METRO HOLDING & SECURITIES P. LTD, MUMBAI v. DCIT CIR 2(2), MUMBAI

ITA 5802/MUM/2010 | 2007-2008
Pronouncement Date: 18-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 580219914 RSA 2010
Assessee PAN AABCM3972D
Bench Mumbai
Appeal Number ITA 5802/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant METRO HOLDING & SECURITIES P. LTD, MUMBAI
Respondent DCIT CIR 2(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-11-2011
Assessment Year 2007-2008
Appeal Filed On 19-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHIRI D. MANMOHAN VP AND SHRI RAJENDRA SING AM ITA NO. : 5802/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. METRO HOLDING & SECURITIES P. LTD. 2 ND FLOOR METRO HOUSE S.B. SINGH ROAD COLABA CAUSEWAY MUMBAI-400 001 PAN NO: AABCM 3972 D VS. DCIT - CIRCLE 2(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. V. LAKHANI RESPONDENT BY : SHRI A.K. NAYAK DATE OF HEARING : 14 .11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 05.05.2010 OF THE LD. CIT(A)-5 FOR THE ASSESSMENT Y EAR 2007-08. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DIS ALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME U/S.14A OF THE I.T. ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD MADE INVESTMENT IN ITA NO : 5802/MUM/2010 M/S.M ETRO HOLDING & SECURITIES P. LTD. 2 SHARES OF GROUP COMPANIES AT `. 93.92 LAKHS BUT NO DISALLOWANCES OF EXPENSES HAD BEEN MADE IN RELATION TO INCOME FROM INVESTMENT WHICH WAS EXEMPT. THE AO THEREFORE FOLLOWING RULE 8D DI SALLOWED 0.5% OF THE INVESTMENT AMOUNTING TO `. 46 962/- AS EXPENDITURE RELATING TO THE EXEMPT INCOME U/S.14A. IN APPEAL THE SAME WAS CONF IRMED BY THE LD. CIT(A) AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE INVESTMENTS HAD BEEN MADE IN THE SHARES OF GROUP CO MPANIES FROM WHICH NO DIVIDEND INCOME HAD BEEN RECEIVED. THERE W AS THEREFORE NO REQUIREMENT OF ANY EXPENDITURE IN RELATION TO THE E XEMPT INCOME. ACCORDINGLY IT WAS URGED THAT ADDITION MADE ON ACC OUNT OF DISALLOWANCES SHOULD BE DELETED. THE LD. DR ON THE OTHER HAND SU BMITTED THAT THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE ON THE EMPLOYEES WHICH WERE LOOKING AFTER THE SUBSTANTIAL INVESTMENT AND THEREFORE IT WAS NOT CORRECT TO SAY THAT NO EXPENDITURE HAD BEEN INCURRE D. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING THE DISALLOWANCE OF EXPEND ITURE RELATING TO EXEMPT INCOME U/S.14A OF THE I.T. ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENTS IN THE SH ARES OF THE COMPANIES THE ONLY INCOME WHICH COULD BE IN THE FO RM OF THE DIVIDEND. THEREFORE EVEN IF NO DIVIDEND INCOME WAS RECEIVED THE EXPENDITURE IN RELATION TO THE MANAGEMENT OF THE INVESTMENTS HAS T O BE DISALLOWED. THE AUTHORITIES BELOW HAVE APPLIED RULE 8D AND DISALLOW ED A SUM OF `. 46 962/-. HOWEVER IN VIEW OF THE JUDGMENT OF THE H ON'BLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ & BOYCE MANUFACTURI NG COMPANY LTD. VS. DCIT (328 ITR 81) THE PROVISIONS OF RULE 8D WIL L APPLY ONLY FROM ASSESSMENT YEAR 2008-09. IT HAS ALSO BEEN HELD THAT IN RESPECT OF PRIOR YEARS EXPENDITURE IN RELATION TO THE EXEMPT INCOME BOTH DIRECT AND ITA NO : 5802/MUM/2010 M/S.M ETRO HOLDING & SECURITIES P. LTD. 3 INDIRECT HAS TO BE DISALLOWED ON A REASONABLE BASIS . IN THIS CASE THE INVESTMENTS ARE ONLY WITH THE GROUP COMPANIES FROM WHICH NO INCOME HAD ACTUALLY BEEN RECEIVED. HOWEVER SOME ESTABLISH MENT EXPENDITURE IS REQUIRED TO BE INCURRED FOR LOOKING AFTER INVESTMEN TS. IN OUR VIEW SUCH EXPENDITURE CAN BE REASONABLY ESTIMATED ON THE FACT S OF THE CASE AT `. 2500/- PER MONTH AND ACCORDINGLY WE UPHOLD THE DI SALLOWANCE OF `. 30 000/- AND THE BALANCE ADDITION IS DELETED. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOVEMBER 2011. SD/- SD/- ( D. MANMOHAN ) ( RAJENDRA SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DT: 18.11.2011 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR A - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI