CITICROP FINANCE (I) LTD, MUMBAI v. ADDL CIT RG 10(1), MUMBAI

ITA 2973/MUM/2009 | 2004-2005
Pronouncement Date: 28-09-2011 | Result: Allowed

Appeal Details

RSA Number 297319914 RSA 2009
Assessee PAN AABCC4881F
Bench Mumbai
Appeal Number ITA 2973/MUM/2009
Duration Of Justice 2 year(s) 4 month(s) 20 day(s)
Appellant CITICROP FINANCE (I) LTD, MUMBAI
Respondent ADDL CIT RG 10(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 28-09-2011
Date Of Final Hearing 13-02-2012
Next Hearing Date 13-02-2012
Assessment Year 2004-2005
Appeal Filed On 08-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI B. RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO. 2973/MUM/2009 ASSESSMENT YEAR- 2004-05 M/S. CITICORP FINANCE (I) LTD. 5 TH FLOOR PLOT C-61 BANDRA KURLA COMPLEX G BLOCK BANDRA EAST MUMBAI-400 051 PAN-AABCC 4881F VS. THE ADDL. CIT RANGE 10(1) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ARVIND SONDE RESPONDENT BY: SHRI DEVI SINGH DATE OF HEARING :19.09.2011 DATE OF PRONOUNCEMENT: 28.09.2011 O R D E R PER B.R. MITTAL JM : THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2004-05 AGAINST THE ORDER OF LD. CIT(A) DT. 06.03.2009 ON FOLLOWING GROUNDS: 1. THE CIT(A)-X MUMBAI [HEREINAFTER REFERRED TO AS TH E CIT(A)] ERRED IN UPHOLDING THE ACTION OF THE ADDITIONAL CIT RANGE 10(1) MUMBAI [HEREINAFTER REFERRED TO AS TO AO] IN MAKING A DISALLOWANCE U/S.14A OF THE ACT. 2. THE CIT(A) ERRED IN HOLDING THAT RULE 8D HAS RETRO SPECTIVE APPLICATION NOTWITHSTANDING THE FACT THAT THE RULE WAS INSERTED BY THE INCOME-TAX (FIFTH AMENDMENT) RULES 2008 W.E.F. 24 TH MARCH 2008 AND HAD NO APPLICATION TO THE YEAR UNDER APPEAL AND ALSO NOTWITHSTANDING THE FACT THAT THE RULE ITA NO. 2973/M/2009 2 WAS INSERTED PURSUANT TO THE PROVISIONS OF SUB-SECT ION (2)AND (3) TO SECTION 14A WHICH WERE INSERTED BY THE FINAN CE ACT 2006 W.E.F. 01 ST APRIL 2007. 3. (A) THE CIT(A) ERRED IN ENHANCING THE ASSESSMENT WI THOUT FOLLOWING THE DUE PROCESS OF LAW AS LAID DOWN IN SE CTION 251(2) OF THE ACT AND THEREBY NOT PROVIDING THE APP ELLANTS A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUC H ENHANCEMENT. (B) THE CIT(A)- ERRED IN ENHANCING THE INCOME BY RS.5 78 29 310/- BY DIRECTING THE AO TO CONSIDER TH E DISALLOWANCE U/S.14A AT RS.11 40 10 585/- AS AGAINS T THE DISALLOWANCE MADE BY THE AO AT RS.5 61 81 275/-. (C) WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE DIR ECTED AO TO RESTRICT THE DISALLOWANCE U/S.14A TO THE DIVIDEND O F RS.3 12 76 133/- CLAIMED AS EXEMPT U/S.10(34) OF TH E ACT. 4. (A) THE CIT(A)- ERRED IN HOLDING THAT DISALLOWAN CE UNDER RULE 8D(2)(II) IS CALLED FOR IN RESPECT OF INTEREST EXPE NDITURE EVEN IN RESPECT OF INVESTMENTS MADE OUT OF CAPITAL INTRODUC ED BY THE APPELLANTS PURSUANT TO THE FIPB APPROVAL AS PER WHI CH THERE WAS A SPECIFIC REQUIREMENT OF INFUSION OF SHARE CAP ITAL FROM PARENT COMPANY FOR THE PURPOSE OF INVESTING IN SUBS IDIARIES. (B) THE CIT(A) OUGHT TO HAVE HELD THAT SINCE THE CA PITAL INTRODUCED WAS SUFFICIENT TO TAKE CARE OF THE INVES TMENT NO INTEREST WAS REQUIRED TO BE ALLOCATED. (C) THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE H AS TO PROVE THAT THE BORROWED FUNDS HAVE BEEN UTILIZED TO EARN INCOME WHICH IS NOT EXEMPT AND NOT THAT THE INVESTMENTS HA VE BEEN MADE OUT OF SURPLUS FUNDS. (D) WITHOUT PREJUDICE THE CIT(A)- ERRED IN NOT ACC EPTING THE APPELLANTS CONTENTION THAT ONLY DIVIDEND YIELDING I NVESTMENTS IF ANY SHOULD BE CONSIDERED FOR THE PURPOSE OF COM PUTING THE DISALLOWANCE UNDER RULE 8D(2)(II). 5. (A) THE CIT(A)- ERRED IN NOT ACCEPTING THE APPEL LANTS CONTENTION THAT NO DISALLOWANCE IN RESPECT OF ADMINISTRATIVE E XPENSES IS CALLED FOR AS NO SEPARATE INFRASTRUCTURE OR ADMINIS TRATIVE MACHINERY WAS REQUIRED FOR THE PURPOSE FOR EARNING DIVIDEND INCOME . (B) WITHOUT PREJUDICE THE CIT(A) ERRED IN NO ACCE PTING THE APPELLANTS CONTENTION THAT ONLY DIVIDEND YIELDING I NVESTMENTS ITA NO. 2973/M/2009 3 SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE UNDER RULE 8D(2)(II) . (C) WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE AP PRECIATED THAT DISALLOWANCE IF ANY SHOULD BE BASED ON ACTUAL EXPENDITURE INCURRED AND NOT ON SOME ARTIFICIAL BAS IS. 6. (A) THE CIT(A) ERRED IN HOLDING THAT THE VENTURE CAPITAL ADVISORY FEES PAID TO CITIBANK OF RS.64 02 401/- WA S ENTIRELY TOWARDS INVESTMENT ACTIVITY AND IS THEREFORE ENTIRE LY ATTRIBUTABLE TO EARNING DIVIDEND INCOME. (B) THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AMOUNT HAS BEEN INCURRED FOR NON-BINDING INVESTMENT GUIDANCE A ND CANNOT BE ATTRIBUTED TO EARNING OF DIVIDEND. 2. AT THE TIME OF HEARING LD. AR SUBMITTED THAT TH ERE ARE TWO ISSUES INVOLVED IN THIS APPEAL AND BOTH ARE IN RESPECT OF MAKING DISALLOWANCE U/S. 14A OF THE INCOME TAX ACT R.W. RULE 8D OF INCOME TA X RULES. HE SUBMITTED THAT AO MADE DISALLOWANCE ON ADHOC BASIS AND WHEREA S LD. CIT(A) HAS MADE DISALLOWANCE BY FOLLOWING RULE 8D OF INCOME TAX RUL ES. HE SUBMITTED THAT IN VIEW OF DECISION OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF GODREJ & BOYCE LTD. MFG. CO. VS DCIT (2010) 238 ITR 81 (BOM) RULE 8D IS PROSPECTIVE IN NATURE AND IS APPLICABLE FROM ASSESS MENT YEAR 2008-09. HE SUBMITTED THAT BOTH THE ISSUES MAY BE RESTORED TO T HE FILE OF LD. CIT(A) FOR HIS RECONSIDERATION ON THE BASIS OF THE EVIDENCE AS MAY BE FILED BY THE ASSESSEE. 3. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT HE HAS NO OBJECTION TO RESTORE THE ISSUE INVOLVED IN THIS APP EAL TO THE FILE OF LD. CIT(A) FOR HIS FRESH CONSIDERATION. 4. IN VIEW OF THE ABOVE SUBMISSION OF LD. REPRESENTA TIVES OF BOTH THE PARTIES AND CONSIDERING THE DECISION OF HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. MFG. CO. VS DCIT (SUPRA ) WE FIND SUBSTANCE IN THE SUBMISSION OF LD. AR THAT LD. CIT(A) WAS NOT JU STIFIED TO MAKE DISALLOWANCE U/S. 14A OF INCOME TAX ACT BY FOLLOWING RULE 8D OF INCOME TAX ITA NO. 2973/M/2009 4 RULES AS THE SAID RULE 8D IS NOT APPLICABLE TO ASSE SSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2004-05. HENCE WE SET ASIDE THE ORDER OF LD. CIT(A) ON THE ISSUES INVOLVED IN THIS APPEAL AN D RESTORE THE SAME TO HIS FILE FOR FRESH ADJUDICATION AFTER CONSIDERING EVIDE NCES MAY BE FILED BY THE PARTIES AND AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED FOR S TATISTICAL PURPOSES. 5. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 28 TH DAY OF SEPTEMBER 2011 SD/- SD/- ( B. RAMAKOTAIAH) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 28 TH SEPTEMBER 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 2973/M/2009 5 DATE INITIALS 1. DRAFT DICTATED ON: 19.9.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 20.09.2011 SR. PS/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/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: