M/s. PNB Finance & Industries Ltd, New Delhi v. ACIT, New Delhi

CO 129/DEL/2009 | 2005-2006
Pronouncement Date: 20-10-2010

Appeal Details

RSA Number 12920123 RSA 2009
Assessee PAN AAACP0256C
Bench Delhi
Appeal Number CO 129/DEL/2009
Duration Of Justice 1 year(s) 4 month(s) 8 day(s)
Appellant M/s. PNB Finance & Industries Ltd, New Delhi
Respondent ACIT, New Delhi
Appeal Type Cross Objection
Pronouncement Date 20-10-2010
Appeal Filed By Assessee
Bench Allotted F
Tribunal Order Date 20-10-2010
Date Of Final Hearing 20-10-2010
Next Hearing Date 20-10-2010
Assessment Year 2005-2006
Appeal Filed On 11-06-2009
Judgment Text
ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 1422/DEL/2009 A.Y. : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 14(1) ROOM NO. 415 4 TH FLOOR C.R. BUILDING NEW DELHI VS. M/S PNB FINANCE & INDUSTRIES LTD. 10 DARYA GANJ NEW DELHI (PAN: AAACP0256C) AND C.O. NO. 129/DEL/2009 (IN ITA NO. 1422/DEL/2009) A.Y. 2005-06 M/S PNB FINANCE & INDUSTRIES LTD. 10 DARYA GANJ NEW DELHI (PAN: AAACP0256C) (APPELLANT) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 14(1) ROOM NO. 415 4 TH FLOOR C.R. BUILDING NEW DELHI (RESPONDENT) ASSESSEE BY : SH. PRADEEP DINODIA A.R. & SHRI R.K . KAPOOR A.R. DEPARTMENT BY : SH. H.K. LAL D.R. ORDER PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDERS OF LD. COMMISSIONER OF INCOME T AX (APPEALS) DATED 16.1.2009 PERTAINING TO ASSESSMENT YEAR 2005-0 6. REVENUES APPEAL 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFI CER TO COMPUTE THE ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 2 PROFIT OF ` 61 04 691/- ON SALE OF SHARES AS LONG TERM CAPITAL GAIN AS AGAINST ASSESSED AS INCOME FROM BUSINESS BY THE ASSE SSING OFFICER. 3. ASSESSING OFFICER NOTED THAT IN THIS CASE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCE. ASSESSEE HAD SHOWN INCOME UNDER THE HEAD SHORT TERM CAPITAL GAI NS AMOUNTING TO ` 7 112/- AND LONG TERM CAPITAL LOSS OF ` 11 15 745/- WHICH HAS BEEN CARRIED FORWARD FOR ADJUSTMENT AGAINST FUTURE LONG TE RM CAPITAL GAINS. ASSESSING OFFICER ASKED THE ASSESSEE COMPANY TO SHO W CAUSE AS TO WHY THE ASSESSEE INCOME SHOULD NOT BE TREATED AS BUSINESS INCOME. CONSIDERING THE ASSESSEES SUBMISSIONS ASSESSING OFF ICER REFERRED THE MEMORANDUM OF ASSOCIATION OF THE COMPANY WHICH HAS TH E OBJECTS INCLUDING ACQUIRING HOLDING ISSUING ON COMMISSION UNDERWRITING AND DEALING IN STOCK FUNDS SHARES DEBENTURES DEBENTU RE STOCK BONDS OBLIGATIONS SECURITIES AND INVESTMENTS OF ALL KIND . ASSESSING OFFICER OBSERVED THAT THAT THE OBJECT OF THE COMPANY AS OUTL INED ABOVE CLEARLY SHOWS THAT THE ASSESSEE COMPANY INTENDS TO DEAL IN SHARES DEBENTURES ETC. WITH A PROFIT MOTIVE. THIS PROF IT MOTIVE ITSELF INDICATES THAT THE NATURE OF PURCHASE AND SALE OF S HARES IS ADVENTURE IN THE NATURE OF TRADE. ASSESSING OFFICER FURTHER P LACED RELIANCE UPON THE SEVERAL CASE LAWS. ACCORDINGLY ASSESSING OF FICER HELD THAT THE TRANSACTIONS OF SALE AND PURCHASE OF SHARES IS BUS INESS INCOME OF THE ASSESSEE. HE ACCORDINGLY DENIED THE BENEFIT OF INDEXATION OF COST OF ACQUISITION OF THE SHARES SOLD AND COMPUTED THE BUSI NESS INCOME ON ACCOUNT OF SALE OF SHARES AT ` 6079691/- WHICH COMPR ISED OF REDEMPTION AMOUNT OF MUTUAL FUNDS OF ` 146913580 COS T PRICE OF SHARES ` 140833889. ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 3 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED THE EARLIER LD. COMMISSIONER OF IN COME TAX (APPEALS)S DECISION IN THE ASSESSEES OWN CASE. LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED THE FOLLOWING OBSERVA TIONS IN THE APPELLATE ORDER OF A.Y. 2003-04 AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND HAVE G ONE THROUGH THE ORDER OF THE ASSESSING OFFICER AND THE DETAILED SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. THE F ACTS CLEARLY SHOWS THAT THE APPELLANT COMPANY IS NOT ENG AGED IN THE TRADING OF SHARES IN THE YEAR UNDER CONSIDERATI ON WHICH ACTIVITY WAS DISCONTINUED SEVERAL YEARS AGO AS IS EVIDENT FROM THE FACT THAT AFTER 31.3.1996 THE APPELLANT HA S NOT ENGAGED IN ANY PURCHASE OF SHARES. THE FACTS FURT HER SHOW THAT THE APPELLANT COMPANY INVESTED IN THE TIMES BA NK LTD. (NOW HDFC BANK) A SUM OF ` 100.35 LACS AS A LONG TERM INVESTMENT IN THE YEAR 1996 AND FURTHER SOME OF ` 20 1.15 LACS IN THE YEAR 1997. THE ASSESSING OFFICER ALS O HAS NOT DISPUTED THE FACT THAT THE APPELLANT IS NOT A TRANS FER IN EQUITY SHARES AND NO BUSINESS OF BUYING AND SELLING OF SHARES HAS BEEN CARRIED ON AFTER 1.4.1997. THE FACTS SHOW THAT APART FROM THE SHARES OF HDFC BANK ALL OTH ERS ARE DEBT MUTUAL FUNDS WHICH HAVE BEEN SOLD BY THE APPELLANT DURING THE YEAR. I FIND SUFFICIENT FORCE IN THE CONTENTION OF THE APPELLANT THAT IT IS NOT A DEALER IN THE DEBT MUTUAL FUNDS THEREFORE IT IS HELD THAT THE SHORT T ERM CAPITAL GAIN IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN S. ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 4 AS REGARDS THE SALE OF SHARES OF HDFC BANK I FIND THAT THESE SHARES WERE PURCHASED ON 27.1.1996 AND HAVE BEEN HELD FOR A PERIOD OF MORE THAN SEVEN YEARS BEFORE BEING SOLD DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS REFERRED TO THE PROVISIONS OF SECTION 2(42A) A S PER WHICH IF A SHARE IS HELD FOR MORE THAN 12 MONTHS TH E SAME SHALL BE TREATED AS A LONG TERM CAPITAL ASSET. I A LSO FIND THAT THE APPELLANT HAD PURCHASED SHARES OF TIMES BA NK LTD. (LATER CONVERTED INTO HDFC BANK BY WAY OF AMALGAMATION ) AS LONG TERM INVESTMENT AS PER THE RESOLUTION PASSE D BY THE BOARD OF DIRECTORS STATING THEREIN THAT THE SHARES WHEN PURCHASED BE TREATED AS THE COMPANYS INVESTMENT. THESE SHARES HAVE ALL ALONG BEEN CLASSIFIED UNDER T HE HEAD INVESTMENT LONG TERM IN THE AUDITED BALANCE SHE ETS FROM THE YEAR OF PURCHASE UPTO THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ALSO DRAWN MY AT TENTION TO THE FACT THAT OUT OF THE HOLDING OF 5 21 739/- S HARES OF HDFC BANK ONLY 89996/- SHARES HAVE BEEN SOLD DURING THE YEAR WHEREAS THE BALANCE OF ` 4 31 743/- SHARES IS HELD BY THE COMPANY WHICH IS AUTHORIZES THE COMPANY TO DEAL IN SHARES ETC. THE ASSESSING OFFICER HIMSELF HAS TAKEN NOTE OF THE FACT THAT THE MERE PROVISION IN THE MEMORANDU M OF ASSOCIATION IS NOT ENOUGH INDICATOR OF THE NATURE AND KIND OF ACTIVITIES ENGAGED BY THE APPELLANT. THE ASSE SSING OFFICER HAS APPARENTLY BASED HIS CONCLUSION REGARD ING THE NATURE OF SALE OF SHARES BY THE APPELLANT DURING TH E YEAR MERELY ON THE ABOVE SAID PROVISION IN THE MEMORANDUM OF ASSOCIATION. I DO NOT FIND SUFFICIENT MERIT IN THE ACTION OF ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 5 THE ASSESSING OFFICER IN TREATING THE SALE OF SHAR ES OF HDFC BANK DURING THE YEAR AS A BUSINESS ACTIVITY OF TRA DING IN SHARES SINCE SUCH A DECISION SHOULD BE BASED ON T HE CONSIDERATION OF FACTS AS A WHOLE AND NOT MERELY O NE FACTOR. THE CONSIDERATION OF THE FACTS AS A WHOLE CLEARLY SHOWS AS OUTLINED HEREINABOVE THAT THE APPELLANT COMPANY DID NOT ENGAGE IN ANY PURCHASE AND SALE OF SHARES THAT THE SHARES HAVE BEEN HELD FOR MORE THAN 7 YEARS AS A LO NG TERM INVESTMENT AND SO SHOWN IN THE AUDITED ACCOUNTS AN D THAT THE VERY INTENTION OF INVESTMENT IN THESE SHARES WA S FOR LONG TERM INVESTMENT PURPOSES AS EVIDENCED BY THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS. AS FAR AS THE RELIANCE PLACED BY THE ASSESSING OFF ICER ON THE DECISION OF THE APEX COURT IN THE CASE OF SU TLEJ COTTON MILLS SUPPLY AGENCY LTD. 1PP ITR 706 IS CONCE RNED THE LD. AUTHORISED REPRESENTATIVE APPEARING FOR TH E APPELLANT HAS DISTINGUISHED IT ON FACTS SINCE IT HA D NEVER DONE ANY REGULAR SALE AND PURCHASE OF SHARES. COMIN G TO RELIANCE PLACED BY THE ASSESSING OFFICER ON THE D ECISION IN THE CASE OF RAJA BAHADUR VISHESHWARA SINGH AND OTHE RS VS. C.I.T. (SUPRA) THE APPELLANT HAS DISTINGUISHED THE SAME BY SHOWING THAT THERE ARE NEITHER ANY BORROWED FUNDS N OR ANY SUBSTANTIAL TRANSACTION OF PURCHASE AND SALE OF SHA RES IN THE CASE OF THE APPELLANT; ACCORDINGLY THE RELIANCE PL ACED BY THE ASSESSING OFFICER ON THE SAID CASE APPEARS TO BE DISTINGUISHABLE. THE DECISION IN THE CASE OF DALHOU SIE INVESTMENT TRUST CO. LTD. VS. C.I.T.( SUPRA) RELIE D UPON BY THE ASSESSING OFFICER IS ALSO BASED ON THE FACTS SPECIFIC TO ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 6 THAT CASE WHEREAS THE FACTS IN THE CASE OF THE APP ELLANT ARE QUITE DIFFERENT. THE OBSERVATION OF THE AUTHORIT Y ON ADVANCE RULINGS IN THE CASE OF FIDALITY (SUPRA) ALS O DOES NOT ADVANCE THE CASE OF THE ASSESSING OFFICER FOR THE REASONS THAT THE APPELLANT COMPANY HAS NOT ACTUALLY PURCHAS ED ANY EQUITY SHARES AND THERE IS NO FREQUENCY OF TRADING IN SHARES AT ALL. I ALSO FIND THAT SIMILAR TRANSACTIONS OF S ALE AND LONG TERM INVESTMENTS IN EARLIER YEARS HAS BEEN TREATED T O BE IN THE NATURE OF LONG TERM CAPITAL GAINS BY THE ASSESS ING OFFICER . IN FIND MERIT IN THE RELIANCE PLACED B Y THE APPELLANT COMPANY ON THE DECISION IN THE CASE OF SCH EDULE INVESTMENT COMPANY LTD. VS. C.I.T. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE MERE FACT THAT A COMPANY HAS WIT HIN ITS OBJECTS THE DEALING IN INVESTMENT IN SHARES DOES NO T GIVE TO THE COMPANY THE CHARACTERISTICS OF A DEALER IN SH ARES BUT IF OTHER CIRCUMSTANCES ARE PROVED IT MAY BE RELEVA NT FOR THE PURPOSES OF DETERMINING THE NATURE OF THE ACTIVITIES OF THE COMPANY. THE HONBLE SUPREME COURT HAVE HELD IN TH E CASE OF MADAN GOPAL RADHEY LA 73 ITR 652 (SC) THAT AN ASSESSEE CAN HOLD ASSETS BOTH AS STOCK IN TRADE AS WELL AS PROPRIETARY INVESTMENT AND THE INTENTION IS TO BE GA THERED FROM THE CONDUCT OF THE ASSESSEE THE ENTRIES IN THE ACCOUNTS RESOLUTION OF THE BOARD OF DIRECTORS ETC. I FIND THAT THE APPELLANTS CASE IS SQUARELY COVERED BY T HE RATIO OF THE DECISION LAID DOWN BY THE APEX COURT IN THE AB OVE SAID CASE. ON OVERALL CONSIDERATION OF THE FACTS OF THE CASE AS DISCUSSED HEREINABOVE AND THE RATIO OF THE DECISIO N OF THE ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 7 HONBLE SUPREME COURT IN THE CASES OF MADAN GOPAL RA DHEY LAL AND SCHEDULE INVESTMENT CO. LTD. (SUPRA) I AM OF THE VIEW THAT THE PROFIT ARISING ON THE SALE OF SHARES HAS TO BE TREATED AS LONG TERM CAPITAL GAINS. ACCORDINGLY THE ADDITION OF ` 2 65 77 430/- IS HEREBY DELETED AND T HE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED THE TOT AL INCOME OF THE APPELLANT COMPANY BY TREATING THE PROF IT ON SALE OF SHARES AS LONG TERM CAPITAL GAINS. 4.1 HE FOUND THAT FACTS OF THE PRESENT YEAR WERE SIMILAR AND HE DID NOT SEE ANY REASON TO DEVIATE FROM THE REASONED FIND INGS OF EARLIER ORDERS. ACCORDINGLY HE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DIRECTED TO RECOMPUTE THE INCOME OF THE ASSESSEE B Y TREATING THE PROFIT ON SALE OF SHARES AS LONG TERM CAPITAL GAINS . 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THIS TRIBUNAL IN ASSES SEES OWN CASE IN ITA NO. 2872 & 3640/DEL/2007 FOR A.Y. 2004-05 & 2003-04 VIDE ORDER DATED 17.12.2008. THE TRIBUNAL ON THIS ISSUE HAD HELD A S UNDER:- WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH T HE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENTS CITED BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE. WE FIND THAT THE ASSESSING OFFICER IN THE PRESENT CA SE HAS ASSESSED THE INCOME IN QUESTION AS INCOME FROM BUSIN ESS ON THE BASIS OF THE OBJECT CLAUSE OF MEMORANDUM OF ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 8 ASSOCIATION OF THE ASSESSEE COMPANY AS PER WHICH THE ASSESSEE CAN DEAL IN SHARES. THE ASSESSING OFFICER HAS PLACED RELIANCE ON VARIOUS JUDGEMENTS BUT AS PER PA RA NO. 3 AND 3.2 OF HIS ORDER LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOTED THAT ALL THESE JUDGMENTS ARE DISTINGUISHABLE. LD. DEPARTMENTAL REPRESENTATIVE OF THE REVENUE COULD NOT POINT OUT ANY DEFECT IN THIS FIN DING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN PARA NO . 3 AND 3.1 A CLEAR FINDING IS GIVEN BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS) THAT THE SHARES IN QUESTIO NS WERE SOLD BY THE ASSESSEE IN THE PRESENT YEAR BEING SHA RES OF HDFC BANK WERE PURCHASED BY THE ASSESSEE ON 27.1.199 6 AND HAVE BEEN HELD FOR A PERIOD OF MORE THAN SEVEN Y EARS BEFORE BEING SOLD DURING THE YEAR UNDER CONSIDERATI ON. IN PARA NO. 3.3 OF HIS ORDER IT IS ALSO NOTED BY TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESS EE HAS NO BUSINESS OF BUYING AND SELLING OF SHARES AFT ER 1.4.97. IT IS ALSO NOTED BY THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IN PARA NO. 3.3 OF HIS ORDER THAT APART F ROM THE SHARES OF HDFC BANK ALL OTHERS ARE DEBT MUTUAL FUN DS WHICH HAVE BEEN SOLD BY THE ASSESSEE DURING THE YE AR AND ON THE BASIS OF THESE FACTS A CLEAR FINDING IS GIV EN BY LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESS EE IS NOT A DEALER IN THE DEBT MUTUAL FUND AND THEREFOR E INCOME ARISING ON SALE OF THESE INVESTMENTS ARE TO BE AS SESSED AS SHORT TERM CAPITAL GAIN AND INCOME ARISING ON SALE O F SHARES OF HDFC BANK IS ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAINS. WHILE DECIDING THIS ISSUE LD. CO MMISSIONER ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 9 OF INCOME TAX (APPEALS) HAS FOLLOWED THE JUDGEMENT OF HONBLE APEX COURT RENFERRED IN THE CASE OF MADAN GO PAL RADHEY LAL (SUPRA) AND IN THE CASE OF SCHEDULE INVE STMENT CO. LTD. (SUPRA). CONSIDERING ALL THESE FACTS OF TH E PRESENT CASE WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) BECAUSE NEITHER THE ASSESSING OFFICER NOR THE LD. DEPARTMENTAL REPRESENT ATIVE OF THE REVENUE COULD BRING ANYTHING ON RECORD TO S HOW THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PURCHAS E AND SALE OF SHARES ON REGULAR BASIS AND HENCE MERELY BE CAUSE AS PER THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIA TION THE ASSESSEE CAN DEAL IN SHARES IT CANNOT BE HELD THAT ANY TRANSACTION BY THE ASSESSEE FOR PURCHASE OF SHARES OR FOR SALE OF SHARES PURCHASED IN EARLIER YEARS IS A BUS INESS TRANSACTION. WE THEREFORE UPHOLD THE ORDER OF LD . COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 6.1 SINCE THE FACTS OF THE PRESENT CASE ARE IDENTIC AL BOTH THE COUNSELS FAIRLY AGREED THAT THE ISSUE IS COVERED. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME T AX (APPEALS). ASSESSEES CROSS OBJECTION 7. IN THE CROSS OBJECTION IT HAS BEEN URGED THAT LD . COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN MAKING AN ENHANCEME NT OF DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT . IT HAS FURTHER BEEN URGED THAT NO ADHOC DISALLOWANCE CAN BE LEGAL LY MADE IN THE CASE OF THE ASSESSEE. ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 10 7.1 ON THIS ISSUE ASSESSING OFFICER NOTED THAT ASS ESSEE WAS ASKED TO SHOW CAUSE WHY DISALLOWANCE BE NOT MADE U/S 14A AGAI NST EXEMPT INCOME. AGAINST THIS ASSESSEE SUBMITTED THAT NO EXP ENDITURE ATTRIBUTABLE TO EXEMPT INCOME DURING THE YEAR RELEVA NT YEAR WAS INCURRED. HOWEVER ASSESSING OFFICER DID NOT ACC EPT THIS CONTENTION. HE HELD THAT A PART OF EXPENSES TOWARDS SALARY A DMINISTRATIVE OTHER EXPENSES WOULD HAVE GONE TO MANAGE TAX FREE INVESTME NTS. HENCE ON A ESTIMATE BASIS AN AMOUNT OF ` 25000/- WAS D ISALLOWED FROM TOTAL EXPENDITURES CLAIMED BY THE ASSESSEE. 8. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED THE ITAT DECISION IN THE OF M/S. DAGA CAPITAL MANAGEMENT (P) LTD. AND ASKED THE ASSESSEE TO WORKOUT AS PER RULE 8D WHICH AS PER THE ASSESSEES WORKING COMES TO ` 136838/- AS AGAINST THE ADHOC DISALLOWANCE OF ` 25000/- MADE BY THE ASSESSING OFFICER. IN THE LIGHT OF THE ABOVE DECISION LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSESSING OFFICER I S DIRECTED TO ENHANCE THE DISALLOWANCE AS PER THE WORKING OF RULE 8D AFTER DULY VERIFYING THE WORKING MADE AVAILABLE BY THE ASSESSE E. 9. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 10. LD. COUNSEL ASSESSEE SUBMITTED THAT RULE 8D WAS NOT APPLICABLE FOR THE CONCERNED YEAR. FOR THAT PROPOSITION HE REL IED UPON THE HONBLE MUMBAI HIGH COURT DECISION IN THE CASE OF GODREJ BOYC E MFG. CO. LTD. VS. DCIT IN ITA NO. 626 OF 2010 234 CTR 1. IN THIS C ASE IT WAS HELD THAT RULE 8 D HAS BEEN NOTIFIED ON 24.3.2008 AND WILL BE APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09. THE HONBLE HIGH COURT HAS OVERRULED TRIBUNAL DECISION OF M/S DAGA CAPITAL MANAGEMENT P. LT D. ITA NO. 1422/DEL/2009 & CO NO. 129/DEL/2009 A.Y. 2005-06 11 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. ADMITTEDLY AS PER THE DECISION OF THE HONBLE MUMBAI HIGH COURT CITED ABOVE RULE 8D CANNOT BE APPLIED IN THE ASSESSMENT YEAR INVOLVED IN THIS CASE. HENCE WE RESTORE THE DISALLOWANCE MADE BY THE ASSES SING OFFICER AND SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ENHANCING THE DISALLOWANCE. 12. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20/10/2010 UP ON CONCLUSION OF HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 20/10/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES