Teletube Electronics Ltd., New Delhi v. ACIT, New Delhi

ITA 5647/DEL/2010 | 2002-2003
Pronouncement Date: 06-09-2011 | Result: Allowed

Appeal Details

RSA Number 564720114 RSA 2010
Bench Delhi
Appeal Number ITA 5647/DEL/2010
Duration Of Justice 8 month(s) 23 day(s)
Appellant Teletube Electronics Ltd., New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 06-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 06-09-2011
Date Of Final Hearing 06-09-2011
Next Hearing Date 06-09-2011
Assessment Year 2002-2003
Appeal Filed On 13-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: H NEW DELHI BEFORE SMT. DIVA SINGH JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO: 5647/DEL/2010 A.Y. : 2002-2003 M/S TELETUBE ELECTRONICS LTD. VS. ACIT CIRCLE 16( 1) 6 TH FLOOR TDI CENTRE DISTRICT CENTRAL RE VENUE BLDG. CENTRE JASOLA NEW DELHI NEW DELHI 25 (APPELLANT) (RESPONDEN T) APPELLANT BY : SH. D.C.GARG C.A. RESPONDENT BY : SH. R.S.NEGI SR.D.R. O R D E R PER DIVA SINGH JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 12.10.2009 OF THE COMMISSIONER OF INCOME-TAX (APPE ALS)-XIX NEW DELHI PERTAINING TO THE ASSESSMENT YEAR 2002-03 WHEREIN T HE ASSESSEE HAS RAISED TWO GROUNDS. HOWEVER AT THE TIME OF HEARING IT WAS SUBMITTED BY LD.A.R. MR.D.C.GARG C.A. THAT THE ASSESSEE DOES N OT WISH TO PRESS GROUND NO.1 AND THE ONLY GROUND NO.2 IS TO BE ADJUD ICATED UPON. FOR READY REFERENCE THE SAME IS REPRODUCED HEREUNDER. THAT THE LEARNED CIT(A)-XIX NEW DELHI HAS ERRED I N LAW AS WELL AS ON FACTS AND CIRCUMSTANCES IN DIRECTING THE A.O. TO APPLY PROVISIONS OF RULE 8D FOR THE PURPOSE OF CALCULATING DISALLOWANCE ON A CCOUNT OF EXPENSES ATTRIBUTABLE TOWARDS EARNING OF TAX FREE INCOME . 2 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.68 0 0 850/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED AT AN INCOME O F RS. 99 39 023/-. IN VIEW OF THE FACT THAT THE ASSESSEE HAD SHOWN TAX FREE INCOME AMOUNTING TO RS. 98 72 000/- AND NO CORRESPONDING E XPENSES ATTRIBUTABLE TO EARNING SUCH TAX FREE INCOME WERE S HOWN NOTICE U/S 148 WAS ISSUED. TAKING INTO CONSIDERATION 200 ITR 488 WHEREIN THE COURT HAS HELD THE PROPORTIONATE MANAGEMENT EXPENSES SHOU LD BE DEDUCTED FROM THE GROSS DIVIDEND FOR THE PURPOSE OF GRANTING RELIEF THE A.O. MADE AN ADDITION OF RS. 30 94 000/-. 3. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY I T WAS CONTENDED AS PER PARA 9.1 OF THE IMPUGNED ORDER THAT NO EXPENSES WERE INCURRED TO EARNING DIVIDEND HENCE EXPENDITURE ON NOTIONAL BASI S CANNOT BE DISALLOWED; THAT THE AO DECIDED THE ISSUE WITHOUT A FFORDING OPPORTUNITY THAT FOR THE SAID REASON HE COULD NOT APPRECIATE T HE FACT THAT THE ASSESSEE HAS BEEN RECEIVING THE DIVIDEND INCOME F ROM THE SHARES HELD IN SAMTEL COLOURS LTD. SINCE 1982; THAT NO ADMINIS TRATIVE OR OTHER COSTS HAVE ACTUALLY BEEN INCURRED TO EARN SUCH DIVIDEND; THAT THE SAID DIVIDEND HAD BEEN EARNED ON 67 13 014 SHARES HELD I N M/S SAMTEL COLOURS LTD. AND OUT OF THESE SHARES 65 01 586 SHA RES HAVE BEEN HELD BY THE ASSESSEE SINCE LONG AND ONLY 2 11 525 SHARES WERE ACQUIRED IN THE YEAR UNDER CONSIDERATION; THAT THE SHARES ACQUIRE D BY THE ASSESSEE DURING THE YEAR ARE OUT OF THE CURRENT EARNINGS AND NOT OUT OF ANY 3 BORROWED FUNDS. IN SUPPORT OF THIS CLAIM COPY OF L EDGER OF DIVIDEND INCOME AND INVESTMENTS WAS STATED TO BE ENCLOSED. IT WAS SUBMITTED THAT THE COPY OF LEDGER OF DIVIDEND INCOME AND INV ESTMENT MAY BE ACCEPTED AS ADDITIONAL EVIDENCE AS OPPORTUNITY FOR FILING THE SAME BEFORE THE A.O. WERE NOT PROVIDED. RELIANCE WAS PLACED UP ON THE ORDER DT. 16.9.2008 OF CIT(A) WHEREIN IDENTICAL EXPENSES IN 2004-05 A.Y. HAD BEEN DELETED. 4. THE CIT(A) TAKING INTO CONSIDERATION THE FACT T HAT THE SPECIAL BENCH IN ITO VS. DAGA CAPITAL MANAGEMENT P.LTD. (20 08) 26 SOT 603 (MUM.)(SB) DIRECTED THE AO TO WORK OUT THE DISALL OWANCE AS PER RULE 8D OF I.T.RULES IN THE LIGHT OF THE DECISION OF SPECIA L BENCH IN ITO VS. DAGA CAPITAL MANAGEMENT P.LTD. (SUPRA). 5. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 6. LD.A.R. SUBMITTED THAT IN VIEW OF THE FACT THAT THE ORDER OF THE SPECIAL BENCH IN THE CASE OF ITO VS. DAGA CAPITAL M ANAGEMENT P.LTD. (SUPRA) HAS BEEN OVERRULED BY THE JUDGEMENT OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. 328 I TR 81 THE ADHOC DISALLOWANCE MAY BE QUASHED. ATTENTION WAS INVITED TO PAGE 54 AND 55 OF THE PAPER BOOK SO AS TO CONTEND THAT THE ASSESSE E HAS RECEIVED DIVIDEND ONLY FROM ONE COMPANY THROUGH ONE CHEQUE A ND HAS INVESTED IN EQUITY SHARES OF SAMTEL COLORS LTD. OUT OF ITS SELF GENERATED RETAINED EARNINGS AND NOT OUT OF BORROWED FUNDS. 4 6.1. RELIANCE WAS ALSO PLACED UPON THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES LTD. 323 ITR 518 AND THE ORDER OF THE COORDINATE BENCH IN THE CASE OF MINDA INVES TMENTS LTD. VS DCIT IN ITA 4046/DEL/2009 OF DELHI E BENCH OF THE ITAT VIDE ORDER DT. 13.10.2010 WHEREIN NO DISALLOWANCE WAS SUSTAINED. 7. THE LD.SR.D.R. ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE ENTIRE FACTUAL MATRIX AND THE SETTLED LEGAL POSITION WE ARE OF THE VIEW THAT IT IS APPROPRIATE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE TO RESTORE THE ISSUE BACK TO THE FILE OF THE A.O. FOR VERIFICA TION ON FACTS. THE AO SHALL VERIFY WHETHER BORROWED FUNDS HAVE BEEN USE D BY THE ASSESSEE FOR MAKING THE INVESTMENT OR IS THE INVESTMENT MADE OUT OF SELF GENERATED FUNDS OF THE ASSESSEE. AFTER DUE VERIFICATION THE A .O. SHALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW. IN THE CASE OF HER O CYCLES LTD. (CITED SUPRA) IT IS SEEN THAT THERE WAS A FINDING OF FACT ARRIVED AT BY THE TRIBUNAL THAT THERE WAS NO NEXUS BETWEEN THE EXPEND ITURE INCURRED AND INCOME GENERATED. AS SUCH IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE ON FUNDS BORROWED IN THE MAIN UNIT IT WOULD NOT IPSO FACTO INVITE THE DISALLOWANCE UNDER SECTION 14A UNLESS THERE WAS EVIDENCE TO SHOW THAT SUCH INTEREST BEARI NG FUNDS HAD BEEN INVESTED IN THE INVESTMENTS WHICH HAD GENERATED THE TAX EXEMPT 5 DIVIDEND INCOME. SIMILARLY IN THE CASE OF ITA 404 6/DEL/2009 MINDA INVESTMENTS LTD. THE UNREBUTTED FACT ON RECORD WAS THAT NO EXPENDITURE HAD BEEN IDENTIFIED TO HAVE BEEN INCURRED TO EXEMPT INCOME. IN THE PRESENT CASE FACTS NEED VERIFICATION. THE JUDGEMEN T OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE LTD. STATES THAT THE A.O. CAN ADOPT A REASONABLE BASIS TO IDENTIFY THE EXPENS ES IN RELATION TO THE EARNING OF THE EXEMPT INCOME. THE APPLICATION OF R ULE 8D HAS BEEN MADE PROSPECTIVE AS SUCH IT CANNOT BE APPLIED RETRO SPECTIVELY. BE THAT IS IT MAY IN THE YEAR UNDER CONSIDERATION NEXUS HAS TO BE ESTABLISHED WITH THE EXEMPT INCOME IN ORDER TO MAKE A DISALLOWANCE F OR THIS FACTS NEED VERIFICATION FOR WHICH PURPOSES THE ISSUE IS RESTOR ED TO THE AO WHO SHALL VERIFY AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTU NITY OF BEING HEARD. ACCORDINGLY FOR THE REASONS GIVEN HEREINABOVE GROUN D NO.2 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING ITSELF I.E. ON 6 TH SEPTEMBER 2011. SD/- SD/- (K.D. RANJAN) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 6 TH SEPTEMBER 2011. 6 *MANGA COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT; RESPONDENT; CIT; CIT(A); DR BY ORDER DEPUTY REGISTRAR ITAT. // C O P Y //