M/s. Munoth Financial Service Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1224/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64514 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 1224/MDS/2012 ASST. YEARS : 2008-09 M/S . MUNOTH FINANCE SERVICES LTD., 343, MOUNOTH CENTRE, TRIPLICANE HIGH ROAD, TRIPLICANE, CHENNAI 600 005. PAN : AAACM52884D. (APPELLANT) V. THE ASST. COMMISIONER OF INCOME TAX, COMPANY CIRCLE-IV(3), CHENNAI (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVO CATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL.CIT DATE OF HEARING : 06 NOV 2012 DATE OF PRONOUNCEMENT : NOV 2012 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, CHENNAI, DA TED 29.3.2012 FOR THE ASST. YEAR 208-09. THE ONLY ISSUE IN THIS APPEAL OF THE ITA 1224/MDS/12 2 ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF ADDITION OF C.2,87,2 87/- MADE UNDER SEC.14A OF THE I.T. ACT READ WITH RULE 8D OF I.T. R ULES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE A COMPANY ENGAGED IN THE BUSINESS OF CAPITAL MARKET O PERATIONS, FILED ITS RETURN OF INCOME ON 02.8.2008 DECLARING TOTAL I NCOME OF C.50,93,640/-. THE ASSESSMENT WAS COMPLETED ON 20. 12.2010 UNDER SEC.143(3) OF THE ACT DETERMINING INCOME AT C.54,35 ,427/-. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER DIS ALLOWED C.2,87,287/- UNDER SEC.14A READ WITH RULE 8D OF THE I.T. RULES TOWARDS EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEM PT INCOME. THE ASSESSEE DURING THIS ASST. YEAR EARNED EXEMPT INCOM E OF C.6,70,465/-. THE DISALLOWANCE WAS MADE BY THE ASS ESSING OFFICER STATING THAT THE ASSESSEE MUST HAVE INCURRED EXPENS ES TOWARDS EARNING THE SAID INCOME. ON APPEAL, THE COMMISSI ONER OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEF ORE US. ITA 1224/MDS/12 3 3. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT DURING THIS ASST. YEAR AND IT HAD NOT INCURRED ANY EXPENDITURE. THEREFORE, NO DISALLOWAN CE UNDER SEC.14A READ WITH RULE 8D OF IT RULES IS WARRANTED. THE D EPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 4. THE COMMISSIONER OF INCOME TAX (APPEALS), IN HI S ORDER, CONSIDERED THIS ISSUE ELABORATELY IN HIS ORDER WHIL E SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE OB SERVATIONS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ARE AS UNDER : - TH E UN DI S P UT E D FACT S OF T HE C A SE ARE TH A T THE APPELLANT H A S CO NS I D ER A B L E I N V ESTM E NT S OF RS. 6, 7 1 , 39 ,98 1 /- THAT YIELD EXE MP T I NCOM E A ND DURIN G T HE Y EA R U N D ER C O NS I DE R AT ION (AND RECE I VED EXEM P T INC O M E OF RS . 6 , 70,4 6 5 / - THAT HA S BE E N C LA IM E D AS E XEMP T AND NO EXPENDI T U RE H AS B E E N CON SI DER E D A TT RI B U T ABLE T O THE EARNING OF SAID E X EMP T IN CO ME . T H E AS S E SS MEN T Y EA R BE I NG 2 0 08 - 09 , THE APPLI C ABI L I T Y O F R U L E 8D IS A L S O NO T I N D ISP UT E . T H E O NLY CO NTE NTION OF THE APPEL L ANT I S T H A T IT HA S N O T I N CUR R ED A N . 'EX P E NDIT URE O N T HE EARN I NG OF THE E X E MPT IN C O M E. ITA 1224/MDS/12 4 4. 2 I HA VE C ONSID E RED THE S U BM I S S I ONS OF T HE AP P E L L ANT AN D ALSO THE R EA SO N S G IVE N BY TH E AO IN MAK I NG TH E SA I D D I SA LL OWA NCE . A D MI TT EDLY , THE AP P EL LA N T HAD R ECE I VE D EXE M PT I NCO M E. HO N' A BLE SUPRE M E C OU R T O F I ND I A IN T H E CASE OF C OMM I SSI O N E R OF IN COM E- TAX, MU MB AI V . WALF O RT S HA R E & STOCK BRO K E RS (P . ) LTD . (3 2 6 ITR 1 ) AN D HON'ABLE HIGH COU R T OF BOM B A Y I N TH E CASE O F GO DR E J & B OYCE M F G C O LTD . VS DCIT (328 IT R 81) HA VE APPROVE D THA T N O DE D UC T ION S H ALL B E ALL O WE D I N RESPECT O F A N EX PE ND I T U R E INC UR RE D BY AN A S S E S E E I N RELATI O N T O I NCOME WHICH DOE S NOT FO RM PA R T OF T HE T O TA L I N CO M E UNDE R T HE A C T A N D TH A T THE A O IS NO T O N L Y E N TI T LE D B U T A LS O DU TY B OUND T O D I SA L L O W AN EX P ENDITU R E W HI CH IS IN RELA TI O N TO E A RN I NG O F E XE MPT I N CO M E . THE JURIS D ICTIONAL BE N CH O F THE !TAT , C H E N NA I I N THE C A S E O F SOUTHE R N P ET RO C HEM I CAL I N DU STR IES V S . DCIT (9 3 TT J 161) HA S AL S O APP ROVE D D I S A L L OW A NC E OF P R O P O R T IONA T E M AN AGE MENT E X PENSES WHILE COMPUTI N G T H E D I VIDEND I NCOME B Y O B SE RV IN G, ' WH E T HER T O INVES T O R NOT T O I NV E S T AND WH E TH E R T O RETAIN THE INV E STMENTS OR TO LIQ U IDATE THE SA ME AR E V E RY STRATEGIC DECISIONS W HI CH TH E MA N A G E M EN T I S C A L LE D UP O N TO TAKE . THESE ARE M IND - B O GGLIN G D EC ISI ON S A ND TOP MA NAGE M ENT I S I NV O LVED IN TAKING THESE DE CI SIONS. THIS DECISION-M A KING PROCESS IS V ERY C OMP LI CA T ED AND REQUIRES VERY CAREF U L ANALYSIS. MOR E OVE R , THE ASSESSEE HAD TO K E EP TR A CK OF VA R IOUS DIVIDEND INCOMES DECLARED BY T HE I NVES T EE COMP A N I E S AND ALSO TO KEEP TR A CK OF THE DIVIDE ND IN COME H A V I N G B EE N REGULARL Y RECEIVED BY THE ASSESSEE. THA T ACT IV I TY ITSELF CAL L ED FO R C ONSIDERAB L E MA N A GEM ENT A TT E NT I ON AND COULD NO T BE LEFT TO A JUNIO R C L ERK: ', ITA 1224/MDS/12 5 IN V I EW OF TH E FACTS OF TH E C A S E THAT THERE ARE CONSIDERABLE INV ES TM E NT S A POR T ION O F CER TAIN O(HER EXP ENS E S L I KE THE DIRECTORS' REM UNE RAT I ON A N D ESTAB LI SHMENT COS T S I S A L S O ATTRIBU T ABLE T O IN VE STMENT S AS T HE DECISION S TO W ARDS TH E I N VE S TME N TS ARE T O B E MAD E BY T H OSE PEO P LE I N T HE KEY MANAGEMENT P O SITI ONS . I HOLD THA T PRO V I S ION S OF S EC TI ON 1 4 A R E AD WIT H RU LE 8D ARE APPLICABLE TO THE P R E S ENT CASE O F THE A P P E LL AN T AND THE D I SA LL OWANCE MADE BY THE AO IS I N L INE WI TH THE PRO VISIONS OF TH E LA W . THEREFORE DISALLOWA N CE MADE BY THE AO I S UP HELD A N D THE G ROU N D S O F APPE AL TA KEN B Y THE AP P E L LANT ARE DISMISSED. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS), WE FEEL THAT THERE IS NO INFIRMITY IN HI S ORDER IN SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDE R SEC.14A READ WITH RULE 8D OF I.T. RULES FOR THE ASST. YEAR 2008- 09. IN THE CIRCUMSTANCES, WE SUSTAIN THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS). THE GROUNDS RAISED BY THE ASSESSEE ARE REJECTED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED ITA 1224/MDS/12 6 6. ORDER PRONOUNCED IN THE OPEN COURT ON WEDNESDA Y, THE 14 TH DAY OF NOVEMBER 2012, AT CHENNAI. SD/- SD/- ( DR. O.K. NARAYANAN) (CHALLA NAGENDR A PRASAD) VICE PRESIDENT JUDICIAL MEMBE R CHENNAI, DATED : 14 TH NOVEMBER 2012. JLS. COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT(APPEALS) CHENNAI (4) C.I.T., CHENNAI (5) D.R. (6) GUARD FILE