TaxTMI 
TaxTMI 
2011 (3) TMI 1040
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....spective effect, the same is not applicable in Asstt. Year 2006-07 in view of the provisions of Sec.295(4) of the I.T. Act. 1(C). That, since in Sec.14A(1) of the LT. Act the word used is "incur" with reference to the expenditure in relation to the exempt income, the Ld. CIT(A) erred in disallowing indirect expenses instead of only direct expenses, if any, towards earning the exempt dividend income. 2. That, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in enhancing the assessee's income for A.Y. 2006-07 by a sum of Rs.1,12,08,623 by way reducing its claim of deduction uls.801A of the I.T. Act. 2(A). That, the Ld. CIT(A) erred in holding that the U.P. Government duty on electricity @ 9 paise per unit has to be excluded from the average landed cost of electricity as computed by the assessee. 3. That, the Ld. CIT(A) erred in directing the Ld. A.O. to charge interest u/s.234A of the I.T. Act as there was no delay in filing the original Return of the assessee for A.Y. 2006-07. 4. That, the Ld.CIT(A) erred in directing the Ld. A.O. to charge interest u/s.234B of the I.T. Act." Revenue's appeal (ITA No.....
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....f income was over and above the assessed income by the Assessing Officer. 3) That the Income Tax Appellate Tribunal having no power of enhancing assessee's income in view of Supreme Court judgment in the cases of Hukumchand Mills Ltd. vs. CIT reported in 63 ITR 232 and MCorp Global Pvt. Ltd. vs. CIT reported in 309 ITR 434, the appeal filed against the enhancement by the CIT(A) by the department is mis-conceived. 4) That the enhancement notices served by the CIT(A) being subject mater of Writ (WP No.1637 of 2008) and the CIT(A) flaying passed the order on the liberty granted by the Hon'ble Calcutta High Court and the order in question having been released by the order of the High Court giving liberty only to the petitioner to file the appeal, the department having not been so granted liberty to appeal, the appeal filed by the department is misconceived. 5) That in any case the issues raised by the CIT(A) in the enhancement notices having been considered by him while passing his order, no further appeal lies against the order. 6) That the CIT(A) having clearly given a finding in his order that penalty of Rs.30,000/- on country liquor bottles p....
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....se of computing the book profit. The ld. C.I.T.(A) instead of permitting the assessee to withdraw the appeal required the assessee vide two letters dated 1/9/2008 and 15/9/2008 issued to it to explain why its total income should not be enhanced. The assessee filed a writ petition being W.P. No.1637 of 2008 before the Hon'ble High Court at Calcutta against the proposed enhancement of its income by ld. C.I.T.(A). The Hon'ble High Court vide an interim order dated 14/1/2009 directed as follows:- "During the pendency of the writ petition, the Commissioner of Income Tax (Central)(Appeals)-II Kolkata is at liberty to proceed with the appeal for the Asstt. Year 2006-07 and is at liberty to pass the order, but the said order shall not be communicated and shall not be given effect to without the leave of this Court." 6. It is relevant to state that vide two letters dated 1/9/2008 and 15/9/2008 proposing to enhance the income of the assessee, the ld. C.I.T.(A) stated as under:- (a) To disallow expenses in terms of sec. 14A of the Act read with Rule 8D of I.T. Rules in respect of exempted dividend income. (b) Deductions allowed to the assessee under sec....
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....en enhanced by him. The ld. A/R submitted that the appeal of the department should be dismissed as no relief has been granted by the ld. C.I.T.(A) to the assessee. The ld. A/R further submitted that if the above contention of the assessee is accepted, the cross objection filed by the assessee is not required to be considered. 10. On the other hand, the ld. Departmental Representative submitted that the ld. C.I.T.(A) should have enhanced the income of the assessee as proposed by him in the letters dated 1/9/2008 and 15/9/2008. He submitted that the A.O. had not considered that the assessee was not entitled for the deductions u/s. 80-IA and 80-IB of the Act as claimed by it. He submitted that the grounds of appeal taken by the department should be adjudicated on merits. 11. We have carefully considered the submissions of the learned representatives of the parties and the order of ld. C.I.T.(A). It is relevant to state that the assessee has also filed a written submission dated 30/11/2010, a copy of which was also delivered to the ld. Departmental Representative. We have considered the said written submission. 12. As mentioned hereinabove that the assesse....
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....lf-generated goods or services when transferred to any other business carried on by the assessee is the price that such goods or services would ordinarily fetch in the open market. We are of the considered view that the contention of ld. A/R has merit that in the facts and circumstances of the case that appeal filed by the department for not enhancing the income of the assessee as proposed by ld. C.I.T.(A) is not sustainable. The ld. C.I.T.(A) has not given relief to the assessee from the income assessed by the A.O. We are of the considered view that no grievance is caused to the department when an enquiry is made by the ld. C.I.T.(A) suo moto and after making an enquiry he is satisfied that no further addition is to be made and in that view of the matter the interest of the department is not prejudicially affected as the ld. C.I.T.(A) has not granted relief to the assessee out of the assessed income. If the department feels that any income liable to tax has escaped assessment, there are other provisions under the Income-tax Act to take care of such escaped income liable to tax. In view of the above, we accept the contention of the ld. A/R and hold that the appeal filed by the depa....
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....of Rs.79,62,878/- as added by the ld. C.I.T.(A) should be deleted. Without prejudice to above, ld. A/R further submitted that Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. vs. DCIT [43 DTR 447/328 ITR 81] has held that Rule 8D is prospective in nature and is applicable from assessment year 2008-09. He submitted that the A.O. is required to determine the expenses prior to assessment year 2008-09 in relation to exempted dividend income and for that purpose he could adopt a reasonable basis for computation of such disallowance. The ld. A/R submitted that to make any disallowance u/s. 14A of the Act, it requires finding of incurring of expenditure and placed reliance on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT vs. Hero Cycles Ltd. [323 ITR 518 (P and H)]. The ld. A/R further submitted that a reasonable disallowance of expenses attributable to exempt income could be made and it could be @ 1% of such income and in this connection he placed reliance on the decisions of I.T.A.T., Kolkata in the case of Civil Engineers Enterprises (P) Ltd. vs. DCIT dated 19/8/2010 in ITA No. 859 (Kol)/2010 and in the case of ITO vs. B.P.S. Securities....
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....utable to the dividend income are to be disallowed u/s. 14A of the Act. For the same reason mentioned hereinabove, the decision of Hon'ble Apex Court in the case of Rai Bahadur Hardutroy Motilal Chamaria (supra) is of no assistance to the assessee. In the said decision the Hon'ble Apex Court held that if a new source is to be considered, then the first appellate authority should remand the matter to assess fresh source of income, failing which assessee is deprived of a finding by two Tribunals and one right of appeal. We may state that as per existing provisions of I.T. Act, the ld. C.I.T.(A) has no power to remand the matter to the A.O. but he is to adjudicate the same after giving opportunities of hearing to the parties. We are of the considered view that the decision of Hon'ble Apex Court in the case of Nirbheram Daluram (supra) applies to the case of the assessee. In the said case the A.O. included in the total income of the assessee a sum of Rs.2,45,000/- referable to ostensible transactions in hundi loans. While considering the appeal filed by the assessee against the said assessment order, the Appellate Assistant Commissioner not only sustained the said addition of Rs.2,45,0....