Goyal & Co. Construction Pvt.Ltd.,, Ahmedabad v. The Income tax Officer,Ward-4(1,, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON' BLE SHRI N.S.SAINI A.M. ) I.T.A. NO. 1895/AHD./2009 ASSESSMENT YEAR : 2006-2007 GOYAL & CO. CONSTRUCTION PVT. LTD. AHD. - VS- THE I.T.O WARD-4(1) AHD. (PAN : AABCG 5459R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.M.MEHTA A.R. RESPONDENT BY : SHRI SAMIR TEKRIWAL SR .D.R O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 27.03.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VIII AHMEDABAD FOR THE ASSESSMENT YEAR 2006-2007. 2. GROUND NO.1 RAISED BY THE ASSESSEE IN THIS APPEA L IS AS UNDER: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN NOT ACCEPTING THE ASSESSEES PLEA THAT IT IS NOT AT A LL A CASE FIT FOR INVOKING THE PROVISIONS OF SECTION 14A AND HE FURTHER ERRED IN QUANTIFYING THE CONSEQUENTIAL DISALLOWANCE IN A SUM OF RS.2 50 000/ - 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN TH E AFORESAID GROUND OF APPEAL IS THAT THE ASSESSEE COMPANY IS A PARTNER IN A FIRM M/S. GOKULD HAM DEVELOPERS. FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE FIRM HAS FILED THE RETUR N OF INCOME ON 31.12.2006 DECLARING TOTAL INCOME OF RS.67 35 558/- VIA WEB. THE ASSESSING OFF ICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 21.08.2008 WHEREIN HE DISALLOWED RS.4 91 730/- BEING ADMINISTRATIVE EXPENSES UNDER SECTION 14A OF THE I.T. ACT 1961. 4. ON APPEAL AGAINST THE DISALLOWANCE OF RS.4 91 73 0/- UNDER SECTION 14A BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IT WAS CONTENDED THAT IN THE ASSESSMENT YEAR 2 ITA NO. 1895-AHD-2009 UNDER APPEAL THE ASSESSEE HAS EARNED ONLY INTEREST INCOME WHICH HAS BEEN OFFERED TO TAX. THEREFORE PART OF THE ADMINISTRATIVE EXPENSES ATTR IBUTABLE TO SUCH EARNING CANNOT BE DISALLOWED UNDER SECTION 14A. AFTER CONSIDERING THE SUBMISSION S MADE BY THE ASSESSEE IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) SCALED DOWN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.4 91 730/- TO RS.2 5 0 000/-. 5. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US SHRI P.M.MEHTA A.R. APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT THE ASSESSEE HAS NOT RE CEIVED ANY INCOME BY WAY OF SHARE OF PROFIT FROM THE SAID PARTNERSHIP FIRM WHICH IS CONSIDERED AS EXEMPT UNDER SECTION 10(2A) OF THE INCOME TAX ACT 1961. THE ASSESSEE HAS RECEIVED ONL Y INTEREST INCOME WHICH IS TAXABLE UNDER SECTION 28(V) OF THE INCOME TAX ACT 1961 AND THE S AME HAS BEEN OFFERED BY THE ASSESSEE IN ITS RETURN OF INCOME. ON THIS BASIS IT WAS ARGUED THAT PROVISIONS OF SECTION 14A OF THE I.T. ACT ARE NOT APPLICABLE BECAUSE THE ASSESSEE HAS NOT EARNED ANY INCOME BY WAY OF SHARE OF PROFIT FROM THE SAID PARTNERSHIP FIRM WHICH CAN BE CONSIDERED AS TA X-FREE INCOME. APART FROM THIS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IT WAS CONTENDED THAT RULE 8D IS NOTIFIED W.E.F. 24.03.2008 I.E. FROM THE ASSESSMENT YEAR 2008-09. A S HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT REPORTED IN 328 ITR 81 THE PROVISIONS OF RULE 8D ARE NOT RETROSPECTIVE IN NATU RE AND WAS APPLIED W.E.F. ASSESSMENT YEAR 2008-09. ON THIS GROUND IT WAS CONTENDED THAT DISA LLOWANCE UNDER SECTION 14A IN RESPECT OF ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS.2 50 00 0/- SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE DELETED. 7. SHRI SAMIR TEKRIWAL SR.D.R. RELYING ON THE JUD GEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT ( SUPRA ) POINTED OUT THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 BUT FOR EARLIER PERIOD DISALLOWANCE HAS TO BE DETERMINED ON REASONABLE BASIS. HE ACCORDINGLY CONT ENDED THAT DISALLOWANCE OF ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS.2 50 000/- SUSTAINED B Y THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER IS FAIR AND RE ASONABLE AND THE SAME BE UPHELD. 3 ITA NO. 1895-AHD-2009 8. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY CONTROVERSY INVOLVED IN THIS APPEAL IS WHETHER DISALLOWANCE IN RESPECT OF ADMINISTRATIVE EXPENSES CAN BE MADE UNDER SECTION 1 4A OR NOT. ADMITTEDLY AS PER JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. VS- DCIT ( SUPRA ) THE RULE 8D IS NOT RETROSPECTIVE. THIS IS APPLIC ABLE FROM ASSESSMENT YEAR 2008-09. FOR EARLIER PERIOD DISALLOWANCE IS TO BE DETERMINED ON REASONABLE BASIS. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THIS WILL MEET THE ENDS OF JUSTICE IF DISALLOWANCE IN RESPECT OF ADMINISTRATIVE EXPENSES FOR THE ASSESSMENT YEAR UNDER APPEAL IS RESTRICTED TO RS.50 000/- ONLY. WE DIRECT THE ASSES SING OFFICER ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 9. THE 2 ND AND LAST GROUND OF APPEAL IS RELATING TO LEVY OF I NTEREST UNDER SECTION 234A 234B 234C AND 234D OF THE I.T. ACT. 10. LEVY OF INTEREST UNDER THESE SECTIONS IS CONSEQ UENTIAL. THE ASSESSING OFFICER IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF RELATING TO LEVY OF I NTEREST IN THESE SECTIONS. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 25.02.2011. SD/- SD/- (N.S.SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25/02/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED 4) CIT CONCERNED 5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD TALUKDAR/SR.P.S. 4 ITA NO. 1895-AHD-2009