DCIT CEN CIR 37, MUMBAI V. MANOJ V WADHWA, MUMBAI

ITA 8564/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3327 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHIT JAINDR
• Assessee Lawyers: NITESH S JOSH I
• Keywords: Business income; Opportunity of being heard
• Section: 14A

Judgement Text

1 B IN THE INCOME TAX APPELLATE TRIBUNAL B BENC H, MUMBAI !' , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI KARUNAKARA RAO , AM ./I.T.A. NO.9169/M/2010 (AY: 2007-2008) MANOJ V. WADHWA, 11, HAPPY HOME, 244, WATERFIELD ROAD, BANDRA (W), MUMBAI 400 050. & / VS. DCIT, CENTRAL CIRCLE 37, GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ' $ ./PAN : AALPW 0303 K ( '( /APPELLANT) .. ( )*'( / RESPONDENT) ./I.T.A. NO.8564/M/2010 (AY: 2007-2008) DCIT, CENTRAL CIRCLE 37, GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. & / VS. MANOJ V. WADHWA, 11, HAPPY HOME, 244, WATERFIELD ROAD, BANDRA (W), MUMBAI 400 050. ( '( /APPELLANT) .. ( )*'( / RESPONDENT) '( + , / ASSESSEE BY : SHRI NITESH S. JOSHI )*'( + , / REVENUE BY : SHRI MOHIT JAIN, DR & + -$ /DATE OF HEARING : 26.6.2013 ./0 + -$ /DATE OF PRONOUNCEMENT : 3.7.2013 1 1 1 1 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO CROSS APPEALS UNDER CONSIDERATION REL EVANT FOR THE SAME ASSESSMENT YEAR 2007-2008 AND THEY ARE FILED AGAINS T THE SAME ORDER OF CIT (A)-41, MUMBAI DATED 31.12.2009. ITA NO.9169/M/2010 IS FILE D BY THE ASSESSEE AND ITA NO.8564/M/2010 IS FILED BY THE REVENUE. SINCE, THE IDENTICAL ISSUE OF APPLICABILITY OF PROVISIONS OF SECTION 14A IS INVOLVED IN BOTH THE APPEALS, THEREFORE, BOTH THESE APPEALS ARE BEING CLUBBED AND DISPOSED OF IN THIS CONSOLIDATED ORDER IN THE FOLLOWING PARAGRAPHS. 2 GROUNDS RAISED IN ASSESSEES APPEAL ITA NO. 9169/M/2 010: 1. THE CIT (A) OUGHT TO HAVE HELD THAT IN THE PRESENT CASE NO DISALLOWANCE COULD BE MADE UNDER SECTION 14A OF THE ACT. 2. THE CIT (A) OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE APPLIED FOR THE PURPOSES OF MAKING A DISA LLOWANCE OF EXPENDITURE INCURRED BY AN ASSESSEE (SHAREHOLDER) IN RELATION T O DIVIDEND FROM COMPANIES IN RESPECT OF WHICH INCOME TAX IS CHARGED ON THE COMPA NY UNDER SECTION 115-O. 3. THE CIT (A) FAILED TO APPRECIATE THAT IN RESPECT OF HIS ACTIVITY OF SHARE TRADING, DERIVATIVE TRADING AND SPECULATION APART FROM DIVID END INCOME THE APPELLANT EARNED BUSINESS INCOME WHICH WAS LIABLE TO TAX IN HIS HANDS AND THEREFORE WAS NO QUESTION OF INVOKING THE PROVISIONS OF SECTION 1 4A OF THE ACT TO MAKE ANY DISALLOWANCE. 4. HAVING ACCEPTED THAT THE AO HAD ERRED IN APPLYING T HE PROVISIONS OF RULE-8D OF THE INCOME TAX RULES FOR THE PURPOSES OF COMPUTING THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE CIT (A) ERRED IN SETTING ASIDE THE MATTER TO THE AO FOR FRESH DETERMINATION OF DISALLOWANCE UNDE R SECTION 14A. 5. IN ANY EVENT, HAVING CORRECTLY OBSERVED THAT NO EX PENDITURE HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT RELATING TO THE EARNING OF THIS INCOME, THE CIT (A) ERRED IN SETTING THE MATTER TO THE AO TO DETERMINE THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A. GROUNDS RAISED IN REVENUES APPEAL ITA NO. 8564/M/20 10: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) HAS ERRED IN REMITTING THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE OF DISALLOWANCE OF EXPENDITURE U/S 14A AF TER GIVING REASONABLE OPPORTUNITY OF THE ASSESSEE OF BEING HEARD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT PROVISIONS OF RULE-8D DOES NOT HAVE RETROSPECTIVE E FFECT BY FOLLOWING THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF M/S. GODREJ & BOYCE MFG. CO. 2. AT THE OUTSET, SHRI NITESH S. JOSHI, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SOLITARY ISSUE REVOLVES AROUND THE APPLICA BILITY OF PROVISIONS OF SECTION 14A READ WITH RULE-8D OF THE INCOME TAX RULES, 1962 FOR THE ASSESSMENT YEAR 2007- 2008. IN THIS REGARD, HE MENTIONED THAT THE AO ERR ONEOUSLY APPLIED THE RULE-8D FOR THE ASSESSMENT YEAR IN QUESTION AS THE SAID PROVISI ONS APPLICABLE FROM THE ASSESSMENT YEAR 2008-2009 ONWARDS AS HELD BY THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT REPORTED IN 3 28 ITR 81 (BOM). LD CIT (A) REMANDED THE MATTER TO THE FILES OF TH E AO FOR DECIDING THE ISSUE AFRESH AND HE HAS NOT APPROVED THE AOS DECIS ION TO MAKE DISALLOWANCE AS PER RULE 8D. IN THIS REGARD LD COUNSEL MENTIONED THAT THE ISSUE HAVE TO BE SENT BACK TO 3 THE FILES OF AO FOR FRESH ADJUDICATION AND DECIDING THE ISSUE AFRESH ON THE QUANTUM OF DISALLOWANCE ADOPTING THE REASONABLE BASIS AS HELD AGAIN BY THE SAME JUDGMENT FOR THE ASSESSMENT YEAR PRIOR TO AY 2008-2009. 3. ON THE OTHER HAND, LD DR HAS NO OBJECTION FOR TH E PROPOSAL OF REMANDING THE MATTER TO THE FILES OF THE AO FOR FRESH ADJUDICATIO N OF THE ISSUE BY ADOPTING THE REASONABLE BASIS U/S 14A OF THE ACT. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. CONSIDERING THE FACTUAL MATRIX OF THE CASE AS WELL AS THE PRAYER OF THE LD COUNSEL AND NO OBJECTION FROM THE LD DR FOR REMANDING THE MATTER TO THE FILE S OF THE AO FOR FRESH ADJUDICATION WE PROCEED TO SET ASIDE THE GROUNDS RAISED IN THE A SSESSEES APPEAL AS WELL AS THE REVENUES APPEAL FOR FRESH ADJUDICATION CONSIDERING THE SAID JUDGMENT AND ADOPTING THE REASONABLE BASIS AS HELD BY THE SAID BINDING JUDGMENT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (SUPRA) . AO SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE ARE SET ASIDE. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSE SSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3.7.2013 SD/- SD/- ( I.P. BANSAL) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 2& 3.7.2013 . & . ./ OKK , SR. PS 1 1 1 1 + ++ + )-34 )-34 )-34 )-34 540- 540- 540- 540- / COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 4 5. 4 78 )-& , , / DR, ITAT, MUMBAI 6. 8!9 : / GUARD FILE. *4- )- //TRUE COPY// 1& 1& 1& 1& / BY ORDER, ; ;; ; / < < < < = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI