Minda Industries Ltd, New Delhi v. DCIT, New Delhi

ITA 1667/DEL/2009 | 2004-2005
Pronouncement Date: 18-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 166720114 RSA 2009
Bench Delhi
Appeal Number ITA 1667/DEL/2009
Duration Of Justice 2 year(s) 6 month(s) 25 day(s)
Appellant Minda Industries Ltd, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 18-11-2011
Date Of Final Hearing 14-11-2011
Next Hearing Date 14-11-2011
Assessment Year 2004-2005
Appeal Filed On 23-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 1667(DEL)2009 ASSESSMENT YEAR: 2004-05 MINDA INDUSTRIES LTD. DY.COMMISSIO NER OF INCOME TAX B-64/1 WAZIRPUR INDL.AREA V. CIRCLE 6(1) NEW DELHI. DELHI-52. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP DINODIA CA RESPONDENT BY: DR.B.R.R . KUMAR SR. DR ORDER PER A.D. JAIN J.M . THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004- 05 TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN REDUCING THE 90 PERCENT OF THE FOLLOWING FROM THE PROFIT OF THE BUSINESS AS PER EXPLANATION (BAA) OF SECTION 80 H HC OF THE ACT. ` A) EXCESS PROVISION/UNCLAIMED AMOUNT WRITTEN BACK 11 62 745/- ITA 1667(DEL)09 2 MISC. INCOME ` B) JOB INCOME 9 750 C) ROYALTY 2 28 700 D) SCRAP SALE 3 97 717 6 36 167/- E) EXEMPT BENEFIT ON EXPORTS OF OTHERS 1 35 45 354/- 1 53 44 266/- KEEPING IN VIEW OF VARIOUS JUDGMENTS AND ACCEPTED A CCOUNTING POLICIES ALL THE ABOVE AMOUNTS ARE RELATED TO BUSI NESS ACTIVITIES OF THE APPELLANT AND SHOULD NOT BE REDUCED FROM THE P ROFIT OF THE BUSINESS AS PER EXPLANATION (BAA) OF SECTION 80 HH C OF THE ACT. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN NOT REDUCING 90 PERCENT OF EXP ORT BENEFIT ON EXPORTS OF OTHERS AMOUNTING TO ` 1 35 45 354/- AS PER PROVISION TO SUB-SECTION (3) OF SECTION 80 HHC OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING THE ACTIO N OF THE LD. AO IN REDUCING THE QUANTUM OF LONG TERM CAPITAL LOSS FR OM ` 5 13 924/- TO ` 1 43 434/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO RECALCULATE THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES AS AGAINST DISALLOWANCE OF ` 50 000/- MADE BY THE ASSESSING OFFICER. 2. APROPOS GROUND NO.1 THE ASSESSING OFFICER REDUC ED NINETY PER CENT OF THE FOLLOWING ITEMS FOR COMPUTING THE ASSESSEES BUSINESS PROFITS APPLYING EXPLANATION (BAA) TO SECTION 80 HHC OF THE I.T. ACT:- ITA 1667(DEL)09 3 ` I) EXCESS PROVISION/UNCLAIMED AMOUNT WRITTEN BACK 11 62 745/- II) JOB INCOME 9 750/- III) ROYALTY 2 28 700/- IV) SCRAP SALES 3 97 717/- V) EXEMPT BENEFIT OF EXPORTS OF OTHERS 1 35 45 354/- 3. THE LEARNED CIT(A) CONFIRMED THE SAID ACTION OF THE AO. 4. AT THE OUTSET THE LEARNED COUNSEL FOR THE ASSES SEE STATES AT THE BAR THAT HE DOES NOT PRESS THE ASSESSEES CLAIM REGARDING TH E JOB INCOME THE ROYALTY AND THE EXEMPT BENEFIT ON EXPORT OF OTHERS. REJEC TED AS NOT PRESSED. 5. SOFAR AS REGARDS THE EXCESS PROVISION/UNCLAIMED AMOUNT WRITTEN BACK THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE AUTHORITIES BELOW HAVE ERRED IN REDUCING NINETY PERCENT THEREOF FROM THE A SSESSEES PROFIT OF BUSINESS. RELIANCE HAS BEEN PLACED ON THE FOLLOWI NG DECISIONS:- 1. CIT V. ABDUL REHMAN INDUSTRIES 293 ITR 475(MAD); 2. CLAAS INDIA LTD. V. ACIT 119 TTJ (DEL)173; 3. POLYPLEX CORPN. LTD. V. ITO WARD 14(4) NEW DELHI 176 TAXMANN (MAG) 56(DEL); 4. CIT BANGALORE V. DAVANAM JEWELLERS 195 TAXMANN 394(KAR). 6. CONCERNING THE SCRAP SALE REITERATING THE ABOVE ARGUMENTS RELIANCE HAS BEEN PLACED ON FENNER (INDIA)LTD. V. CIT 241 ITR 803(MAD). 7. IT HAS BEEN CONTENDED THAT THESE ITEMS ARE THE N ORMAL INCIDENCE OF THE ASSESSEES BUSINESS. ITA 1667(DEL)09 4 8. THE LD. DR ON THE OTHER HAND HAS SUPPORTED THE IMPUGNED ORDER IN THIS REGARD CONTENDING THAT THE MISC.INCOME AND T HE AMOUNTS WRITTEN BACK DID NOT RELATE TO THE PROFITS OF THE YEAR UNDER CON SIDERATION AND THE EXPORT BENEFITS WERE RIGHTLY REDUCED FROM THE PROFITS OF T HE BUSINESS IN VIEW OF THE EXPLANATION (BAA) OF SECTION 80 HHC OF THE ACT. 9. SO FAR AS REGARDS THE EXCESS PROVISION/UNCLAIMED AMOUNT WRITTEN BACK IN ABDUL REHMAN INDUSTRIES (SUPRA) IT HAS BEEN H ELD THAT WHERE THERE WERE CREDITS APPEARING IN THE BOOKS ON THE BASIS OF PURCHASE OF ITEMS FOR VARIOUS SUPPLIERS AND THEIR SUPPLIERS WERE NOT PAID THE UNCLAIMED CREDIT BALANCE WERE BROUGHT TO THE PROFIT AND LOSS ACCOUNT AND IT EMANATED FROM THE TRADING TRANSACTION ONLY THE TRANSACTIONS WERE CON NECTED OR CLOSELY LINKED WITH THE ASSESSEES BUSINESS ACTIVITIES; THAT THE R ECEIPTS HAD ARISEN ONLY OUT OF ORDINARY TRADING TRANSACTIONS AND THEREFORE THE Y HAD RIGHTLY BEEN ASSESSED AS BUSINESS RECEIPTS ENTITLING THE ASSESSEE TO THE BENEFIT U/S 80 HHC OF THE ACT. THE RECEIPTS WERE FROM SALES AND SUPPLIES AND COMPONENTS GOT MANUFACTURED FROM OUTSIDERS. THE ASSESSEE WAS ENGA GED IN THE MANUFACTURE AND SALE OF HARVESTER OUTSOURCING MANUFACTURE OF SOME OF ITS SUPPLIES AND COMPONENTS ON THE BASIS OF IMPORTED TECHNOLOGY AS P ER DESIGNS AND SPECIFICATIONS SUPPLIED BY IT UNDER ITS DIRECT CONT ROL AND SUPERVISION PUTTING ITA 1667(DEL)09 5 THEM TO FURTHER PROCESSING IN ITS OWN INDUSTRIAL UN DERTAKING TO MAKE THEM MARKETABLE. THE PROFITS DERIVED FROM SUCH SPARES AND COMPONENTS WERE HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE ACT. 10. IN POLYPLEX CORPN. LTD. (SUPRA) IT WAS HELD THAT THE AMOUNT OF EXCESS PROVISION OF EXPENSES OF EARLIER YEARS WRITT EN BACK IN THE RELEVANT ASSESSMENT YEAR FORMS PART OF PROFITS OF BUSINESS A S COMPUTED UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION BUT CANNOT BE CONSIDERED IN THE NATURE OF BROKERAGE COMMISSION INTEREST R ENT CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFITS PROVIDED IN CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80 HHC OF THE ACT; AND T HAT THEREFORE THE AO WAS NOT JUSTIFIED IN REDUCING NINETY PERCENT OF THE EXCESS PROVISION WRITTEN BACK WHILE COMPUTING THE PROFITS OF BUSINESS OF THE RELEVANT ASSESSMENT YEAR FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80 HHC O F THE ACT. 11. IN CLAAS INDIA LTD. (SUPRA) IT HAS BEEN HELD THAT PROVISION WRITTEN BACK MERELY REDUCES THE EXPENDITURE CLAIMED AND HEN CE IT CANNOT BE EXCLUDED WHILE COMPUTING THE PROFITS OF BUSINESS UN DER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80 HHC OF THE ACT; THAT THE PROVISION WRITTEN BACK CANNOT BE CONSIDERED TO BE OF THE NATURE OF MISC.IN COME OR INTER-CONNECTED WITH THE BUSINESS OF EXPORTS FOR THE PURPOSE OF CL AUSE (BAA) OF THE EXPLANATION TO SECTION 80 HHC OF THE ACT; AND THAT THEREFORE THE AO CANNOT ITA 1667(DEL)09 6 EXCLUDE NINETY PERCENT OF THE PROVISION WRITTEN BAC K FOR THE PURPOSE OF COMPUTING PROFITS OF BUSINESS IN ARRIVING AT DEDUCT ION U/S 80 HHC OF THE ACT. 12. IN VIEW OF THE ABOVE WE FIND THAT IT HAS BEEN JUDICIALLY HELD BY DIFFERENT COURTS THAT PROVISION WRITTEN BACK CANNOT BE CONSIDERED AS MISC.INCOME OR ANY OTHER RECEIPT OF A SIMILAR NATUR E INCLUDED IN THE PROFITS OF BUSINESS AS PROVIDED IN CLAUSE (BAA) OF THE EXPLAN ATION TO SECTION 80 HHC OF THE ACT. THEREFORE THE EXCESS PROVISION WRITT EN BACK IN THE CASE OF THE ASSESSEE WAS WRONGLY REDUCED TO THE EXTENT OF NINET Y PERCENT WHILE COMPUTING THE PROFITS OF BUSINESS OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION U/S 80 HHC OF THE ACT. THIS ISSUE IS THEREFORE DECIDED IN FAVOUR OF THE ASSESSEE 13. COMING TO THE OTHER ITEM SCRAP SALES THE LD. DR HAS REITERATED THAT THE INCOME FROM SCRAP SALES MADE HAD TO BE ATTRIBUT ABLE TO AN INDUSTRIAL UNDERTAKING BUT IT DEFINITELY IS NOT DERIVED FROM UNDERTAKING DOING THE BUSINESS OF EXPORT FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80HHC OF THE ACT; AND THAT THEREFORE NINETY PERCENT OF THE SCRAP SALES HAS RIGHTLY BEEN REDUCED FROM THE PROFITS OF THE BUSINESS IN ACCORDA NCE WITH CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80 HHC OF THE ACT. ITA 1667(DEL)09 7 14. IN FENNER (INDIA)LTD. (SUPRA) IT HAS BEEN CA TEGORICALLY HELD THAT IN THE INDUSTRIAL UNDERTAKING WHERE SCRAP MATERIAL RES ULTED SUCH SCRAP MATERIAL HAD SALEABLE VALUE AND IT HAD DIRECT NEXUS WITH THE INDUSTRIAL UNDERTAKING FOR WHICH THE SCRAP MATERIAL WAS ELIGIBLE FOR DEDUCTIO N U/S 80 HH OF THE ACT. 15. THE FACTUM OF SCRAP MATERIAL RESULTING IN THE A SSESSEES BUSINESS REMAINED UNDISPUTED. BESIDES SUCH SCRAP MATERIAL BEING OF A SALEABLE VALUE HAS ALSO REMAINED UNCHALLENGED. THE ISSUE OF SUCH SCRAP MATERIAL HAVING A DIRECT CONNECTION WITH THE INDUSTRIAL UNDERTAKING H AS BEEN SETTLED IN FAVOUR OF THE ASSESSEE IN FENNER (INDIA)LTD.(SUPRA) UN DER SIMILAR CIRCUMSTANCES. FENNER (INDIA)LTD. (SUPRA) HAS BEEN FOLLOWED IN CIT V. SUNDARAM INDUSTRIES LTD. 253 ITR 396(MAD). 16. THEREFORE ON THIS ISSUE ALSO THE GRIEVANCE OF THE ASSESSEE IS JUSTIFIED AND IS ACCEPTED. IT IS HELD THAT NINETY PERCENT OF THE SCRAP SALES HAS WRONGLY BEEN REDUCED BY THE AUTHORITIES BELOW. 17. IN SUM GROUND NO.1 IS ACCEPTED. 18. MOVING TO GROUND NO.2 THE FACTS ARE THAT THE A SSESSEE HAD CLAIMED A LONG TERM CAPITAL LOSS ON SALE OF ` 2 85 00 000/- EQUITY SHARES OF M/S. MINDARIKA (P)LTD. AT ` 5 13 934/-. THE SHARES HAD BEEN PURCHASED IN FINANCIAL YEAR 1996-97. THE WHOLE LOT WAS SOLD @ ` 15/- PER SHARE BEFORE 31.3.04. THE LONG TERM CAPITAL LOSS HAD BEEN WORK ED OUT BY THE ASSESSEE ITA 1667(DEL)09 8 AFTER APPLYING THE INDEXATION COST OF ACQUISITION. THIS CAME TO ` 5 13 934/-. THE AO ON THE OTHER HAND ON THE BASIS OF AUDITED BALANCE SHEET OF M/S. MINDARIKA (P)LTD. AS ON 31.3.04 TOOK THE BOOK VALU E OF SHARES @ ` 15.13 AND THEREBY ASSESSED THE LONG TERM CAPITAL LOSS OF ` 1 43 434/- AFTER APPLYING THE INDEXED COST OF ACQUISITION. 19. BY VIRTUE OF THE IMPUGNED ORDER THE LD. CIT(A) CONFIRMED THE AFORESAID ACTION OF THE AO OBSERVING THAT THE AO H AD ONLY ADOPTED THE ACTUAL BOOK VALUE AS GIVEN IN THE AUDITED BALANCE S HEET OF M/S. MINDARIKA (P)LTD. AS ON 31.3.04. 20. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE AO HAD ERRED IN SUBSTITUTING HIS OWN VALUE FOR THE AGREED TRANSACTION WHICH WAS @ ` 15/- PER SHARE; THAT THE NOTIONAL VALUE TAKEN BY TH E AO AT @ ` 15.13 IS IMPERMISSIBLE U/S 48 ; THAT OTHERWISE TOO THE VALU E TAKEN BY THE ASSESSEE IS AS PER THE BALANCE SHEET AND SO EVEN ON MERITS IT IS THE ASSESSEES VALUATION WHICH IS CORRECT; THAT THE LD. CIT(A) HAS FAILED TO CONSIDER THAT SINCE THE SALE TOOK PLACE BEFORE 31.3.04 THE BOOK VALUE AS PER TH E AUDITED BALANCE SHEET OF M/S. MINDARIKA (P)LTD. AS ON 31.3.04 COULD NOT HAVE BEEN TAKEN INTO CONSIDERATION; THAT IT IS JUST A VARIATION IN THE A SSESSEES LOSS AND THAT TOO A VERY SMALL VARIATION OF 13 PAISE; AND THAT THERE BE ING ANY ALLEGATION OF PROFIT ITA 1667(DEL)09 9 OUT OF BOOKS. IT HAS BEEN CONTENDED THAT THE ACTU AL CONSIDERATION RECEIVED CANNOT BE SUBSTITUTED WITH SOME ESTIMATED PRICE. FOR THIS RELIANCE HAS BEEN PLACED ON 1. K.P. VARGHESE V. ITO 131 ITR 597(SC); 2. CIT V. V.S. BALASUBRAMANIAM 159 ITR 288(MAD); 3. CIT V. GODAVARY CORPN. 200 ITR 567(SC); 4. CIT V. I.P. CHAUDHARI 328 ITR 7; 5. CIT V. S.K. CONSTRUCTION CO. 167 TAXMANN 171(DEL ); 6. PREM NARAIN & CO. V. CIT 161 TAXMANN 361(P&H). IT HAS BEEN CONTENDED THAT AS HELD IN CIT V. V.S. BALASUBRAMANIAM 159 ITR 288(MAD) (SUPRA) FOR THE PURPOSE OF SECTION 5 5 OF THE ACT RULE 1D OF THE W.T. RULES AFFORDS A GOOD GUIDE-LINE FOR DETERM INING THE VALUE OF THE SHARES. IT HAS BEEN FURTHER SUBMITTED THAT IN BHAR AT HARI SINGHANIA V. CIT 73 TAXMANN 3(SC) IT HAS BEEN HELD THAT IT IS OBLIG ATORY TO FOLLOW RULE 1D OF THE W.T. RULES IN EVERY CASE WHERE UNQUOTED EQUITY SHARES ARE ACCOMPANYING OTHER THAN AN INVESTMENT COMPANY OR A MANAGING AGENCY COMPANY HAVE TO BE VALUED. 21. THE LD. DR ON THE OTHER HAND HAS STRONGLY REL IED ON THE IMPUGNED ORDER CONTENDING THAT THE FACTUM OF THERE BEING LO SS DOES NOT MAKE ANY DIFFERENCE; THAT THE SHARES WERE SOLD ABOUT FOUR MO NTHS BEFORE 31.3.04 AND IT WAS DIFFICULT TO DETERMINE THE DAY TO-DAY VALUE OF THE SHARES; AND THAT SO THE ITA 1667(DEL)09 10 BOOK VALUE AS PER THE AUDITED BALANCE SHEET OF M/S . MINDARIKA (P)LTD. AS ON 31.3.04 WAS CORRECTLY TAKEN. 22. THE ISSUE IS AS TO WHETHER THE AUTHORITIES BELO W HAVE CORRECTLY SUBSTITUTED THE FULL VALUE OF CONSIDERATION OF TH E SHARES I.E. OF ` 15/- WITH THAT OF ` 15.13. IT REMAINS UNDISPUTED THAT THE SHARES WERE SOLD SOME FOUR MONTHS PRIOR TO 31.3.04 WHEREAS THE VALUE ADOPTED WAS THE BOOK VALUE AS PER THE AUDITED BALANCE SHEET OF M/S. MINDARIKA (P) LTD. AS ON 31.3.04. NO RULE GOVERNING SUCH A SITUATION UNDER THE I.T. ACT HAS BEEN SHOWN TO EXIST. IN SUCH A SITUATION AS HELD IN BHARAT HARI SINGHA NIA (SUPRA) AND V.S. BALASUBRAMANIAM (SUPRA) THE W.T. RULES HOLD A GOO D GUIDE-LINE AND IN FACT RULE 1D OF THE W.T. RULES HAS BEEN HELD IN B HARAT HARI SINGHANIA (SUPRA) TO BE OBLIGED TO BE FOLLOWED WHERE UNQUOTED EQUITY SHARES OF A COMPANY OTHER THAN AN INVESTMENT COMPANY OR A MANAG ING AGENCY COMPANY HAVE TO BE VALUED. 23. FURTHER IN K.P. VARGHESE V. ITO (SUPRA) GO DAVARY CORPN.(SUPRA) I.P. CHAUDHARI (SUPRA) S.K. CON STRUCTION CO.(SUPRA) AND PREM NARAIN & CO.(SUPRA) IT HAS BEEN CATEGOR ICALLY HELD THAT FULL VALUE OF CONSIDERATION CANNOT BE SUBSTITUTED BY A N OTIONAL VALUE. THIS IS PARTICULARLY SO WHEN AS IN THE PRESENT CASE THER E IS NO MATERIAL BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAD RECEIVED ANY THING OVER AND ABOVE THE ITA 1667(DEL)09 11 SALE PRICE DECLARED AT ` 15/- PER SHARE. RATHER IT IS NOT EVEN THE DEPARTMENTS ALLEGATION HEREIN THAT THE SALE PRICE OF THE SHARES HAD BEEN UNDERSTATED BY THE ASSESSEE. 24. IN THE ABOVE VIEW OF THE MATTER FINDING FORCE IN GROUND NO.2 TAKEN BY THE ASSESSEE THE SAME IS ACCEPTED THE ACTION OF T HE AO IN REDUCING QUANTUM OF LONG TERM CAPITAL LOSS FROM ` 5 13 924/- TO ` 1 43 434/- IS REVERSED AND THE LOSS IS DIRECTED TO BE TAKEN AT ` 5 13 924/-. 25. THE LAST GROUND I.E. GROUND NO.3 ALLEGES THA T THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO RECALCULATE THE DISALL OWANCE U/S 14A OF THE I.T. ACT READ WITH RULE 8D OF THE I.T. RULES AS AGAINST DISALLOWANCE OF ` 50 000/- MADE BY THE AO. HERE IT IS SEEN THAT THE AO MADE AN ESTIMATED DISALLOWANCE OF ` 50 000/-. IT WOULD BE APPROPRIATE TO REPRODUCE HER EUNDER THE RELEVANT OBSERVATIONS MADE BY THE AO:- THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED. A LTHOUGH IT IS CLEAR FROM THE FACTS OF THE CASE THAT THE ASSESSEE DID NO T INCUR ANY INTEREST EXPENSES FOR MAKING INVESTMENT IN SHARES AGAINST WH ICH THE DIVIDEND INCOME HAS BEEN EARNED. BUT IT IS ALSO TRUE THAT T HE ASSESSEE WOULD HAVE REQUIRED SOME PERSON/EMPLOYEES TO KEEP TRACK A ND MAINTAIN THE DETAILS OF DIVIDEND INCOME EARNED. AND FOR THIS P URPOSE THE ASSESSEE WOULD HAVE INCURRED EXPENDITURE ON STATIONARY TELE PHONE TRAVEL & CONVEYANCE SALARY OTHER ADMINISTRATIVE AND MAINTE NANCE EXPENSES ETC. IT IS PRACTICALLY NOT POSSIBLE THAT THE ASSES SEE WOULD NOT HAVE INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOM E. IN VIEW OF THIS ITA 1667(DEL)09 12 DISCUSSION ` 50 000/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME U/S 14A OF THE I.T. ACT. 26. FROM THE ABOVE IT IS CLEAR THAT IT IS AN ADMIT TED CASE OF THE AO THAT THE ASSESSEE DID NOT INCUR ANY INTEREST EXPENSE FOR MAKING INVESTMENT IN SHARES AGAINST WHICH THE DIVIDEND INCOME HAD BEEN EARNED. THE LEARNED CIT(A) CONFIRMED THE AOS ACTION. 27. WHILE PASSING THE IMPUGNED ORDER THE LD. CIT(A ) HAS PLACED RELIANCE ON THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN D AGA CAPITAL MANAGEMENT (P)LTD.. THIS DECISION HOWEVER HAS SINCE BEEN O VER-TURNED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE 328 ITR 81(BOM). ACCORDING TO GODREJ & BOYCE RULE 8D OF THE I.T. RULES IS NOT APPLICABLE RETROSPECTIVELY. IN CONSONANCE WITH GODREJ & BOYC E THE YEAR UNDER CONSIDERATION BEING ASSESSMENT YEAR 2004-05 AND RUL E 8D HAVING BEEN BROUGHT IN FROM ASSESSMENT YEAR 2007-08 THE SAID R ULE IS NOT APPLICABLE. FURTHER EVEN SECTION 14A SUB-SECTIONS (2) & (3) WERE INSERTED IN THE ACT W.E.F. 1.4.07 BY FINANCE ACT 2006. SUB-SECTION (2) OF SECTION 14A IS APPLICABLE FOR ASSESSMENT YEAR 2007-08 ONWARDS AND THEREFORE ALSO RULE 8D OF THE I.T. RULES IS NOT APPLICABLE TO THE YEAR UND ER CONSIDERATION. THIS OBSERVATION FINDS STRENGTH FROM IMPULSE (INDIA)(P) LTD. V. ACIT 22 SOT 368 (DEL). MOREOVER GODREJ & BOYCE HAS HELD THA T ONLY SUCH EXPENSES ITA 1667(DEL)09 13 CAN BE DISALLOWED U/S 14A OF THE ACT WHICH CAN BE ATTRIBUTED TO EARN EXEMPT INCOME. AS OBSERVED HEREIN ABOVE THE AO IN THE P RESENT CASE HAS HIMSELF ADMITTED THAT NO EXPENSES WERE INCURRED BY THE ASSE SSEE TO EARN THE EXEMPT INCOME. IT WAS ONLY AN ESTIMATE WHICH WAS MADE. THIS IS IMPERMISSIBLE IN VIEW OF GODREJ & BOYCE(SUPRA). 28. HENCE GROUND NO.3 IS ALSO ACCEPTED. 29. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18.11.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR ITA 1667(DEL)09 14