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2011 (3) TMI 1040 - AT - Income TaxDisallowance - Expenses allegedly attributable to its exempt dividend income -in terms of sec. 14A of the Act read with Rule 8D of I.T. Rules - the ld. A/R that no facts have been brought on record attributing the expenses to exempted dividend income - However, it is a fact that some expenses must have been incurred by the assessee while earning exempted dividend income - As the A.O. while allowing exemption of dividend income from tax, he has not considered the disallowance required to be made in view of sec. 14A of the Act - The decision of Hon ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. , wherein it has been held that Rule 8D of the Rules is prospective in nature and is applicable from assessment year 2008-09 - The case before us is undisputedly relates to assessment year 2006-07 and, therefore, Rule 8D of the Rules is not applicable to the assessment year under consideration - Hence, issue be restored to the A.O. to re-examine and consider the disallowance to be made in respect of the exempted dividend income shown by the assessee in view of Sec. 14A of the Act after giving due opportunity of hearing to the assessee and considering such details as may be filed before him - Hence, the appeal taken by the assessee is allowed for statistical purposes by restoring the issue to the A.O. Enhanced assessee s income by reducing claim of deduction u/s. 80-IA - the assessee s appeal challenging enhancement of income by Rs.1,12,08,623/- by way of reducing its claim of deduction u/s. 80-IA of the Act on the ground that electricity duty @ 9 paise per unit is to be excluded from the average landed cost of electricity as computed by the assessee, the ld. A/R fairly conceded that the said issue is covered against the assessee by the decision of I.T.A.T., Kolkata Bench in the case of Graphite India Ltd. vs. DCIT dated 06/12/2007, - Decided in favour of assessee. Interest under secs. 234A and 234B - Hence, the assessee s appeal in respect of charging of interest under secs. 234A and 234B of the Act are consequential and no specific adjudication is called for.
Issues Involved:
1. Disallowance of expenses attributable to exempt dividend income. 2. Enhancement of income by reducing the claim of deduction under Section 80-IA. 3. Charging of interest under Sections 234A and 234B. 4. Departmental appeal against CIT(A)'s order regarding deductions under Sections 80-IA and 80-IB. 5. Admissibility of additional evidences and remand report. Issue-wise Detailed Analysis: 1. Disallowance of Expenses Attributable to Exempt Dividend Income: The assessee challenged the enhancement of income by Rs.79,62,878 due to disallowance of expenses related to exempt dividend income of Rs.26,65,049. The CIT(A) applied Rule 8D of the IT Rules, which the assessee contended was not applicable retrospectively for the assessment year 2006-07. The Tribunal observed that Rule 8D is prospective from the assessment year 2008-09, as held by the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd. The Tribunal remanded the issue to the AO to re-examine and consider the disallowance under Section 14A without applying Rule 8D, allowing the assessee to present relevant details. 2. Enhancement of Income by Reducing Deduction under Section 80-IA: The CIT(A) enhanced the assessee's income by Rs.1,12,08,623 by excluding U.P. Government duty on electricity at 9 paise per unit from the average landed cost of electricity. The assessee conceded that this issue was covered against them by the ITAT Kolkata Bench's decision in Graphite India Ltd. vs. DCIT. Consequently, the Tribunal rejected this ground of appeal. 3. Charging of Interest under Sections 234A and 234B: The assessee contested the directions to charge interest under Sections 234A and 234B, arguing no delay in filing the original return. The Tribunal noted these grounds are consequential and did not require specific adjudication. 4. Departmental Appeal Against CIT(A)'s Order: The department argued that CIT(A) erred by not enhancing the income by Rs.53.78 crores as initially proposed. The Tribunal held that CIT(A) had conducted due enquiry and was justified in not making further enhancements beyond Rs.1,12,08,623. The Tribunal dismissed the departmental appeal, stating no relief was granted to the assessee by the CIT(A) and no prejudice was caused to the department. 5. Admissibility of Additional Evidences and Remand Report: The department contended that CIT(A) admitted additional evidence without allowing the department to examine it and passed the order without obtaining the remand report. The Tribunal did not find merit in these contentions, as the CIT(A) had already conducted necessary enquiries and made appropriate enhancements. Conclusion: The Tribunal dismissed the departmental appeal and the assessee's cross-objection, while partly allowing the assessee's appeal for statistical purposes by remanding the issue of disallowance under Section 14A to the AO. The decision emphasized the non-applicability of Rule 8D retrospectively and upheld the CIT(A)'s partial enhancement of income.
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