GODAVARI CORPORATION P.LTD, MUMBAI v. ITO 1(1)(4), MUMBAI

ITA 4549/MUM/2010 | 2006-2007
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 454919914 RSA 2010
Assessee PAN AAACG1850D
Bench Mumbai
Appeal Number ITA 4549/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 13 day(s)
Appellant GODAVARI CORPORATION P.LTD, MUMBAI
Respondent ITO 1(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 15-07-2011
Assessment Year 2006-2007
Appeal Filed On 02-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.4549/MUM/2010 ASSESSMENT YEAR-2006-07 M/S. GODAVARI CORPORATION PVT.LTD. INDUSTRY HOUSE 159 CHURCHGATE RECLAMATION MUMBAI-400 020 PAN-AAACG 1850D VS. THE ITO 1(1)(4) AAYAKAR BHAVAN MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJIT SHETTY RESPONDENT BY: SHRI A.K. NAYAK O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 26.2.2010 PASSED BY THE LD. CIT(A)-1 FOR THE ASSESSMENT YEAR 2006-07. 2. THE APPELLANT IS REGISTERED AS A NBFC AND IS ENG AGED IN THE BUSINESS OF FINANCING DEALING IN SHARES AND SECURI TIES INVESTMENTS POWER GENERATION ETC. THE APPELLANT HAD FILED ITS R ETURN OF INCOME ON 21.1.2006 DISCLOSING TOTAL LOSS OF RS. 26 45 002/-. 3. FIRST GROUND OF APPEAL THE ASSESSEE HAS CHALLENG ED THE DISALLOWANCE OF RS. 42 18 010/- U/S. 14A OF THE I.T . ACT 1961 AND THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D OF THE I. T RULES. ITA NO. 4549/M/10 2 4. THE AR OF THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE APPELLANT HAD FURNISHED ITS WORKING OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOME AND HAD DETERMINED THE TOTAL EXPENSES AT RS. 1 30 526/-. IT WAS EXPLAINED THAT AS PER THE P ROVISIONS OF SEC. 14A(2) THE AO ASSUMES JURISDICTION TO DETERMINE TH E AMOUNT OF EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCO ME IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D(2) IN CASE HAVING RE GARD TO THE ACCOUNTS OF THE APPELLANT THE AO IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF SUCH EXPENDITURE IN RELATION TO EXEMPT INCOME. THE AR FURTHER SUBMITTED THAT IN THE ASSESSMENT ORDER THE AO HAS N OT RECORDED ANY DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM O F EXPENSES DETERMINED BY THE APPELLANT AND THE AO HAS MERELY STATED THAT THE WORKING OF DISALLOWANCE IS NOT FOUND TO BE ACCEPTABLE. HE ALSO SUBMITTED THAT THE ASSUMPTION OF THE JURISDICTION BY THE AO FOR DETERM INING THE DISALLOWANCE AS PER RULE 8D(2) IS WRONG IN SO FAR A S THE AO HAS NOWHERE DOUBTED THE CORRECTNESS OF THE CLAIM OF THE APPELLA NT HAVING REGARDS TO THE ACCOUNTS MAINTAINED. HE FURTHER SUBMITTED THAT THERE IS NO EXPENSE WHICH IS DIRECTLY RELATABLE TO THE EARNING OF DIVID END INCOME. THE PROVISIONS OF RULE 8D(2) HAVE BEEN INTRODUCED IN TH E STATUTE BY THE INCOME TAX (FIFTH AMENDMENT) ACT 2008 W.E.F. 23.3. 2008. THE SAID PROVISIONS HENCE ARE NOT APPLICABLE FOR COMPUTING T HE DISALLOWANCE FOR A.Y. 2006-07. INDEPENDENT OF APPLICATION OF THE AF ORESAID RULE THE AO HAS NOT IDENTIFIED ANY EXPENDITURE WHICH IS DIRECTL Y/INDIRECTLY RELATABLE TO THE EARNING OF DIVIDEND INCOME. THE GROSS AMOUN T OF DIVIDEND INCOME HAS BEEN HELD TO BE EXEMPT U/S. 10(34) OF THE I.T. ACT. HE SUBMITTED THAT WITHOUT FINDING ANY BUSINESS EXPENDITURE AS HA VING BEEN INCURRED IN RELATION TO DIVIDEND INCOME THE AO HAS MADE DIS ALLOWANCE OUT OF THE CLAIM OF BUSINESS EXPENDITURE. THEREFORE THE AR SU BMITTED THAT THE DISALLOWANCE MADE U/S. 14A DESERVES TO BE DELETED. ITA NO. 4549/M/10 3 5 AGGRIEVED BY THE ORDER OF THE AO ASSESSEE PREFER RED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD AS FOLL OWS: I HAVE CONSIDERED THE ASSESSMENT ORDER AND SUBMISS IONS OF THE APPELLANT. THE AO HAS COMPUTED THE DISALLOWANC E U/S. 14A AS PER RULE 8D(2) OF I.T. RULES. HAVING REGARD TO THE DECISION OF THE HONBLE SPECIAL BENCH OF ITAT IN CASE OF ITO VS DAG A CAPITAL MANAGEMENT PVT. LTD. 26 SOT 603 AND THE RATIO LAID DOWN THEREIN THE DISALLOWANCE MADE U/S. 14A IS CONFIRMED. 6. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION OF MAKING DISALLOWANCE U/S. 14A IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE LTD. MFG. CO. V S DCIT (2010) 238 ITR 81 (BOM) HOLDING THAT THE PROVISIONS OF SEC. 14 A ARE APPLICABLE IN CIRCUMSTANCES AS ARE PREVAILING PRESENTLY AND THE D ISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME REASONABLE BASIS AND NOT RULE 8D. UNDER SUCH CIRCUMSTANCES WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE Q UANTUM OF DISALLOWANCE AS PER THE AFORE-NOTED JUDGMENT AFTER ALLOWING A R EASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS FOL LOWS: THE LD. CIT(A) ERRED IN NOT DELETING THE INTEREST CHARGES U/S. 234B OF THE I.T. ACT 1961 AND HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE THE SAID INTEREST LEVIED IS BAD IN LAW AND THE APPELLANT DENIES ITS LIABILITY FOR PAYM ENT OF INTEREST U/S. 234B. 8. THE LD. CIT(A) HELD AS FOLLOWS: IN THIS GROUND OF APPEAL THE APPELLANT HAS CHALLE NGED THE LEVY OF INTEREST U/S. 234B. CHARGE OF INTEREST U/S . 234B IS MANDATORY. HOWEVER THE AO IS DIRECTED TO RECOMPUT E THE ITA NO. 4549/M/10 4 INTEREST U/S. 234B IN ACCORDANCE WITH LAW WHILE GIV ING EFFECT TO THIS APPELLATE ORDER. 9. WE FIND THAT THE LD. CIT(A) HAS MERELY ASKED THE AO TO RECOMPUTE IN ACCORDANCE WITH LAW AND HENCE THERE CANNOT BE AN Y GRIEVANCE FOR THE ASSESSEE. HENCE WE CONFIRM THE ORDER OF THE LD. CI T(A). 10. GROUND NO. 3 RAISED BY THE ASSESSEE IS DISMISSE D AS PREMATURE. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASH A VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICI AL MEMBER MUMBAI DATED 15 TH JULY 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI ITA NO. 4549/M/10 5 DATE INITIALS 1. DRAFT DICTATED ON: 12.7. 2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 13.07.2011 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: