IKAB SECURITIES & INVESTMENT LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 8022/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8619 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 04-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER.. I.T.A. NO.8022/MUM/2010. ASSESSMENT YEAR : 2007-08. IKAB SECURITIES & INVESTMENTS LTD., DY. COMMISSIONER OF RAJA BAHADIR COMPOUND, VS. INCOME-TAX, BLDG. NO.5, TAMARIND LANE, FORT, RANGE-4(1), MUMBAI 400 023. MUMBAI. PAN AAACI9007N APPELLANT. RESPONDENT . APPELLANT BY : SHRI PRA KASH JOTWANI. RESPONDEN T BY : SHRI N.K. MEHTA. DATE OF HEARING : 04-10-2012 DATE OF PRONOUNCEMENT : 10-10-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-10, MUMBAI DATED 22-10-2010 AND IN THE SOLITARY GROUND RAISED THEREIN, THE ASSESSEE HAS CHALLENGED THE DISALLOWAN CE OF RS.4,17,376/- MADE BY THE AO U/S 14A OF THE ACT READ WITH RULE 8D OF INCOME-T AX RULES WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(APPEALS). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING AND DEALING IN SHARES AND SEC URITIES AS A MEMBER OF BOMBAY STOCK EXCHANGE. THE RETURN OF INCOME FOR THE YEAR U NDER CONSIDERATION WAS FILED 2 ITA NO.8022/MUM/2010 BY IT ON 30-10-2007 DECLARING TOTAL INCOME OF RS.33 ,75,637/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.1,16,600/- RECEIVED DURING TH E YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWAN CE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE EARNING OF THE SAID EXE MPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SE CTION 14A. THE AO, THEREFORE, WORKED OUT SUCH EXPENSES INCURRED BY THE ASSESSEE I N RELATION TO EARNING OF THE EXEMPT INCOME AT RS.4,17,376/- BY APPLYING RULE 8D OF INCOME-TAX RULES AND MADE A DISALLOWANCE TO THAT EXTENT U/S 14A. ON APPE AL, THE LEARNED CIT(APPEALS) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT RUL E 8D IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007-08 AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD.2 34 CTR 1 AND THE DISALLOWANCE U/S 14A, THEREFORE, WAS REQUIRED TO BE MADE BY ADOPTING SOME REASONABLE BASIS. HE, HOWEVER, HELD THAT THE BASIS GIVEN IN RULE 8D FOR WORKING OUT THE EXPENSES TO BE DISALLOWED U/S 14A WAS REASO NABLE BASIS AND ACCORDINGLY THE DISALLOWANCE MADE BY THE AO ON THE SAID BASIS W AS CONFIRMED BY HIM. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA), RULE 8D OF INCOME-TA X RULES, 1962 IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. AS FURTHER HELD BY THE HONBLE BOMBAY HIGH COURT, THE DISALLOWANCE TO BE MADE U/S 14A FOR THE YEARS PRIOR TO 2008-09 IS REQUIRED TO BE MADE ON SOME REASONABLE BASIS. AFTER HAVING TAKEN NOTE OF THIS DECISION OF THE HONBLE BOMBAY HIGH COURT, THE LEAR NED CIT(APPEALS) STILL HELD THAT THE BASIS GIVEN IN RULE 8D IS REASONABLE AND C ONFIRMED THE DISALLOWANCE MADE BY THE AO BY ADOPTING THE SAID BASIS. IN OUR OPINIO N, THIS APPROACH ADOPTED BY THE 3 ITA NO.8022/MUM/2010 LEARNED CIT(APPEALS) IS UNTENABLE AS THE SAME IS NO T IN CONSONANCE WITH THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYCE MFG. CO. LTD.(SUPRA). WHEN THE DISALLOWANCE U/S 14A FOR THE YEAR UNDER CONSIDERATION IS REQUIRED TO BE MADE BY ADOPTING SO ME REASONABLE BASIS AS HELD BY THE HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW T HAT RELIANCE CANNOT BE PLACED ON THE BASIS GIVEN IN RULE 8D WHICH HAS BEEN HELD T O BE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION BY THE HONBLE BOMBAY HIGH COUR T. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, SUCH DISALLOW ANCE CAN BE REASONABLY WORKED OUT AS SOME PERCENTAGE OF THE DIVIDEND INCOME RECEI VED BY THE ASSESSEE ON ESTIMATED BASIS AND HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IT WOULD BE FAIR AND REASONABL E TO MAKE A DISALLOWANCE U/S 14A AT RS.29,150/- BEING 25% OF THE DIVIDEND INCOME OF RS.1,16,600/- RECEIVED BY THE ASSESSEE. ACCORDINGLY, WE MODIFY THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A TO RS.29,150/-. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF OCT. , 2012. SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 10 TH OCT., 2012. 4 ITA NO.8022/MUM/2010 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES , MUMBAI. WAKODE.