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Income Tax Appellate Tribunal, “H ” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI C.N. PRASAD
आदेश / O R D E R PER C.N. PRASAD, JM:
These three appeals are filed by the assessee and the Revenue against the order of the Ld. CIT(A)-4, Mumbai pertaining to assessment years 2007-08 & 2008-09.
– A.Y. 2007-08 2. The first issue in the appeal of the assessee is that the Ld. CIT(A) erred in confirming the disallowance u/s. 14A r.w.r. 8D of the Act.
2.1. Brief facts are that the Assessing Officer while completing the assessment invoked provisions of Sec. 14A r.w. Rule 8D and following the decision of the Special Bench in the case of ITO Vs Daga Capital Management Pvt. Ltd., disallowed Rs. 5,12,000/-.
2.2. The assessee before the Ld. CIT(A) contended that it had not incurred any expenditure for earning dividend income and therefore no disallowance can be made u/s. 14A r.w. Rule 8D. The assessee contended that provisions of Sec. 14A have no application to the facts of the assessee’s case. However, the Ld. CIT(A) confirmed the order of the Assessing Officer in applying Rule 8D r.w. section 14A of the Act.
3 H.V. Transmissions Ltd.
2.3. The Ld. Counsel for the assessee before us contends that since no expenditure had been incurred in relation to exempt income, no disallowance is warranted under Sec. 14A r.w. Rule 8D. The Ld. Counsel for the assessee submits that the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd Vs DCIT., held that Rule 8D is not retrospective. Therefore he submits that the lower authorities are not justified in applying Rule 8D for the Assessment Year 2007- 08. The Ld. Counsel for the assessee further submits that since investments on which exempt income is received have been made out of self generated funds, no disallowance is warranted u/s. 14A of the Act. The Ld. Counsel for the assessee further submits that as the provisions of Rule 8D have no application, the disallowance may be restricted to 2% of the dividend treating the same as the expenditure attributable for earning dividend income.
The Ld. Departmental Representative supports the orders of the authorities below.
We have heard the rival contentions and perused the orders of the authorities below. For the Assessment Year under consideration i.e. Assessment Year 2007-08, the provisions of Rule 8D have no application as held by the Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. It was held that Rule 8D applies only prospectively. Therefore, we hold that provisions of Rule 8D have no application for Assessment Year 2007-08. However, reasonable disallowance should be made and we direct the Assessing Officer to restrict the disallowance under section 14A at 2% of the dividend
4 H.V. Transmissions Ltd. income as reasonable expenses for earning exempt income. This ground of the assessee is partly allowed.
The second issue in the appeal of the assessee is that the Ld. CIT(A) erred in not adjudicating regarding deduction of disallowance of employees separation cost which was claimed u/s. 37(1) of the Act.
5.1. The Ld. Counsel for the assessee submits that the issue becomes academic in view of the order passed u/s. 143(3) r.w. Sec. 148 wherein the Ld. CIT(A) has given relief. Thus, this ground of the assessee is dismissed.
The next issue in the appeal of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of depreciation claimed on actual cost of the assets as per Sec. 43(1) of the I.T. Act.
6.1. The Ld. Counsel for the assessee submits that the issue has been decided by the Tribunal for the Assessment Year 2008-09 in dated 18.5.2016 and pleads that the same may be followed.
6.2. The Ld. Departmental Representative supports the orders of the authorities below.
6.3. On a perusal of the order of the Co-ordinate Bench, we find that the Co-ordinate Bench confirmed the order of the Ld. CIT(A) in holding that the Assessing Officer to take the cost of acquisition of assets acquired by it from Tata Motors Ltd., at the cost at which they have been acquired i.e. the actual consideration paid by the assessee