KIRAN MEHTA, MUMBAI V. I.T.O. 13(3)(2), MUMBAI

ITA 1721/MUM/2011

• Counselvise Citation: 172119914 RSA 2011
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 02-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: NEELAM C JADHAV; K SHIVARAM SHRI RAHUL R SARDA
• Keywords: Earning of tax free income; Period of limitation; Time period of passing order; Condonation of delay
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI . . , , BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 1721/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) MR. KIRAN MEHTA 105/106, SANGAM ARCADE BUILDING, 1 ST FLOOR, V. P. ROAD, OPP. RLY STATION, VILE PARLE (W), MUMBAO-400 056 / VS. INCOME TAX OFFICER 13(3)(2), MUMBAI ./ ./PAN/GIR NO. AFSPM 6085 N ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ % / APPELLANT BY : SHRI K. SHIVARAM/ SHRI RAHUL R. SARDA & NEELAM C. JADHAV '#! $ % / RESPONDENT BY : SHRI O. P. SINGH & '( $ ) * / DATE OF HEARING : 08.01.2014 +,-. $ ) * / DATE OF PRONOUNCEMENT : 09.01.2014 / O R D E R PER R. C. SHARMA, A. M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER BY THE LD. CIT(A)-24, MUMBAI DATED 28.10.2010, IN THE MATTER OF ORDER PAS SED U/S.143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR (A.Y.) 2007-08. 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TH E DISALLOWANCE OF EXPENDITURE BY INVOKING PROVISIONS OF RULE 8D R.W.S. 14A FOR THE A .Y. 2007-08, AMOUNTING TO RS.1,48,499/-. 2 ITA NO. 1721/MUM/2011 (A.Y. 2007-08) MR. KIRAN MEHTA VS. ITO 3. THERE WAS MARGINAL DELAY IN FILING THE APPEAL. T HE ASSESSEE HAS FILED THE APPLICATION FOR CONDONATION OF DELAY ALONG WITH THE REASONING FOR DELAY. FROM THE RECORD WE FOUND THAT DUE TO ILLNESS, THE ASSESSEE COULD NO T FILE THE APPEAL WITHIN THE LIMITATION PERIOD. ILLNESS IS DULY SUPPORTED BY MEDICAL CERTIF ICATE. LOOKING TO THE REASONS FOR THE DELAY, WE ARE SATISFIED THAT THE DELAY WAS DUE TO R EASONABLE CAUSE AND IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY IN FILING THE APPEAL AND THE APPEAL IS HEARD ON MERITS. 4. WE FOUND THAT THE ASSESSING OFFICER (A.O.) HAS D ISALLOWED THE EXPENDITURE BY APPLYING RULE 8D IN RESPECT OF EXEMPT INCOME EARNED BY THE ASSESSEE. THE CONTENTION OF THE LD. AR, SHRI K. SHIVARAM WAS THAT THE PROVISION OF RULE 8D WAS NOT APPLICABLE FOR THE RELEVANT A.Y. 2007-08 UNDER CONSIDERATION, INSOFAR AS RULE 8D WAS MADE EFFECTIVE FROM A.Y. 2008-09. HE INVITED OUR ATTENTION TO THE DECIS ION OF THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF RUSELL INVESTMENTS LIMITED IN ITA NO.1750/KOL/2011, ORDER DATED 05.06.2013, WHEREIN THE DISALLOWANCE MADE BY THE A. O. FOR THE A.Y. 2006-07 BY INVOKING THE PROVISIONS OF RULE 8D WAS RESTRICTED T O 1% OF THE EXEMPT INCOME. IT WAS CONTENDED BY THE LD. AR THAT THE REASONABLE DISALLO WANCE SHOULD BE MADE TO THE EXTENT OF 1% OF THE EXEMPT INCOME WHICH WAS RS.82,664/- EARNE D BY THE ASSESSEE IN THE FORM OF DIVIDEND INCOME. 5. ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE ASSESSEE HAD ALSO EARNED INTEREST INCOME OF RS.8,34,142/- WHICH WAS ALSO CLAIMED AS EXEMPT, THEREFORE, HE CONTENDED FOR THE DISALLOWANCE OF EXPENSES IN RESPECT OF SUCH INT EREST INCOME ALSO. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THA T THE ASSESSEE HAS CLAIMED ONLY DIVIDEND INCOME AS EXEMPT. THE INTEREST INCOME OF RS.4,34,142/- WAS OFFERED AS INCOME FROM OTHER SOURCES AND THE SAME WAS INCLUD ED BY THE A.O. ALSO IN THE INCOME OF ASSESSEE WHILE COMPUTING THE TOTAL INCOME. THUS, TH E DISALLOWANCE, IF ANY, IS TO BE MADE WITH REFERENCE TO THE DIVIDEND INCOME OF RS.82,664/ - EARNED BY THE ASSESSEE. WE FOUND THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE MUMBA I BENCH IN THE CASE OF ACIT VS. M/S. 3 ITA NO. 1721/MUM/2011 (A.Y. 2007-08) MR. KIRAN MEHTA VS. ITO SIRDAR CARBONIC & GAS IN ITA NO.7746/M/10, ORDER DATED 29.11.2013, WHERE IN AFTER FOLLOWING THE VERDICT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AGGRAVATE LTD. (ITA NO.934/2011) DECIDED ON 08.01.2013, THE DISAL LOWANCE WAS RESTRICTED TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME. THE PRECISE OBSERVATION OF THE CO-ORDINATE BENCH WAS AS UNDER: 15. WE ARE NOT INCLINED TO ACCEPT THE REASONING O F THE CIT(A) THAT BECAUSE OF IN HIS VIEW, THE MECHANISM PROVIDED UNDER RULE 8D WAS REASONABLE HENCE THE ACTION OF THE AO IN APPLYING RULE 8D CAN BE SAID TO BE JUS TIFIED. IN FACT, IN VIEW OF THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE JURISDI CTIONAL HIGH COURT, THE AO WAS REQUIRED TO MAKE THE DISALLOWANCE ON SOME REASONABL E BASIS AND NOT BY APPLYING RULE 8D. FIRST TO HOLD THAT THE RULE 8D WAS NOT APP LICABLE FOR THE ASSESSMENT YEAR THEN TO CONFIRM THE DISALLOWANCE MADE BY THE AO UND ER RULE 8D, IS IN FACT AN ACT WHICH IS NOT IN CONFORMITY WITH THE PROPOSITION OF LAW LAID BY THE HON'BLE HIGH COURT. IT MAY BE OBSERVED THAT IT IS NOT A CASE WHE RE NO EXEMPT INCOME WAS RECEIVED BY THE ASSESSEE DESPITE MAKING INVESTMENTS FOR EARNING EXEMPT INCOME. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE EXEMPT INCOME EARNED BY THE ASSESSEE WAS VERY LESS OR NOT IN PROPORTION TO THE INVESTMEN TS MADE BY THE ASSESSEE FOR THIS PURPOSE. UNDER SUCH CIRCUMSTANCES THE DIFFERENT CO- ORDINATE BENCHES OF THIS TRIBUNAL HAVE OBSERVED THAT IN SUCH CASES CERTAIN P ERCENTAGE OF EXEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DIS ALLOWANCE FOR THE YEARS EARLIER TO ASSESSMENT YEAR 2008-09. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. 'GODREJ AGGRAVATE LTD.' (ITA NO.934/2011) DECID ED ON 08.01.13 HAS UPHELD THE ORDER OF THE TRIBUNAL DIRECTING THE AO TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSE E. 16. SINCE IN THE CASE IN HAND ALSO, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS EARNED NO INCOME OR VERY LESS INCOME I N COMPARISON TO INVESTMENTS MADE FOR EARNING EXEMPT INCOME, HENCE IN OUR VIEW I T WOULD BE REASONABLE TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 2% OF TH E EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. THIS ISSUE IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, RESPECTFULLY FOLLO WING THE DECISION OF THE CO- ORDINATE BENCH AS DISCUSSED ABOVE, WE DIRECT THE A. O. TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF 2% OF EXEMPT INCOME OF RS.82,664/-, WHICH WORKS OUT TO RS.1,652/-. WE DIRECT ACCORDINGLY. 4 ITA NO. 1721/MUM/2011 (A.Y. 2007-08) MR. KIRAN MEHTA VS. ITO 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 09, 2 014 SD/- SD/- (SANJAY GARG) (R. C. SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & / / MUMBAI; 0' /DATED : 09.01.2014 (.'../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & 1) ( ) / THE CIT(A) 4. & 1) / CIT - CONCERNED 5. 4(5 ')'67 , * 67. , & / / DR, ITAT, MUMBAI 6. 8 9 / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , & / / ITAT, MUMBAI