DCIT, New Delhi v. Barmalt India Pvt. Ltd., New Delhi

ITA 5978/DEL/2010 | 2006-2007
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 597820114 RSA 2010
Assessee PAN AAACB2825M
Bench Delhi
Appeal Number ITA 5978/DEL/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant DCIT, New Delhi
Respondent Barmalt India Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-03-2011
Date Of Final Hearing 07-03-2011
Next Hearing Date 07-03-2011
Assessment Year 2006-2007
Appeal Filed On 29-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : F NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRES IDENT AND SHRI A.D. JAIN JUDICIAL MEMBER ITA NOS.5978 & 5979/DEL./2010 (ASSESSMENT YEARS : 2006-07 & 07-08) DCIT CO. CIRCLE 2(1) VS. BARMALT INDIA PVT. LT D. NEW DELHI. 503 ARADHANA APARTMENTS SECTOR 13 R.K. PURAM RING ROAD NEW DELHI-110025. (PAN/GIR NO.AAACB2825M) (APPELLANT) RESPONDENT) ASSESSEE BY : SHRI M.P. RUSTAGI ADV. & SH. P.N. SH ASTRI CA REVENUE BY : SHRI H.K. LAL SR.DR ORDER PER A.D. JAIN JM THESE ARE DEPARTMENTS APPEALS FOR AYS 2006-07 & 07-08 CONTENDING THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF `2 0 44 366 AND `37 48 174 RESPECTIVELY MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES A TTRIBUTABLE TO EXEMPT INCOME U/S 14A OF THE I.T. ACT. SINCE COMMON ISSUES AR E INVOLVED IN BOTH THESE APPEALS THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER . FOR THE SAKE OF CONVENIENCE THE FACTS ARE BEING TAKEN FROM I.T.A. NO.597 8. I.T.A. NO.5978 (A.Y. 2006-07) 2. THE AO DISALLOWED THE EXPENSES OF `22 71 517 UNDER SECT IONS 14A(2) AND 14A(3) OF THE ACT TOWARDS EXPENSES DEEMED TO HAVE BEEN INCUR RED IN EARNING DIVIDEND INCOME CLAIMED TO BE EXEMPT UNDER SECTIONS 10(34) /10(35) OF THE ACT. IN DOING SO THE AO REFERRED TO CIT VS. UNITED GENERAL TRUST LTD. 200 ITR 488 (SC); SOUTHERN PETRO CHEMICALS INDUSTRIES 93 TTJ 161; AND HAR ISH KRISHNAKANTA BHATT 91 ITD 311. THE DISALLOWANCE WAS COMPUTED UNDER RULE 8D O F THE I.T. RULES AT `22 71 517. I.T.A. NOS.5978 & 5979/DEL./2010 (A.YS. : 2006-07 & 07-08) 2 3. THE CIT(A) RELYING ON M/S GODREJ & BOYCE MFG. P. LTD. VS. DCIT 43 DTR 177 OBSERVED THAT THE AO WAS NOT CORRECT IN HOLDING TH AT THE PROVISIONS OF RULE 8D OF THE RULES WERE APPLICABLE IN THE ASSESSEES CASE FOR ASSESS MENT YEAR 2006-07 THE YEAR UNDER CONSIDERATION; THAT HOWEVER EVEN IN THE ABS ENCE OF APPLICABILITY OF RULE 8D OF THE RULES THE EXPENDITURE INCURRED/APPORTIONED TO EARN THE EXEMPT INCOME WAS REQUIRED TO BE DISALLOWED; THAT THE ASSESSEE HA D SUBMITTED THAT THERE WAS NO DIRECT EXPENSES ATTRIBUTABLE TO THE EARNING OF THE D IVIDEND INCOME; AND THAT IN THE EARLIER YEARS ESTIMATED DISALLOWANCE HAD BEEN MADE BY THE AO U/S 14A OF THE ACT. THE CIT(A) WORKED OUT THE DISALLOWANCE AT 0.05 % OF THE AVERAGE INVESTMENT I.E. `45 43 03 352. THIS CAME TO `22 71 517. THE CIT(A) RESTRICTED THE DISALLOWANCE U/S 14A OF THE ACT FROM `22 15 517 TO `2 27 151. 4. THE LD.DR HAS CONTENDED THAT WHILE WRONGLY DELETING TH E ADDITION TO THE EXTENT OF `20 44 366 THE CIT(A) FAILED TO CONSIDER SECTI ON 14A(3) OF THE ACT WHICH SPECIFIES THAT EVEN IF THE ASSESSEE MAKES A CLAIM THAT NO EXP ENDITURE HAS BEEN INCURRED IN EARNING THE EXEMPT INCOME SECTION 14A(2) SHAL L APPLY; AND THAT THE DISALLOWANCE U/S 14A(1) OF THE ACT WAS THEREFORE CAL LED FOR. 5. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HA S STRONGLY RELIED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE CIT(A) HAS CORRECTLY FOLLOWED M/S GODREJ & BOYCE (SUPRA) IN RESTRICTING THE DISALLOW ANCE TO `2 27 151. 6. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL PLACED ON RECORD. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A). AS PER GODREJ & BOYCE VS. DCIT (SUPRA) THOUGH RULE 8D OF THE RULES IS NOT APPLICABLE FOR ASSESSMENT YEAR 2006-07 THE YEAR UNDER CONSIDERATION THE EXPENDITURE INCURRED/APPO RTIONED TO EARN THE EXEMPT INCOME IS REQUIRED TO BE DISALLOWED. THE ASSESSEE HAS MAINTAINED THAT THERE WAS NO DIRECT EXPENSES ATTRIBUTABLE TO THE EARNING OF THE DIVIDEND INCOME. IT IS A MATTER OF RECORD THAT IN THE EARLIER YEAR ESTIMATED DISALLOWANCE WAS MADE BY THE AO U/S 14A OF THE ACT. AS SUCH THE CIT(A) WAS C ORRECT IN MAKING THE I.T.A. NOS.5978 & 5979/DEL./2010 (A.YS. : 2006-07 & 07-08) 3 DISALLOWANCE OF `2 27 151 AT 0.05% OF THE AVERAGE INVEST MENT OF 45 43 03 352. THE ACTION OF THE CIT(A) IS ACCORDINGLY UPHELD. I.T.A. NO.5979 (A.Y. 2007-08) 7. SINCE THE FACTS IN THIS APPEAL ARE SIMILAR TO THE APPEA L FOR ASSESSMENT YEAR 2006-07 THE ACTION OF THE CIT(A) FOR THE ASSESSMENT YEA R 2007-08 IS ALSO UPHELD. 8. IN THE RESULT BOTH THE APPEALS OF THE DEPARTMENT ARE D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11.03.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D.JAIN) VICE PRESIDENT JUDICIAL MEMBER DELHI DATED : 11.3.2011 SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-V NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT