DCIT, CC-II, Kolkata, Kolkata v. M/s. Sanwarmull Shroff, Kolkata

ITA 574/KOL/2011 | 2007-2008
Pronouncement Date: 27-09-2011 | Result: Dismissed

Appeal Details

RSA Number 57423514 RSA 2011
Assessee PAN AUMPS0881M
Bench Kolkata
Appeal Number ITA 574/KOL/2011
Duration Of Justice 5 month(s) 15 day(s)
Appellant DCIT, CC-II, Kolkata, Kolkata
Respondent M/s. Sanwarmull Shroff, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 27-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 27-09-2011
Assessment Year 2007-2008
Appeal Filed On 12-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE /AND . !' . ) [BEFORE SRI MAHAVIR SINGH JM & SHRI C. D. RAO AM] # # # # / I.T.A NO. 574/KOL/2011 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. SANWAR MULL SHROFF CENTRAL CIRCLE-11 KOLKATA. (PAN-AUMPS 0881 M) ()* /APPELLANT ) (+ )*/ RESPONDENT ) FOR THE APPELLANT: SHRI A. S. MONDAL FOR THE RESPONDENT: SHRI RAJEEVA KUMAR DATE OF HEARING: 27.09.2011 DATE OF PRONOUNCEMENT: 27.09.2011 - / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A) CENTRAL-III KOLKATA IN APPEAL NO.160/CC-II/CIT(A)C-III/09-10 DATED 12.01.2011. A SSESSMENT WAS FRAMED BY DCIT CC-II KOLKATA U/S. 143(3) OF THE INCOME TAX ACT 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 31.12. 2009. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE MADE BY ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES 1962 (HEREINA FTER REFERRED TO AS THE RULE) AT 1% OF EXEMPT INCOME AS AGAINST THE DISALLOWANCE MADE BY A SSESSING OFFICER. FOR THIS REVENUE HAS RAISED FOLLOWING GROUNDS: 1) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 17 40 68 1/- MADE U /S I4A OF THE ACT READ WITH RULE 8D ON A/C OF DISALLOWANCE OUT OF INTEREST PAID ON BORROWE D FUND UTILIZED FOR BUYING SHARES YIELDING TAX FREE DIVIDEND ONLY BY CONSIDERING THE OVERALL POSITION FOR THE FUNDS INVESTED BY THE ASSESSEE WITHOUT EXAMINING THE EXACT SOURCE OF EACH INVESTMENT MADE FOR PURCHASE OF SHARES AND WITHOUT CONSIDERING THAT THE ASSESEE HAD NOT MAINTAINED ANY SEPARATE ACCOUNT IN RESPECT OF INVESTMENT IN SHARES AND THAT THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE SHARES WE RE PURCHASED FULLY OUT OF HIS OWN FUND. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. I 05 643/- MADE ON A/C OF DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES ATTRIBUTABLE TO EARNING TAX FREE DIVIDEND TO 1% OF THE EXEMPTED INCOME ONLY BY HOLDING THAT PROVISION OF RULE 8D WI LL NOT BE APPLICABLE WITHOUT CONSIDERING THAT WHILE PASSING ORDER ON 10/07/2009 IN ITA NO. 344/KOL/2009 IN ASSESSEES CASE FOR AY 2005-06 ITAT KOLKATA HELD T HAT PROVISION OF RULE 8D WILL BE EFFECTIVE RETROSPECTIVELY. 2 ITA 574/K/2011 M/S.SANWARMULL SHROFF A.Y. 07-08 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSMENT WAS FRAMED FOR THE RELEVANT ASSESSMENT YEAR 2007-08 U/S. 143(3) ON 31. 12.2009 BY VIRTUE OF WHICH ASSESSING OFFICER MADE PROPORTIONATE DISALLOWANCES OF INTERES T RS.17 40 681/- AND ADMINISTRATIVE EXPENSES RS.1 05 643/- BY INVOKING THE PROVISIONS O F SECTION 14A OF THE ACT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO RESTRI CTED THE DISALLOWANCE TO 1% OF EXEMPTED INCOME AND DIRECTED THE ASSESSING OFFICER TO RECOMP UTE THE DISALLOWANCE ACCORDINGLY. AGGRIEVED BY THE SAID ORDER REVENUE PREFERRED APPE AL BEFORE ITAT. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.) HAS ALREADY HELD THAT APPLICABILITY OF RULE 8D OF THE RULES IS PROSPECTIVE AND NOT RETROSPECTIVE W.E.F. ASSESSMENT YEAR 2007-08 WHEREIN HONBLE HIGH COURT HAS ALSO DIRECTED TO RECOMPUTE THE DISALLOWANCE IN CASE THERE IS A NEXUS FOR EXPENSES WITH EXEMPT INCOME BY LAYING DOWN THE PRINCIPLE AS UNDER : (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24 2008 SHALL APPLY WITH E FFECT FROM THE ASSESSMENT YEAR 2008-09; (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09 WHE N RULE 8D WAS NOT APPLICABLE THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE ASSESSING OFF ICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002 -03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASONABLE BASIS FOR EFFECTING THE APPORTIONM ENT. WHILE MAKING THAT DETERMINATION THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E WE FURTHER FIND THAT THE TRIBUNAL KOLKATA BENCH ON THE SELF SAME FACTS IN THE CASE OF SAGRIKA GOODS & SERVICES PVT. LTD. VS. INCOME-TAX OFFICER I.T.A NO. 1278/KOL/2010 ASSESSMENT YEAR 2005-06 DATED 24 TH SEPTEMBER 2010 HAS HELD AS UNDER: 5. HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL A VAILABLE ON RECORD AND THE DECISIONS RELIED ON BY THE LD. AUTHORISED REPRE SENTATIVE OF THE ASSESSEE CITED SUPRA. WE FIND THAT ON THE ISSUE OF DISALLOWANCE U/ S. 14A THIS BENCH OF THE TRIBUNAL HAS BEEN TAKING A CONSISTENT VIEW THAT THIS DISALLO WANCE SHOULD BE RESTRICTED TO 1% OF DIVIDEND INCOME. FOLLOWING THE SAME IN THIS AP PEAL ALSO WE HOLD THAT THE DISALLOWANCE U/S 14A FOR EARNING EXEMPT DIVIDEND IN COME SHOULD BE RESTRICTED TO 1% OF DIVIDEND INCOME. THE ASSESSING OFFICER IS AC CORDINGLY DIRECTED TO DO SO AND 3 ITA 574/K/2011 M/S.SANWARMULL SHROFF A.Y. 07-08 WORK OUT THE QUANTUM OF DISALLOWANCE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED AS DIRECTED ABOVE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF JURISDICTION TRIBUNAL (CITED SUPRA) WE DIRECT THE ASSESSING OFFICER TO WORK OUT THE QUANTUM OF DISALLOWANCE ACCORDINGLY. THIS GROUND OF REVENUES APPEAL IS DIS MISSED. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . !' !'!' !' . (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ' ) )) ) DATED : 27TH SEPTEMBER 2011 ./ $01 2 JD.(SR.P.S.) - 3 +4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT DCIT CENTRAL CIRCLE-11 KOLKATA. 2 + )* / RESPONDENT M/S. M/S. SANWARMULL SHROFF 4/1 RED CROSS PLACE KOLKATA-700 001. 3 . -$ ( )/ THE CIT(A) KOLKATA 4. -$ / CIT KOLKATA 5 . => +$ / DR KOLKATA BENCHES KOLKATA 4 +/ TRUE COPY -$?/ BY ORDER 1 /ASSTT. REGISTRAR .