DCIT, New Delhi v. M/s. Jindal Pipes Ltd, New Delhi

ITA 4473/DEL/2009 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 447320114 RSA 2009
Assessee PAN AAACJ2055K
Bench Delhi
Appeal Number ITA 4473/DEL/2009
Duration Of Justice 1 year(s) 1 month(s) 27 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Jindal Pipes Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 21-01-2011
Date Of Final Hearing 14-01-2011
Next Hearing Date 14-01-2011
Assessment Year 2006-2007
Appeal Filed On 24-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO.4754/DEL/2009 ASSESSMENT YEAR : 2006-07 M/S JINDAL PIPES LTD. 1/23B 1 ST FLOOR ASAF ALI ROAD NEW DELHI. PAN : AAACJ2055K VS. ADDL. CIT RANGE-4 NEW DELHI. ITA NO.4473/DEL/2009 ASSESSMENT YEAR : 2006-07 ADDL. CIT RANGE-4 NEW DELHI. M/S JINDAL PIPES LTD. 1/23B 1 ST FLOOR ASAF ALI ROAD NEW DELHI. PAN : AAACJ2055K (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI A.K. MONGA SR. DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THESE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF T HE CIT (A) DATED 7 TH SEPTEMBER 2009 FOR ASSESSMENT YEAR 2006-07. GROUNDS O F APPEAL READ AS UNDER:- ASSESSEES APPEAL (ITA NO.4754/DEL/2009) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] IS BAD BOTH IN THE EYE OF LAW ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 2 TAX (APPEALS) [CIT (A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED BY THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF A.O. IN MAKING DISALLOWANCE UNDER SECTION14A OF THE ACT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE APPLICATION OF RULE 8D BY A.O. WHIC H IS NOT APPLICABLE IN THE RELEVANT ASSESSMENT YEAR. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO MATERIAL OR EVIDENCE ON RECORD TO SHOW THAT THE EXPENDITURE ON INTEREST WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND THERE IS NO NEXUS BETWEEN THE INTEREST EXPENDITURE INCURRED AND INTEREST INCOME EXEMPT UNDER SECTION 10 (15). 3. THAT THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. REVENUES APPEAL (ITA NO.4473/DEL/2009) 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN RESTRICTING THE DISALLOWANCE UNDER SECTION 14A TO RS.3 40 591/- AS AGAINST RS.10 41 265/- MADE BY THE A.O. 2.1 THE LD. CIT (A) HAS ERRED IN ACCEPTING THE CALCULATION FOR DISALLOWANCE UNDER RULE 8D SUBMITTED BY THE ASSESSEE IGNORING THE FACTS AVAILABLE IN THE ANNEXURES FILED ALONG WITH THE BALANCE SHEET FILED BY THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR TO AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 3 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOT ICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SHOWN DIVIDEND I NCOME AT ` 2 71 41 581/- WHICH WAS CLAIMED AS EXEMPT FROM TAX U/S 10 (34) OF THE IT ACT 1961. THE ASSESSING OFFICER INVOKED THE PR OVISIONS OF SECTION 14A READ WITH RULE 8D AND REFERRING TO THE DECISION OF BOMBAY TRIBUNAL IN THE CASE OF CITICORP FINANCE (INDIA) LTD . THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT TOTAL INVESTME NT MADE BY THE ASSESSEE IN THE BEGINNING OF THE YEAR WAS ` 10 36 21 725 /- AND AT THE END OF THE YEAR WAS AT ` 31 28 84 584/- AND THUS TH E AVERAGE OF INVESTMENT MADE BY THE ASSESSEE WAS ` 20 82 53 154/-. HE CALCULATED THE DISALLOWANCE BY TAKING 0.5% OF THE AVERAGE INVEST MENT AND WORKED OUT THE DISALLOWANCE OF ` 10 41 265/- AND ACC ORDINGLY ASSESSED THE INCOME OF THE ASSESSEE AT ` 25 18 39 310/- IN PLACE OF RETURNED INCOME OF ` 25 07 98 046/-. 3. THE ADDITION MADE BY THE ASSESSING OFFICER WAS AGITAT ED IN AN APPEAL FILED BEFORE THE CIT (A). IT WAS SUBMITTED TH AT THE MAJOR DIVIDEND HAS BEEN EARNED BY THE ASSESSEE ON THE SHARES OF MAHARASHTRA SEAMLESS LTD. ON WHICH DIVIDEND OF ` 2 42 55 000/- WAS RECEIVED. A CALCULATION WAS GIVEN ACCORDING TO WHI CH THE ASSESSEE HAD CALCULATED THE DISALLOWANCE ON AVERAGE VALUE OF INVESTMENT OF ` 6 81 18 225/- AND IT WAS SUBMITTED THAT THE DISALLOWAN CE IF ANY TO BE MADE WAS TO BE RESTRICTED TO A SUM OF ` 3 40 591/-. TH E SAID CALCULATION IS AS UNDER:- DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION D DD DIVIDEND AMOUNT IVIDEND AMOUNT IVIDEND AMOUNT IVIDEND AMOUNT MAHARASHTRA SEAMLESS LIMITED 2 42 55 000 JINDAL DRILLING & INDUSTRIES LTD. 14 01 865 ING VYSYA MUTUAL FUND 14 84 716 TOTAL 2 71 41 581 ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 4 DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION OP. INVESTMENT OP. INVESTMENT OP. INVESTMENT OP. INVESTMENT CL. INVESTMENT CL. INVESTMENT CL. INVESTMENT CL. INVESTMENT MAHARASHTRA SEAMLESS LIMITED 4 85 10 000 4 85 10 000 JINDAL DRILLING & INDUSTRIES LTD. 1 96 08 225 1 96 08 225 ING VYSYA MUTUAL FUND 0 0 TOTAL 6 81 18 225 6 81 18 225 AVERAGE VALUE OF INVESTMENT (68118225 + 68118225)/2 = 68118225 AMOUNT OF DISALLOWANCE 0.5% OF 68118225 = 3 40 591/- * THE SAID VALUES CAN BE VERIFIED FROM PAGE 18 OF TH E PAPER BOOK. 4. LD. CIT (A) AFTER CONSIDERING THESE SUBMISSIONS AND AF TER REFERRING TO THE DECISION OF SPECIAL BENCH IN THE CA SE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) (SB) HAS COME TO THE CONCLUSION THAT RULE 8D OF INCOME-TAX RULES 1962 WOU LD BE RETROSPECTIVE HENCE THE DISALLOWANCE IS WARRANTED. HOWEVER HE HAS RESTRICTED THE DISALLOWANCE TO ` 3 40 591/- AS WORKED OUT BY THE ASSESSEE IN ITS SUBMISSIONS. THE DEPARTMENT IS AGGRIEVED BY THE PART DELETION OF THE ADDITION MADE BY THE ASSESSING OFFICER AND THE ASSESSEE IS OBJECTING TO THE ADDITION SUSTAINED BY THE CIT (A) AT A SUM OF ` 3 40 591/-. 5. THIS APPEAL WAS FIRST FIXED ON 16 TH FEBRUARY 2010 AND THESE APPEALS WERE BLOCKED FOR FOUR MONTHS FROM 16 TH FEBRUARY 2010 AS THE MATTER WAS PENDING BEFORE THE SPECIAL BENCH. IT WAS AGAIN FIXED ON 23 RD NOVEMBER 2010 BY FIXING THE DATE OF HEARING ON 14 TH JANUARY 2011 AND ACCORDINGLY NOTICE WAS SENT TO THE ASSESSEE. T HIS APPEAL WAS CALLED FOR HEARING ON 14 TH JANUARY 2011 AND IT WAS INFORMED THAT THE COUNSEL WAS BUSY IN ANOTHER COURT AND IT WAS KEPT B ACK. THEREFORE THIS CASE WAS CALLED TWICE. HOWEVER NO ONE REPRESENTE D THE ASSESSEE. IN THIS VIEW OF THE POSITION WE PROCEEDED TO DECIDE THE PRESENT APPEALS EX PARTE QUA THE ASSESSEE. ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 5 6. LD. DR RELYING UPON THE DECISION IN THE CASE OF GO DREJ & BOYCE MFG. PVT. LTD. VS. DCIT 328 ITR 81 (BOM) PLEADED TH AT THOUGH IT HAS BEEN HELD THAT RULE 8D IS NOT APPLICABLE RETROSPECTIV ELY BUT IT HAS BEEN HELD THAT REASONABLE DISALLOWANCE HAS TO BE MADE. HE CONTENDED THAT THOUGH THE REASONABLE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER BUT THE FACTS AND FIGURES SUBMITTED BY THE ASSESSEE BEFORE LEARNED CIT (A) WERE NOT PLACED BEFORE THE A SSESSING OFFICER FOR VERIFICATION THEREOF. IT WILL BE IN THE INTEREST OF JUSTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO RE-CON SIDER THE DISALLOWANCE AFRESH. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE LD. DR AND HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER AND CIT (A). THE BASIS OF THE DECISION OF LD. CIT (A) IS THAT ACCORDING TO THE DECISION OF AFOREMENTIONED SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA) RULE 8 D HAS TO BE CONSIDERED TO BE RETROSPECTIVE IN NATURE. THE SAID VIEW POINT EXPR ESSED IN THE SPECIAL BENCH DECISION HAS BEEN OVERRULED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE GODREJ & BOYCE MFG. PVT. LTD. VS. DCIT (SUPRA) WHEREIN IT HAS BEEN HELD THAT RULE 8D WHICH HAS BEEN NOTIFIED W.E.F. 24 TH MARCH 2008 ARE NOT RETROSPECTIVE IN NATURE AND SHAL L APPLY W.E.F. THE ASSESSMENT YEAR 2008-09. HOWEVER IT HAS BEEN HELD THAT THE ASSESSING OFFICER HAD TO ENFORCE THE PROVISIONS OF SUB-SECT ION (1) OF SECTION 14A AND FOR THAT PURPOSE THE ASSESSING OFFICE R IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAD BEEN INCURRE D IN RELATION TO THE INCOME WHICH DID NOT FORM PART OF TOTAL INCOME UNDER THE ACT BY ADOPTING A REASONABLE BASIS OR METHOD CONSISTENT WITH AL L FACTS AND CIRCUMSTANCES. IN THAT CASE THE MATTER WAS REMITTED B ACK TO THE ASSESSING OFFICER FOR RE-DETERMINATION OF THE DISALLOWAN CE OF EXPENDITURE. IT IS ALSO CLEAR THAT THE FACTS AND FIGU RES ON WHICH THE LD. CIT (A) HAS ARRIVED AT A DISALLOWANCE OF ` 3 40 591/- WERE NOT PLACED ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 6 BEFORE THE ASSESSING OFFICER FOR VERIFICATION THEREOF. KEEPING IN VIEW ALL THESE FACTS WE ARE OF THE OPINION THAT IT WILL SE RVE THE INTEREST OF JUSTICE IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE GOD REJ & BOYCE MFG. PVT. LTD. VS. DCIT (SUPRA). 8. NEEDLESS TO OBSERVE THAT THE ASSESSING OFFICER WILL GIV E A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND AF TER PROVIDING SUCH OPPORTUNITY HE WILL RE-ADJUDICATE THE ISSUE IN T HE LIGHT OF THE AFOREMENTIONED OBSERVATIONS. WE DIRECT ACCORDINGLY. 9. IN THE RESULT FOR STATISTICAL PURPOSES BOTH THE APPE ALS ARE ALLOWED IN THE MANNER AFORESAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.01.20 11. SD/- SD/- [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 21.01.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES ITA NO.4754/DEL/2009 ITA NO.4473/DEL/2009 7 DATE OF DICTATION 14.01.2011 DATE OF PRESENTATION OF THE FAIR ORDER TO THE MEMBER 17.01.2011 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING 21.01.2011 DATE OF DISPATCH OF THE ORDER TO THE BENCH 21.01.2011