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29-08-2019, Bimetal Bearings, Section 14A, 8D, 40(a)(i), Tribunal Chennai

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1 week 4 days ago #10677 by amit
Section - 14A, 8D, 40(a)(i), 195
Order Date - 29-08-2019
Favouring - Partly
Court - Tribunal Chennai
Appellant - Bimetal Bearings Limited
Respondent - DCIT
Justice - Duvvuru RL Reddy JM & S. Jayaraman AM
Citation - 919Taxpundit7
Appeal No. - I.T.A. Nos. 668, 669, 670 & 671/Chny/2015
Asstt. Year - 2007-08 to 2010-11

Order

PER : DUVVURU RL REDDY

These four appeals filed by the same assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals) 17, Chennai all dated 30.01.2015 relevant to the assessment years 2007-08, 2008-09, 2009-10 and 2010-11. Since common issues have been raised in these appeals, heard together and are being disposed of by this common order for the sake of brevity.

2. The first common ground raised in the appeals of the assessee relates to disallowance under section 14A r.w. Rule 8D. In the assessment year 2007-08, the Assessing Officer made disallowance of 16,35,618/- by applying the provisions of Rule 8D of the IT Rules towards expenditure for the purpose of earning the dividend income. On appeal, the ld. CIT(A) confirmed the disallowance.

2.1 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book along with case law filed by the assessee. It was he a gument of the ld. Counsel that the applicability of Rule 8D is not retrospective, but applicable from the assessment year 2008-09 onwards and therefore, the Assessing Officer was not correct in making disallowance by applying the provisions of Rule 8D and prayed that the decision of the decision of the Hon’ble Jurisdictional High Court in the case of Simpson & Co. Ltd. v. DCIT in T.C. No. 2621 of 2006 dated 15.10.2012. We find force in the arguments of the ld. Counsel. Various Courts and Benches of the Tribunal including the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT 402 ITR 640 concurred that application of provisions of Rule 8D is prospective in nature and could not be made applicable to cases prior to assessment year 2008–09. Accordingly, in view of the judgement of Hon’ble Jurisdictional High Court in the case of Simpson & Co. Ltd. v. DCIT (supra), we direct the Assessing Officer to restrict the disallowance towards earning of exempt income @ 2% of the dividend amount only. Thus, the ground raised by the assessee is allowed.

2.2 In the assessment years 2008-09 and 2009-10, by applying the provisions of Rule 8D of the IT Rules towards expenditure for the purpose of earning the dividend income, the Assessing Officer made disallowance of ₹.21,80,640/- and ₹.38,75,992/- respectively. On appeal, the ld. CIT(A) confirmed the disallowances.

2.2.1 We have heard the rival contentions, perused the materials available on record and gone through the orders of authorities below including paper book along with case law filed by the assessee. By referring to the grounds of appeal, where the assessee has relied upon the decisions in the case of CIT v. Hero Cycles 323 ITR 518 (P&H) and the Delhi Benches of the Tribunal in the case of ACIT v. Sub Investments 8 ITR (Tri) 33 have held that unless the Assessing Officer established that specific expenditure has been incurred by the assessee for earning exempt income, there can be no disallowance under section 14A of the Act, the ld. Counsel prayed for deleting the disallowance made by the Assessing Officer. In the case of Maxopp Investment Ltd. v. CIT (supra), the Hon’ble Supreme Court has observed that as long as an exempt income was earned, the expenditure incurred as attributable to earning such exempt income, had to be disallowed under section 14A of the Act. Since the Assessing Officer has

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