LAWKIM LTD ( NOW MERGED WITH GODREJ & BOYCE MFG CO. LTD), MUMBAI v. ADDL CIT 10(2), MUMBAI

ITA 2014/MUM/2010 | 2003-2004
Pronouncement Date: 19-01-2011

Appeal Details

RSA Number 201419914 RSA 2010
Bench Mumbai
Appeal Number ITA 2014/MUM/2010
Duration Of Justice 10 month(s) 7 day(s)
Appellant LAWKIM LTD ( NOW MERGED WITH GODREJ & BOYCE MFG CO. LTD), MUMBAI
Respondent ADDL CIT 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2011
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 19-01-2011
Assessment Year 2003-2004
Appeal Filed On 12-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI R.S. PADVEKAR (JM ) I.T.A.NO. 3653/MUM/09 & 2014/MUM/10 (A.YS. 2005-06 & 2003-04) ) M/S. LAWKIM LTD. GODREJ & BOYCE MFG.CO.LTD. - LAWKIM MOTORS GROUP PLANT 19A PIROJSHANAGAR LBS MARG VIKHROLI MUMBAI-400 079. PAN:AAACL2462N VS. DY. COMMR. OF INCOME-TAX-10(2) AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI NILESH JOSHI. RESPONDENT BY SHRI S HRAVAN KUMAR. O R D E R PER R.S. SYAL AM : THESE TWO APPEALS BY THE ASSESSEE RELATE TO ASSTT. YEARS 2003-04 AND 2005-06. SINCE SOME OF THE ISSUES RAISED IN THESE A PPEALS ARE COMMON WE ARE THEREFORE PROCEEDING TO DISPOSE THEM OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. A.Y. 2003-04: 2. BRIEFLY STATED FACTS OF THIS CASE ARE THAT THE A SSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ELECTRIC MOTORS . DIVIDEND OF RS.12 90 164/- WAS EARNED WHICH WAS OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO CONSIDERED THE PROVISIONS OF SEC. 14A IN THE BODY OF THE ASSESSMENT ORDER. ON PAGE 15 HE NOTED THAT AS IN T HE IMMEDIATELY PRECEDING ASSESSMENT YEAR SOME DISALLOWANCE WAS MADE BY ESTIM ATING EXPENSES ATTRIBUTABLE TO THE EARNING OF DIVIDEND INCOME IN THE LIKE MANNER HE MADE DISALLOWANCE OF RS.3 00 000/- ON ESTIMATE BASIS. WH ILE COMPUTING THE TOTAL INCOME HE ADDED BACK A SUM OF RS.3 00 000/-BY GIVI NG THE NARRATION EXPENSES ATTRIBUTABLE TO EARNING DIVIDEND INCOME IN THE COM PUTATION OF INCOME UNDER THE ITA NOS.3653/M/09 & 2014/M/10 2 HEAD PROFITS AND GAINS OF BUSINESS. WHILE COMPUTI NG INCOME FROM OTHER SOURCES HE TOOK THE FIGURE OF DIVIDEND ON SHARES OF COMPANIES AND UNITS OF UTI ETC. AT RS.12 90 164/- AND THEREAFTER REDUCED A SUM OF RS.3 00 000/- WITH THE NARRATION EXPENSES ATTRIBUTABLE TO EARNING DIVIDE ND INCOME (AS DISCUSSED ABOVE). THE REMAINING AMOUNT OF RS9.90 LACS WAS IN CLUDED IN THE TOTAL INCOME. WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A) HE D IRECTED THE AO TO WORK OUT THE ADDITION U/S.14A AS PER RULE 8D. THE ASSESSEE I S AGGRIEVED AGAINST THAT. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE DIVIDEND INCOME O F RS.12.90 LAKHS EARNED BY THE ASSESSEE WAS RIGHTLY OFFERED FOR TAXATION AS THE S AME WAS NOT EXEMPT U/S.10(33) FOR THIS PARTICULAR YEAR. THE AO ALSO AS SESSED THIS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES BUT SHIFTED A SUM OF RS.3 00 000/- TOWARDS EXPENSES FROM THE `BUSINESS INCOME TO THE `INCOME FROM OTHER SOURCES. THIS EXERCISE DONE BY THE AO IS TAX NEUTRAL INASMUCH AS THERE WAS NO NET ADDITION OR DISALLOWANCE MADE BY THE AO. ON ONE HAND A SUM OF R S.3 00 000/- WAS DISALLOWED AND ON THE OTHER HAND THE SAME AMOUNT WA S ALLOWED UNDER INCOME FROM ANOTHER HEAD. WHEN THERE WAS NO INCOME EXEMPT U/S.10 IN THIS YEAR NATURALLY THE PROVISIONS OF SEC.14A COULD NOT HAVE BEEN APPLIED AS IT WAS RIGHTLY DONE BY THE AO HIMSELF BY CONSIDERING THE M ANDATE OF SEC. 14A IN THE BODY OF THE ORDER BUT CHOOSING NOT TO MAKE ANY D ISALLOWANCE UNDER THIS SECTION. IN OUR CONSIDERED OPINION THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTORING THE MATTER TO THE FILE OF AO WITH A DIRECTION TO CO MPUTE DISALLOWANCE OF EXPENSES U/S.14A READ WITH RULE 8D FOR THE OBVIOUS REASON TH AT THE INCOME FROM DIVIDEND WAS IN FACT TAXABLE IN THIS YEAR AND THE ASSESSEE R IGHTLY OFFERED THE SAME ACCORDINGLY. THE PRE-REQUISITE FOR APPLICATION OF SECTION 14A IS THAT THERE SHOULD BE SOME INCOME WHICH IS NOT CHARGEABLE TO TAX. IF T HERE IS NO EXEMPT INCOME THE ITA NOS.3653/M/09 & 2014/M/10 3 APPLICATION OF SEC. 14A READ WITH RULE 8D IS AUTOMA TICALLY RULED OUT. WE THEREFORE SET ASIDE THE IMPUGNED ORDER ON HIS ISSU E. 4. IN THE RESULT THE APPEAL IS ALLOWED TO THIS EXT ENT. A.Y. 2005-06: 5. IN THIS APPEAL THE ONLY ISSUE IS AGAINST TH E DISALLOWANCE U/S 14A. IN THIS YEAR THE DIVIDEND INCOME WAS EXEMPT AND THE PROVISI ONS OF SEC. 14A ARE RIGHTLY APPLICABLE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE RAISED IN THIS AP PEAL IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) IN WHIC H IT HAS BEEN HELD THAT DISALLOWANCE IS CALLED FOR U/S.14A IN SUCH CIRCUMST ANCES. HOWEVER THE MANNER OF COMPUTATION OF SUCH DISALLOWANCE HAS BEEN RESTORED TO THE FILE OF AO FOR MAKING ON SOME REASONABLE BASIS. IT HAS FURTHER BEEN HELD IN THIS CASE THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE AS THESE ARE PROSPECTIVE . RESPECTFULLY FOLLOWING THE PRECEDENT WE SET ASIDE THE IMPUGNED ORDER AND DIRE CT THE AO TO COMPUTE DISALLOWANCE U/S.14A IN ACCORDANCE WITH THE RATIO L AID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORENOTED CASE OF GODREJ & BOYCE LTD. 7. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THE 19TH DAY OF JANUARY 20 10. SD/- SD/- (R.S. PADVEKAR) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 19TH JANUARY 2010. NG: ITA NOS.3653/M/09 & 2014/M/10 4 COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-X MUMBAI. 4 CIT MUM. CITY-X MUMBAI. 5.DR A BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA NOS.3653/M/09 & 2014/M/10 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 13-1-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 17-1-201 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *