AYUB ISMAIL KHWAJA, MUMBAI V. I.T.O. 13(3)(3), MUMBAI

ITA 1752/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9431 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 19-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2011
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO. 1752/M/2011 ( AY: 2007 - 2008 ) SHRI AYUB ISMAIL KHWJA, C/O. 502, DELUXE COURT, R.V. BAMBARDEKAR ROAD, BANDRA (W), MUMBAI 09. / VS. ITO - 13(3)(3), MUMBAI. ./ PAN : AABPK9340G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M. SUBRAMANIAN / RESPONDENT BY : SHRI SACHCHIDANAND DUBEY, DR / DATE OF HEARING : 20.1.2015 / DATE OF PRONOUNCEMENT : 20.1.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 3.9.3011 IS AGAINST THE ORDER OF THE CIT (A) - 24, MUMBAI DATED 28.12.2010 FOR THE ASSESSMENT YEAR 2007 - 2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READ S AS UNDER: THE LD CIT (A) HAS ERRED IN THE FACTS AND CIRCUMSTANCES O THE CASE IN UPHOLDING DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT OF EXPENSE INCURRED BY THE PARTNER IN THE COURSE OF THE CONDUCT OF THE BUSINESS OF THE FIRM. THE REMARKS MADE IN THIS CONNECTION ARE AGAINST FACTS AND THE LAW AND DO NOT JUSTIFY THE SAID DISALLOWANCE. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE RECEIVED BOTH THE TAXABLE INCOME AS WELL AS THE EXEMPT INCOME. EXEMPT INCOME INCLUDES SHARE INCOME RECEIVED FROM M/S. DELUXE BUILDERS AND M/S. DELITE ENTERPRISES TOTALING TO RS. 4,34,927.40. FURTHER, ASSESSEE ALSO RECEIVED REMUNERATION WHICH IS TAXABLE AS BUSINESS INCOME OF THE ASSESSEE AND THE SAME AMOUNTS TO RS. 3,33,761.60. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER MADE ADDITION OF RS. 2,16,465/ - BEING THE DEPRECIATION, INSURANCE, INTEREST RELATING 2 TO THE MOTOR CAR LOAN AND D R IVER SALARY OF RS. 30,000/ - WAS ALSO DISALLOWED. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPEL LATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CIT (A) CONFIRMED THE SAID DISALLOWANCE FOR A DIFFERENT REASON INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. AGGRIEVED, ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE PROVISIONS OF SECTION 14A WERE RIGHTLY INVOKED. HOWEVER, WHILE COMPUTING THE DISALLOWANCE, DEPRECIATION WAS ALSO CONSIDERED AS EXPENDIT URE RELATABLE TO THE EXEMPT INCOME AND THE SAME IS UNSUSTAINABLE IN LAW. OTHERWISE, HE IS OF THE OPINION THAT THE OTHER DISALLOWED EXPENDITURES CAN BE APPORTIONED BETWEEN THE EXEMPT INCOME AND THE TAXABLE INCOME AND A REASONABLE SUM MAY BE DISALLOWED CONSI DERING THE AY 2007 - 08 IN QUESTION, WHICH IS NOT COVERED BY THE PROVISIONS OF RULE 8D OF THE IT RULES, 1962. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. THERE IS NO DISPUTE SO FAR AS THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A IS CONCERNED. FURTHER, IT IS A SETTLED PROPOSITION OF LAW THAT THE RULE 8D DOES NOT APPLY TO TH E ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THE DISALLOWANCE OF A REASONABLE SUM RELATABLE TO THE EARNING OF THE AFOREMENTIONED SHARE INCOME IS A N ISSUE FOR ADJUDICATION BY US. THE SUBMISSION OF THE LD COUNSEL SUBMITTED THAT THE DEPRECIATION CANNOT BE CONSIDERED AS EXPENDITURE INCURRED FOR THE PURPOSE OF SECTION 14A IS ALSO A SETTLED PROPOSITION AND THE LD DR HAS NOT BROUGHT ANY CONTRARY DECISIONS IN THIS REGARD. IN THESE CIRCUMSTANCES, THE LIMITED ISSUE FOR ADJUDICATION IS QUANTIFYING THE REASONAB LE AMOUNT FOR DISALLOWANCE. IN THIS REGARD, LD COUNSEL ALSO RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 AND SUGGESTED FOR 3 DISALLOWING SOME PE RCENTAGE OF EXPENDITURE. CONSIDERING THE PECULIAR FACTS OF THE PRESENT CASE, WE ARE OF THE OPINION THAT MAKING A DISALLOWANCE OF AN AD - HOC SUM OF RS. 50,000/ - SHOULD MEET BOTH THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2015. S D / - S D / - ( AMIT SHUKLA ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 20/1/2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI