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Wednesday, December 18, 2013

Disallowance U/s 14A before AY 2008-09 should be restricted to 2% of Exempt Income. : Mumbai ITAT

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER

I.T.A. No.8006/M/2010 (AY: 2007-2008)

Shakuntaladevi Trade & Investments Pvt. Ltd. ,                                   The ITO-9(3)(1),
745/2, Krishna Kuti r Society,                                                             Room No.227, 2nd Floor,
Khar Pal i Road, Behind Khar                                                             Aayakar Bhavan,
RTO Of f ice, Khar (West),                                                                 Mumbai – 400 020.
Mumbai – 400 052.                                                                            Respondent
PAN : AAACS 7846 R                                             Vs.
Appellant

अऩीराथी की ओय से / Appellant by : Shri Bikas Kumar Bogi
प्रत्मथी की ओय से/ Respondent by : Shri M.L. Perumai, DR

सुनवाई की तायीख /Date of Hearing : 19.11.2013
घोषणा की तायीख /Date of Pronouncement : 06.12.2013
आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

This appeal filed by the assessee on 19.11.2010 is against the order of CIT (A)-20, Mumbai dated 20.9.2010 for the assessment year 2007-08.

2. In this appeal, assessee raised the following grounds which read as under:

“1. The CIT (A) erred in confirming the disallowance u/s 14A of Rs. 2,28,944/- made by the AO and not granting relief as claimed by the appellant.
2. The CIT (A) erred in confirming disallowance u/s 14A of Rs. 2,28,944/-, which is based on the formula given in Rule 8D in spite of the fact that the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd held that Rule 8D is not applicable for AY 2007-2008.
3. The CIT (A) erred in concluding that there was nothing wrong to make disallowance based on the method prescribed under Rule 8D even though Rule 8D was not applicable to the relevant year.
4. The CIT (A) erred in ignoring the fact that firstly AO has to give his finding having regard to the account of the assessee that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not for part of the total income under this Act.
5. The CIT (A) erred in concluding that the appellant failed to meet its onus to establish expenses disallowed by the AO, since there was no disallowance of expenses rather it was ½% of average value of investment that was disallowed by the learned officer.
6. The CIT (A) erred in relying to the judgment of Hon’ble Supreme Court in the case of Munjal Sales Corporation vs. CIT 298 ITR (SC), since the facts of the given case and your appellant’s case are not the same.”

3. The only issue emanating from the above grounds is the disallowance of Rs. 2,28,944/- u/s 14A made by the AO and confirmed by the CIT (A). At the outset, Shri Bikas Kumar Bogi, Ld Counsel for the assessee brought our attention to the judgment of the Hon’ble Bombay High Court in the case of CIT vs. M/s. Godrej
Agrovet Ltd vide Income Tax Appeal No. 934 of 2011, dated 8.1.2013 and mentioned that the in view of the above mentioned judgment of the, the ITAT has taken the view that the disallowance u/s 14A should be restricted to 2% of the dividend income. Ld Counsel also relied on various decisions of the ITAT, Kolkata
Benches in support of his contention. 

4. On the other hand, Ld DR relied on the orders of the Revenue Authorities.

5. We heard both the parties and perused the orders of the Revenue. It is a fact that the relevant assessment year is 2007-08 under consideration is outside the scope of provisions of Rule 8D. The said provisions cannot be treated as applicable to the A.Y.2007-08 under consideration indirectly when the same is precluded by the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs.
DCIT, reported in (2010) 328 ITR 81(Bom). The Hon’ble Bombay High Court also in the case of CIT vs. M/s. Godrej Agrovet Ltd vide Income Tax Appeal No. 934 of 2011, dated 8.1.2013, has held that percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years
earlier to the assessment year 2008-09. The relevant portion of the said judgment of the Bombay High Court (supra) reads as under:

"4. So far as question (b) is concerned, the Tribunal in its impugned order dated 17.9.2010 while applying the decision of this court in the matter of Godrej (supra) has disallowed the expenditure only to the extent of 2% of the total exempt income earned by the respondent-assessee on the basis its order dated 27.2.2009 for the assessment year 2002-2003 and order dated 10.9.2009 for the Assessment Years 2003-2004 and 2004-2005 wherein disallowance was restricted to 2% of the exempt income. Further; the Tribunal has remanded the matter to the AO to verify the disallowance claimed and restrict the disallowance only to the extent to 2% of the total exempt income. We find no fault with the order of the Tribunal. "

Considering the binding nature of the judgment, we direct the AO to quantify the disallowance in the light of the aforesaid judgments of the Hon’ble High Court. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

6. In the result, appeal of the assessee is allowed for statistical purposes. 

Order pronounced in the open court on 6th December, 2013.

Sd/-                                   Sd/-
(SANJAY GARG)            (D. KARUNAKARA RAO)
JUDICIAL MEMBER       ACCOUNTANT MEMBER

Mumbai; 6.12.2013


Tuesday, July 16, 2013

Case Study - CA Final - Direct Taxes - NOV 2013

Dear Friends :- The file contains selected 40+ case decisions pronounced in last one year applicable for CA Final Direct Taxes Nov 2013. The same can be download from following link :-

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Direct Tax Amendments : CA Final : Nov 2013

Friends :- The File contains the Amendments made by Finance Act 2012 applicable for CA Final NOV 2013 Term. The same can be download from the following link:

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CA Final Results of Last 21 Term : May 2003 – May 2013 : An Interesting Analysis

Dear Friends / Professional Colleagues 

CA Final Results of May 2013 term declares today (16th July 2013) afternoon. First of all many many congratulations to NEWLY Qualified CA's.  

In recent times, Hiring of Newly CA's had hits an all time low. I thought that the effect of the same may reflect in the latest Exam Results and I was right. It looks like that effect of economic slowdown has made an impact on the numbers. Let's see the Analysis

1. Passing percentage of students appearing in Both Group is 10.03%. [Lowest among last 5 terms] 2764 students has successfully passed both groups which is lowest among last 6 terms. There is 30% decrease in number of students passed both group in comparison to last term. 

2. Passing percentage of students appearing in 1st Group is 13.79% only, [Lowest among last 21 terms (as per available data)]. Only 6319 students passed group 1 which is also lowest among last 6 term. There is 50% decrease in number of students passed both group in comparison to last term.   

3. Passing percentage of students appearing in 2nd Group is 18.65% [[Lowest among last 5 terms] 9389 students has successfully passed both groups which is also lowest among last 5 terms. There is 15% decrease in number of students passed both group in comparison to last term.

4. More than 1.20 lakh students appeared [Consecutive five terms] both as well as Individual groups in aggregate. 

There is sharp reduction in number of students passed in this term in comparison to preceding terms.
Exam
Group I
Group II
Both Group

 Appear
 Passed
 Pass
%
 Appear
 Passed
 Pass 
%
 Appear.
 Passed
 Pass
%
May-13
45,822
6,319
13.79
50,354
9,389
18.65
27,556
2,764
10.03
Nov-12
48,320
13,193
27.30
51,906
11,341
21.85
29,339
3,804
12.97
May-12
51,002
12,912
25.32
55,108
16,325
29.62
30,976
5,075
16.38
Nov-11
49,299
12,590
25.54
57,186
15,905
27.81
31,705
5,003
15.78
May-11
48,548
17,641
36.34
53,766
14,338
26.67
32,419
6,649
20.51
Nov-10
41,302
9,911
24.00
45,955
7,034
15.31
28,430
2,802
9.86
Jun-10
28,889
4,063
14.06
35,187
3,235
9.09
20,666
945
4.57
Nov-09
25,224
5,011
19.87
30,641
3,099
10.11
18,502
1,454
7.86
Jun-09
25,848
8,379
32.42
27,840
4,185
15.03
18,625
2,579
13.85
Nov-08
21,176
5,892
27.82
23,856
5,762
24.15
14,614
2,926
20.27
May-08
17,552
6,444
36.71
18,685
5,290
28.31
10,580
2,645
25.00
Nov-07
16,137
6,353
39.37
16,493
5,005
30.35
8,654
2,446
28.26
May-07
15,083
2,289
15.18
15,874
2,777
17.49
7,467
1,023
13.70
Nov-06
14,587
5,505
37.74
16,947
6,555
38.68
6,830
1,830
26.79
May-06
15,355
5,832
37.98
17,952
5,718
31.85
7,053
1,608
22.80
Nov-05
15,902
5,039
31.68
20,085
5,772
28.74
7,620
1,348
17.69
May-05
18,211
5,748
31.56
20,513
3,520
17.16
8,650
1,243
14.37
Nov-04
16,645
4,089
24.57
20,448
4,484
21.93
7,666
939
12.25
May-04
20,724
7,011
33.83
21,364
3,354
15.70
9,770
1,490
15.25
Nov-03
19,501
4,450
22.82
20,377
4,381
21.50
8,597
1,076
12.52
May-03
20,290
4,469
22.03
18,692
2,203
11.79
7,943
802
10.10