Wealth Advisors (India) Pvt Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1349/CHNY/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 8719 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.1349/CHNY/2017 ! / ASSESSMENT YEAR : 2010-2011. M/S. WEALTH ADVISORS (INDIA) PVT LTD, LEMUIR HOUSE, 10 G N CHETTY ROAD, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 3(3) CHENNAI. [PAN AAACW 5266F] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. A.S. SRIRAMAN, ADVOCATE &' '# $ % /RESPONDENT BY : SHRI. AR.V. SREENIVASAN, JCIT. ( ) $ * /DATE OF HEARING : 21-10-2019 +,! $ * /DATE OF PRONOUNCEMENT : 19-11-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 1, CHENNAI (CIT(A) FOR SHORT) DATED 27.02.2017 FOR THE ASSES SMENT YEAR (AY) 2010-2011. ITA NO.1349/2017 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT APPEALS IS CONTRA RY TO THE LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT APPEALS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.74,369/- UNDER SECTION 14A READ WITH RULE 8D WITHOUT APPRECIATING THE FACT THAT NO PART OF THE EXPENSE W AS ACTUALLY ESTABLISHED TO HAVE BEEN INCURRED FOR THE PURPOSE O F EARNING TAX EXEMPT INCOME. 3. THE LEARNED CIT APPEALS OUGHT TO HAVE FOLLOWED T HE DECISION OF THE HONORABLE APPELLATE TRIBUNAL, CHENNAI IN THE CASE NAPC LTD VS ACIT ITA NO. 1919/MDS/2011 THAT UNLESS THERE IS A FINDING OF THE ASSESSING OFFICER THAT THE SUO MOTO DISALLOW ANCE OF RS. 10,000/- MADE BY THE APPELLANT WAS INCORRECT, NO DI SALLOWANCE WOULD LIE AS THE INGREDIENTS FOR INVOKING THE RULE 8D ARE NOT SATISFIED. THE APPELLANT ALSO SUBMITS THAT THE APPL ICATION OF RULE 8D IS NOT AUTOMATIC AND HENCE MECHANICAL APPLICATIO N OF THE SAME INVOKING THE METHOD OF COMPUTATION OF DISALLOW ANCE IS INCONSISTENT WITH LAW AND ALSO FACTS AND CIRCUMSTAN CES OF THE CASE. FOR THESE AND OTHER REASONS, WHICH MAY BE ADDUCED A T THE TIME OF HEARING, THE APPELLANT PRAYS THAT THIS APPEAL BE ALLOWED. THE APPELLANT CRAVES PERMISSION TO ADD, ALTER OR AM END THE AFORESAID GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE NAMELY M/S. WEALTH ADVISORS (INDIA) PVT LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF FINANCIAL P RODUCT DISTRIBUTION AND FINANCIAL ADVISORY SERVICES. THE RETURN OF INC OME FOR THE ASSESSMENT YEAR 2010-2011 WAS FILED ON 11.10.2010 D ISCLOSING TOTAL INCOME OF RS.48,26,341/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIO NER OF INCOME TAX, COMPANY CIRCLE-III(3), CHENNAI (HEREINAFTER CALLED AS ITA NO.1349/2017 :- 3 -: ASSESSING OFFICER) PASSED U/S.143(3) OF THE AC T ON 26.12.2012 AT TOTAL INCOME OF RS.52,32,870/-. WHILE DOING SO, THE ASSESSING OFFICER MADE DISALLOWANCE OF 10% OF THE STAFF WELFA RE EXPENDITURE TO THE EXTENT OF RS.3,32,162/- AND MADE ADDITION OF R S.84,369/- U/S.14A OF THE ACT. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER DELETED THE ADDITION ON AC COUNT OF STAFF WELFARE EXPENDITURE AND CONFIRMED THE ADDITION MADE U/S.14A OF THE ACT. 5. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD. COUNSEL SUBMITTED THAT GRO UND RELATING TO THE NON RECORDING OF SATISFACTION BY THE ASSESSING OFFI CER AS TO HOW THE SUO MOTU DISALLOWANCE OFFERED BY THE ASSESSEE IS IN CORRECT WAS NOT ADJUDICATED BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS). HE FURTHER SUBMITTED THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME AND THEREFORE THE QUESTION OF DISALLO WANCE DOES NOT ARISE. 6. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL RELATES T O DISALLOWANCE U/S.14A OF THE ACT. FROM THE PERUSAL OF THE MATERI AL ON RECORD, IT APPEARS THAT ASSESSEE ITSELF HAD OFFERED SUO MOTU DISALLOWANCE OF ITA NO.1349/2017 :- 4 -: RS.10,000/- U/S.14A OF THE ACT. THE PROVISIONS OF SECTION 14A OF THE ACT MANDATES THE ASSESSING OFFICER TO RECORD SATI SFACTION AS TO HOW THE CLAIM MADE BY THE ASSESSEE IS INCORRECT. ASSES SEE HAD RAISED SPECIFIC GROUND OF APPEAL BEFORE THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) REGARDING NON RECORDING OF THE SATISFACT ION. HOWEVER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD FAILED TO ADJUDICATED THIS GROUND OF APPEAL, SINCE THIS GROUND OF APPEA L GOES TO THE ROOT OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT T HE MATTER SHOULD GO BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION AND ALL OTHER CONTENTIONS ARE L EFT OPEN BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 19TH DAY OF NOVEMBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED: 19TH NOVEMBER, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF