ACIT, CHENNAI V. M/s. Binny Limited, CHENNAI

ITA 911/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51709 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: B RAMAKRISHNAN
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 911/MDS/2011 (ASSESSMENT YEAR : 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), CHENNAI 600 034 (APPELLANT) V. M/S BINNY LIMITED, NO.106, ARMENIAN STREET, CHENNAI 600 001. PAN : AAACB2529C (RESPONDENT) APPELLANT BY : DR. I. VIJAYAKUMAR, CIT-DR RESPONDENT BY : SHRI B. RAMAKRISHNAN, CA DATE OF HEARING : 11.08.2011 DATE OF PRONOUNCEMENT : O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY REVENUE FOR THE ASSESSMENT YEAR 2007- 2008 AGAINST AN ORDER DATED 11.02.2011 OF COMMISSIO NER OF INCOME TAX (APPEALS)-III, CHENNAI. I.T.A. NO. 911/MDS/11 2 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I N THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS. 8,70,783/- MADE U/S 14A OF THE INCOME-TAX ACT, 1961 [IN SHORT, THE ACT] R.W.R 8D OF THE INCOME TAX RULES, 1962 [IN SHO RT, THE RULES]. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER OBSERVED THAT INVESTMENT IN TAX FREE INCOME DERIVING TERRIT ORY WAS RS. 28,78,97,000/-. THE ASSESSEE HAD DERIVED DIVIDEND INCOME OF RS. 93,000/- WHICH WAS TAX FREE. HENCE, APPLYING RULE 8D OF THE RULES, THE ASSESSING OFFICER HELD THAT AN AMOUNT OF ONE HA LF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHI CH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARIN G IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND LAST DA Y OF THE PREVIOUS YEAR NEEDED TO BE DISALLOWED AND HENCE DISALLOWED A N AMOUNT OF RS. 8,70,783/-. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SU BMITTED THAT THE ASSESSING OFFICER HAS WRONGLY APPLIED THE PROVI SIONS OF RULE 8D I.T.A. NO. 911/MDS/11 3 OF THE RULES R.W.S. 14A OF THE ACT AND DISALLOWED O NE HALF PERCENT AVERAGE VALUE OF INVESTMENT. THE ASSESSEE RELIED O N THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S GO DREJ BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 1 WHEREIN IT WAS HELD THA T THE PROVISIONS OF RULE 8D OF THE RULES WILL APPLY FROM ASSESSMENT YEAR 2008-09. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MINDA INVESTMENTS VS . DCIT IN ITA NO. 4046/DEL/2009. 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE LD. A.R. OF THE ASSESSEE, HELD THAT APPLICATION OF PROV ISIONS OF RULE 8D OF THE RULES WAS NOT RETROSPECTIVE AND THAT IT WOUL D APPLY ONLY FROM ASSESSMENT YEAR 2008-09. SINCE THE ASSESSMENT YEAR INVOLVED IN THIS APPEAL WAS 2007-08, RULE 8D OF THE RULES CANNO T BE MADE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE . STILL FURTHER, HE ALSO OBSERVED THAT THE ASSESSING OFFICER HIMSELF HA S STATED THAT INTEREST OUTGO DURING THE YEAR WAS NIL AND THEREFOR E, DELETED THE DISALLOWANCE AFTER FOLLOWING THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT AND CONSIDERING THE FACTS OF THE ASSESSE ES CASE. I.T.A. NO. 911/MDS/11 4 6. THE LD. D.R. SUBMITTED THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT RELIED ON BY THE LD. CIT(A) IN TH E CASE OF GODREJ BOYCE MFG. CO. LTD. [SUPRA] WAS NOT ACCEPTED BY THE DEPARTMENT AND HAS NOT ATTAINED FINALITY. HE, THEREFORE, PRAY ED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED AND THE ORDER OF THE ASSESSING OFFICER SHOULD BE RESTORED. 7. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDERS OF THE LD. CIT(A). 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD AND THE CITED DECISIONS , WE FIND THAT IN THE INSTANT CASE, THE ASSESSING OFFICER HAS DISALL OWED ONE HALF PERCENT OF AVERAGE VALUE OF INVESTMENT AMOUNTING TO RS. 8,70,793/- U/S 14A OF THE ACT AND RULE 8D OF THE RU LES AS EXPENSES INCURRED FOR EARNING DIVIDEND INCOME OF RS. 93,000 /-. THE LD. CIT(A) HAS HELD THAT THE ASSESSING OFFICER HIMSELF HAS STATED THAT THE INTEREST OUTGO DURING THE YEAR WAS NIL. THIS O BSERVATION OF THE I.T.A. NO. 911/MDS/11 5 LD. CIT(A) HAS NOT BEEN REBUTTED BY THE LD. D.R. F URTHER, THE LD. CIT(A) HAS OBSERVED THAT THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF M/S GODREJ BOYCE MFG. CO. LTD [SUPRA] HAS HELD T HAT THE PROVISIONS OF RULE 8D OF THE RULES WILL APPLY FROM ASSESSMENT YEAR 2008-09 AND SINCE THE ASSESSMENT YEAR UNDER APPEAL IS 2007-08, RULE 8D OF THE RULES WAS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE ONLY OBJECTION OF THE LD. D.R. IS THAT SINCE TH E DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HON'BLE BOMBAY HIG H COURT, THEREFORE, IT HAS NOT BECOME FINAL AND SHOULD NOT B E FOLLOWED. THE LD. D.R. COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT WAS REVER SED IN APPEAL BY THE HON'BLE SUPREME COURT OR OPERATION OF THE SA ID ORDER OF THE HON'BLE BOMBAY HIGH COURT WAS STAYED BY THE HON'BLE SUPREME COURT. HE ALSO COULD NOT POINT OUT ANY DISTINGUISH ABLE FEATURES IN THAT CASE SO AS TO MAKE IT INAPPLICABLE IN THE PRES ENT CASE OF THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY GOOD OR J USTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IT IS CONFIRMED. GROUND OF APPEAL OF THE REVENUE IS DISMISSED. I.T.A. NO. 911/MDS/11 6 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 12 TH AUGUST, 2011. SD/- SD/- (GEORGE MATHAN) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 12 TH AUGUST, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-III, CHENNAI (4) CIT-I, CHENNAI (5) D.R. (6) GUARD FILE