Income Tax Appellate Tribunal - Delhi
Green Max Estates Pvt. Ltd., New Delhi vs Department Of Income Tax on 13 June, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C': NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND SHRI C.L. SETHI, JUDICIAL MEMBER
I.T. A. No.4234/Del/2011
Assessment Year: 2007-08
Asstt. Commissioner of Income-tax, M/s. Green Max Estates Pvt. Ltd,
Circle 12(1), New Delhi. Vs. C-8/1-A, Vasant Vihar,
New Delhi.
PAN: AABCG5082A
(Appellant) (Respondent)
Appellant by : Shri Salil Mishra, Sr. DR.
Respondent by : Shri U.N. Marwah, FCA.
ORDER
PER C.L. SETHI, JUDICIAL MEMBER
In this appeal filed by the revenue against the order dated 13.06.2011 passed by the learned Commissioner of Income-tax (Appeals) pertaining to Assessment Year 2007-08, the solitary ground taken by the revenue is as under:-
"Whether ld. CIT(A) was correct on facts and circumstances of the case and in law in deleting the disallowance of Rs.11,90,423/- on account of expenses incurred for earning exempted income made by the AO u/s 14A read with rule 8D."
2. We have heard both the parties and perused the material on record. 2
3. It was noted by the Assessing Officer that the assessee has earned dividend income of Rs.27,74,840/- from mutual fund and claimed the same to be exempted from tax. The AO worked out an amount of Rs.11,90,423/- being an expenditure allegedly incurred by the assessee in earning the dividend income by applying the method prescribed under Rule 8D of the Income-tax Rules read with sec. 14A of the Act. However, on an appeal, the learned CIT(A) deleted the addition by observing that Rule 8D read with sec. 14A(2) is not applicable to the Assessment Years prior to the Assessment Year 2008-09 as so held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (2010) 328 ITR 81. The learned CIT(A) further held that in respect of earlier years prior to the Assessment Year 2008-09, the disallowance under sec. 14A has to be worked out on reasonable basis keeping in view the proximity between expenditure and exempt income. The learned CIT(A) found that the assessee had not incurred any expenditure for earning exempted dividend income and, there cannot be any presumption that the assessee must have incurred expenditure to earn tax-free income. The learned CIT(A) therefore, deleted the addition. Hence, the revenue is in appeal before us.
4. In the course of hearing, a recent unreported decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT has been 3 placed before us, where the Hon'ble Delhi High Court has also taken a view that Rule 8D inserted on 24.03.2008 would operate prospectively from the Assessment Year 2008-09 and, for periods prior to Rule 8D, the AO will have to adopt a reasonable method on the basis of objective criteria to determine the expenditure. However, the AO will have to show as to why he is not satisfied with the correctness of the assessee's claim that no expenditure has actually been incurred for earning the exempt income.
5. In the light of recent decision of Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. (unreported), we restore this matter back to the file of the Assessing Officer to examine as to whether any amount of expenditure has been incurred by the assessee in relation to exempt dividend income and in that process, the Assessing Officer shall adopt a reasonable method on the basis of objective criteria to determine the expenditure. The assessee shall be at liberty to place before the AO any such evidences or details on which the assessee may wish to rely in support of its claim that no expenditure relating to the exempt income was incurred by the assessee so as the same is liable to be disallowed under sec. 14A of the Act. The AO shall provide a reasonable opportunity of being heard to the assessee. This understanding that the matter is being restored back to the file of the 4 Assessing Officer was given to both the parties at the time of hearing, to which both the parties had agreed.
6. In the result, the appeal filed by the revenue is treated to be allowed for a statistical purpose.
7. This decision was pronounced in the Open Court immediately after the hearing was over on 22nd November, 2011.
Sd/- Sd/-
(G.D. AGRAWAL) (C.L. SETHI)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 22nd November , 2011
Copy of the order forwarded to:
1. Appellant.
2. Respondent.
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.