FOR EARNING DIVIDEND INCOME SH OULD NOT BE DISALLOWED U/S. 14A OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO HELD THAT DIRECT AND INDIRECT EXPENSES WERE TO BE DISALLOWED IN CASE OF EXEMPT INCOME, THAT THE ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE WERE RELATED TO THE EARNING OF DIVIDEND IN COME, THAT PROPORTIONATE EXPENDITURE HAD TO BE DISALLOWED INVOKING THE PROVISIONS OF RULE 8D(2)(II ) AND 8D(2)(III) OF THE INCOME-TAX RULES 1962(RULES). HE MADE A DISALLOWANCE OF RS. 8,12,893 /- AND RS. 1,24,974/- RESPECTIVELY UNDER THE SAID RULES. THE DISALLOWANCE MADE LAND AN AMOUNT OF RS. 9.36 LAKHS WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA HELD THAT AO HAS T O MAKE A REASONABLE ESTIMATE OF DISALLOWANCE AS PER THE PROVISIONS OF SECTION 14A OF THE ACT, TH AT METHOD PROVIDED UNDER RULE 8D WAS REASONABLE ESTIMATE IN THE CASE OF THE ASSESSEE-COM PANY. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUPPORT ED THE ORDER OF THE AO AND FAA. NONE APPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE MATERIAL AND HEARD THE DR. WE FIND THAT THE ASSESSMENT YEAR INVOLVED IS 2007-08. HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. HAS CLEARLY HELD THAT PROVIS IONS OF RULE 8D WERE APPLICABLE FROM THE AY 2008-09 ONLY, HOWEVER REASONABLE DISALLOWANCE COULD BE MADE IN EARLIER YEAR DEPENDING UPON THE FACTS OF THE CASE. IN THESE CIRCUMSTANCES, IN OUR O PINION IN THE INTEREST OF JUSTICE, MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUD ICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND DECIDE T HE ISSUE OF DISALLOWANCE, IF ANY, TO BE MADE AS PER THE LAW PREVAILING AT THAT TIME. EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE-CO MPANY IS ALLOWED IN PART. AS A RESULT,APPEAL APPE AL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 1)2 '() + VKAFKD :IK LS 3 + ) 45. ORDER PRONOUNC ED IN THE OPEN COURT ON 10 TH APRIL, 2014 . 0 + -.# 7 8' 10 VIZSY VIZSY VIZSY VIZSY , 201 4 . + / 9 SD/- SD/- ( ! / VIVEK VARMA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8' /DATE: 10 TH APRIL,2014. SK 0 0 0 0 + ++ + &)! &)! &)! &)! : : : :!#) !#)!#) !#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ ; < , 4. THE CONCERNED CIT / ; < 5. DR I BENCH, ITAT, MUMBAI / !=/ &)' VKBZ VKBZ VKBZ VKBZ , . . . 6. GUARD FILE/ / 1 '!) '!) '!) '!) &) &)&) &) //TRUE COPY// 0' / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI