ITO 1(1)(1), MUMBAI V. ASTOR CORPORATION P. LTD, MUMBAI

ITA 930/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71036 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 14-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Unexplained investment; Business income; Earning of tax free income; Additional evidence
• Section: 69; 143(3); 14A

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 929 AND 930/MUM./2011 ( &) * !+* / ASSESSMENT YEAR : 200506 AND 200607 ) INCOME TAX OFFICER WARD1(1)1, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. ,- / APPELLANT ) V/S M/S. ASTOR CORPORATION PVT. LTD. KASTURI BUILDING, 171/172 J. TATA ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AAECA0015G &) *1# 2 3 / REVENUE BY : MR. O.P. SINGH 4! 2 3 / ASSESSEE BY : MR. S.C. TIWARI A/W MS. NATASHA MANGAT )! 2 # / DATE OF HEARING 14.08.2013 $ 5+ 2 # / DATE OF ORDER 06.09.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEALS HAVE BEEN PREFERRED BY THE REVE NUE, CHALLENGING THE IMPUGNED SEPARATE ORDER DATED 30 TH NOVEMBER 2010, FOR THE ASSESSMENT YEAR 200506 AND ORDER DATED 16 TH SEPTEMBER 2009, FOR THE ASSESSMENT YEAR 200607, PASSED BY THE LEARNED COMMISSIONER (A PPEALS)I, MUMBAI, M/S. ASTOR CORPORATION PVT. LTD. 2 FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). WE FIRST PROCEED TO DISPOSE OFF THE APPEAL IN ITA NO.929/MUM./2011, FOR THE ASSESSMENT YEAR 200506, VIDE WHICH, THE REVENUE HAS CHALLENGED ON FOLLOWING GROU NDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANC E U/S 14A TO RS. 45,000/- AGAINST RS. 2,09,132/- MADE BY THE ASSESSING OFFICE R. 2. THE LD CIT(A) HAS FURTHER OVERLOOKED THE FACT TH AT IN ABSENCE OF ANY WORKING OF DISALLOWANCE BY ASSESSEE, THE ASSESSING OFFICER HAS RIGHTLY APPORTIONED THE EXPENSES IN THE RATIO OF EXEMPT INC OME TO TOTAL INCOME. 3. THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT EVEN THOUGH THE APPORTIONED OF EXPENSES WAS CORRECTLY MADE, ALTERNA TIVELY THE CIT(A) OUGHT TO HAVE WORKED OUT THE DISALLOWANCES U/S 14A AS PER WORKING UNDER RULE 8D CONFIRMED BY BOMBAY HIGH COURT IN THE CASE OF GODRE J & BOYCE. 4. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N U/S 69 OF RS. 5 LACS. 5. THE LD. CIT(A) HAS FURTHER ERRED IN ACCEPTING TH E FRESH EVIDENCE IN VIOLATION TO RULE 46A . 2. BRIEF FACTS OF THE CASE ARE THAT, IN THE PRESENT CA SE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENTS AND FINANCIN G WHEREIN UNDER THE INVESTMENT ACTIVITIES, THE ASSESSEE UNDERTAKES ACQU ISITION OF SHARES AND SECURITIES AND UNDER THE FINANCING ACTIVITIES, IT T AKES PLACEMENT OF DEPOSITS, ETC. THE ASSESSING OFFICER, DURING THE COURSE OF AS SESSMENT PROCEEDINGS, NOTED THAT THE ASSESSEE HAS CLAIMED EXEMPT INCOME O F ` 7,09,157, COMPRISING OF DIVIDEND FROM THE COMPANIES AND MUTUA L FUNDS. HE NOTED THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE UNDER SE CTION 14A, IN RELATION TO THE EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMP T INCOME. ACCORDINGLY, HE DISALLOWED A SUM OF ` 2,09,132, AFTER TAKING INTO ACCOUNT 17% OF ADMINISTRATIVE EXPENSES AS THE DIVIDEND INCOME WAS ALSO 17% OF THE TOTAL INCOME. HE ALSO REFERRED TO THE DECISION OF THE TRI BUNAL, MUMBAI BENCH, IN RYTHEM EXPORTS PVT. LTD., [2005] 2 SOT 429 (MUM.). 3. BEFORE THE COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT NO INTEREST EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE AND, THEREFORE, NO M/S. ASTOR CORPORATION PVT. LTD. 3 DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A CAN B E MADE. IN SUPPORT OF THIS CONTENTION, A COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT WAS FILED BEFORE THE COMMISSIONER (APPEALS), WHO, AFTER APPRE CIATING THE FACTS, HELD THAT SOME DISALLOWANCE SHOULD BE MADE ON ACCOUNT OF MANAGERIAL EXPENDITURE AND ADMINISTRATIVE EXPENDITURE. ACCORDI NGLY, HE RESTRICTED THE DISALLOWANCE TO ` 45,000, AFTER OBSERVING AND HOLDING AS UNDER: 5.4 I HAVE CONSIDERED THE A.OS ORDER AS WELL AS TH E APPELLANTS A/R SUBMISSION. I HAVE ALSO TAKEN NOTE OF THE CASE LAWS RELIED ON BY THE APPELLANT. CONSIDERING THE SAME, I AGREE WITH THE A .O. THAT THE NO INCOME CAN BE EARNED IN VACUUM. THERE MUST BE SOME MANAGERIAL OR ANY OTHER ADMINISTRATIVE EXPENSES TO EARN SUCH INCOME. HOWEVE R, IN MY CONSIDERED VIEW, THE A.O. WAS NOT CORRECT IN MAKING PROPORTION ATE DISALLOWANCE WITHOUT ASSIGNING ANY VALID REASON FOR THE SAME. HENCE, TAK ING NOTE OF THIS FACT, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THO UGH THE A.O. HAS NOT ROOT OUT ANY MATERIAL ON RECORD, BUT LOOKING TO THE AMOU NT SO EARNED AS DIVIDEND INCOME CLEARLY JUSTIFIES THAT THERE MUST BE SOME OR ANY KIND OF MANAGERIAL EXPENSES OR ADMINISTRATIVE EXPENSES TO EARN SUCH IN COME. ACCORDINGLY, I RESTRICT THE DISALLOWANCE TO THE EXTENT OF ` 45,000. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT EVEN THOUGH REASONABLE DISALLOWANCE HAS TO BE MADE IN THE ASSESSMENT YEAR 200506, HOWEVER, THE COMMISSIONER (APPEALS) HAS NO T GIVEN ANY BASIS AS TO HOW A SUM OF ` 45,000 IS REASONABLE, THEREFORE, THE DISALLOWANCE AS SUSTAINED BY THE COMMISSIONER (APPEALS) IS TOO LOW. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE RELIED UPON THE FINDINGS OF THE COMMISSIONER (APPEALS) AND SUBM ITTED THAT ONCE THERE IS NO INTEREST EXPENDITURE, ADMINISTRATIVE EXPENDITURE TO THE EXTENT OF ` 45,000 IS QUITE REASONABLE. HE DREW OUR ATTENTION TO VARIO US EXPENDITURES DEBITED IN THE PROFIT & LOSS ACCOUNT AND SUBMITTED THAT MOST O F THE EXPENDITURES WERE NOT DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. THEREFORE, THE DISALLOWANCE OF ` 45,000 IS JUSTIFIED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS EARNED EXEM PT INCOME OF ` 7,09,157, AS DIVIDEND AND NO EXPENDITURE UNDER SECT ION 14A WAS DISALLOWED M/S. ASTOR CORPORATION PVT. LTD. 4 BY THE ASSESSEE. THE ASSESSING OFFICER ALSO, WITHOU T ANY BASIS, HAS TAKEN 17% OF THE ADMINISTRATIVE EXPENDITURE WITHOUT LOOKI NG TO THE NATURE OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT. L OOKING TO THE FACT THAT THE ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE, THE DISALLOWANCE OF ` 45,000 ON ACCOUNT OF OTHER ADMINISTRATIVE EXPENDITU RE SEEMS TO BE REASONABLE. CONSEQUENTLY, WE DO NOT FIND ANY REASON TO DISTURB THE FINDINGS GIVEN BY THE COMMISSIONER (APPEALS) AND THE SAME AR E HEREBY UPHELD FOR THE REASON THAT, ADMITTEDLY, THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE FOR THE ASSESSMENT YEAR 200506 AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, (20 10), 328 ITR 081 (BOM.). THUS, GROUND NO.1 TO 1.2, AS RAISED BY THE REVENUE, ARE TREATED AS DISMISSED. 7. GROUND NO.2 AND 3, RELATE TO ADDITION OF ` 5,00,000, MADE UNDER SECTION 69. THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS MADE INVESTMENT IN MUTUAL FUNDS AND IN RESPECT OF RELIAN CE MUTUAL FUNDS, THE ASSESSEE HAS MADE TWO DEPOSITS OF ` 5,00,000 EACH ON 29 TH MARCH 2005, AS PER THE INFORMATION RECEIVED FROM AIR. THE ASSESSEE COULD NOT EXPLAIN THE INVESTMENT IN RESPECT OF ONE DEPOSIT OF ` 5,00,000. THE ASSESSEE DENIED BEFORE THE ASSESSING OFFICER THAT IT HAS NOT MADE T WO DEPOSITS BUT ONLY ONE DEPOSIT OF ` 5,00,000. HOWEVER, THE ASSESSING OFFICER ADDED THE SAID AMOUNT OF ` 5,00,000 AS UNEXPLAINED INVESTMENT UNDER SECTION 6 9 AND THE ASSESSEE COULD NOT PROVE ITS CONTENTION. 8. BEFORE THE COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAD INVESTED ONLY ` 5,00,000 AND ANOTHER ` 5,00,000 WAS IN THE NAME OF BROOK TRADING COMPANY PVT. LTD. AND THE PROOF OF IN VESTMENT MADE BY THE SAID COMPANY WAS ALSO FILED ALONG WITH THE PHOTOCOP Y OF CHEQUE AND BANK ACCOUNT OF THE SAID COMPANY. IT WAS ALSO SUBMITTED THAT IT WAS BY MISTAKE OF THE ACCOUNTANT THAT PERMANENT ACCOUNT NUMBER OF THE ASSESSEE WAS WRITTEN WHILE MAKING THE INVESTMENT FOR THE BROOK TRADING C OMPANY PVT. LTD. THUS, THE SUM OF ` 5,00,000 HAS BEEN DEPOSITED BY BROOK TRADING COMPA NY PVT. M/S. ASTOR CORPORATION PVT. LTD. 5 LTD. AND NOT BY THE ASSESSEE AND, THEREFORE, THE SA ME SHOULD BE DELETED. THE COMMISSIONER (APPEALS), AFTER VERIFYING THE SAI D DETAILS DELETED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER: 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AS WELL AS THE ORDER OF THE A.O. CONSIDERING BOTH, I FIND THAT THE INVES TMENTS WERE MADE BY BROOK TRADING COMPANY, WHICH IS AN ASSOCIATION CONCERN OF THE APPELLANT COMPANY. THE APPELLANTS A/R HAS ALSO FILED A COPY OF CHEQUE DATED 01/03/2005 ALONG WITH BANK ACCOUNT IN SUPPORT OF ITS CONTENTION, WHI CH CLEARLY SUGGESTS THAT THE INVESTMENTS WERE MADE BY BROOK TRADING COMPANY AN A SSOCIATE CONCERN OF THE APPELLANT COMPANY. THUS NOTING ALL ABOVE FACTS, I AM OF THE CONSIDERED VIEW THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THIS ADDITION. ACCORDINGLY, THE APPEAL ON THIS GROUND IS ALLOWED. 9. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER (APPEALS) SHOULD HAVE GIVEN OPPORTUNIT Y TO THE ASSESSING OFFICER FOR ADMITTING THE ADDITIONAL EVIDENCE IN TH E FORM OF PROOF OF INVESTMENT MADE BY THE BROOK TRADING COMPANY PVT. L TD., BY WAY OF PHOTOCOPY OF CHEQUE AND BANK STATEMENT. THUS, THERE IS A CLEAR CUT VIOLATION OF RULE 46A OF THE INCOME TAX RULES AND, THEREFORE, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 10. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE HAS MERELY CLARIFIED BEFORE THE C OMMISSIONER (APPEALS) THAT SECOND INVESTMENT WAS NOT MADE BY THE ASSESSEE BUT BY ASSOCIATE CONCERN BROOK TRADING COMPANY PVT. LTD. AND IN SUPP ORT OF THAT PHOTOCOPY OF CHEQUE BOOK, BANK STATEMENT AND PROOF OF INVESTM ENT WAS GIVEN. THESE DOCUMENTS DO NOT REQUIRE ANY EXAMINATION OF FACTS B UT MERE VERIFICATION BECAUSE BANK STATEMENT CANNOT BE HELD TO BE ADDITIO NAL EVIDENCE. HE, THUS, STRICTLY RELIED UPON THE FINDINGS OF THE COMMISSION ER (APPEALS). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSE D THE RELEVANT FINDINGS OF THE COMMISSIONER (APPEALS) AS WELL AS O F THE ASSESSING OFFICER. THE ASSESSEE, BEFORE THE ASSESSING OFFICER, CONTEND ED THAT IT HAS MADE INVESTMENT OF ` 5,00,000 ONLY IN RELIANCE MUTUAL FUNDS AND THE SEC OND INVESTMENT OF ` 5,00,000 HAS NOT BEEN MADE BY IT. TO CLARIFY THIS CONTENTION, M/S. ASTOR CORPORATION PVT. LTD. 6 THE ASSESSEE HAS FILED THE PROOF OF INVESTMENT MADE IN THE NAME OF ASSOCIATE CONCERN BROOK TRADING COMPANY PVT. LTD. WHICH HAD M ADE THE INVESTMENT. ALONG WITH THAT A PHOTOCOPY OF CHEQUE DATED 1 ST MARCH 2005, AND THE BANK ACCOUNT WAS GIVEN BEFORE THE COMMISSIONER (APPEALS) . THE COMMISSIONER (APPEALS), AFTER VERIFYING THESE DETAILS, HAS DELET ED THE ADDITION. THE COMMISSIONER (APPEALS) HAVING A COTERMINUS POWER W ITH THAT OF THE ASSESSING OFFICER CAN VERY WELL EXAMINE THESE FACTS IN THE COURSE OF APPELLATE PROCEEDINGS. HE HAS MERELY VERIFIED THE ASSESSEES CONTENTION FROM THE COPY OF CHEQUE AND BANK ACCOUNT ALONG WITH THE PROOF OF INVESTMENT IN THE NAME OF BROOK TRADING COMPANY PVT. LTD. UNDER THESE CIRC UMSTANCES, IT CANNOT BE HELD THAT THERE IS A VIOLATION OF RULE 46A. THUS, U NDER THESE FACTS, THE FINDINGS GIVEN BY THE COMMISSIONER (APPEALS) ARE AF FIRMED AND, ACCORDINGLY, GROUND NO.2 AND 3, AS RAISED BY THE REVENUE ARE TRE ATED AS DISMISSED. 12. 1 #7 4! 2 &) * !+* 200506 2 14 ) 4# 89 : 12. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSM ENT YEAR 200506 IS TREATED AS DISMISSED. WE NOW TAKE UP APPEAL IN ITA NO.930/MUM./2011, FOR THE ASSESSMENT YEAR 200607, VIDE WHICH, THE REVENUE HAS CHALLENGE D THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE DRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANC E U/S 14A TO RS. 1 LAC AGAINST RS.17,88 LACS MADE BY THE ASSESSING OFFICER . 1.1 THE LD. CIT(A) HAS FURTHER OVERLOOKED THE FACT THAT IN ABSENCE OF ANY WORKING OF DISALLOWANCE BY ASSESSEE, THE ASSESSING OFFICER HAS RIGHTLY APPORTIONED THE EXPENSES IN THE RATIO OF EXEMPT INC OME TO TOTAL INCOME. 1.2 THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT EVE N THOUGH THE APPORTIONED OF EXPENSES WAS CORRECTLY MADE, ALTERNA TIVELY THE CIT(A) OUGHT TO HAVE WORKED OUT THE DISAIOWANCES U/S 14A AS PER WORKING UNDER RULE 8D CONFIRMED BY BOMBAY HIGH COURT IN THE CASE OF GODRE F & BOYCE. 13. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD EARNE D DIVIDEND INCOME AND LONG TERM CAPITAL GAIN ON SALE OF SHARES AND SE CURITIES WHICH WERE M/S. ASTOR CORPORATION PVT. LTD. 7 EXEMPT FROM TAX. HE FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 36,27,293, UNDER VARIOUS HEADS LIKE SALARY, INSURA NCE, LEGAL AND PROFESSIONAL CHARGES, MOTOR CAR REPAIR AND CONV EYANCE. THE ENTIRE EXPENDITURES HAVE BEEN CLAIMED FOR EARNING OF BUSIN ESS INCOME AND OTHER SOURCE. THE ASSESSEE HAS NOT ATTRIBUTED THE ENTIRE EXPENDITURE FOR EARNING OF EXEMPT INCOME UNDER SECTION 14A. AFTER REJECTING TH E ASSESSEES EXPLANATION, HE HELD THAT 42% OF THE EXPENDITURE WH ICH IS IN PROPORTION TO THE EXEMPT INCOME FROM THE TOTAL INCOME, EXPENDITUR E SHOULD BE DISALLOWED. ACCORDINGLY, HE WORKED OUT THE DISALLOWANCE UNDER S ECTION 14A AT ` 17,88,312. 14. BEFORE THE COMMISSIONER (APPEALS), IT WAS CONTENDED THAT THE ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE AND ATTRIBUTING 42% OF THE VARIOUS EXPENDITURE IS WHOLLY UNJUSTIFIED LOOKI NG TO THE OVER ALL BUSINESS ACTIVITIES OF THE ASSESSEE FOR WHICH THE ASSESSEE H AS INCURRED EXPENDITURE. THE COMMISSIONER (APPEALS), AFTER CONSIDERING THE A SSESSEES SUBMISSIONS, HAS RESTRICTED THE DISALLOWANCE OF ` 1,00,000 ON ACCOUNT OF MANAGERIAL AND ADMINISTRATING EXPENDITURE. THE RELEVANT OBSERVATIO NS AND FINDINGS OF THE COMMISSIONER (APPEALS) IS REPRODUCED HEREIN BELOW: 4.3 I HAVE CONSIDERED THE A.O.S ORDER AS WELL AS THE APPELLANTS A/R SUBMISSION. CONSIDERING THE SAME, I FIND THAT THE A .O. HAS MERELY DISALLOWED THE EXPENSES ON PROPORTIONATE BASIS. THE A.O. HAS N OT ROOT OUT A SINGLE REASON FOR MAKING SUCH DISALLOWANCE. HOWEVER I AGRE E WITH THE A.O. THAT THE NO INCOME CAN BE EARNED IN VACUUM. THERE MUST BE SO ME MANAGERIAL OR ANY OTHER ADMINISTRATIVE EXPENSES TO EARN SUCH INCOME. HOWEVER, IN MY CONSIDERED VIEW, THE A.O. WAS NOT JUSTIFIED IN MAKI NG PROPORTIONATE DISALLOWANCE WITHOUT ASSIGNING ANY VALID REASON FOR THE SAME. HENCE TAKING NOTE OF THIS FACT, I CONSIDER IT PROPER AND APPROPR IATE TO HOLD THAT THOUGH THE A.O. HAS NOT ROOT OUT ANY MATERIAL ON RECORD, BUT L OOKING TO THE AMOUNT SO EARNED AS DIVIDEND INCOME CLEARLY JUSTIFIES THAT TH ERE MUST BE SOME OR ANY KIND OF MANAGERIAL EXPENSES OR ADMINISTRATIVE EXPEN SES TO EARN SUCH INCOME. ACCORDINGLY I RESTRICT THE DISALLOWANCE TO THE EXTE NT OF RS.1,00,000/-. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 15. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEES MAIN ACTIVITY IS FOR EARNING INCOME FROM TRADING OF SHAR ES, DIVIDEND AND INTEREST M/S. ASTOR CORPORATION PVT. LTD. 8 INCOME. ALL THE EXPENDITURES INCURRED BY THE ASSESS EE HAS BEARING ON THE INCOME EARNED. THE ASSESSING OFFICER HAS ATTRIBUTED THE PROPORTION OF EXEMPT INCOME OUT OF THE TOTAL INCOME AND HAS ALLOC ATED THE EXPENDITURE FOR THE EXEMPT INCOME ON THE SAME RATIO I.E., 42%. THE BASIS GIVEN BY THE COMMISSIONER (APPEALS) FOR RESTRICTING THE DISALLOW ANCE AT ` 1,00,000 IS WITHOUT ANY PROPER BASIS. 16. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT ALL ITS EXPENDITURES WERE BASICALLY FOR THE BU SINESS AND DIVIDEND INCOME WAS MERELY INCIDENTAL AND SUCH A HUGE AMOUNT OF EXP ENDITURE CANNOT BE SAID TO BE ATTRIBUTABLE FOR EARNING OF DIVIDEND INCOME A ND MOREOVER RULE 8D CANNOT BE HELD TO BE APPLICABLE IN THE ASSESSMENT Y EAR 200607, THEREFORE, DISALLOWANCE OF ` 1,00,000, AS SUSTAINED BY THE COMMISSIONER (APPEAL S) IS QUITE REASONABLE. 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS OF THE COMMISSI ONER (APPEALS). ADMITTEDLY, IN THIS YEAR, PROVISIONS OF RULE 8D CAN NOT BE APPLIED AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & B OYCE MFG. CO. LTD. (SUPRA) AND SOME REASONABLE BASIS HAS TO BE SEEN FOR ALLOCA TING THE EXPENDITURE PERTAINING TO EARNING OF EXEMPT INCOME FOR THE PURP OSE OF DISALLOWANCE UNDER SECTION 14A. THE ASSESSING OFFICER HAS TAKEN THE RATIO OF 42% OF THE EXEMPT INCOME WITH THAT OF THE TOTAL INCOME AND, AC CORDINGLY, DISALLOWED THE PROPORTIONATE EXPENDITURE @ 42%. SUCH A BASIS OF DI SALLOWANCE CANNOT BE SUSTAINED ON FACTS AS LOOKING TO THE NATURE OF EXPE NDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT, IT IS SEEN THAT THEY ARE MOR E FOR EARNING OF BUSINESS INCOME. ONCE INTEREST EXPENDITURE HAS NOT BEEN DEBI TED, DISALLOWANCE OF ` 1,00,000, ON ADMINISTRATIVE EXPENDITURE CAN BE SAID TO BE REASONABLE DISALLOWANCE UNDER SECTION 14A ON THE FACTS OF THE PRESENT CASE. CONSEQUENTLY, WE DO NOT FIND ANY REASON TO DISTURB THE FINDINGS AND CONCLUSION DRAWN BY THE COMMISSIONER (APPEALS) AND, ACCORDINGLY, THE SAME IS CONFIRMED. THIS GROUND IS, THUS, TREATED AS DISM ISSED. M/S. ASTOR CORPORATION PVT. LTD. 9 18. 1 #7 4! 2 &) * !+* 200607 2 14 ) 4# 89 : 18. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSM ENT YEAR 200607 IS TREATED AS DISMISSED. $ 2 5+ ; <)7 6 TH SEPTEMBER 2013 2 = : ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, <) <) <) <) DATED : 6 TH SEPTEMBER 2013 $ 2 .&#'> ?>+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) 4! / THE REVENUE; (3) @ () / THE CIT(A); (4) @ / THE CIT, MUMBAI CITY CONCERNED; (5) >!C= .&#&) , , / THE DR, ITAT, MUMBAI; (6) =D* E / GUARD FILE. /># .&# / TRUE COPY $) / BY ORDER . 4. FG / PRADEEP J. CHOWDHURY !1H &)4 F! / SR. PRIVATE SECRETARY I / 8 4 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI