M/s. H.J. SECURITIES P. LTD., MUMBAI v. ACIT - 4(1), MUMBAI

ITA 335/MUM/2009 | 2005-2006
Pronouncement Date: 16-03-2011 | Result: Allowed

Appeal Details

RSA Number 33519914 RSA 2009
Assessee PAN AAACH5600E
Bench Mumbai
Appeal Number ITA 335/MUM/2009
Duration Of Justice 2 year(s) 2 month(s)
Appellant M/s. H.J. SECURITIES P. LTD., MUMBAI
Respondent ACIT - 4(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 16-03-2011
Date Of Final Hearing 16-03-2011
Next Hearing Date 16-03-2011
Assessment Year 2005-2006
Appeal Filed On 15-01-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI VIJAY PA L RAO (JM) ITA NO.335/M/2009 ASSESSMENT YEAR 2005-06 ITA NO.1086/M/2009 ASSESSMENT YEAR 2006-07 M/S.H.J. SECURITIES PVT. LTD. THE DCIT 4(1) 24/26 GROUND FLOOR CAMA BUILDING R.NO.640 6 TH FLOOR DALAL STREET FORT MUMBAI 400 001. AAYAKAR BHAVA N M.K.ROAD MUMBAI 400 020. PAN : AAACH 5600 E APPELLANT RESPONDENT ASSESSEE BY : SHRI S.C.TIWARI REVENUE BY : SHRI A.P.SINGH O R D E R PER RAJENDRA SINGH (AM) THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS DATED 8.10.2008 AND 29.1.2009 OF CIT(A) FOR THE ASS ESSMENT YEAR 2005-06 AND 2006-07. SINCE THE DISPUTE RAISED IS IDENTICAL THESE APPEALS ARE BEING DISPOSED OFF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE IDENTICAL DISPUTE RAISED IN BOTH THE APPEALS IS REG ARDING DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A IN RELATION TO EXEMPT INCOME. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE ASSESSMENT PROCEEDINGS AO NOTED THAT ASSESSEE HAD EARNED DIVID END INCOME OF 2 RS.28 92 294/- AND RS.33 25 686/- FOR THE ASSESSMEN T YEARS 2005-06 AND 2006-07 RESPECTIVELY. THE AO NOTED THAT THE DIVIDEN D INCOME WAS EXEMPT FROM TAX AND THEREFORE EXPENDITURE RELATABLE TO DIVIDEND INCOME WAS REQUIRED TO BE DISALLOWED. HE ALSO OBSERVED THAT THE ASSESSEE HAD INCURRED BOTH DIRECT EXPENSES LIKE DEMAT EXPENSES DEPOSITORY CHARGES S TAMP DUTY CHARGES ETC. AS WELL AS INDIRECT EXPENSES LIKE INFRASTRUCTURAL EXPE NSES AND ADMINISTRATIVE EXPENSES LIKE SALARY ETC IN RELATION TO THE EXEMPT DIVIDEND INCOME. HE THEREFORE ON ESTIMATE ATTRIBUTED 5% OF DIVIDEND INC OME AS THE EXPENSES RELATING TO THE DIVIDEND INCOME. ACCORDINGLY HE DIS ALLOWED SUMS OF RS.1 44 615/- AND RS.1 66 284/- FOR ASSESSMENT YEAR S 2005-06 AND 2006-07 RESPECTIVELY. 3. IN APPEAL CIT(A) OBSERVED THAT EXPENSES RELATIN G TO THE EXEMPT INCOME WERE REQUIRED TO BE DISALLOWED UNDER SECTION 14A(2) AND 14A(3) R.W.R. 8D WHICH IN HIS OPINION WAS APPLICABLE FROM RETROSPECT IVE DATE. CIT(A) ACCORDINGLY DIRECTED THE AO TO DISALLOW THE EXPENSES AS PER RUL E 8D. AGGRIEVED BY THE DECISION OF THE CIT(A) THE ASSESSEE IS IN APPEAL IN BOTH THE YEARS. 4. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NO DISPUTE THAT THE ASSE SSEE HAD EARNED DIVIDEND INCOME IN BOTH THE YEARS WHICH WAS EXEMPT FROM TAX. UNDER THE PROVISIONS OF SECTION 14(2) AND 14(3) THE EXPENDITURE RELATING TO EXEMPT INCOME HAS TO BE DISALLOWED AS PER METHOD PRESCRIBED BY THE GOVERNME NT. THE GOVERNMENT HAS SINCE NOTIFIED THE METHOD IN THE FORM OF RULE NO.8D CIT(A) HAS HELD THAT RULE 8D HAS RETROSPECTIVE APPLICATION. HOWEVER HONBLE HIGH COURT OF MUMBAI RECENTLY IN CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. (328 ITR 81) HAVE HELD THAT RULE 8D WOULD APPLY ONLY FROM A.YR.2008-09 AND THAT FOR THE PRIOR PERIOD 3 EXPENSES RELATING TO EXEMPT INCOME BOTH DIRECT AND INDIRECT HAVE TO BE DISALLOWED ON A REASONABLE BASIS AFTER ALLOWING OPP ORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSMENT YEARS INVOLVED IN THE PRES ENT APPEALS ARE A.Y.2005- 06 AND 2006-07 AND THEREFORE RULE 8D IS NOT APPLICA BLE IN THESE YEARS. WE THEREFORE SET ASIDE THE ORDERS OF CIT(A) AND RESTOR E THE MATTER BACK TO HIM FOR PASSING FRESH ORDERS AFTER NECESSARY EXAMINATION IN THE LIGHT OF JUDGMENT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF GODREJ BOYC E MANUFACTURING CO. LTD. (SUPRA) AND AFTER ALLOWING OPPORTUNITY OF HEARING T O THE ASSESSEE. 5. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSE. 6. THE ORDER WAS PRONOUNCED IN THE OPEN COURT TODAY I.E. 16.03.2011. SD/- SD/- ( VIJAY PAL RAO ) (RAJENDRA SING H) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 16.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR H BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK