Radha Kannan, Madurai V. DCIT, Madurai

ITA 1178/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6350 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHI JCIT
• Assessee Lawyers: R SRINIVASAN
• Keywords: Business income; Earning of tax free income
• Section: 14A; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 1178/MDS/2017 / ASSESSMENT YEAR : 2013-14 MS. RADHA KANNAN, THIAGARAJAR MILLS PREMISES, KAPPALUR, MADURAI 625 008. [PAN: AEGPR 4831N] VS. DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, MADURAI 625 002. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI. R. SRINIVASAN, ADVOCATE )*% & / RESPONDENT BY : SHRI. ASISH TRIPATHI, JCIT & /DATE OF HEARING : 10.08.2017 & /DATE OF PRONOUNCEMENT : 14.08.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-16, CHENNAI IN ITA NO. 37/CIT( A)-16/2016-17 DATED 21.03.2017. :-2-: I.T.A. N0. 1178/MDS/2017 2. MS. RADHA KANNAN, THE ASSESSEE, A NON-RESIDENT A ND BRITISH CITIZEN EARNED INCOME FROM INTEREST RECEIPTS, LOANS AND ADVANCES, BANKS AND INVESTMENT DIVIDEND INCOME, SHARE OF PROFIT, PROFIT ON SALE OF INVESTMENTS ETC. IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER HELD THAT THE ASSESSEE EARNED A TOTAL INCOME OF RS. 2,23,09,397/-. OUT OF WHICH RS. 1,15,07,244/- IS RELATED TO DIVIDEND INCO ME EARNED FROM SHARES AND UNITS OF MUTUAL FUNDS WHICH THE ASSESSEE CLAIMED AS AN EXEMPT INCOME. APPLYING SECTION 14A R.W.R. 8D2(III), THE AO HELD T HAT RS. 9,66,370/- SHOULD BE THE EXPENDITURE INCURRED IN RELATION TO INCOME N OT INCLUDIBLE IN TOTAL INCOME AND HENCE ADDED TO THE INCOME OF THE ASSESSEE. AGG RIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND CIT(A) DISMIS SED THE APPEAL. 3. AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPE AL, INTER ALIA, WITH THE FOLLOWING GROUNDS: 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE APPEAL WITHOUT THERE BEING ANY MATER IAL TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT THE ASSESSING OFFICER HAS NOT RECORDED AN Y SATISFACTION AS TO HOW THE CLAIM OF THE APPELLANT THAT NO EXPEND ITURE HAS BEEN INCURRED AGAINST DIVIDEND INCOME IS NOT ACCEPTABLE AND CONSEQUENTLY THE ADDITION IS NOT SUSTAINABLE. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT IT IS OBVIOUSLY CLEAR FROM THE ACCOUNTS T HAT NO EXPENDITURE HAS BEEN INCURRED OR CLAIMED EVEN AGAIN ST THE :-3-: I.T.A. N0. 1178/MDS/2017 TAXATION INCOME ADMITTED AND THE GROSS INCOME HAS B EEN OFFERED FOR TAXATION AND SO QUESTION OF ANY DISALLOWANCE OR APPLICATION OF SECTION 14A IS NOT ATTRACTED IN THIS CASE. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N RELYING ON THE CASES MENTIONED IN PAGE 3 OF HIS ORD ER AS THE FACTS AND ISSUES IN THOSE CASES ARE TOTALLY DIFFERENT FRO M THE FACTS AND ISSUE IN THIS CASE. 4. THE AR SUBMITTED THE ASSESSEES RECEIPTS AND THE HEAD IN WHICH THE INCOME WAS ADMITTED AS UNDER: SL.NO NATURE OF INCOME AMOUNT RS HEAD OF INCOME 1. INTEREST RECEIPTS FROM LOANS AND ADVANCES 7,35,647 BUSINESS INCOME 2. INTEREST RECEIPTS FROM BANKS AND INVESTMENTS 1,37,644 OTHER SOURCES 3. DIVIDEND INCOME 1,15,07,244 EXEMPTED U/S. 10 4. PROFIT ON SALE OF INVESTMENTS 91,05,838 CONSIDERED UNDER CAPITAL GAIN 5. SHARE OF PROFIT FROM PARTNERSHIP FIRM 8,23,024 EXEMPTED U/S. 10 4.1 AGAINST THESE RECEIPTS AND INCOME THE EXPENDITU RE INCURRED AND CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT ARE AS U NDER: BANK CHARGES 50.00 GENERAL EXPENSES 3,017.00 SERVICE TAX ON SHARES 267.46 STT ON SHARES 611.25 :-4-: I.T.A. N0. 1178/MDS/2017 SUBSCRIPTION 5,618.00 HOWEVER, THE ABOVE EXPENDITURES WERE ADDED BY THE A SSESSEE IN THE COMPUTATION OF BUSINESS INCOME AND ARRIVED THE ASSE SSABLE BUSINESS INCOME. THUS, THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AT ALL. 4.2 FROM THE ABOVE, THE AR SUBMITTED THAT IT IS CLE AR THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE, WHETHER T AXABLE OR EXEMPTED. FURTHER, THE ASSESSEE HAD HUGE RESERVES AND SURPLUS OF RS. 1854.18 LAKHS AT THE BEGINNING OF THE YEAR AND RS. 2063.15 LAKHS AT THE END OF THE YEAR, SHE HAS NOT BORROWED ANY MONEY FOR ANY INVESTMENT AND A LL THE INVESTMENTS HAVE BEEN MADE OUT OF OWN RESOURCES ONLY. FACTS BEING S O, THE ASSESSING OFFICER HAS NOTIONALLY ADDED RS. 9,66,370/- TO THE INCOME, INVOKING SECTION 14A R.W.R. 8D. RELYING ON THE JURISDICTIONAL HIGH COURT DECIS ION IN THE CASE OF PATCO 272 ITR 195 (MAD), THE AR SUBMITTED THAT THE ASSESSEE R ECEIVED DIVIDEND OF MUTUAL FUND UNITS AND CLAIMED THAT SAID DIVIDEND IS EXEMPT U/S. 10(33), IN ABSENCE OF A PROXIMATE CAUSE BETWEEN EXPENDITURE IN CURRED BY ASSESSEE AND TAX EXEMPT INCOME, SECTION 14A COULD NOT BE INVOKED . PER CONTRA, THE DR SUPPORTED THE ORDER OF THE AO & THE ORDER OF THE CI T(A). 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT ORDERS. IT IS CLEAR FROM THE ABOVE THAT THE ASSESS EE HAS NOT CLAIMED ANY EXPENDITURE OR DEDUCTION AT ALL. WHEN NO EXPENDITU RE OR DEDUCTION IS INCURRED :-5-: I.T.A. N0. 1178/MDS/2017 BY THE ASSESSEE IN RELATION TO ANY INCOME WHICH INC LUDES THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THE ADDITIO N MADE BY THE ASSESSING OFFICER U/S. 14A R.W.R. 8D AND SUSTAINED BY THE CIT (A) IS HELD AS UNWARRANTED AND ACCORDINGLY DELETED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 14 TH DAY OF AUGUST, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 14 TH AUGUST, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF