NARENDRAPAL GUPTA, MUMBAI v. ACIT CEN CIR 30, MUMBAI

ITA 4260/MUM/2010 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 426019914 RSA 2010
Assessee PAN AAXPG2396L
Bench Mumbai
Appeal Number ITA 4260/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 27 day(s)
Appellant NARENDRAPAL GUPTA, MUMBAI
Respondent ACIT CEN CIR 30, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 22-07-2011
Assessment Year 2005-2006
Appeal Filed On 25-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER & SHRI R.S. PADVEKAR JUDICIAL MEMBER. S.NO. I.T.A. NO. ASSTT.YEAR. 1. 4257/MUM/2010 2002-03. 2. 4259/MUM/2010 2004-05. 3. 4260/MUM/2010 2005-06. 4. 4261/MUM/2010 2006-07. 5. 4262/MUM/2010 2007-08. SHRI NARENDRAPAL GUPTA ASSTT. COMMISSIONER OF INCOME-TAX 28 RAJA BHANDUR BUILDING VS. CENTRAL CIRCLE-30 MUMBAI. FORT MUMBAI 400 023. PAN AAXPG 2396L APPELLANT. RESPONDENT. APPELLANT BY : SHRI M.L. BHUWANIA. RESPO NDENT BY : SHRI GOLI SRINIWAS RAO. O R D E R. PER P.M. JAGTAP A.M. : THESE FIVE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST FIVE SEPARATE ORDERS PASSED BY THE LEARNED CIT(APPEALS)-39 MUMBA I DATED 18-03-2010 AND SINCE A COMMON ISSUE IS INVOLVED THEREIN THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE COMPOSITE ORDE R. 2 ITA NOS.4257 4259 4260TO4262/MUM/2010 ASSTT. YEARS : 2002-03 2004-05 TO 2007-08. 2. THE SOLITARY COMMON ISSUE INVOLVED IN THESE APPE ALS RELATES TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(APPEALS) U/S 14A OF THE INCOME-TAX ACT 1961 READ WITH RULE 8D OF IN COME-TAX RULES 1962. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO BELONGS TO RNA BUILDERS GROUP. A SEARCH AND SEIZURE ACTION U/S 132 WAS CONDUCTED ON 30-11-2007 IN THE CASES BELONGING TO RNA BUILDERS GROUP INCLUD ING THE CASE OF THE ASSESSEE. THEREAFTER NOTICES U/S 153A WERE ISSUED BY THE AO F OR ALL THE YEARS UNDER CONSIDERATION ON 31-07-2008 IN RESPONSE TO WHICH RE TURNS WERE FILED BY THE ASSESSEE DECLARING THE SAME TOTAL INCOME AS WAS DEC LARED IN THE RETURNS OF INCOME FILED ORIGINALLY. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS THE AO NOTICED THAT SUBSTANTIAL DIVIDEND INCOME WAS EARNED BY THE ASSES SEE DURING THE YEARS UNDER CONSIDERATION WHICH WAS CLAIMED TO BE EXEMPT FROM T AX U/S 10(33). HE THEREFORE REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENSES INCURRED IN RELATION TO THE SAID EXEMPT INCOME SHOULD NOT BE DISALLOWED U/S 14A READ WITH RULE 8D. IN REPLY IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT SURPLU S FUNDS AVAILABLE AT THE RELEVANT TIME WERE INVESTED IN SHARES. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALREADY MADE DISALLOWANCE OUT OF OTHER EXPENDITURE SUO MOTU IN THE COMPUTATION OF TOTAL INCOME U/S 14A. THE APPLICABILITY OF RULE 8D WAS AL SO CHALLENGED BY THE ASSESSEE ON THE GROUND THAT THE SAID RULE WAS APPLICABLE ONL Y FROM ASSESSMENT YEAR 2007- 08. THE AO DID NOT FIND THIS EXPLANATION OF THE ASS ESSEE TO BE ACCEPTABLE. ACCORDING TO HIM THE VARIOUS EXPENSES DEBITED BY T HE ASSESSEE TO THE PROFIT AND LOSS ACCOUNT INCLUDING FINANCIAL EXPENSES WERE ATTR IBUTABLE TO EARNING OF DIVIDEND INCOME. HE THEREFORE WORKED OUT THE QUANTUM OF SU CH EXPENSES BY APPLYING THE METHOD PRESCRIBED IN RULE 8D AND DISALLOWANCE TO TH AT EXTENT WAS MADE BY HIM U/S 14A IN ALL THE FIVE YEARS UNDER CONSIDERATION RELYI NG ON THE DECISION OF SPECIAL 3 ITA NOS.4257 4259 4260TO4262/MUM/2010 ASSTT. YEARS : 2002-03 2004-05 TO 2007-08. BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMEN T P. LTD. REPORTED IN 117 ITD 169 (MUM.)(SB). 4. THE DISALLOWANCE MADE BY THE AO U/S 14A READ WIT H RULE 8D IN ALL THE FIVE YEARS UNDER CONSIDERATION WAS CHALLENGED BY THE ASS ESSEE IN THE APPEALS FILED BEFORE THE LEARNED CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEALS) THE SUBMISSION MAD E BEFORE THE AO WAS REITERATED ON BEHALF OF THE ASSESSEE. THE LEARNED C IT(APPEALS) HOWEVER DID NOT FIND MERIT IN THE SAID SUBMISSION AND CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 14A READ WITH RULE 8D RELYING MAINLY ON THE DEC ISION OF SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT (SUPRA). AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS) THE ASSESSEE HAS PREFERRED THESE APPE ALS BEFORE THE TRIBUNAL. 5. AFTER CONSIDERING THE SUBMISSION AND PERUSING TH E RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ISSUE INVOLVED IN T HE PRESENT APPEALS IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF DCIT VS. GODREJ AND BOYCE MFG. CO. LTD. 328 ITR 81 WHEREIN I T WAS HELD THAT RULE 8D IS APPLICABLE ONLY FROM ASSESSMENT YEAR 2007-08 AND PR IOR TO ASSESSMENT YEAR 2007- 08 THE QUANTUM OF DISALLOWANCE TO BE MADE U/S 14A HAS TO BE DETERMINED BY ADOPTING SOME REASONABLE METHOD. KEEPING IN VIEW TH E SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT WE SET ASIDE THE IMPUGNE D ORDERS OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER T O THE FILE OF THE AO WITH A DIRECTION TO DETERMINE THE QUANTUM OF DISALLOWANCE OF EXPENSES TO BE MADE U/S 14A BY ADOPTING SOME REASONABLE METHOD. THE AO IS A LSO DIRECTED TO CONSIDER THE STAND OF THE ASSESSEE THAT INVESTMENT IN SHARES WAS MADE OUT OF HIS OWN FUNDS AND NOT FROM THE BORROWED FUNDS WHILE QUANTIFYING THE D ISALLOWANCE TO BE MADE U/S 14A. THUS THE GROUND TAKEN BY THE ASSESSEE IN ALL THE FIVE APPEALS IS TREATED AS PARTLY ALLOWED. 4 ITA NOS.4257 4259 4260TO4262/MUM/2010 ASSTT. YEARS : 2002-03 2004-05 TO 2007-08. 6. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE T REATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. . ORDER PRONOUNCED ON THIS 22 ND DAY OF JULY 2011. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI DATED: 22 ND JULY 2011. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR H-BENCH. (TRUE COPY ) BY ORD ER ASSTT. R EGISTRAR ITAT MUMBAI BEN CHES MUM BAI.