Arumugam Olaganathan, CHENNAI V. DCIT, CHENNAI

ITA 1563/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9301 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A VASUDEVAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1563/MDS/2015 / ASSESSMENT YEAR : 2010-11 SHRI ARUMUGAM OLAGANATHAN 12-A/2 SPARTAN NAGAR MUGAPPAIR CHENNAI 600 050 VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE I(1) CHENNAI [PAN AAAPO 3267 D ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI A. VASUDEVAN, CA /RESPONDENT BY : SHRI A.V SREEKANTH, JCIT / DATE OF HEARING : 01 - 03 - 2016 ! / DATE OF PRONOUNCEMENT : 12 - 05 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I, DATED 24.3.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF EXPENDITURE U/S 14A. ITA NO.1563/15 :- 2 -: 3. SHRI A.VASUDEVAN, LD. REPRESENTATIVE FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE ACCOUNTED RS. 1,21,166 /- AS DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION WHICH WA S EXEMPTED U/S 10(35) OF THE ACT. THE ASSESSING OFFICER BY APPLYI NG THIRD LIMB OF RULE 8D OF THE INCOME-TAX RULES, DISALLOWED 0.5% OF THE AVERAGE INVESTMENT WHICH YIELDED THE EXEMPTED INCOME. ACCO RDING TO THE LD. REPRESENTATIVE, NO EXPENDITURE WAS INCURRED FOR EAR NING THE EXEMPTED INCOME. THE LD. REPRESENTATIVE SUBMITTED THAT SEC. 14A IS APPLICABLE ONLY IF THE ASSESSEE INCURRED ANY EXPENDITURE FOR EARNING THE TAX FREE INCOME. IN THIS CASE, ACCORDING TO THE LD. REPRESE NTATIVE, NO EXPENDITURE WAS INCURRED, THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE. 4. ON THE CONTRARY, SHRI A.V. SREEKANTH, LD. DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT RULE 8D PROVIDES FOR DISALLOWANCE OF EXPENDITURE RELATABLE TO EARNING THE EXEMPTED INCOM E. IN THE CASE BEFORE US, ACCORDING TO THE LD. DR, THE ASSESSEE E ARNED INCOME WHICH WAS EXEMPTED FROM TAX, THEREFORE, THE EXPENDITURE I NCURRED FOR EARNING SUCH INCOME HAS TO BE COMPUTED AS PER THE P ROCEDURE LAID DOWN IN RULE 8D. THE THIRD LIMB OF RULE 8D PROVIDE S FOR DISALLOWANCE OF 0.5% OF THE AVERAGE INVESTMENT WHICH YIELDED THE EXEMPTED INCOME. THE ASSESSING OFFICER AFTER CONSIDERING TH E INVESTMENT MADE BY THE ASSESSEE TILL 31.3.2010 DISALLOWED 0.5% OF THE AVERAGE ITA NO.1563/15 :- 3 -: INVESTMENT WHICH YIELDED THE EXEMPTED INCOME. THER EFORE, ACCORDING TO THE LD. DR, THE CIT(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. RUL E 8D PROVIDES METHOD FOR DISALLOWANCE OF EXPENDITURE FOR EARNING THE EXEMPTED INCOME. ADMITTEDLY, THE ASSESSEE HAS MADE INVESTM ENT WHICH RESULTED IN EXEMPTED INCOME. IT IS NOBODYS CASE T HAT THE ASSESSEE HAS BORROWED ANY LOAN FOR THE PURPOSE OF MAKING INV ESTMENT, THEREFORE, THE FIRST LIMB OF RULE 8D MAY NOT BE APP LICABLE. NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST THAT THE ASSESSE E HAS INCURRED ANY INTEREST EXPENDITURE WHICH ARE NOT DIRECTLY ATTRIBU TABLE TO ANY PARTICULAR INCOME OR RECEIPT. THEREFORE, THE SECON D LIMB OF RULE 8D IS ALSO NOT APPLICABLE. NOW COMING TO THIRD LIMB OF R ULE 8D, AN AMOUNT EQUAL TO 0.5% OF THE AVERAGE VALUE OF THE INVESTMEN T, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE AS ON THE FIR ST DAY AND LAST DAY OF THE PREVIOUS YEAR, HAS TO BE CONSIDERED FOR DISALLO WANCE. IN THIS CASE, THE ASSESSING OFFICER HAS CONSIDERED THE INVESTMENT S WHICH ARE APPEARING IN THE BALANCE SHEET AS ON THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR AND TAKEN THE INCOME WHICH WAS NOT FO RMED PART OF THE TOTAL INCOME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION ITA NO.1563/15 :- 4 -: THAT THE ASSESSING OFFICER HAS RIGHTLY APPLIED THIR D LIMB OF RULE 8D FOR MAKING THE DISALLOWANCE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGL Y THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 12 TH MAY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF