DCIT, New Delhi v. M/s Jindal Equipment Leasing & Consultancy Services Pvt. Ltd., New Delhi

ITA 4722/DEL/2010 | 2007-2008
Pronouncement Date: 15-09-2011 | Result: Allowed

Appeal Details

RSA Number 472220114 RSA 2010
Bench Delhi
Appeal Number ITA 4722/DEL/2010
Duration Of Justice 10 month(s) 17 day(s)
Appellant DCIT, New Delhi
Respondent M/s Jindal Equipment Leasing & Consultancy Services Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-09-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted I
Tribunal Order Date 15-09-2011
Date Of Final Hearing 15-09-2011
Next Hearing Date 15-09-2011
Assessment Year 2007-2008
Appeal Filed On 28-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER & SHRI B.K. HALDAR ACCOUNTANT MEMBER ITA NO.4722/DEL/2010 ASSESSMENT YEAR: 2007-08 DCIT VS. JINDAL EQUIPMENT LEASING & CIRCLE 4(1) ROOM NO. 407 CONSULTANCY SERVICES PVT. LTD. C.R. BLDG. I.P. ESTATE 37-NAJAFGARH ROAD NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : ROHIT GARG SR. DR RESPONDENT BY : NONE ORDER PER U.B.S. BEDI J.M. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-VII NEW DELHI DATED 1.9.2 010 RELEVANT TO A.Y. 2007-08 WHEREBY THE REVENUE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN RESTRICTING THE ADDITION MA DE U/S 14A TO RS. 77 06 410/- AS AGAINST RS. 92 20 419/- MADE BY THE AO BECAUSE DISALLOWANCE HAS CORRECTLY BEEN MADE BY THE AO U/S 14A OF THE ACT AS PER PROVISIONS OF RULE 8D OF I.T. RULES. ITA NO. 4722/D/2010 2 2. THE FACTS INDICATE THAT THE AO MADE A DISALLOWAN CE OF RS. 92 20 419/- U/S 14A OF THE ACT READ WITH RULE 8D OF I.T. RULES 1962 WHICH ACTION OF AO CAME TO BE CHALLENGED BEFOR E THE FIRST APPELLATE AUTHORITY WHO AFTER CONSIDERING VARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS MUMBAI HIGH COURT HAS CONCL UDED TO RESTRICT SUCH DISALLOWANCE U/S 14A TO RS. 77 06 410 /- THEREBY GIVING RELIEF OF RS. 15 14 009/-. AGAINST THIS ORD ER OF LD. CIT(A) DEPARTMENT HAS COME UP IN APPEAL AND IT WAS STRONGL Y PLEADED THAT LD. CIT(A) HAS MAINLY RELIED UPON THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF M/S GODREJ & BOYCE MANUFA CTURING COMPANY (MUMBAI) LTD. VS. DCIT (2010) TIOL-564-HC-M UM- IT BUT IN THAT CASE THOUGH RULE 8D HAS BEEN HELD T O BE NOT RETROSPECTIVE SO FAR THE ASSESSMENT YEARS PRIOR T O 2008-09 THERE IS A SPECIFIC DIRECTION PASSED BY THE HONBLE BOMBAY HIGH COURT TO REMIT THE MATTERS BACK TO THE FILE OF THE AO IN ORDER TO DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED A NY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIV IDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED U/S 14A AND FOR AD OPTING REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT T HE AO NEEDS TO BE DIRECTED TO PROVIDE REASONABLE OPPORTUNITY TO THE ASSESSEE FOR PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE ITA NO. 4722/D/2010 3 MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMST ANCES OF THE CASE. BUT IN THIS CASE LD. CIT(A) HAS WITHOUT VER IFICATION FROM THE AO HAS DETERMINED THE PROPORTIONATE DISALLOWANC E. THEREFORE IN THE INTEREST OF JUSTICE AND IN ORDER TO FOLLOW THE BOMBAY HIGH COURT DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY (SUPRA) THE MATTER SHOULD BE REMITTED BACK TO THE AO FOR WORKING OUT DISALLOWANCE TO BE M ADE U/S 14A. THEREFORE ORDERS OF AUTHORITIES BELOW SHOULD BE SET ASIDE TO RE-DECIDE THE ISSUE IN THE LIGHT OF BOMBAY HIGH COURT DECISION AFTER CONSULTING BOOKS AND MATERIAL. 3. DESPITE SENDING NOTICE TO THE ASSESSEE SUFFICIEN TLY IN ADVANCE ON 26.7.111 FOR A DATE ON 5 TH SEPTEMBER 2011 ASSESSEE DID NOT APPEAR. THEREFORE WE PROCEED TO DECIDE THE APPEAL OF THE REVENUE AFTER CONSIDERING THE ARGUMEN TS OF LD. DR AND MATERIAL ON RECORD. 4. WE HAVE HEARD LD. DR AND CONSIDERED THE MATERIAL ON RECORD AND FIND THAT LD. CIT(A) HAS CONCLUDED IN PA RA 3.4 OF HIS ORDER TO GIVE PARTIAL RELIEF TO THE ASSESSEE WHICH IS REPRODUCE AS UNDER: - ITA NO. 4722/D/2010 4 3.4 IN THE LIGHT OF THE JUDGMENTS CITED IN THE FOREGOING PARAS IT CAN BE CONCLUDED THAT WHEN THE DIVIDEND IS NOT TAXABLE AT ALL THE EXPENDITURE ON RENT TAXES SALARIES INTEREST ETC. PERTAINING TO THAT WOULD ALSO NOT BE ALLOWABLE BECAUSE THERE IS NO TAXABLE INCOME OF THE ASSESSEE AGAINST WHICH SUCH EXPENDITURE CAN BE ALLOWED AND SECONDLY THE DISALLOWANCE U/S 14A COULD BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAD BEEN EARNED OR RECEIVED BY THE ASSESSEE. THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT REVEALS THAT AN AMOUNT OF RS. 1 17 61 601/- HAS BEEN SHOWN UNDER THE HEAD EXPENDITURE BY THE APPELLANT. IT IS ALSO OBSERVED THAT THE ABOVE AMOUNT INCLUDES DIRECTORS MEETING FEE OF RS. 5 000/- LEGAL AND PROFESSIONAL CHARGES TO THE EXTENT OF RS. 6 34 630/- AND AUDIT FEES OF RS. 31 815/- WHICH ARE TO BE EXCLUDED FOR THE PURPOSE OF APPORTIONMENT OF EXPENSES ATTRIBUTABLE TO DIVIDEND INCOME. AFTER EXCLUDING THE ABOVE ITEMS OF EXPENDITURE THE EXPENDITURE WORKS OUT AT RS. 1 10 90 156/-. THE PROPORTIONATE DISALLOWANCE WOULD THUS BE AS UNDER: DIVIDEND INCOME X TOTAL EXPENSES = RS. 7 02 12 550 X 1 10 90 156 TOTAL RECEIPTS 10 10 41 607/- = RS. 77 06 410/- THEREFORE THE PROPORTIONATE DISALLOWANCE U/S 14A OF THE ACT IS RESTRICTED TO RS. 77 06 410/-. ITA NO. 4722/D/2010 5 AS A RESULT THE APPELLANT GETS A RELIEF OF RS. 15 14 009/- (RS. 92 20 419/- MINUS RS. 77 06 410/-) AND GROUNDS OF APPEAL NO. 1 TO 7 ARE PARTLY ALLOWED. 5. BUT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. (BOMBAY) VS. DCIT (SUPRA) FOR THE CASE S PRIOR TO A.Y. 2008-09 FOLLOWING SPECIFIC DIRECTION HAS BEEN GIVEN: - VI) EVEN PRIOR TO A.Y. 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE AO HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SEC. 14A. FOR THAT PURPOSE THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; VII) THE PROCEEDINGS FOR A.Y. 2002-03 SHALL STAND REMANDED BACK TO THE AO. THE AO SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH ITA NO. 4722/D/2010 6 DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED U/S 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION THE AO SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. IN THIS CASE LD. CIT(A) HAS WITHOUT ASCERTAININ G WHETHER ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED U/S 14A AND WITHOU T REMANDING THE MATTER BACK ON THE FILE OF THE AO HAS CONCLUDED TO GIVE PARTIAL RELIEF. THEREFORE IN OUR CONSIDER ED VIEW ACTION OF LD. CIT(A) IS NEITHER JUSTIFIED NOR PROPER BEING NO T IN CONFORMITY WITH BOMBAY HIGH COURT DECISION WHICH IS FOUND TO H AVE BEEN FOLLOWED. AS SUCH CONSIDERING THE ENTIRETY OF FACT S CIRCUMSTANCES AND MATERIAL ON RECORD WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND REMIT TH E MATTER BACK TO THE FILE OF THE AO WITH THE DIRECTION TO RE-DECI DE THE ISSUE AFRESH AFTER OBTAINING NECESSARY DETAILS AND ADOPTI NG ITA NO. 4722/D/2010 7 REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT BY GIVING THE PROPER OPPORTUNITY TO THE ASSESSEE. WE HOLD AND DI RECT ACCORDINGLY. 7. AS A RESULT THE APPEAL OF THE REVENUE GETS ACCE PTED FOR STATISTICAL PURPOSES. 8. ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HE ARING ON 15.9.2011 . SD/- SD/- (B.K. HALDAR) (U .B.S. BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.9.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR