KAMA SCHACHTER JEWELLERY P., LTD, MUMBAI v. ADDL CIT CIR 9(2), MUMBAI

ITA 3974/MUM/2010 | 2007-2008
Pronouncement Date: 31-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 397419914 RSA 2010
Assessee PAN AAACK2261J
Bench Mumbai
Appeal Number ITA 3974/MUM/2010
Duration Of Justice 5 month(s) 13 day(s)
Appellant KAMA SCHACHTER JEWELLERY P., LTD, MUMBAI
Respondent ADDL CIT CIR 9(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-10-2010
Date Of Final Hearing 27-10-2011
Next Hearing Date 27-10-2011
Assessment Year 2007-2008
Appeal Filed On 17-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NOS. 3973 & 3974 /MUM/2010 (ASSESSMENT YEARS: 2006-07 & 2007-08) M/S KAMA SCHACHTER JEWELLERY (P) LTD. UNIT 203-204 TOWER II SEEPZ ++ SEEPZ SEZ ANDHERI EAST MUMBAI 400096 PAN: AAACK 2261 J ADDITIONAL COMMISSIONER OF INCOME TAX CIRCLE 9-2 AAYAKAR BHAVAN MK MARG CHURCHGATE MUMBAI 400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 27.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY : SHRI K.G. KUTTY DR O R D E R PER D.K.AGARWAL (JM) THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 18.2.201 0 PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEARS 2006-07 A ND 2007- 08. SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING DIAMOND STUDDED JEWELLERY. IT FILED RETURNS FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 DECLARING TOT AL INCOME AT RS.5 73 61 141/- AND RS.8 26 87 230/- (RE VISED) RESPECTIVELY. ON PERUSAL OF THE P&L A/C AND COMPU TATION OF ITA NOS 3973 AND 3974 OF 2010 KAMA SCHACHTER JEWELLERY MUMBAI 2 TOTAL INCOME THE AO INTERALIA OBSERVED THAT THE AS SESSEE COMPANY HAS RECEIVED A DIVIDEND TO THE EXTENT OF RS.2 31 258/- AND RS.2 64 038/- FOR A.YS 2006-07 A ND 2007- 08 RESPECTIVELY AND THE SAME HAS BEEN CLAIMED AS EXEMPT U/S 10(34/35) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). HE FURTHER OBSERVED THAT NO EXPENDITURE IS DEBITED TO THE P&L A/C TOWARDS EARNING OF SUCH EXEMPT INCOME. ACCORDIN GLY THE ASSESSEE COMPANY WAS ASKED TO FURNISH THE COMPLETE DETAILS OF DISALLOWANCE U/S 14A R.W.R. 8D OF THE INCOME TAX RULES 1962. IN RESPONSE THE ASSESSEE COMPANY SUBMITTED T HAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF MAFATLAL HOLDINGS V/S ACIT 85 TTJ 821 (MUM) NO DISALLOWANC E COULD BE MADE ON THE GROUND THAT THE DIVIDEND INCOME WAS EXEMPT IN THE HANDS OF THE ASSESSEE. IT WAS FURTHER SUBMIT TED THAT THE ASSESSEE HAS SUO-MOTU MADE DISALLOWANCE U/S 14A . HOWEVER THE AO DID NOT ACCEPT THE ASSESSEES EXPLA NATION. THE AO AFTER RELYING ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S DAGA CAPITAL MA NAGEMENT (P) LTD. 117 ITD 169(MUM) (SB) COMPUTED THE DISALL OWANCE U/S 14A/RULE 8D AT RS.707 907/- AND RS.12 05 773/- FOR THE A.YS 2006-07 AND 2007-08 RESPECTIVELY AS PER THE WO RKING GIVEN IN THE RESPECTIVE ASSESSMENT ORDERS. ON APPE AL THE LD. CIT (A) FOR THE SAME REASONS WHILE FOLLOWING T HE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) DIRECT ED THE AO TO REWORK THE DISALLOWANCE TAKING THE AVERAGE VALUE OF THE ITA NOS 3973 AND 3974 OF 2010 KAMA SCHACHTER JEWELLERY MUMBAI 3 ASSET AFTER REDUCING THE CURRENT LIABILITY AND PROV ISIONS AS SHOWN IN THE BALANCE SHEET AND THE AMOUNT DISALLOWE D BY THE ASSESSEE ITSELF IN COMPUTATION OF TOTAL INCOME. 3. BEING AGGRIEVED BY THE ORDER OF THE LD CIT (A) T HE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE COMMON GROUNDS THE SUSTENANCE AND WORKING OF THE DISALLOWANCE OF RS.707 907/- AND RS.12 05 773/- U /S 14A R.W.R. 8D OF THE I.T. RULES 1962 FOR THE A.YS 2006 -07 AND 2007-08 RESPECTIVELY. 4. THE ASSESSEE VIDE HIS WRITTEN SUBMISSIONS DATED 24.10.2011 SUBMITTED THAT IN VIEW OF THE RECENT DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN GODREJ AND BOYCE M FG. CO. LTD. V/S DCIT (328 ITR 81) RULE 8D IS NOT APPLICA BLE THE AO WILL HAVE TO DETERMINE THE QUANTUM OF DISALLOWAB LE EXPENDITURE BY A REASONABLE METHOD HAVING REGARD TO ALL FACTS AND CIRCUMSTANCES. IT WAS FURTHER SUBMITTED T HAT IN A RECENT DECISION IN THE CASE OF VIP INDUSTRIES LTD V /S DCIT IN ITA NO.7242/MUM/2008 AND ITA NO.1004/MUM/2008 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 DATED 17.9.201 0 THE TRIBUNAL HAS HELD THAT THE DISALLOWANCES OF ADM INISTRATIVE EXPENDITURE AT THE RATE OF 5% OF THE EXEMPT INCOME EARNED BY THE ASSESSEE BY WAY OF DIVIDEND AND INTEREST FRO M TAX FREE BONDS IS QUITE FAIR AND REASONABLE. THEREFORE HE H AS NO OBJECTION IF THE MATTER IS RESTORED BACK TO THE FIL E OF THE AO TO ITA NOS 3973 AND 3974 OF 2010 KAMA SCHACHTER JEWELLERY MUMBAI 4 WORK OUT THE DISALLOWANCE IN THE LIGHT OF THE SAID DECISION. THE COPY OF THE ORDER IN THE CASE OF VIP INDUSTRIES LTD. (SUPRA) WAS ALSO PLACED ON RECORD. 5. ON THE OTHER HAND THE LD DR SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS SET ASIDE TO THE FILE OF THE A.O TO DECIDE THE SAME IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AN D BOYCE MFG. CO. LTD. (SUPRA). 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECO RD WE FIND MERIT IN THE PLEA OF THE PARTIES THAT THE ISSUE STA NDS COVERED BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (SUP RA) WHEREIN THEIR LORDSHIPS AFTER CONSIDERING THE DECIS ION OF THE TRIBUNAL IN DAGA CAPITAL MANAGEMENT PVT. LTD. (117 ITD 169 (MUM) (SB) WHILE HOLDING THAT THE PROVISIONS OF SU B SECTIONS (2) AND (3) OF SEC.14A OF THE ACT ARE CONSTITUTIONA LLY VALID HAVE HELD VIDE PLACITUM 88(VI) APPEARING AT PAGE 13 8 OF THE ITR AS UNDER: (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09 WHEN RULE 8D WAS NOT APPLICABLE THE A.O HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE A.O IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE A.O MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND ITA NOS 3973 AND 3974 OF 2010 KAMA SCHACHTER JEWELLERY MUMBAI 5 CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT WE SET AS IDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS AC COUNT AND SEND BACK THE MATTER TO THE FILE OF THE A.O TO DECI DE THE SAME AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE A ND THE OTHER DECISION RELIED ON BY THE ASSESSEE (SUPRA) AF TER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE AND ACCORDINGLY THE COMMON GROUNDS TAKEN B Y THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOS ES. 7. IN THE RESULT BOTH THE APPEALS STAND PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST OCT. 2 011. SD SD (RAJENDRA SINGH) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 31ST OCTOBER 2011. VINODAN ITA NOS 3973 AND 3974 OF 2010 KAMA SCHACHTER JEWELLERY MUMBAI 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI