DCIT, New Delhi v. M/s. AKM System Pvt. Ltd., New Delhi

ITA 5211/DEL/2011 | 2007-2008
Pronouncement Date: 27-01-2011 | Result: Allowed

Appeal Details

RSA Number 521120114 RSA 2011
Assessee PAN AAACA2464K
Bench Delhi
Appeal Number ITA 5211/DEL/2011
Appellant DCIT, New Delhi
Respondent M/s. AKM System Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 27-01-2011
Date Of Final Hearing 24-01-2012
Next Hearing Date 24-01-2012
Assessment Year 2007-2008
Appeal Filed On 23-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER ITA NO.5211/DEL/2011 ASSESSMENT YEAR : 2007-08 DCIT CIRCLE 1 (1) ROOM NO.390 CR BUILDING NEW DELHI. VS. AKM SYSTEM PVT. LTD. 143 GOLF LINKS NEW DELHI. PAN : AAACA2464K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAT TANEJA ADVOCATE REVENUE BY : MRS. ANUSHA KHURANA SR.DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 21 ST SEPTEMBER 2011. THE GROUNDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) HAS ERRED IN HOLDING THAT RULE 8D OF THE IT RULES WAS NOT A PPLICABLE BEFORE A.Y. 2008-09. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND (S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE U/S 14 A AS PER RULE 8D AT ` 20 36 902/-. BEFORE LEARNED CIT (A) I T WAS PLEADED THAT RULE 8D IS NOT APPLICABLE RETROSPECTIVELY HENCE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT LEGALLY SUSTAINABLE. REFERENCE WAS MADE TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ITA NO.5211/DEL/2011 2 GODREJ & BOYCE MFG. PVT. LTD. REPORTED IN 43 DTR 17 1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE LEARNED CIT (A) HAS GIVEN A FINDING THAT DISALLOWANCE COULD NOT BE CALCULATED ON THE BASIS OF RULE 8D AS THE SAME WAS APPLICABLE FROM ASSESSMENT YEAR 2008-09 . SINCE THE CASE OF THE ASSESSEE IS FOR ASSESSMENT YEAR 2007-08 RULE 8D COULD NOT BE APPLIED. HOWEVER LEARNED CIT (A) OBSE RVED THAT A REASONABLE DISALLOWANCE HAS TO BE MADE AS PER THE AFORE MENTIONED DECISION OF HONBLE BOMBAY HIGH COURT AND HE HAS PASSED THE FOLLOWING ORDER:- 4.3.1 IN VIEW OF THE DETAILED DISCUSSION IN PRECED ING PARAGRAPHS I HAVE NO HESITATION IN UPHOLDING THE RIGH T OF THE REVENUE TO DISALLOW EXPENDITURE WHICH HAS BEEN INCURR ED IN RELATION TO THE EXEMPT INCOME IN TERMS OF SECTION 14A OF THE ACT. HOWEVER THE DETERMINATION OF THE QUANTUM OF SUCH EXPENDITURE FOLLOWING THE DECISION IN THE CASE OF GOD REJ & BOYCE MFG. CO. LTD. (SUPRA) HAS TO BE DONE BY THE A.O. ON A REASONABLE BASIS OR METHOD AFTER VERIFYING ALL THE REL EVANT FACTS AND AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE. CONSIDERING THE SAME THE IMPUGNED DISALLOWANCE OF RS.20 36 902/- MADE BY THE A.O. UNDER RULE 8D CANNOT BE UPHELD AS SUCH AS RULE 8D DOES NOT HAVE RETROSPECTIVE APPLICA TION. THE A.O. IS DIRECTED VERIFY THE COMPLETE FACTS AND FIGURES IN THIS REGARD AND COMPUTE THE AMOUNT OF EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO THE EXEMPT INCOME AND DISALLOW THE SAME. THIS GROUND OF APPEAL IS DISPOSED OF ACCORDI NGLY. 3. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. NOW SINCE THE HONBLE JU RISDICTIONAL HIGH COURT HAS DECIDED THIS ISSUE IN THE CASE OF MAX OPP INVE STMENT LTD. VS. CIT 203 TAXMAN 364 (DEL) THE MATTER REQUIRES RE-CO NSIDERATION AT THE LEVEL OF ASSESSING OFFICER TO BE DECIDED IN ACCORDANCE WITH THE OBSERVATIONS OF THEIR LORDSHIPS IN THE SAID DECISION. IN THE SAID DECISION IT HAS BEEN HELD THAT EVEN FOR THE PRE-RULE 8D PERIOD WHENEVER THE ISSUE OF SECTION 14A ARISES BEFORE AN ASSESSIN G OFFICER HE HAS FIRST OF ALL TO ASCERTAIN THE CORRECTNESS OF TH E CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER T HE ACT. EVEN ITA NO.5211/DEL/2011 3 WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN IN CURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE T OTAL INCOME THE ASSESSING OFFICER WILL HAVE TO VERIFY THE CORRECTNESS OF SUCH CLAIM. IN CASE THE ASSESSING OFFICER IS SATISFIED WITH THE CLAIM OF T HE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE A S THE CASE MAY BE THE ASSESSING OFFICER IS TO ASCERTAIN THE CLAIM OF THE ASSE SSEE IN SO FAR AS THE QUANTUM OF DISALLOWANCE UNDER SECTION 14A IS CO NCERNED. IN SUCH EVENTUALITY THE ASSESSING OFFICER CANNOT EMBARK UP ON A DETERMINATION OF THE AMOUNT OF EXPENDITURE FOR THE PURPOSES OF SECTION 14A(1). IN CASE THE ASSESSING OFFICER IS NOT O N THE BASIS OF OBJECTIVE CRITERIA AND AFTER GIVING THE ASSESSEE A REASO NABLE OPPORTUNITY SATISFIED WITH THE CORRECTNESS OF THE CLAI M OF THE ASSESSEE HE SHALL HAVE TO REJECT THE CLAIM AND STATE THE REASON S FOR DOING SO. HAVING DONE SO THE ASSESSING OFFICER WILL HAVE TO DETER MINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HE IS REQUIRED TO DO SO ON THE BASIS OF REASONABLE AND ACCEPTABLE METHOD OF APPOR TIONMENT. THEREFORE WE RESTORE THIS ISSUE TO THE FILE OF ASSESSING O FFICER TO RE- DETERMINE THE DISALLOWANCE AS PER THE AFOREMENTIONED DECISION OF HONBLE JURISDICTIONAL HIGH COURT. THE DIRECTIONS GI VEN BY LEARNED CIT (A) ARE MODIFIED AND THE ASSESSING OFFICER IS DIRECTED T O RE-COMPUTE THE DISALLOWANCE AS PER THE AFOREMENTIONED OBSERVATION S. WE DIRECT ACCORDINGLY. 4. IN THE RESULT FOR STATISTICAL PURPOSES THE APPEAL FI LED BY THE REVENUE IS TREATED TO BE ALLOWED IN THE MANNER AFORE SAID. THE ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.20 12. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 27.01.2012. ITA NO.5211/DEL/2011 4 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.5211/DEL/2011 5 DATE OF DICTATION 24.01.2012 DATE OF PRESENTATION OF THE DRAFT ORDER TO THE MEMBER 24.01.2012 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING DATE OF DISPATCH OF THE ORDER TO THE BENCH