VINOD LODHA, Jaipur V. ACIT, Jaipur

ITA 1020/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5559 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRTJHVIRAJ MEENA CIT DHK
• Assessee Lawyers: SITARAM SHARMA
• Keywords: Salary income; Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.1020/JP/16 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 SHRI VINOD LODHA, A-8, MAHAVEER NAGAR, TONK ROAD, JAIPUR CUKE VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AARPL 0330 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SITARAM SHARMA, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI PRTJHVIRAJ MEENA , (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28.02.2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 28/02/2017. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 23.08.2016 WHEREIN THE SOLE GROUND OF APPEAL IS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING DI SALLOWANCE OF EXPENSES OF RS. 2,99,831/- (BEING % OF AVERAGE VA LUE OF INVESTMENT) MADE BY THE AO U/S 14A OF THE IT ACT, 1961 R.W. RUL E 8D OF IT RULES, 1992 ON ACCOUNT OF ALLEGED EXPENDITURE INCURRED IN RELA TION TO EXEMPT INCOME. 2. THE ASSESSEE DERIVES INCOME FROM SALARY, HOUSE PROPERTY, AND INCOME FROM OTHER SOURCES. IN RESPECT OF EXEMPT INCOME AM OUNTING TO RS. 66,22,709/- REFLECTED UNDER THE HEAD INCOME FROM OTHER SOURCES , THE AO DISALLOWED RS. 23,07,594/- AS PER THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D OF THE IT ITA NO.1020/JP/16 SHRI VINOD LODHA VS. THE ACIT, CIRCLE-6,JAIPUR 2 RULES. THE LD. CIT(A) DELETED THE DISALLOWANCE OF RS. 19,16,148/- DISALLOWED BY THE AO UNDER RULE 8D(2)(II) HOLDING THAT ADEQUATE I NTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE WHICH HAVE BEEN UTILIZ ED FOR THE PURPOSES OF MAKING INVESTMENT. HOWEVER, AS FAR AS THE DISALLO WANCE OF RS. 2,99,831/- UNDER RULE 8D(2)(III) IS CONCERNED, THE SAME WAS S USTAINED HOLDING THAT THE AO HAS POINTED OUT THE EXPENDITURE RELATABLE TO THIS INVESTMENT. AGAINST THE SAID ORDER OF LD. CIT(A), THE ASSESSEE HAS COME UP IN AP PEAL BEFORE US. 2.1 IT WAS SUBMITTED BY THE LD AR THAT DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED EXPENSES TO THE TUNE OF R S. 1,24,984/- AS AGAINST THE EXPENDITURE OF RS. 2,99,831/- WHICH HAS BEEN DISALL OWED BY THE AO AS IS EVIDENT FROM COPY OF RETURN OF INCOME. 2.2 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE MAINTAIN A OFFICE FOR ITS ACTIVITIES INCLUDING INVESTMENT ACTIVITIES AND TOT AL EXPENSES OF OFFICE ARE RS. 1,24,984. THE SALARY PAID OF RS. 41,260/- CONSISTS ONLY SALARY OF AN OFFICE PEON FOR UPKEEP CLEANING OF OFFICE AND PETTY WORK IN OFF ICE AND IS NOT AT ALL RELATABLE TO INVESTMENT. THE OTHER EXPENSES ARE DAY TO DAY OF FICE EXPENSES NOT RELATABLE TO ACTIVITY OF INVESTMENTS. THE BANK CH ARGES OF RS. 38,403/- CHARGES BY BANK CANNOT BE WHOLLY RELATED TO INVESTMENTS ACT IVITY BUT CHARGES BY BANK AS SERVICE FEES AND OTHER CHARGES. IT IS ONLY D.M AT EXPENSES OF RS.4691/- WHICH RELATES TO INVESTMENTS. THESE FACTS WERE PL ACED BEFORE CIT(A) AS IS EVIDENT FROM WRITTEN SUBMISSIONS MADE BEFORE HER BU T SHE DID NOT CONSIDER THESE WHILE PASSING APPEAL ORDER. IN VIEW OF ABOVE FACTS OF THE CASE, THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF RS.2,99,831/- FOR EXPENDITURE RELATABLE TO INVESTMENT WHEN TOTAL EXPE NSES OF ASSESSEE FOR THE YEAR ARE RS. 1,24,984/- OUT OF WHICH ONLY A SMALL P ART OF BANK CHARGES OF RS. ITA NO.1020/JP/16 SHRI VINOD LODHA VS. THE ACIT, CIRCLE-6,JAIPUR 3 38045/- AND D.MAT CHARGES OF RS. 4691/- ARE ONLY RE LATABLE TO INVESTMENTS. UNDER THE PROVISIONS OF SECTION 14A R.W.S. RULE 6D OF IT RULES, EXPENSES RELATABLE TO EARNING EXEMPT INCOME ONLY CAN BE DISA LLOWED WHICH CANNOT BE MORE THAN TOTAL EXPENSES INCURRED BY ASSESSEE. IT IS THEREFORE, PRAYED THAT DISALLOWANCE OF RS. 2,99,831/- CONFIRMED WRONGLY BY LD. CIT(A) MAY BE REDUCED TO A SUITABLE REASONABLE FIGURE. 2.3 THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 2.4 ON PERUSAL OF SECTION 14A OF THE ACT, IT PROVID ES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO D EDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASS ESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. THEREAFTER, IT IS PROVIDED THAT THE AO SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCR IBED. ON READING OF SECTION 14A, IT IS THEREFORE CLEAR THAT WHAT CAN BE DISALLOWED IS THE EXPENDITURE WHICH HAS BEEN INCURRED BY THE ASSESSEE AT FIRST PLACE DURING THE YEAR UNDER CONSIDERATION AND THE SAME WILL THUS ACT AS AN OUTER LIMIT BEYOND WHICH THERE CANNOT BE ANY DISALLOWANCE OF EXPENDITU RE. RULE 8D THEREFORE WILL HAVE TO BE READ IN CONJUNCTION WITH SECTION 14A OF THE ACT. IN THE INSTANT CASE, TOTAL EXPENDITURE WHICH HAS BEEN INCURRED IS ONLY R S. 1,24,984/- AS AGAINST DISALLOWANCE OF RS. 2,99,831/- MADE BY THE AO. WE, THEREFORE, RESTRICT THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RS. 1, 24,984/- WHICH HAS BEEN ACTUALLY INCURRED BY THE ASSESSEE. TO THAT EXTENT, THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS UPHELD AND BALANCE DISALLOWANCE OF RS ITA NO.1020/JP/16 SHRI VINOD LODHA VS. THE ACIT, CIRCLE-6,JAIPUR 4 174,847 IS DIRECTED TO BE DELETED. IN THE RESULT, GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/ 2017. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 28/02/2017 VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VINOD LODHA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-6, JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A) II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 1020/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.