ITO, BEAWAR V. GANPATI PRODUCTS, BEAWAR

ITA 880/JPR/2014

• Counselvise Citation: 88023114 RSA 2014
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Assessee Lawyers: MAHENDRA GARGIEYA DHK
• Keywords: Earning of tax free income; Tax effect
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH IH-DS-CALY] YS[KK LNL; DS LE{K BEFORE: SHRI P.K. BANSAL, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 880/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. THE INCOME - TAX OFFICER, WARD-2, BEAWAR. CUKE VS. M/S. GANPATI PRODUCTS, G-151, RIICO INDUSTRIAL AREA, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACFG 0405 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 36/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. M/S. GANPATI PRODUCTS, G-151, RIICO INDUSTRIAL AREA, BEAWAR. CUKE VS. THE INCOME - TAX OFFICER, WARD-2, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACFG 0405 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA, ADDL. CIT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA, ADVOCATE. LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 4/11/2015 VKNS'K@ ORDER PER P.K. BANSAL, A.M. BOTH THESE APPEALS ARISE OUT OF THE ORDER OF LD. C IT (A) DATED 10.10.2014. 2. AFTER HEARING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AS THE TAX EFFECT IN TH IS CASE IS LESS THAN RS. 4,00,000/- AND IS COVERED BY THE LATEST BOARD INSTRUCTION NO. 5/2014 [F.NO.279/MISC./142/ 2 ITA NO. 880/JP/2014 & 36/JP/2015 ITO VS. M/S. GANPATI PRODUCTS. 2007/ITJ (PT) DATED 10/07/2014 . ACCORDING TO WHICH, THE REVENUE SHOULD NOT FILE THE APPEAL WHERE THE TAX EFFECT IS LESS THAN RS. 4,00,0 00/-. I ACCORDINGLY DISMISS THE APPEAL OF THE REVENUE AS IN THIS CASE THE LD. CIT ( A) HAS REDUCED THE ADDITION FROM RS. 3,23,429/- TO RS. 1,04,183/-. 3. NOW COMING TO THE APPEAL OF THE ASSESSEE, I NOTE D THAT THE AO AND CIT (A) HAD DISALLOWED THE INTEREST UNDER SECTION 14A AMOUNTING TO RS. 99,183/- AND RS. 5,000/- BY APPLYING RULE 8D READ WITH SECTION 14A. THE PROVIS IONS OF SECTION 14A(2) EMPOWERS THE AO TO DETERMINE THE AMOUNT OF EXPENDITURE INCUR RED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE IT ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. NO DOUBT, IN THIS REG ARD THE RULE 8D HAS BEEN BROUGHT INTO THE STATUTE WITH EFFECT FROM 24.3.2008. THESE RULES ARE NOT RETROSPECTIVE IN NATURE AND SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 20 08-09. THIS WAS SO HELD BY THE HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. DCIT, 328 ITR 81 (MUMBAI) AND MAX INVESTMENTS LTD. VS. CIT, 203 TAXMAN 364 (DELHI HC). THIS RULE 8D CAN ALSO BE APPLIED ONLY IF THE AO HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF T HE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO THE INCOME WHICH DO ES NOT FORM PART OF THE TOTAL INCOME. IN VIEW OF THIS SPECIFIC PROVISION, I AM O F THE VIEW THAT ONCE THE ASSESSEE SUBMITS ABOUT THE CLAIM OF EXPENDITURE RELATING TO THE EXEMPT INCOME, THE AO IS DUTY BOUND TO RECORD THE SATISFACTION HOW HE DID NOT AGR EE WITH THE CLAIM OF THE ASSESSEE. UNTIL AND UNLESS HE REJECTS THE CLAIM OF EXPENDITUR E BY RECORDING THE FINDING WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSEE, THE AO C ANNOT MAKE ANY DISALLOWANCE EVEN 3 ITA NO. 880/JP/2014 & 36/JP/2015 ITO VS. M/S. GANPATI PRODUCTS. APPLYING RULE 8D. THE ASSESSMENT IN AN YEAR INVOLV ED IN THE CASE OF THE ASSESSEE IS THE ASSESSMENT YEAR 2007-08 WHEN RULE 8D WAS NOT IN EXISTENCE. THE DISALLOWANCE, THEREFORE, ON THE BASIS OF RULE 8D ITSELF IS VOID A ND ILLEGAL. I ALSO NOTED IN THE ASSESSMENT ORDER THAT NO SATISFACTION WHATSOEVER HA S BEEN RECORDED BY THE AO REJECTING THE CLAIM OF THE ASSESSEE THAT THE ASSESS EE HAS NOT INCURRED ANY EXPENDITURE RELATING TO THE INCOME NOT FORMING PART OF THE TOTA L INCOME. IN VIEW OF THIS FACT, I AM OF THE VIEW THAT THE AO CANNOT MAKE ANY DISALLOWANCE. I ACCORDINGLY DELETE THE DISALLOWANCE MADE UNDER SECTION 14A BY A SUM OF RS. 99,183/- AND RS. 5,000/-. 4. THE GROUND NO. 1 SINCE NOT PRESSED AND NOT ARGUE D STANDS DISMISSED. 5. IN THE RESULT, I DISMISS THE APPEAL FILED BY THE REVENUE AND ALLOW PARTLY THE APPEAL FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 4/11/2015. SD/- IH-DS-CALY ( P.K. BANSAL ) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 4/11/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ITO WARD-2, BEAWAR. 2. IZR;FKHZ@ THE RESPONDENT M/S. GANPATI PRODUCTS, BEAWAR. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 880 & 36/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR