RAMANUJ FINANCE P. LTD, MUMBAI V. ACIT CIR 9(3), MUMBAI

ITA 8984/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75458 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJBHIYE
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, MH MHMH MH INCOME TAX APPELLATE TRIBUNAL MUMB AI - D BENCH MUMBAI . . , / ! ! ! ! , BEFORE S/SH.B.R.MITTAL,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 8984/MUM/2010, ' ' ' ' # # # # / ASSESSMENT YEAR 2007-08 RAMANUJ FINANCE P. LTD. 1101 ANMOL ENCLAVE, S.V. ROAD, GOREGAON (W), MUMBAI-400062 VS. ACIT CIR 9(3) MUMBAI. PAN: AAACS9126L ( $% / ASSESSEE ) ( &'$% / RESPONDENT) $% $% $% $% ( (( ( ) ) ) ) / ASSESSEE BY : SHRI HARI S. RAHEJA &'$% ( ) / RESPONDENT BY : SHRI SHEKHAR L. GAJBHIYE ' ' ' ' ( (( ( +, +, +, +, / DATE OF HEARING : 13 . 01 .201 4 -.# ( +, / DATE OF PRONOUNCEMENT : 29 . 01 .201 4 ' ' ' ' , 1961 ( (( ( 254 )1( +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M: CHALLENGING THE ORDER DATED 02.11.2010 OF THE CIT(A )-20, MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL. 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS GROSSLY ERRED IN CONFIRMING THE ADDIT ION /DISALLOWANCE OF RS.7,25,694/-MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAID A MOUNT IS ATTRIBUTABLE TO EARNING DIVIDEND INCOME. 2.THE APPELLANT SUBMITS THAT ON THE ONE HAND THE CI T (APPEAL) HAS RIGHTLY FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT IN GODREJ & BOYCE HELD THA T THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE BUT HAS ON THE HAND CONFIRMED THE DISALL OWANCE MADE BY THE ASSESSING OFFICER AS PER THE FORMULA PRESCRIBED UNDER RULE 8D THUS INDIRECTL Y UPHOLDING THE APPLICABILITY OF THE SAID RULE FOR THE ASST. YEAR 2007-08. 3.THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR VA RY THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SHARE T RADING,FILED ITS RETURN OF INCOME ON 23.10. 2007DECLARING TOTAL INCOME OF RS.90,97,910/-.IT ALS O DERIVED INCOME BY WAY OF LONG TERM CAPITAL/SHORT TERM CAPITAL GAINS ON SALE OF ITS INV ESTMENTS IN SHARES & SECURITIES,INTEREST AND DIVIDEND.THE RETURN WAS PROCESSED U/S.143(1) ACCEPT ING RETURNED INCOME. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FINALI SED BY THE ASSESSING OFFICER (AO) ON 29.10. 2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS.9 8,79,850/- . EFFECTIVE GROUND OF APPEAL PERTAINS TO THE CORRECTN ESS OF DISALLOWANCE OF EXPENDITURE OF RS.7, 25,694 U/S.14A OF THE ACT.DURING THE ASSESSMENT PRO CEEDINGS,AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND RS.14,93,996/- AND HAD CLAIMED EXEM PTION U/S.10(34) OF THE ACT.ON BEING 2 ITA NO. 8984/MUM/2010 RAMANUJ FINANCE P. LTD. ASKED IT STATED THAT IT DID NOT INCUR ANY EXPENDITU RE ON EARNING DIVIDEND THE AO, RELYING ON THE FORMULA GIVEN IN RULE 8D OF THE INCOME TAX RULES,19 62(RULES)HELD THAT A SUM O F RS.7,25,694/- WAS INCURRED AS EXPENDITURE FOR EARNING DIVIDEND IN COME.HE ADDED THE SAME TO THE INCOME RETURNED BY THE ASSESSEE. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT PRO VISIONS OF RULE 8D(2) WERE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION, THAT REASONABLE DISAL LOWANCE COULD BE MADE BY THE AO U/S. 14A OF THE ACT FOR APPORTIONING THE EXPENDITURE.AS A RESUL T,HE DECLINED TO INTERVENE AND CONFIRMED THE ADDITION MADE BY THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE SUBMITED THAT T HE DISALLOWANCE MADE WAS EXCESSIVE AS ONLY SUCH INVESTMENTS SHOULD HAVE BEEN CONSIDERED F OR WORKING OUT THE DISALLOWANCE WHICH YIELDED DIVIDEND INCOME DURING THE YEAR AND NOT ANY OTHER INVESTMENTS,THAT THE PROVISIONS OF SECTION 14A R.W.RULE 8D HAD NO APPLICATION DURING T HE AY-2007-08,THAT THE ASSESSEE HAD NOT UTILISED ANY BORROWED MONEY FOR MAKING INVESTMENT,T HAT THE ASSESSEE HAD SUBSTANTIAL INCOME FOR MAKING INVESTMENT,THAT THE AO HAD NOT RECORDED THEI R REASONS FOR INVOKING THE PROVISIONS OF SECTION 14 A OF THE ACT, THAT DURING THE ASSESSMENT YEAR UNDER APPEAL COMPANY HAS EARNED NON- TAXABLE DIVIDEND INCOME AND LONG TERM CAPITAL GAIN OF RS.14,93,996/-AND RS.87,721/- RESPECTIVELY,THAT ALL THE EXPENSES CLAIMED BY THE A PPELLANT WERE INCURRED IN ROUTINE COURSE FOR RUNNING THE COMPANY AND NO EXPENDITURE WAS ATTRIBUT ED TOWARDS EARNING OF DIVIDEND INCOME AND LONG TERM CAPITAL GAIN,THAT AS PER THE CALCULATION SUBMITTED BY THE ASSESSEE DISALLOWANCE SHOULD NOT HAVE BEEN MORE THAN RS.2,816/-.HE RELIED UPON T HE ORDERS OF UDUPI RANGE (20 TAXMANN.COM 196(KAR),GULSHAN INVESTMENT CO. LTD. (1 54 TTJ (KOL) 273,OASIS SECURITIES LTD. (154 TTJ (MUMBAI) (UO) 17 AND MANGAT RAM (154 TTJ ( ASR) (UO) 24.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDERS OF THE AO AND THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT AO HAD WORKED OUT THE DISALLOWANCE AS PER THE RULE 8D OF T HE RULES WITHOUT GIVING ANY REASONS.IN OUR OPINION,PROVISIONS OF THE RULE 8D ARE APPLICABLE FR OM AY. 2008-09 ONLY.HOWEVER, A REASONABLE DISALLOWANCE CAN BE MADE,IF IT IS FOUND THAT ASSESS EE HAD CLAIMED EXPENDITURE FOR EARNING EXEMPT INCOME.HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (ITA NO. 626 OF 2010 AND WRIT PETITION NO. 751 OF 2 010)HAS ALSO HELD THAT REASONABLE DISALLOWANCE CAN BE MADE U/S.14A OF THE ACT FOR THE YEAR 2007-08.ON A QUERY BY THE BENCH,AR ADMITTED THAT THERE WAS NO SEPARATE DEMAT ACCOUNTS FOR THE INVESTMENTS AND THE TRADING ASSETS I.E.SHARE, THAT COMMON ACT BANK ACCOUNT WAS BEING M AINTAINED FOR ALL THE SHARES.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE,WE ARE OF THE O PINION THAT IN THE INTEREST OF JUSTICE, MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO TO EX AMINE THE ISSUE OF DISALLOWANCE AFRESH. EFFECTIVE GROUND OF APPEAL FILED BY THE ASSE SSEE-COMPANY IS ALLOWED,IN PART. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 1 2 '1+ 3 4 VKAFKD :IK LS 5+ ( + 67. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2014. 0 ( -.# 9 FNUKAD FNUKAD FNUKAD FNUKAD 29 TUOJH] TUOJH] TUOJH] TUOJH] 2014 . ( /. SD/- SD/- ( . . . B.R.MITTAL ) ( ! ! ! ! / RAJENDRA ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER 3 ITA NO. 8984/MUM/2010 RAMANUJ FINANCE P. LTD. / MUMBAI, :' /DATE: 29.01.2014 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 D BENCH, ITAT, MUMBAI / ;?/ &+' MH MHMH MH , . . . 6. GUARD FILE/ / @ . ';+ &+ //TRUE COPY// 0' / BY ORDER, A / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI.