Jaswant Rai Arora, New Delhi V. ACIT, New Delhi

ITA 1403/DEL/2012

• Counselvise Citation: 140320114 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Assessee Lawyers: V K NISHCHAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1403 /DEL/2012 ASSESSMENT YEAR : 2008-09 JASWANAT RAI ARORA, VS. ACIT, CC-14, 1114, 11 TH FLOOR, NAURANG HOUSE, NEW DELHI 21, K. G. MARG, NEW DELHI/ GIR / PAN:AAUPA5876A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K. NISHCHAL, CA RESPONDENT BY : MS. SULEKHA VERMA, CIT DR ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 04.10.2011. THE ASSESSEE HAS RAISED TWO ISS UES IN THIS APPEAL ONE OF WHICH RELATES TO THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE DISALLOWANCE U/S 14A READ WITH RULE 8D FOR AN AMOUN T OF RS.3,30,381/- AGAINST DIVIDEND INCOME OF RS.2,61,877/-. THE SECO ND GROUND OF APPEAL RELATES TO CONFIRMATION OF ADDITION OF RS.1,11,000/ - ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWLS. 2. AT THE OUTSET, LD. A.R. SUBMITTED THAT THE ASSES SEE HAD MADE INVESTMENT OUT OF HIS OWN FUNDS AND THEREFORE, NO D ISALLOWANCE FOR INTEREST ITA NO.1403/DEL/2012 2 PAID WAS REQUIRED TO BE MADE. IT WAS FURTHER SUBMI TTED THAT LOAN RAISED BY THE ASSESSEE WAS UTILIZED FOR MAKING INVESTMENT IN THE INITIAL PUBLIC OFFER OF SHARES OF POWER GRID LTD. ON WHICH NO DIVIDEND WAS RECEIVED. IT WAS SUBMITTED THAT ASSESSEE HAD NOT SPENT ANY EXPENDITU RE FOR EARNING DIVIDEND INCOME AS HE WAS ENGAGED IN TRADING OF SHARES AND T HE DIVIDEND INCOME WAS RECEIVED AS INCIDENTAL INCOME FOR CARRYING ON THE B USINESS OF TRADING IN SHARES. 3. LD. D.R. ON THE OTHER HAND SUBMITTED THAT INCURR ING OF EXPENDITURE IS NOT NECESSARY FOR THE PURPOSE OF APPLICATION OF SEC TION 14A OF THE ACT AND IN THIS RESPECT, RELIANCE WAS PLACED ON THE CASE LAW O F MAXOPP INVESTMENTS, 347 ITR 272 AND IN THE SPECIAL BENCH DECISION IN TH E CASE OF CHEMINVEST LTD., 124 TTJ 577. 4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE A.O. MADE DISALLOWANCE U/S 14A AS PER THE PROVISIONS OF RULE 8D AND DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE THAT NO DIRECT OR INDIRECT EXPENDITURE WAS INCURRED FOR THE PURPOSE OF EARNING DIVIDEND INCOME. HOWEVER, THE A.O. WITHOUT GIVING ANY COGENT REASON, RELIED UPON THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND MADE DISALLOWANCE ACCORDINGLY. ON APPEAL BEFORE LD. CIT (A), LD. CIT(A) DID NOT AGREE WITH THE ARGUMENTS OF THE ASSESSEE AND UPHELD THE DISALLOWANCE. WE FURTHER FIND THAT THE ASSESSEE HAD CLAIMED THAT NO EXPENDITURE WAS INCURRED FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND IN S UCH CIRCUMSTANCES, THE HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVE STMENT LTD. IN PARA 29 HAS HELD THAT BEFORE APPLYING RULE 8D, A.O. HAS TO GIVE COGENT REASON FOR NOT ACCEPTING THE CONTENTION OF THE ASSESSEE WHICH, IN THE PRESENT CASE, HAS ITA NO.1403/DEL/2012 3 NOT BEEN DONE BY THE A.O. THE HON'BLE DELHI HIGH C OURT VIDE PARA 29 OF ITS DECISION HAS HELD AS UNDER: SCOPE OF SUB-SECTIONS (2) AND (3) OF SECTION 14A SUB-SECTION (2) OF SECTION 14A PROVIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME. HOWEVER, IF ONE EXAMINES THE PROVISION CAREFULLY, I T WOULD BE FOUND THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ONLY IF THE ASSESSING OFFICER, HAVING R EGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WORDS, THE REQUIREMENT OF THE ASSESSING OFFIC ER EMBARKING UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE INCUR RED IN RELATION TO EXEMPT INCOME WOULD BE TRIGGERED ONLY IF THE ASSES SING OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E. THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSING OFFICER ENTER ING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCU RRED IN RELATION TO EXEMPT INCOME IS THAT THE ASSESSING OFFICER MUST RE CORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-SECTION (3) IS NOTHING BUT AN OFFSHOOT OF SUB- SECTION (2) OF SECTION 14A. SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WORDS, SUB-SECTION (2) DEALS WITH CASES WHERE THE ASSESSEE SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T AND SUB- SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE ASSERTS THA T NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER, IF SATISFIED WITH THE CORRECTNES S OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPEN DITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE A MOUNT OF EXPENDITURE IN ACCORDANCE WITH ANY PRESCRIBED METHO D, AS MENTIONED IN SUB-SECTION (2) OF SECTION 14A. IT IS ONLY IF TH E ASSESSING OFFICER IS ITA NO.1403/DEL/2012 4 NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD, THE PRESCRIBED METHOD BEING THE METHOD STIPULATED IN RULE 8D. WHILE REJECTING THE CLAIM OF THE ASSESS EE WITH REGARD TO THE EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS FOR THE SAME. [PARA 29}. 5. IN VIEW OF ABOVE WE ARE OF THE CONSIDERED OPINIO N THAT THE MATTER SHOULD BE RE-ADJUDICATED BY THE A.O. WHO WILL ARRIV E AT THE APPROPRIATE DECISION AFTER FOLLOWING THE ABOVE JUDGEMENT AND WI LL MAKE DISALLOWANCE IF ANY AS PER LAW. IN VIEW OF ABOVE, GROUND NO.2 IS A LLOWED FOR STATISTICAL PURPOSES. 6. THE OTHER GRIEVANCE OF THE ASSESSEE IS WITH REGA RD TO ADDITION ON ACCOUNT OF LOW HOUSE HOLD DRAWINGS. THE LD. A.R. S UBMITTED THAT THE ASSESSEE WAS LIVING WITH HIS FAMILY AND WAS 76 YEAR S OF AGE AND HIS FAMILY HAD MADE SUFFICIENT WITHDRAWALS AND, THEREFORE ADDI TION IN THE CASE OF THE ASSESSEE WAS NOT JUSTIFIED. 7. LD. D.R. ON THE OTHER HAND SUBMITTED THAT THOUGH THE ASSESSEE WAS AN OLD MAN BUT KEEPING IN VIEW OF HIS SOCIAL STATUS RS .9,000/- WITHDRAWAL MADE BY HIM WAS NOT SUFFICIENT AND THE A.O. HAS MADE VER Y REASONABLE ADDITION ASSUMING HOUSE HOLD EXPENSES TO BE RS.10,000/- PER MONTH. 8. WE HAVE GONE THROUGH THE FACTS OF THE CASE AND M ATERIAL PLACED ON RECORD. WE ARE OF THE OPINION THAT AN ADDITION OF RS.50,000/- ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWAL WILL MEET THE ENDS OF JUS TICE. WE ORDER ACCORDINGLY. IN VIEW OF THE ABOVE, GROUND NO.3 IS PARTLY ALLOWED. ITA NO.1403/DEL/2012 5 9. GROUND NO.1, 4 AND 5 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY ADJUDICATION. 10. IN VIEW OF ABOVE, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOV., 2014. SD./- SD./- ( H. S. SIDHU) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 14 TH NOV., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER