IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.7078/M/2012
Assessment Year: 2009-10
M/s. Jagruti Resins Pvt. Ltd. ITO 8(2)(1)
Bhansali House, 1st Floor, Mumbai - 400020
Plot No.5A, Off V.D. Road, Vs.
Andheri (W),
Mumbai - 053
PAN: AAACJ1726D
(Appellant) (Respondent)
Assessee by : Shri Darshak Shah, A.R.
Revenue by : Shri Maurya Pratap, D.R.
Date of Hearing : 03.04.2014
Date of Pronouncement : 03.04.2014
ORDER
Per Sanjay Garg, Judicial Member:
The present appeal has been filed by the assessee against the order of the
Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)]
dated 08.08.12.
2. The sole ground raised in the appeal is with regard to the confirmation of
disallowance of Rs.14,40,379/- u/s 14A of the Income Tax Act.
3. The Assessing Officer (hereinafter referred to as the AO) during the
assessment proceedings observed that the assessee company had received
Rs.8,28,000/- by way of dividend and claimed the same as exempt income. He
asked the assessee to submit working of disallowance u/s.14A r.w.r.8D. In
response, the AR of the assessee submitted the working of disallowance
2 ITA No.7078/M/2012
M/s. Jagruti Resins Pvt. Ltd.
u/s.14A r.w.r.8D which was worked out at Rs.14,40,379/-. The AO made the
disallowance u/s.14A of the I.T. Act accordingly.
4. In appeal before the CIT(A), the ld. A.R. of the assessee submitted that
the assessee was holding the investment in shares since 2003. During the year
under consideration, no trading or investment in shares had been done. No
expenditure was attributable to the earning of the dividend income. The AO
had not given any finding for rejecting the assessee's claim that no
disallowance was required u/s.14A.
5. The ld. CIT(A) asked the assessee to identify the expenses incurred
directly in connection with its business activities of plastic granules. The
assessee submitted that out of total expenses of Rs.86.45 lacs, a sum of
Rs.81.81 lacs had been incurred directly with regard to the plastic business. A
sum of Rs.4,57,073/-, consisting of salary and wages, auditor's remuneration,
miscellaneous expenses, computer expenses, office expenses and diwali
expenses had been classified as common expenses.
However the ld. CIT(A) observed that on perusal of the P&L A/c it was
revealed that other than sales, the assessee had received income from interest
and dividend. Under such circumstances, a part of the common expenses was
allocable towards the earning of dividend income. He therefore held that the
provisions of section 14A had rightly been invoked by the AO. Aggrieved
against the order of the CIT(A), the assessee has come in appeal before us.
6. We have considered the submissions of the ld. representatives of the
parties. It may be observed that in the case of `Godrej & Boyce
Manufacturing Co. Ltd.' 328 ITR 81, the Hon'ble Bombay High Court has
held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable but can be
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M/s. Jagruti Resins Pvt. Ltd.
applied only if the assessee's method is not satisfactory. It has been further held
that Rule 8D is not retrospective and applies from A.Y. 2008-09. It may be
further observed that under section 14A of the Income Tax Act, resort can be
made to Rule 8D of the Income Tax Rules for determining the amount of
expenditure in relation to exempt income, if, the AO is not satisfied with the
correctness of the claim made by the assessee in respect of such expenditure.
However, a perusal of the assessment order reveals that the AO without
recording any dissatisfaction with regard to the claim of the assessee that no
expenditure was incurred by the assessee for earning the exempt income,
straightway applied Rule 8D against the mandate of the provisions of section
14A of the Income Tax Act. The ld. CIT(A) though called for the working for
the calculation of disallowance u/s 14A of the act from the assessee, but
ignored the same while confirming the disallowance.
7. So keeping in view of the overall facts and circumstances of the case, we
restore this issue back to the file of the AO with a direction that the AO will
examine the computation/calculation made in this regard by the assessee. The
AO will be at liberty to call for any record/evidences or statement etc. from the
assessee as may be required by him for deciding the issue under consideration.
After going through the details provided by the assessee, if the AO will be
satisfied with the objection/calculation made by the assessee then he will
assess the income accordingly. However, if the AO does not agree with the
computation made by the assessee and in that event, he will have to record his
dissatisfaction with reasoning for the same by way of a speaking order, then he
will be at liberty to resort to the provisions of Rule 8D. Needless to say, the
assessee will co-operate and promptly supply the necessary details etc. to the
AO for deciding the issue under consideration.
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M/s. Jagruti Resins Pvt. Ltd.
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 03.04.2014.
Sd/- Sd/-
(D. Karunakara Rao) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 03.04.2014.
* Kishore
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR "C" Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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