2011 (1) TMI 1516 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 14A applying Rule 8D.
2. Allowance of exemption u/s 10(1) on income from seeds division treating it as agricultural income.

Summary:

1. Disallowance u/s 14A Applying Rule 8D:
The issue in the assessee's appeal pertains to the disallowance of `55,15,000/- u/s 14A by applying the provisions of Rule 8D. The A.O. disallowed the amount, attributing it to the exempt dividend income of `6,12,95,164/-. The CIT(A) confirmed this disallowance. However, the assessee argued that Rule 8D was not applicable for the impugned assessment year, referencing the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT 328 ITR 81. Consequently, the Tribunal restored the matter to the A.O. to reconsider the disallowance under section 14A without resorting to Rule 8D, adhering to established legal principles.

2. Allowance of Exemption u/s 10(1) on Income from Seeds Division:
The issue in the Revenue's appeal concerns the allowance of exemption u/s 10(1) on the income of `44,85,20,568/- from the seeds division, treating it as agricultural income. The assessee claimed this income as exempt, substantiating that the seeds were grown with the help of farmers under a Seeds Production Agreement, where the assessee had beneficial ownership of the land and the agricultural produce belonged to the assessee. The A.O. disagreed, citing lack of ownership of land and nexus between the income and agricultural operations. However, the CIT(A) allowed the exemption, following the Tribunal's decisions in the assessee's own case for previous years. The Tribunal upheld the CIT(A)'s decision, referencing consistent rulings in favor of the assessee in similar cases and emphasizing the rule of consistency as per the Supreme Court's decision in Radhaswamy 193 ITR 325.

Conclusion:
The assessee's appeal was allowed for statistical purposes, and the Revenue's appeal was dismissed. The Tribunal's decision was pronounced in the open court on 28th January 2011.