ASHIM SAMANTA, MUMBAI V. ASST CIT 16(1), MUMBAI

ITA 1390/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4540 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RUTURAJ GURJAR ARS
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA 1390/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) I.T.A NO.1390/MUM/2017 (ASSESSMENT YEAR: 2012-13) ASHIM SAMANTA 194, NATRAJ STUDIO, ARVIND CHAMBERS, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI- 69 PAN : AACPS8265M VS THE ACIT-16(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI MIHIR NANIWADEKAR & RUTURAJ GURJAR, ARS RESPONDENT BY MS. NEHA THAKUR, DR DATE OF HEARING 11-10-2018 DATE OF PRONOUNCEMENT -10-2018 O R D E R PER RAJESH KUMAR , AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF CIT(A)-4, MUMBAI PERTAINING TO ASSESSMENT YEAR 2012 -13. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF EXPENDITURE OF RS.5,13,482 U/S 14A OF THE I.T. ACT R.W.R. 8D OF I.T. RULES, 1962 AS MADE BY THE AO. THE ASSE SSEE HAS ALSO CHALLENGED HE ADDITION ON THE BASIS THAT NO SATISFA CTION HAS BEEN RECORDED AO BEFORE INVOKING RULE 8D WITH REFERENCE TO THE BOOKS OF 2 ITA 1390/MUM/2017 ACCOUNT MAINTAINED BY THE ASSESSEE. 3. THE FACTS IN BRIEF ARE THAT THE AO FOUND, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT ASSESSEE HAS EARNED DIV IDEND OF RS.5,50,883 COMPRISING DIVIDEND FROM SHARES AND SEC URITIES OF RS.1,91,513 AND FROM MUTUAL FUNDS OF RS.3,59,370/-. THE LD.AO FOUND THAT THE ASSESSEE HAS NOT BIFURCATED EXPENSES TOWAR DS EARNING OF EXEMPT INCOME AND AFTER INVOKING THE PROVISIONS OF RULE 8D(2), WORKED OUT THE DISALLOWANCE OF RS.5,13,482 U/R 8(2)(III) O F I.T. RULES, 1962. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) CONFIRMED THE ORDER OF AO BY HOLDING THAT THE ASSESSEE HAS NOT BIFURCATED THE EX PENDITURE PERTAINING TO EARNING OF EXEMPT INCOME, THEREFORE, RULE 8D(2) WAS RIGHTLY INVOKED. 4. THE LD.AR VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSES IN CONNECTION WITH EARNING OF EXEMPT INCOME. THE LD.AR WHILE POINTING OUT FROM THE ASSESSMENT OR DER SUBMITTED THAT THE AO HAS NOT RECORDED ANY SATISFACTION BY REFERRI NG TO THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AS TO HOW THE EX PENSES SHOULD HAVE BEEN BIFURCATED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME. THE LD.AR FURTHER SUBMITTED THAT WHILE INVOKING PRO VISIONS OF SECTION 14A R.W.R. 8D(2)(III) OF THE I.T. RULES, 1962, THE AO HAS TO RECORD HIS SATISFACTION WITH REFERENCE TO BOOKS OF ACCOUNT AS TO HOW THE STAND OF THE ASSESSEE IS INCORRECT AND ONLY THEREAFTER THE P ROVISIONS OF RULE 8D 3 ITA 1390/MUM/2017 COULD BE INVOKED; BUT, IN THE PRESENT CASE, NOTHING OF THAT SORT WAS DONE BY THE AO. THE LD.AR SUBMITTED THAT IN VIEW OF THE RATIO OF JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES PVT LTD 313 ITR 340 (BOM), THE ADDITION AS MADE BY THE AO SHOULD BE DELETED. 5. SECONDLY, THE LD.AR SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT IN RESPECT OF THE DIVIDEN D INCOME EARNED BY POINTING OUT TO PAPER BOOK PAGES 34 & 35, WHICH A C OPY OF P&L ACCOUNT AND BALANCE-SHEET, WHEREIN THE ASSESSEE SUBMITTED T HAT THE ONLY EXPENSES WERE BANK COMMISSION, LEGAL AND POROFESSIO NAL CHARGES AND CONVEYANCE EXPENSES AGGREGATING TO RS.9,102 WHEREAS THE DIVIDEND FROM MUTUAL FUNDS AND SHARES WERE RS.3,72,865. THE ONLY EXPENSES WHICH CAN BE ATTRIBUTED IS LEGAL AND PROFESSIONAL E XPENSES OF RS.1,000. WHILE REFERRING TO PAGES 41 & 42 WHICH IS A COPY OF P&L ACCOUNT AND BALANCE-SHEET IN RESPECT OF PROPRIETORY BUSINESS UN DER THE NAME & STYLE OF ARADHANA FILMS, THE LD.AR POINTED OUT THAT THE O NLY EXPENSE INCURRED WAS STT PAID OF RS.6,199 WHICH WAS PAID IN RESPECT OF RIL REGULAR SAVING FUND ON WHICH THE ASSESSEE INCURRED LONG TER M CAPITAL LOSS OF RS.2,20,339. THE LD.AR SUBMITTED THAT NONE OF THE EXPENSES DEBITED IN THE P&L ACCOUNT WHICH AS FILED AT PAGE 41, RELATED TO EARNING OF EXEMPT INCOME. THEREFORE, THE DISALLOWANCE AS WORKED OUT BY THE AO AND 4 ITA 1390/MUM/2017 CONFIRMED BY THE LD.CIT(A) IS TOTALLY WRONG AND AGA INST FACTS OF THE CASE. 6. THE THIRD PLEA TAKEN BY THE LD.AR IS THAT THE AO HAS DISALLOWED EXPENSES U/R 8D(2)(III) BY TAKING ALL INVESTMENTS, WHICH HAVE NOT YIELDED EXEMPT INCOME AND, THEREFORE, THE SAME IS ALSO WRON G AND HAVE TO BE EXCLUDED WHILE CALCULATING THE DISALLOWANCE. 7. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE LOWER AUTHORITIES. 8. WE HAVE PERUSED THE ORDER OF AO AND FOUND THAT N O SATISFACTION HAS BEEN RECORDED WITH REFERENCE TO THE BOOKS OF ACCOUN T OF THE ASSESSEE AND AO PROCEEDED TO INVOKE RULE 8D WITHOUT RECORDI NG HIS SATISFACTION, WHICH IN OUR OPINION, IS WRONG AND AGAINST THE SETT LED LAW. IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS ACIT 382 ITR 81 (SC) I T HAS BEEN HELD THAT RECORDING SATISFACTION IS A PRE-REQUISITE HAVI NG REGARD TO THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE FAILING WHICH THE DISALLOWANCE HAS TO BE DELETED. WE, THEREFORE, FOLLOWING THE JU DGEMENT OF HONBLE APEX COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD VS ACIT (SUPRA), DELETE THE DISALLOWANCE MADE BY THE BY SETTING ASID E THE ORDER OF LD.CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5 ITA 1390/MUM/2017 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH OCTOBER, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI