Income Tax Appellate Tribunal - Mumbai
Allana Cold Storage Ltd, Mumbai vs Department Of Income Tax on 18 June, 2013
ुं ई यायपीठ "आई"' मब
आयकर अपील य अ धकरण, मब ुं ई
IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI
BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM)
सव ी बी.आर. म तल, या यक सद य एवं राजे , लेखा सद य के सम
आयकर अपील सं./I.T.A. No.993/Mum/2011
( नधारण वष / Assessment Years: 2007-08)
Dy.Commissioner of बनाम/ M/s Allana Cold Storage Ltd.,
Income Tax -1(1), Vs. Allana House,
Room No.579, 4, J.A. Allana Marg,
Ayakar Bhavan, Colaba,
M.K.Road, Mumbai-400002.
Mumbai-400020
थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. : AAACA5972E
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से / Appellant by : Ms.Neeraja Pradhan
यथ क ओर से/Respondent by : Mr.Apurva R Shah
सन
ु वाई क तार ख / Date of Hearing : 18.6.2013
घोषणा क तार ख /Dat e of Pronouncement : 18.6.2013
आदे श / O R D E R
Per B.R.Mittal, JM:
The Department has filed this appeal for assessment year 2007-08 against order of ld. CIT(A)-I, Mumbai dated 7.09.2010 on the following grounds :
"1. Whether on the facts and in the circumstances of the case and in law., the CIT(A) erred in restricting the disallowance u/s 14A of Rs.20,000/- against Rs.21,56,375/- made by the AO'
2. The ld. CIT(A) has further erred in appreciating that once the assessee has failed to furnish details of expenses for earning tax free dividend income, the AO has rightly worked out the disallowance as per the working upheld by the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd."
2. The assessee is engaged in manufacturing and processing of frozen food stuffs i.e. meat and meat products.
2I.T.A. No. 993/Mum/2011
3. During the course of assessment proceedings, the AO noticed that the assessee claimed exemption u/s 10(34) of the Income Tax Act, 1961 (the Act) on dividend income amounting to Rs.8,91,473/-. The AO has stated that the section 14A of the Act requires the assessee to include all direct and indirect expenses attributable for the earning of the exempt income. The assessee stated that there was only one dividend warrant received for the dividend income of Rs.8,91,471/- that the assessee made investment in the past out of own funds. It was stated that the expenses incurred towards demat charges for holding of shares in e-format amounting to Rs.1,388/- and the same have been offered for disallowance in the return of income. It was also contended that there remains no basis to apply provisions of Rule 8D of the Income Tax Rules, 1962 (the Rules). However, the AO did not agree with the contention of the assessee and by applying Rule 8D of the Rules and also considering the provisions of Sub-sections (2) and (3) of Section 14A of the Act, he made disallowance of Rs.21,56,375/- u/s 14A of the Act considering 0.5% of the average investment of Rs.43,12,75,097/-. Being aggrieved, the assessee filed appeal before the First Appellate Authority. On behalf of the assessee it was contended that the Rule 8D of the Rules as applied by the AO do not apply to the assessment year under consideration. It was also contended that the disallowance cannot exceeds the expenditure incurred in relation to earning the exempt income. The ld. CIT(A) after considering the submission of the assessee vide paragraph 5.3, restricted the disallowance to the extent of Rs.20,000/-. The said paragraph 5.3 is reproduced below:
"5.3 I have considered the AO's order as well as the appellant's AR submission . Considering the same, I find that while disallowing u/s 14A r.s. Rule 8D of the IT Rules, the AO has not pointed out any valid or cogent explanation/reason. Merely on assumptive basis, the AO has disallowed a sum of Rs.21,56,375/- u/s 14A r.w.Rule 8D(2) of the IT Rules. I find that in the case of Godrej and Boyce Mfg.Co.Ltd, the Hon'ble Bombay High Court has clearly held that Rule 8D cannot have retrospective effect and would apply w.e.f.2008-09. Thus, in my considered view application of Rule 8D in the instant case is not justified. It is also evident that the appellant company has only offered direct expenses of Rs.1388/- for the purpose of earning dividend income, which is highly unjustifiable. Hence in my considered view, the income earned as dividend income of Rs.8,91,473/- clearly suggests that there must be some managerial or any other administrative expenses to earn such income. Hence taking note of all these facts as well as the case referred above, I consider it proper and appropriate to hold that though the AO has not root out any material on record, but looking to the amount so earned as dividend income clearly justifies that there must be some or any kind of managerial expenses or administrative expenses to earn such income. Accordingly I restrict the disallowance to the extent of Rs.20,000/-. Thus, this ground of appeal is allowed."3
I.T.A. No. 993/Mum/2011 Hence, this appeal by the Department.
4. At the time of hearing, the ld. DR submitted that the assessing officer made disallowance of Rs.21,56,375/- considering the average investment justifiably.
5. However, the ld. AR reiterated his submissions as made before the ld. CIT(A). He further submitted that the assessee had made investment in 5 or 6 Companies. The said investments was made within the group concern. During the course of hearing the ld. AR in reply to a query from Bench conceded that for maintaining and performing the investment aggregating Rs.43,12,75,097/-, the assessee needs services of a professional and also some indirect expenses have to be considered to have a track of the said investment made. The ld. AR submitted that in the circumstances, a reasonable disallowance may be made.
6. Considering the facts of the case and the submissions of the ld. Representatives of the parties, it is considered that a sum of Rs.1 Lakh on an adhoc basis will be reasonable and justified to meet the expenses in respect of the investment made by the assessee of Rs.43,12,75,097/-. Therefore, we restrict the disallowance to Rs.1 Lakh u/s 14A of the Act as against Rs.20,000/- sustained by the ld. CIT(A) and Rs.21,56,375/- made by the AO. Hence, the orders of the authorities below is modified by restricting disallowance to Rs.1 Lakh u/s 14A of the Act. Accordingly, Ground of appeal taken by the department is allowed in part.
7. In the result, appeal filed by the Department is allowed in part.
Order pronounced after hearing ld. Representative of the parties in the open court on 18th June, 2013 आदे श क घोषणा खुले यायालय म दनांकः 18th June, 2013 को क गई ।
Sd/- Sd/-
(राजे /RAJENDRA) (बी.आर. म तल/B.R.MITTAL)
लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER
मब
ुं ई Mumbai; दनांक Dated 18/ 06/2013
व. न.स./ SRL , Sr. PS
4
I.T.A. No. 993/Mum/2011
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)-
4. आयकर आयु त / CIT
5. वभागीय त न ध, आयकर अपील य अ धकरण, मब
ुं ई /
DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
आदे शानस
ु ार/ BY ORDER,
स या पत त //True Copy//
सहायक पंजीकार (Asstt. Registrar)
आयकर अपील य अ धकरण, मंब
ु ई /ITAT, Mumbai