Appeal details
Counselvise Citation
[2014] 120 COUNSELVISE.COM (IT) 8274 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-12-2014
Appeal Filed By
Assessee
Bench Allotted
E
Next Hearing Date
20-11-2014
Assessment Year
2009-2010
Appeal Filed On
18-02-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1341/MUM/2013 ASSESSMENT YEAR: - 2009-10 M/S. ENAM FINANCIAL CONSULTANTS PVT. LTD., KHATU BUILDING, 2 ND FLOOR, 44BANK STREET,FORT, MUMBAI 400 001. VS.` ADDL. CIT 2(1). PAN:- AAACR2763E APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21.12.2012 OF CIT(A) FOR THE A.Y. 2009-10. THE ASSE SSEE HAS RAISED FOLLOWING GROUNDS: 1. (I) REGARDING DISALLOWANCE OF RS 49,98,4201- U /S 14A OF THE INCOME TAX ACT AND ALSO WRONGLY ENHANCING THE BOOK PROFIT U/S 115 JB BY RS. 49,98,4201- I.E. 14A DISALLOWANCE (A) THE LEARNED CIT (A) 4 HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ASSESSMENT OF THE APPELLANT ON THE BOOK PROFIT U/S 115 JB OF RS. 22,93,05,212/- (B) THE LEARNED CIT (A) 4 HAS ERRED IN CONFIRMING T HE DISALLOWANCE U/S 14A MADE BY THE A.D. WITHOUT BRINGING ANYTHING ON RECOR D TO PROVE THAT THE EXPENDITURE WERE INCURRED TO EARN EXEMPT INCOME OR WITHOUT BRINGING ON RECORD ANYTHING TO SHOW DIRECT NEXUS BETWEEN THE EX PENDITURE INCURRED & THE EXEMPT INCOME. ASSESSEE BY NONE REVENUE BY LOVE KUMAR DATE OF HEARING 20.11.2014 DATE OF PRONOUNCEMENT 12.12.2014 ITA NO.1341/MUM/2013 ASSESSMENT YEAR: - 2009-10 2 | P A G E ( C) THE LEARNED CIT (A) FURTHER ERRED IN CONFIRMIN G THE ENHANCEMENT OF BOOK PROFIT U/S 115 JB BY ADDING DISALLOWANCE U/S. 14 A OF RS. 49,98,420/- TO THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115 J B. ( D) THE LEARNED CIT (A) ERRED IN NOT CONSIDERING T HE FACTS THAT FOR THE PURPOSE OF BOOK PROFIT U/S. 115 JB LONG TERM CAPITA L GAIN IS NOT REDUCED FROM THE BOOK PROFIT BUT ONLY DIVIDEND INCOME IS RE DUCED HENCE IF AT ALL DISALLOWANCE U/S 14A IS TO BE ADDED TO THE BOOK PRO FIT IT SHOULD BE DIVIDED BETWEEN DIVIDEND INCOME AND LONG TERM CAPITAL GAIN AND RESTRICT THE ADDITION TO THE AMOUNT RELATING TO DIVIDEND INCOME ONLY BECAUSE LONG TERM CAPITAL GAIN IS NOT REDUCED FROM BOOK PROFIT U/S 11 5 JB. 2. 2. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE WHEN THIS APPEAL WAS CALLED FOR HEARING DESPITE THE NOTICES TO THE ASSES SEE ISSUED VIDE RPAD DULY SERVED. ACCORDINGLY, WE PROPOSE TO HEAR AND DISPOS E OFF THIS APPEAL EX PARTE. 3. WE HAVE HEARD LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE SOLE GRIEVANCE OF THE ASSESSEE IS REGARDING DIS ALLOWANCE OF RS. 49,98,420/- U/S 14A OF THE INCOME TAX ACT AND SIMIL AR ENHANCEMENT MADE WHILE COMPUTING THE BOOK PROFIT U/S 115JB. THE ASSE SSEE EARNED DIVIDEND INCOME OF RS. 1,55,40,854/- AND LONG TERM CAPITAL GA IN OF RS. 21,63,98,045/- BOTH WERE CLAIMED EXEMPT FROM INCOME TAX, HOWEVER, NO DISALLOWANCE WAS MADE BY THE ASSESSEE U/S 14A WHILE CLAIMING THE TAX FREE INCOME IN THE RETURN OF INCOME. THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE U/S 14A WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER TH E NORMAL PROVISIONS OF THE ACT. HOWEVER, THE ASSESSEE HAS BEEN ASSESSED U/ S 115JB AND WHILE COMPUTING THE BOOK PROFIT, THE ASSESSING OFFICER MA DE THE ADDITION OF RS. 49,98,430/- BEING THE EXPENDITURE INCURRED FOR EARN ING THE EXEMPT INCOME WHICH WAS COMPUTED U/S 14A BY APPLYING RULE 8D ON A CCOUNT OF DIVIDEND INCOME. ITA NO.1341/MUM/2013 ASSESSMENT YEAR: - 2009-10 3 | P A G E 4. THE ASSESSEE CHALLENGED THE ADDITION ON ACCOUNT OF DISALLOWANCE U/S 14A BEFORE THE CIT(A) AND CLAIMED THAT DISALLOWANCE CALCULATED BY THE ASSESSING OFFICER UNDER RULE 8D SHOULD BE DIVIDED B ETWEEN THE DIVIDEND INCOME AND LONG TERM CAPITAL GAIN AND RESTRICTED THE ADDITION TO THE AMOUNT RELATING TO THE DIVIDEND INCOME ONLY. THE ASSESSEE HAS ALSO CHALLENGED THE ADDITION TO BOOK PROFIT ON ACCOUNT OF DISALLOWANCE U/S 14A. THE CIT(A) HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND CONFIRM ED THE ADDITION MADE BY ASSESSING OFFICER IN PARA 5 AS UNDER:- 5.I HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS OF THE ASSESSEE. THERE IS NO DISALLOWANCE U/S. 14A WHILE C OMPUTING THE INCOME UNDER THE NORMALPROVISIONS OF LAW BECAUSE NO EXPEND ITURE HAS BEEN ALLOWED TO THE ASSESSEE. THE INCOME HAS BEEN ASSESS ED ON BOOK PROFIT 115JB, WHILE COMPUTING THE INCOME U/S 115JB, THE AS SESSING OFFICER HAS REDUCED DIVIDEND INCOME RS. 1,55,40,854/- FROM BOOK PROFIT BECAUSE THE SAME IS EXEMPT FORM INCOME TAX, THEREFORE, THE ASSE SSING OFFICER HAS ADDED THE EXPENSES PERTAINING TO SUCH DIVIDEND INCO ME. THE ASSESSEE HAS CLAIMED THAT SUCH DISALLOWANCE RELATING TO DIVIDEND INCOME ONLY SHOULD BE CONSIDERED, WHEREAS THE ASSESSING OFFICER HAS CO MPUTED THE DISALLOWANCE, AND RIGHTLY SO, AS PER THE DECISION O F HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. CIT (328 ITR 81) UNDER RULE 8D AND, THEREFORE, THE QUANTUM OF INCOME IS NOT RELEVANT OR THE BASIS FOR COMPUTING THE DISALLOWANCE AND THE EN TIRE DISALLOWANCE RELATED TO DIVIDEND INCOME ONLY. THE ASSESSEE HAS A LSO CLAIMED THAT THE BOOK PROFIT CANNOT BE DISTURBED BY THE ASSESSING OF FICER EXCEPT WHAT HAS BEEN PROVIDED U/S 115JB AND DISALLOWANCE U/S 14A IS NOT COVERED BY THE EXCEPTIONS PROVIDED IN EXPLANATION TO SECTION 115JB , THEREFORE, IT IS NOT T BE CONSIDERED FOR MAKING ANY ADDITION AND RELIED ON THE DECISION IN THE CASE OF SPRAY ENGINEERING DEVICES PVT. LTD. (SUPRA) . WHEREAS EXPLANATION 1 TO SECTION 115JB(2) SPECIFICALLY PROVIDES VIDE CL AUSE (F) THAT THE AMOUNT OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SEC TION 10 OR SECTION 11 OR SECTION 12 APPLY WILL BE ADDED TO THE PROFIT AS PER BOOKS OF ACCOUNTS. IN THE CASE OF THE ASSESSEE THE DIVIDEND INCOME IS EXEMPT U/S. 10(34) AND, THEREFORE, THE EXPENSES RELATING TO IT ARE DIR ECTLY COVERED BY THIS CLAUSE, HENCE THEY ARE REQUIRED TO BE ADDED TO THE BOOK PROFIT OF THE ASSESSEE. ASSESSEE HAS ALSO CLAIMED THAT AS PER THE LANGUAGE OF SECTION 115JB IT IS ONLY THE EXPENDITURE DEBITED TO PROFIT AND LOSS A/C. WHICH CAN BE ADDED, IF PROVIDED IN 115JB, BUT THE DISALLOWANC E COMPUTED AS PER RULE 8D IS NEVER DEBITED TO PROFIT AN LOSS A/C. AND , THEREFORE, IT CANNOT BE ADDED TO THE BOOK-PROFIT AND AT BEST IT CAN LOOK IN TO THE EXPENSES ADDED TO PROFIT AND LOSS A/C. AND FIND OUT AS TO WHAT AR E RELATED TO THE DIVIDEND ITA NO.1341/MUM/2013 ASSESSMENT YEAR: - 2009-10 4 | P A G E INCOME AND ADD BACK THE SAME, BUT NOT WHAT IS CALCU LATED AS PER RULE 8D. THE EXPENSES CHARGED TO PROFIT AND LOSS A/C. ARE CO MMON EXPENSES INCURRED FOR EXEMPT INCOME AND OTHER INCOME. THERE ARE VARIOUS METHODS FOR SUCH ALLOCATION, BASED ON AREA OCCUPIED , MANPOWER INVOLVED, AMOUNT INVESTED, INCOME, TURNOVER ETC. BUT ALL WERE LEADING TO DISPUTES AND, THEREFORE LAW PROVIDED FOR RULE 8D AND THE SAM E HAS BEEN UPHELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. CIT 328 ITR 81AND, THEREFORE, SUCH EXPENSES CAN ONL Y BE ALLOCATED AS PER RULE 8D AND IT CANNOT BE SAID THAT THE SO ALLOCATED EXPENSES ARE NOT CHARGED TO PROFIT AND LOSS A/C. BECAUSE THEY ARE DE EMED TO BE PART OF THOSE EXPENSES WHICH HAVE BEEN CHARGED TO PROFIT AN D LOSS A/C. AND ALLOCATED AS PER RULE 8D, THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD AND THE GROUND OF APPEAL IS REJECTED. 5. WE NOTE THAT THE ASSESSEE ITSELF HAS CLAIMED THE EXPENDITURE OF RS. 1,50,12,943/- AGAINST THE EXEMPT INCOME AND THE REBY CLAIMED DEDUCTION OF RS. 49,98,420/-. THE ASSESSING OFFICER COMPUTED THE AMOUNT OF DISALLOWANCE AS PER RULE 8D AT RS. 53,12,398/-, HOWEVER, THE NET AMOUNT CLAIMED AS DEDUCTION OF RS. 49,48,420/- WAS RESTRICTED AS DIS ALLOWANCE U/S 14A. IT IS NOT THE CASE OF THE ASSESSEE THAT NO EXPENDITURE WAS IN CURRED FOR EARNING THE EXEMPT INCOME. ONCE THE PROVISIONS OF SECTION 14A A RE APPLIED THEN THE QUANTUM OF DISALLOWANCE HAS TO BE WORKED AS PER RUL E 8D. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN APPLYING THE PR OVISIONS OF SECTION 14A AS WELL AS DISALLOWANCE MADE BY THE AUTHORITIES BELOW. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF DECEMBER 2014. SD/- SD/- ( B.R.BASKARAN ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 12-12-2014 SKS SR. P.S, ITA NO.1341/MUM/2013 ASSESSMENT YEAR: - 2009-10 5 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI
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