Nikita R. Singhal, Mumbai vs Assessee

Assessee by : Smt. Rachanakanoi, A.R. Revenue by : Shri Asghar Zain VP., Sr. A.R.

Date of Hearing : 14.01.2015 Date of Pronouncement : 18.03.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 08.07.2013 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2005-06.

2. The sole issue raised by the assessee through her grounds of appeal is relating to disallowance made under section 14A read with Rule 8D of the Income Tax Act. At the outset, the Ld. A.R. of the assessee has submitted that the assessment year involved in this case is A.Y. 2007-08. The Assessing Officer (hereinafter referred to as the AO) has made the disallowance by applying rule 8D of the Income Tax Rules. He has further submitted that as per the decision of the Hon'ble Bombay High Court in the case of "Godrej & ITA No.5639/M/2013 2 Nikita R. Singhal

Boyce Manufacturing Co. Ltd. Vs. DCIT" reported in (2010) 328 ITR 81 (Bom), the rule 8D cannot be applied retrospectively and that the same is applicable from A.Y. 2008-09 onwards. The Ld. A.R. has further stated that the dividend income earned by the assessee is in relation to the shares held as stock in trade and that there was no intention of the assessee to make investments or earn exempt income. The dividend income was incidental in this case.

On the other hand, the Ld. D.R. has relied upon the findings of the lower authorities.

3. We have considered the rival submissions of the Ld. representatives of the parties. It may be observed that in the case of 'Godrej & Boyce Manufacturing Co. Ltd.' 328 ITR 81, the Hon'ble Bombay High Court has held that Rule 8D r.w.s. 14A(2) is not arbitrary or unreasonable and also not retrospective and applies from A.Y. 2008-09. Further, the contention of the assessee that the dividend was earned on the shares held as stock in trade and that the dividend income was incidental has also not been looked into by the AO while making the disallowance under section 14A. The contention of the assessee that no borrowed funds were used for the purpose of investment and hence no disallowance of interest was attracted in this case has also not been looked into by the AO.

4. In view of the above, we set aside the impugned order and restore the matter back to the file of the AO with a direction that he will give opportunity to the assessee to place on record all the relevant evidences including its accounts and then examine the same in the light of the contentions raised by the assessee and decide the issue afresh by way of a speaking order. If the AO will not agree with the computation/calculation made by the assessee or with the contentions raised by the assessee, then he will be at liberty to make a ITA No.5639/M/2013 3 Nikita R. Singhal

disallowance under section 14A on some reasonable basis and not under rule 8D as the same cannot be applied retrospectively in light of the decision in the case of "Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT" (supra).

5. In view of the above observations, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 18.03.2015.

Sd/- Sd/- (B.R. Baskaran) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 18.03.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.