The ACIT, Circle-1, Ahmedabad V. Asman Investment Ltd., Ahmedabad

ITA 1379/AHD/2005

• Counselvise Citation: 137920514 RSA 2005
• Duration Of Justice: 7 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 10-05-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: P M MEHTA
• Keywords: Earning of tax free income; Tax effect
• Section: 143(3); 56(2); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH BEFORE: SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARA T, JUDICIAL MEMBER ACIT, CIR-1 AHMEDABAD (APPELLANT) VS. ASMAN INVESTMENT LIMITED AHMEDABAD (RESPONDENT) PAN NO. AABCA5968R REVENUE BY : SRI RAHUL KUMAR, SR. D.R. ASSESSEE BY : SRI P.M. MEHTA, A.R. DATE OF HEARING : 24 -09-2012 DATE OF PRONOUNCEMENT : 09- 11-2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER:- THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER LD. COMMISSIONER OF INCOME TAX (APPEALS)-V AHMEDABAD DA TED 04-02-2005. IT IS PERTINENT TO MENTION HERE THAT EARLIER THIS APPE AL WAS DISMISSED BY THIS TRIBUNAL ON THE BASIS OF LOW TAX EFFECT. THE REVEN UE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT OF GUJRAT WHO ALLOWED THE APPEAL OF THE REVENUE, AND REMANDED THIS APPEAL TO THIS TRIBUNAL FOR CONSIDERATION ON MERIT. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING TO DELETE THE ADMINISTRATIVE EXPENSES DISALLOWED U/S. 14A OF RS. 11,43,784/- 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIR ECTING NOT TO REDUCE THE LOSS RETURNED BY AN AMOUNT DISALLOWED U/ S. 14A. I.T.A. NO 1379/AHD/2005 A.Y.:-2002-03 ITA NO. 1379/AHD/2005 A.Y. 1997-98 PAGE NO. THE ACIT VS. ASMAN INVESTMENT LTD. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF ASSESS ING OFFICER. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FINAL IZED THEREBY THE ASSESSING OFFICER MADE ADDITION U/S 14A IN RESPECT OF DISALLO WANCE OF ADMINISTRATIVE EXPENSES AND INCREASE IN BOOK PROFIT BY ALLOCATING RS. 11,43,784/- AS EXPENSES RELATING TO THE DIVIDEND INCOME. AGAINST THIS ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPE AL. 3. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION MADE ON ACCOUNT OF ADMINISTRATIVE DISALLOWANCE OF EXPENSES U/S 14A OF RS. 11,43,784/-. LD. D.R. FOR THE REVENUE SUBMITTED THAT THE ASSESSEE EA RNED, DIVIDEND INCOME I.E.EXEMPT INCOME AND THE ASSESSING OFFICER HAS RIG HTLY DISALLOWED THE ADMINISTRATIVE EXPENSES. HE SUBMITTED THAT IT CANN OT BE BY ANY STRETCH OF IMAGINATION THAT WHILE EARNING EXEMPT INCOME WHILE IN THE FORM OF DIVIDEND THE ASSESSEE-COMPANY DID NOT INCUR ANY EXPENDITURE. HE SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY COMPUTED THE DISALLOW ANCE OF ADMINISTRATIVE EXPENSES. ON THE CONTRARY, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSE E HAS EARNED DIVIDEND OF RS. 12,63,987/- AS AGAINST TOTAL INVESTMENT OF RS. 15271.49 LACS (AS ON 31- 03-2012). THE ASSESSING OFFICER, THEREFORE, INVOKE D PROVISION OF S. 14A OF THE ACT AND DISALLOWED THE PROPORTIONATE EXPENSES O UT OF ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE. IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE COMPANY IS ENGAGED I N THE BUSINESS OF TRADING IN GARMENTS AND ALSO CARRYING ON BUSINESS OF PURCHA SE AND SALES OF SHARES. HE SUBMITTED THAT NO SEPARATE EXPENDITURE WAS BEING INCURRED BY THE ITA NO. 1379/AHD/2005 A.Y. 1997-98 PAGE NO. THE ACIT VS. ASMAN INVESTMENT LTD. 3 ASSESSEE WITH REFERENCE TO THE EARNING OF DIVIDEND INCOME. THEREFORE, HE SUBMITTED THAT THERE IS JUSTIFICATION FOR DISALLOWI NG ANY PART OF THE ADMINISTRATIVE EXPENSES AS HAVING BEEN INCURRED FOR THE PURPOSE OF EARNING DIVIDEND INCOME. HE SUBMITTED THAT THE DIVIDEND IN COME WAS CHARGEABLE TO TAX U/S 56(2) OF THE ACT AND SECTION 57 OF THE ACT PRESCRIBE DEDUCTION OF EXPENSES INCURRED FOR EARNING ON SUCH DIVIDEND INCO ME. HE SUBMITTED THAT THERE IS NO JUSTIFICATION IN INVOKING OF PROVISION OF SECTION 14A OF THE ACT AND MAKING DISALLOWANCE OF ADMINISTRATIVE EXPENSES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SO FAR DISALLOWANCE U/S 14A I S CONCERNED, THE ASSESSING OFFICER HAS RIGHTLY MADE DISALLOWANCE U/S 14A OF THE ACT IN RESPECT OF ADMINISTRATIVE EXPENSES AS IT CANNOT BE ACCEPTED THAT THE DIVIDEND INCOME CAN BE EARNED WITHOUT INCURRING ANY EXPENDIT URE. MOREOVER, THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE DIVIDEND INCOME ARE CHARGEABLE TO TAX U/S 56(2) OF THE ACT AND ANY EXPENDITURE INCURRED FOR EARNING SUCH DIVIDEND INCOME IS REQUIRED TO BE DEDU CTED U/S 57 OF THE ACT. ADMITTEDLY, NO SUCH EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE SINCE THE DIVIDEND INCOME IS NOT OFFERED FOR TAX UNDER THE HE AD INCOME FROM OTHER SOURCES. THEREFORE, THE CONTENTION OF THE LEARNED C OUNSEL FOR THE ASSESSEE THAT EVEN OTHERWISE ALSO THE ASSESSING OFFICER WHIL E CONSIDERED THAT THE INCOME BEING CHARGEABLE TO TAX UNDER THE HEAD FROM OTHER SOURCES, THEREFORE, DEDUCTION FOR SUCH EXPENDITURE WAS AVAILABLE U/S 57 OF THE ACT CANNOT BE ACCEPTED AS IT WAS INCUMBENT UPON THE ASSESSEE TO C LAIM EXPENDITURE AT THE TIME OF FILING THE RETURN OF INCOME, IF ANY, AGAINS T THE INCOME SO DECLARED. HOWEVER, UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE FEEL THAT THE ASSESSING OFFICER HAS MADE EXCESSIVE DISALLOWANCE W ITHOUT BRINGING INTO RECORD AS TO HOW THIS EXPENDITURE DISALLOWED OUGHT TO HAVE BEEN INCURRED BY ITA NO. 1379/AHD/2005 A.Y. 1997-98 PAGE NO. THE ACIT VS. ASMAN INVESTMENT LTD. 4 THE ASSESSEE FOR EARNING THE DIVIDEND INCOME. KEEP ING IN VIEW OF THE FACT, THE ASSESSEE WOULD NOT NEED MUCH INFRASTRUCTURE AND STAFF FOR TRADING/ INVESTMENT IN SHARES AND EARNING DIVIDEND INCOME TH EREOF, THEREFORE, WE REDUCE THE DISALLOWANCE FROM RS. 11,43,784/- TO RS. 6,00,000/-. IN THIS VIEW OF THE MATTER, THIS GROUND OF THE REVENUES APPEAL IS ALLOWED. 5. NEXT GROUND IS AGAINST DIRECTING NOT TO REDUCE L OSS RETURNED BY AN AMOUNT DISALLOWED U/S 14A OF THE ACT. SINCE WE HAVE DECIDED THE GROUND NO. 1 IN FAVOUR OF THE REVENUE, THEREFORE, WE DIREC T THE ASSESSING OFFICER TO RE-COMPUTE TO THE EXTENT THE DISALLOWANCE OF EXPEND ITURE CONFIRMED IN GROUND NO. 1 OF THIS APPEAL. THUS, THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD : DATED 09 /11/2012 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '#