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CIT vs. ESSAR TELEHOLDINGS LTD.

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1 year 2 months ago #4602 by amit
CIT vs. ESSAR TELEHOLDINGS LTD. was created by amit
Section - 14A, 10(23G), 147, 154, 171, 144, 143, 25-A, 113, 29(2), 115
Order Date - 31-01-2018
Favouring - Assessee
Court - SUPREME COURT OF INDIA
Appellant - CIT
Respondent - ESSAR TELEHOLDINGS LTD.
Justice - ASHOK BHUSHAN, J.
Citation - 218Taxpundit80
Appeal No. - CIVIL APPEAL NO.2165 OF 2012
Asstt. Year - 2003-2004

Order

PER : ASHOK BHUSHAN, J.

Delay Condoned. Leave granted.

2. This appeal when alongwith several appeals were heard on 16.11.2016, this Court noticed that in batch of cases, four questions have arisen.  The present batch of cases of which Civil   Appeal   No.   2165   is   a   leading   case   relates   only   to Question No.2, which is to the following effect:­

“Whether   sub­section   (2)   and   sub­section   (3)   of Section   14A   inserted   with   effect   from   01.04.2007 will apply to all pending assessments?
Whether Rule 8D is retrospectively applicable?”

3. All these appeals raising only above question of law have been   heard   together   and   are   being   decided   by   this   common judgment.   For   deciding   all   these   appeals,   it   shall   be sufficient to refer facts and proceedings in Civil Appeal No. 2165 of 2012.

FACTS

Civil Appeal No. 2165 of 2012

4. This appeal has been filed against the judgment of Bombay High Court dated 12.09.2011 in Income Tax Appeal (L) No. 947 of  2011 by  which  judgment  the  High  Court  has  dismissed  the appeal filed by the Commissioner of Income Tax following an earlier judgment of the Bombay High Court dated 12.08.2010 in the   case   of  Godrej   Boyce   and   Manufacturing   Company   Limited Vs.   Deputy   Commissioner   of   Income   Tax,   Mumbai   &   Anr., reported in (2010) 328 ITR 81(Bom.).   The assessment year in issue is 2003 2004.  The assessee (respondent in appeal) filed his   return   of   income   on   01.12.2003   declaring   a   loss   of Rs.69,92,67,527/­.   A notice under Section 143(2) was issued to the assessee.   The Assessing Officer vide its order dated 27.03.2006 held that during the year under consideration, the assessee   company   was   in   receipt   of   both   taxable   and non­taxable   dividend   income.     Accordingly,   the   dividend   on investment exempt under Section 10(23G) was considered by the A.O.   for   the   purpose   of   disallowance   U/S.14A.     Hence, proportionate   interest   relating   to   investment   on   which exemption   u/s.10(23G)   is   available   as   per   the   working amounting   to   Rs.26   crores   was   disallowed   U/S.14A   r.w.s. 10(23G) of the I.T. Act.  

5. The assessee filed an appeal, which was partly allowed by order dated 05.03.2009.   The assessee filed an appeal before the ITAT.   The ITAT allowed the assessee’s appeal relying on the   Bombay   High   Court’s   judgment   in  Godrej   and   Boyce Manufacturing   Company   Limited   versus   Deputy   Commissioner   of Income   Tax,   Mumabi   &   Another.,   reported   in   (2010)   328   ITR 81(Bom.).  The ITAT held that Rule 8D is only prospective and in the year under consideration Rule 8D was not applicable. ITAT set aside the order of CIT(A) and restored the issue back to the file of the Assessing Officer for de novo adjudication without invoking the provisions of Rule 8D.  Against the order of ITAT, the revenue filed an appeal before the High Court. The High Court following its earlier judgment of  Godrej and Boyce   Manufacturing   Company   Limited   Vs.   Deputy   Commissioner of   Income   Tax,   Mumbai   &   Anr.   (supra)  dismissed   the   appeal. The Commissioner of Income Tax aggrieved by the judgment of the High Court has come up in this appeal. 

6. In the appeal, the only question, which has been pressed for our consideration is the first question, which was raised before the High Court, which is to the following effect:­

“Whether on the facts and circumstance of the case and in law, the Hon’ble ITAT is right in holding that applicability of Rule 8D is only prospective in operation and for the year under assessment it was not applicable?”

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