ACIT 6(2), MUMBAI V. CREATIVE GARMENTS P.LTD, MUMBAI

ITA 946/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3852 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P MEENA
• Keywords: Rule of consistency; Earning of tax free income
• Section: 14A; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAI YA, AM ./I.T.A. NO.389/MUM/2012 ( / ASSESSMENT YEAR : 2007- 08 M/S. CREATIVE GARMENTS PVT. LTD., 9, SUN MILL COMPOUND, LOWER PAREL,MUMBAI-400 013 / VS. THE ACIT , CIR 6(2)(2), MUMBAI ./I.T.A. NO.946/MUM/2012 ( / ASSESSMENT YEAR : 2007- 08 THE ACIT , CIR 6(2)(2), MUMBAI / VS. M/S. CREATIVE GARMENTS PVT. LTD., 9, SUN MILL COMPOUND, MUMBAI-400 013 ./ ./PAN/GIR NO. : AAACC 0431C ( ! /APPELLANT ) .. ( '# ! / RESPONDENT ) ! $ / APPELLANT BY: SHRI VIJAY MEHTA '#! % $ / RESPONDENT BY : SHRI O.P. MEENA % &' / DATE OF HEARING : 16.5.2013 () % &' / DATE OF PRONOUNCEMENT :16.5.2013 *+ / O R D E R PER N.K. BILLAIYA, AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE PREFERRED BY THE VERY SAME ORDER OF THE LD. CIT(A)-12, MUMBAI DT.25.11.2011 PERTAINING TO A.Y. 2007-08. AS BOTH THESE APPEALS W ERE HEARD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 389/MUM/2012 -2007-08 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL AND HAS ALSO FILED AN ADDITIONAL GROUND OF APPEAL. THE FIR ST GRIEVANCE OF THE ITA NOS. 389 & 946/M/12 2 ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFER RING THE DISALLOWANCE U/S. 14A @ 20% OF THE EXEMPTED INCOME IGNORING THE FACT THAT FOR ASSESSMENT YEAR 2004-05 AND 2005-06 IN APPELLANTS OWN CASE THE DISALLOWANCE HAS BEEN RESTRICTED TO 20% OF EXEMPTED INCOME. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHO WN DIVIDEND INCOME OF RS. 2,05,92,430/- AND CLAIMED EXEMPT INCOME U/S. 10 (34) OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAS NOT ATTRIBUTED AN Y EXPENDITURE TOWARDS EARNING OF THIS EXEMPT INCOME. THE AO WAS OF THE F IRM BELIEF THAT THE DISALLOWANCE U/S. 14A IS TO BE MADE IN VIEW OF AM ENDMENT IN SECTION 14A R.W. RULE 8D OF THE ACT. THEREAFTER, THE AO WE NT ON TO COMPUTE THE DISALLOWANCE AT RS. 50,92,351/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE LD. CIT(A) WAS CONVINCED THAT RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT NO DEDUCTION IN RESPECT OF ANY EXPENSE THAT CAN BE AT TRIBUTABLE TO EARNING EXEMPT INCOME IS ALLOWABLE. THE LD. CIT(A) WENT ON TO DISALLOW 20% OF EXEMPT INCOME EARNED BY THE ASSESSEE AS REASONABLE AMOUNT OF DISALLOWANCE U/S. 14A. 5. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), ASS ESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO PAGE-4 OF THE PAPER BOOK AND POINTED OUT THAT SHARE CAPITAL O F THE COMPANY IS AT RS. 1,08,56,330/- AND RESERVES & SURPLUS ARE AT RS. 1,1 19,599,263/- WHEREAS INVESTMENTS IS AT RS. 21,77,08,129/-. IT IS THE SA Y OF THE COUNSEL THAT THE TOTAL INVESTMENT IS MET OUT OF ASSESSEES OWN FUND. DRAWING OUR ATTENTION ITA NOS. 389 & 946/M/12 3 AT PAGE-37 OF THE PAPER BOOK, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT FOR A.Y. 2004-05, THE LD. CIT(A) ON SAME SET O F FACTS HAS RESTRICTED THE DISALLOWANCE AT 2% OF EXEMPT INCOME WHICH DECIS ION HAS BEEN ACCEPTED BY THE REVENUE. THE LD. COUNSEL FOR THE A SSESSEE FURTHER TOOK US TO PAGE-42 OF THE PAPER BOOK AND POINTED OUT THA T FOR A.Y. 2005-06, ONCE AGAIN THE LD. CIT(A) HAS RESTRICTED THE DISALL OWANCE U/S. 14A TO 2% OF THE EXEMPT INCOME WHICH DECISION HAS ALSO BEEN A CCEPTED BY THE REVENUE. THE LD. COUNSEL CONCLUDED THAT ON THE SAME SET OF FACTS, THE LD. CIT(A) GROSSLY ERRED IN MAKING THE DISALLOWANCE OF 20% OF EXEMPT INCOME THIS YEAR. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND ALSO THE AP PELLATE ORDERS IN ASSESSEES OWN CASE FOR A.Y. 2004-05 AND 2005-06. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL THAT ON IDENTICAL FAC TS, THE LD. CIT(A) IN EARLIER YEARS HAVE RESTRICTED THE DISALLOWANCE TO 2 % OF THE EXEMPT INCOME. THE RULE OF CONSISTENCY SAYS IF THE FACTS ARE SAME AND THE LAW HAS NOT CHANGED, THEN THE SAME VIEW SHOULD BE FOLLO WED. THEREFORE, CONSIDERING THE APPELLATE ORDERS OF EARLIER YEARS I N THE CASE OF THE ASSESSEE, WE HAVE NO HESITATION IN DIRECTING THE AO TO RESTRICT THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. GROUND NO . 1 & 2 ARE PARTLY ALLOWED. 9. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS A DDITIONAL GROUND OF APPEAL, THEREFORE IT IS DISMISSED AS NOT PRESSED. ITA NOS. 389 & 946/M/12 4 ITA NO. 946/MUM/2012 REVENUES APPEAL 10. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE L D. CIT(A) HAS ERRED IN HOLDING THAT DISALLOWANCE U/S. 14A CANNOT BE COM PUTED BY APPLYING RULE 8D. 11. WE FIND THAT DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS, THE AO HAS INVOKED PROVISIONS OF SEC. 14A R.W. RULE 8D FOR COMPUTING THE DISALLOWANCE TO BE MADE FOR EARNING OF EXEMPT INCOM E. THE LD. CIT(A) HELD THAT RULE 8D IS NOT APPLICABLE FOR THE YEAR UN DER CONSIDERATION. 12. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE R EVENUE BECAUSE NOWT IT IS SETTLED THAT RULE 8D IS PROSPECTIVE AND IS APPLICABLE WITH EFFECT FROM 1.4.2008 AS PER THE DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S DCIT 328 ITR 81. THAT BEING THE FACT OF THE MATTER, WE DO NOT FIND A NY REASON TO TAMPER WITH THE FINDINGS OF THE LD. CIT(A). THE APPEAL FI LED BY THE REVENUE IS ACCORDINGLY DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.5.2013 . *+ % ) , -*. 16.5.2013 ) % / SD/- SD/- (VIJAY PAL RAO ) ( N.K. BILLAIYA ) * /JUDICIAL MEMBER * / ACCOUNTANT MEMBER MUMBAI; -* DATED 16/05 /2013 . . ./ RJ , SR. PS ITA NOS. 389 & 946/M/12 5 *+ *+ *+ *+ % %% % '&0 '&0 '&0 '&0 10& 10& 10& 10& / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 03/ '& , , / DR, ITAT, MUMBAI 6. /4 5 / GUARD FILE. *+ *+ *+ *+ / BY ORDER, #0& '& //TRUE COPY// 6 66 6 / 7 7 7 7 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI