NESCO LTD MUMBAI vs ADDL CIT 9(2) MUMBAI

आयकर यकर यकर यकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, मुंबई मुंबई मुंबई मुंबई यायपीठ यायपीठ यायपीठ यायपीठ ‘बी’ मुंबई मुंबई मुंबई मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL “ B” BENCH, MUMBAI सवौी, नरेि कुमार ब लै या, लेखा सदःय एवं एवं एवं एवं , संजय गग याियक सदःय के सम' BEFORE SHRI N.K.

BILLAIYA, AM AND SHRI SANJAY GARG, JM आयकर अपील सं./I.T.A.

No.1/Mum/2011 (िनधारण िनधारण िनधारण िनधारण वष वष वष वष / Assessment Year :2007-08 M/s.

NESCO Ltd., Nesco Estate Western Express Highway, Goregaon (E), Mumbai-400 063 बनाम बनाम बनाम बनाम/ Vs.

The ACIT 9(2), Mumbai Appellant Respondent आयकर अपील सं./I.T.A.

No.9104/Mum/2010 (िनधारण िनधारण िनधारण िनधारण वष वष वष वष / Assessment Year :2007-08 The ACIT 9(2), Mumbai बनाम बनाम बनाम बनाम/ Vs.

M/s.

NESCO Ltd., Nesco Estate Western Express Highway, Goregaon (E), Mumbai-400 063 Appellant Respondent C.O.

No.

79/Mum/2010 (Arising out of I.T.A.

No.9104/Mum/2010 (िनधारण िनधारण िनधारण िनधारण वष वष वष वष / Assessment Year :2007-08 M/s.

The ACIT 9(2), Mumbai ःथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACN 1222E (अपीलाथ+ /(Cross Objector) .. (ू-यथ+ / Respondent) अपीलाथ+ ओर से/ Revenue by: Shri R.K.

Sahu ू-यथ+ क/ ओर से/Respondent by: Shri Haresh P.

Shah NESCO Ltd 2 सुनवाई क/ तार1ख / Date of Hearing : 25.03.2014 घोषणा क/ तार1ख /Date of Pronouncement : 25.03.2014 आदेश / O R D E R PER N.K.

BILLAIYA, AM: ITA No.

1/Mum/2011 & ITA No.

9104/M/10 are cross appeals by the assessee and the Revenue against the very same order of the Ld.

CIT(A)-20, Mumbai dt.

28.10.2010 and C.O.

79/M/2012 is filed by the assessee arising out of ITA No.

9104/M/2010.

ITA No.

1/Mum/2011 – Assessee’s appeal 2.

Grievance of the assessee is two-fold.

First grievance relates to the disallowance of expenditure u/s.

14A of the Act and the second grievance is the denial of the claim of extra VRS of Rs.

21,83,256/-.

3. ,256/-.

3.

During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has shown dividend income of Rs.

1,89,44,473/- which has been claimed as exempt income.

The assessee was asked to explain why disallowance u/s.

14A as computed under Rule 8D of the I.T.

Rules be not made.

The assessee submitted that disallowance u/s.

14A is not applicable as the investments made by the assessee are not from borrowed capital.

4.

The AO did not accept this contention of the assessee and relying upon the decision of the Special Bench of the Tribunal in the case of Daga Capital Management Pvt.

Ltd., in ITA No.

8057/M/2003, the AO NESCO Ltd 3 proceeded to compute the disallowance as per Rule 8D and accordingly a sum of Rs.

12,26,731/- was disallowed u/s.

14A of the Act.

5.

The assessee carried the matter before the Ld.

CIT(A) and reiterated that it did not incur any expenditure in earning the dividend income.

After considering the facts of the case, the Ld.

CIT(A) observed that application of Rule 8D is w.e.f assessment year 2008-09 as per the decision of the Jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co.

Ltd.

Vs DCIT 328 ITR 81.

However, at the same time, the Ld.

CIT(A) was of the firm belief that the AO is competent to determine and disallow such expenditure as may be reasonable having proximate nexus with the exempt income.

The Ld.

CIT(A) confirmed the additions made by the AO holding that there was nothing wrong to make a reasonable estimate based on the method prescribed under Rule 8D.

6.

Aggrieved by this, the assessee is before us.

Counsel for the assessee strongly submitted that computation of disallowance read with Rule 8D is against the decision of the Jurisdictional High Court and therefore the additions sustained by the Ld.

CIT(A) deserves to be deleted.

7.

Per contra, the Ld.

Departmental Representative relied upon the findings of the lower authorities.

8. rities.

8.

We have carefully perused the orders of the lower authorities.

It is not in dispute that the AO has invoked Rule 8D for computing the disallowance.

We find that the Ld.

CIT(A) , though agreed that Rule 8D is not applicable for the year under consideration , yet confirmed the disallowance which was computed as per Rule 8D.

NESCO Ltd 4 9.

In our considered view, this issue needs to be decided afresh.

We, therefore, restore this issue back to the files of the AO.

The AO is directed to compute the disallowance , if any , without invoking Rule 8D and after giving reasonable and sufficient opportunity of being heard to the assessee.

Ground No 1 is allowed for statistical purpose.

10.

During the course of the assessment proceedings, the AO noticed that the assessee has filed revised computation of income requesting for deduction of Rs.

21,83,256/- from the income returned for the reason that it had made VRS payment during the year at Rs.

2,28,94,986/- whereas in the original computation of income filed with the return of income, it claimed deduction of only Rs.

2,07,11,730/-.

The claim of the assessee was not accepted by the AO.

The AO was of the opinion that the claim should have been made by filing a revised return of income.

11.

Aggrieved by this, the assessee carried the matter before the Ld.

CIT(A).

CIT(A) dismissed assessee’s claim holding that the impugned claim was made only through a letter in the course of the assessment proceedings which was neither preceded nor followed by a revised return of income.

CIT(A) further observed that it is not a case of the assessee that denying the claim a question of law has arisen.

CIT(A) confirmed the action of the AO.

12.

Counsel for the assessee strongly argued that the claim of the assessee was made lawfully and is fully supported by necessary evidence.

13.

Departmental Representative relied upon the findings of the Ld.

CIT(A). d.

NESCO Ltd 5 14.

After carefully perusing the orders of the lower authorities, we find that the claim was not considered by the AO for the reason that it was not claimed through a revised return of income but only through a revised computation of income.

In our humble opinion, this issue needs to be examined afresh.

The AO is directed to consider the claim of the assessee as per the provisions of law , after giving reasonable opportunity of being heard to the assessee.

15.

In the result, the appeal filed by the assessee is allowed for statistical purpose.

9104/M/10 – Revenue’s appeal 16.

The sole grievance of the Revenue is that the Ld.

CIT(A) erred in deleting the addition of Rs.

6,45,637/- being 10% of the Miscellaneous expenses claimed.

17.

This appeal by the Revenue is not maintainable because the tax effect involved in this appeal is less than Rs.3 lakhs as per the limit prescribed by the CBDT vide Instruction No.3 of 2011 for filing of appeal by the Revenue before the Tribunal.

In such a situation the appeal filed in contravention of such limit cannot be sustained.

This view is duly supported by the decision in the case of ACIT Vs.

Satish Chandra, 10 SOT 383.

Similar view has been taken by the Bombay High Court in the case of CIT Vs.

Camco Colour Co.

254 ITR 565, wherein it has been held that the tax effect involved in the appeal filed by the Revenue being less than the monetary limit as prescribed in Board Circular, the same is not maintainable.

NESCO Ltd 6 18.

Accordingly, in view of the Circular of 2011 as applicable to the appeals filed earlier, the Hon’ble jurisdictional High Court has held in the case of CIT Vs Madhukar K Inamdar (HUF) reported in 318 ITR 149 that the appeals filed by the Revenue prior to the Circular shall also be governed the monetary limit of this circular.

Similar view has been reiterated by the Mumbai Bench of the Tribunal vide order dated 29.04. ted 29.04.2011 in ITO Vs India Safety Vaults Ltd., in ITA No.

648- 651/M/2010.

Respectfully following the precedents, we hold that the appeal filed by the Revenue cannot be taken up for decision on merits as the tax effect in this case is admittedly less than Rs.

3.00 lacs.

We, therefore, dismiss the appeal filed by the Revenue as not maintainable.

C.O.

79/Mum/2012 19.

Before us, the Ld.

Counsel for the assessee stated that he is not pressing the Cross Objection.

The C.O is accordingly dismissed as not pressed.

20.

In the result, the appeal filed by the assessee is allowed for statistical purpose and the cross appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is dismissed.

Order pronounced in the open court on 25th March, 2014 . आदेश क/ धोषणा खुले यायालय म5 6दनांकः 25.3.2014 को क/ गई । Sd/- Sd/- (SANJAY GARG ) (N.K.

BILLAIYA) याियक सदःय/JUDICIAL MEMBER लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; 6दनांक Dated 25.3.2014 व.िन.स./ RJ , Sr.

PS NESCO Ltd 7 आदेश आदेश आदेश आदेश क/ क/ क/ क/ ूितिल प ूितिल प ूितिल प ूितिल प अमे षत अमे षत अमे षत अमे षत/Copy of the Order forwarded to : 1. अपीलाथ+ / The Appellant 2. ू-यथ+ / The Respondent.

3. आयकर आयु9(अपील) / The CIT(A)- 4. आयकर आयु9 / CIT 5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार आदेशानुसार/ BY ORDER, स-या पत ूित //True Copy// उप उप उप उप/सहायक सहायक सहायक सहायक पंजीकार पंजीकार पंजीकार पंजीकार (Dy./Asstt.

Registrar) आयकर आयकर आयकर आयकर अपीलीय अपीलीय अपीलीय अपीलीय अिधकरण अिधकरण अिधकरण अिधकरण, मुंबई / ITAT, Mumbai