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Virgo Marketing Pvt. Ltd. C/o Rra Taxindia,D-28, South Extension,Part-I, New Delhi 49 Vs. Ito, Ward 26(4), Bulandshahr
November, 06th 2019
             IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH: `SMC' NEW DELHI

           BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER

                    I.T.A. Nos. 6804 & 6805/Del/2018
                  Assessment Years: 2000-01 & 2001-02

VIRGO MARKETING PVT. LTD.                 vs.   ITO, WARD 26(4),
C/O RRA TAXINDIA,                               BULANDSHAHR
D-28, SOUTH EXTENSION,
PART-I, NEW DELHI ­ 49
(PAN: AWWPM3839K)
(ASSESSEE)                                      (RESPONDENT)

                        Assessee by:Sh. P.C. Yadav, Adv.
                        Revenue by: Sh. Amrit Lal, Sr. DR.


                                 ORDER

      These appeals are filed by the assessee against the respective

Orders passed by the Ld. CIT(A)-9, New Delhi relating to Assessment

Years 2000-01 & 2001-02 on the following grounds.


GROUNDS RAISED IN ITA NO. 6804/DE/2018 (AY 2000-01)


That on facts and circumstances of the case, the order passed by the LD.

CIT (Appeal) is bad both in the eyes of law and on facts.


That the LD. CIT (Appeal) has erred in law and on facts in confirming the

addition of Rs. 18,43,898/- made u/s 14A,despite the fact that rule 8D

was not applicable for the year under consideration.


That the Ld. CIT (Appeal) has erred in law and on facts in confirming the

addition of Rs. 18,43,898/- made u/s 14A, despite the fact that no

borrowed funds were used in making the investment.
                                                                         2

That the Ld. CIT (Appeal) has erred in law and on facts in confirming the

addition of Rs. 18,43,898/- made u/s 14A, despite the fact that the

investment has been made much prior to the borrowing of funds.







That the impugned appellate order is arbitrary, illegal, bad in law and in

violation of rudimentary principles of contemporary jurisprudence.


That the Appellant craves leave to add/alter any/all grounds of appeal

before or at the time of hearing of the appeal.


GROUNDS RAISED IN ITA NO. 6805/DE/2018 (AY 2001-02)


That on facts and circumstances of the case, the order passed by the Ld .

CIT (Appeal) is bad both in the eyes of law and on facts.


That the Ld. CIT (Appeal) has erred in law and on facts in confirming the

addition made uls 14A,despite the fact that rule 8D was not applicable for

the year under consideration.


That the Ld. CIT (Appeal) has erred in law and on facts in confirming the

addition of Rs. 15,85,000/- out of addition of Rs. 16,86,393/- made u/s

14A, despite the fact that no borrowed funds were used in making the

investment.


That the Ld. CIT (Appeal) has erred in law and on facts in confirming the

addition of Rs. 15,85,000/- out of addition of Rs. 16,86,393/- made u/s

14A, despite the fact that the investment has been made much prior to

the borrowing of funds.
                                                                           3

That the impugned appellate order is arbitrary, illegal, bad in law and in

violation of rudimentary principles of contemporary jurisprudence.


That the Appellant craves leave to add/alter any/all grounds of appeal

before or at the time of hearing of the appeal.


2.    Since the grounds of appeal raised in both these appeals are similar

and identical, hence, we have heard both the appeals together and are

being disposed of by this common order for the sake of convenience, by

dealing with ITA No. 6804/Del/2018 (AY 2000-01) and the result thereof

will apply mutatis mutandis to other appeal being ITA No. 6805/Del/2018

(AY 2001-02).


3.    At the time of hearing, Ld. Counsel for the assessee stated that the

legal issue in dispute in both the appeals is that "whether      Rule 8D is

applicable in the case of the assessee or not for the assessment years

2000-01 & 2001-02"? He further stated that the issue in dispute is

squarely covered in favour of the assessee in view of the decision dated

31.01.2018 of the Hon'ble Supreme Court of India in the case of

Commissioner of Income Tax vs. Essar Teleholdings Ltd. reported in

(2018) 101 CCH 0021 (SC). He further stated that the AO has made the

addition u/s. 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules,

1962 for the assessment years in dispute. But Rule 8D was prospective

in operation and could not have been applied to any assessment year

prior to assessment year 2008-09. He further stated that the assessee's

case is for assessment year 2000-01 and 2001-02. Therefore, Rule 8D is
                                                                           4

not applicable in the case of the assessee. In support of his contention, he

filed the copy of decision dated 31.01.2018 of the Hon'ble Supreme Court

of India in the case of Commissioner of Income Tax vs. Essar Teleholdings

Ltd. reported in (2018) 101 CCH 0021 (SC) and requested to follow the

same and delete the addition in dispute in both the assessment years by

allowing the appeals of the assessee.


4.    Ld. Sr. DR relied upon the orders of the revenue authorities.


5.    I have heard both the parties and perused the orders of the revenue

authorities alongwith the decision dated 31.01.2018 of the Hon'ble

Supreme Court of India in the case of Commissioner of Income Tax vs.

Essar Teleholdings Ltd. reported in (2018) 101 CCH 0021 (SC). I have

also gone through the impugned order passed by the Ld. First Appellate

Authority who himself in para no. 5.6 at page no. 10 (which is attached

with APB Pg. 13) has mentioned that no doubt, the AO erred in making a

disallowance under rule 8D, since the same was not applicable during the

year under consideration, he did not make any reference to the accounts

of the assessee, which is specific mandate of section 14A. But in para no.

5.7 of the impugned order,      Ld. CIT(A)      has held    that "However,

provision of Section 14A as available during the relevant AY 2000-02 was

very much applicable even without advent of Rule 8D which is,

apportionment of expenditure in respect of exempt income was to be

done and disallowed...."
                                                                                5






5.1   It is an admitted fact that the issue involved in this appeal is

relating to addition made under section 14A of the Act read with Rule 8D

which is     squarely covered in favour       of the assessee in view of the

decision dated 31.01.2018 of the Hon'ble Supreme Court of India in the

case of Commissioner of Income Tax vs. Essar Teleholdings Ltd. reported

in (2018) 101 CCH 0021 (SC) wherein it was observed in the Heads Notes

as under:-


                   "Income-Expenditure incurred in relation to income not

                   includible    in   total   income-Applicability   of   rule-

                   Retrospective vis-a-vis prospective effect-AO held that

                   assessee company was in receipt of both taxable and

                   non-taxable dividend income-Accordingly dividend on

                   investment exempt u/s 10(23G) was considered by AO

                   for purpose of disallowance u/» 14A and Rule 8D-AO

                   held that, sub-section (2) and sub-section (3) of section

                   14A inserted with effect from 01.04.2007 would apply to

                   all   pending      assessments     and    Rule    8D       was

                   retrospectively applicable-CIT(A) partly allowed appeal

                   of assessee-Tribunal allowed assessee's appeal holding

                   that Rule 8D was only prospective and in year under

                   consideration Rule 8D was not applicable-High Court

                   affirmed     tribunal's order   and   dismissed   appeal    of

                   revenue- Whether Rule 8D of Income Tax Rules is

                   prospective in operation as held by High Court or it is
                                                                    6

retrospective in operation .and should also be applicable

in assessment year in question as claimed by revenue-

Held, machinery provision of taxing statute had to give

effect to its manifest purposes-But applicability of

machinery provision whether it was prospective or

retrospective   depended        on   content      and    nature    of

Statutory Scheme-Methodology for determining amount

of expenditure in addition to income not includable in

total income was for first time prescribed by Rule 8D as

was envisaged in Section 14A sub-section (2) and sub-

section (3)- Memorandum of explanation explaining

provisions of Finance Act, 2006 had clearly mentioned

that Section 14 sub-section (2) and sub-section (3)

should be effective with effect from assessment year

2006-07 alone which was indicator that provision was

intended   to    operate       prospectively-Methodology          as

provided under Rule 8D was neither well-known nor

well-settled    mode      of    computation-New          mode      of

computation was brought in place by Rule 8D-No AO

even in his imagination could have applied methodology

which   was     brought    in    place      by    Rule   8D,     thus

retrospective   operation       of   Rule    8D    could   not    be

accepted-Rule 8D was prospective in operation and

could not have been applied to any assessment year
                                                                             7

                   prior to Assessment Year 2008-09-Revenue's appeal

                   dismissed."


5.2   Keeping in view of the aforesaid discussions and respectfully

following the aforesaid precedent, the addition in dispute for the

assessment year 2000-01 is deleted      and accordingly the appeal of the

assessee is allowed.


5.3   Following the consistent view as taken in assessment year 2000-01

in para nos. 5.1 & 5.2 as aforesaid, the addition in        dispute in the

assessment year 2001-02 is deleted and appeal for this assessment year

is also allowed.


6.    In the result, both the appeals filed by the assessee stand allowed.


       Order pronounced on 05/11/2019.

                                                         Sd/-
                                                     [H.S. SIDHU]
                                                  JUDICIAL MEMBER
Date 05/11/2019

"SRB"


Copy forwarded to: -

1.    Appellant -
2.    Respondent -
3.    CIT
4.    CIT (A)
5.    DR, ITAT          TRUE COPY
                                                      By Order,



                                  Assistant Registrar, ITAT, Delhi Benches

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