Jayant Avinash Dave, Pune V. Dy CIT, Pune

ITA 1766/PUN/2012

• Counselvise Citation: 176624514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GARIMA C HOUDHARY
• Keywords: Earning of tax free income
• Section: 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 1766 /PN/20 12 ASSESSMENT YEAR : 200 8 - 09 JAYANT AVINASH DAVE, 46/2/1B, KAKA HALWAI INDUSTRIAL ESTATE, PUNE SATARA ROAD, PUNE (APPELLANT) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 11(2), PUNE (RESPONDENT) PAN NO. AAQPD6875J APPELLANT BY: SHRI S.N. PURANIK RESPONDENT BY: SMT. GARIMA CHOUDHARY DATE OF HEARING : 30 - 12 - 2013 DATE OF PRONOUNCEMENT : 21 - 03 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 15 - 02 - 2012 FOR THE A.Y. 2008 - 09. GROUND NO. 1 IS IN RESPECT OF ADDITION MAD E BY MAKING THE DISALLOWANCE U/S. 14A OF THE INCOME - TAX ACT OF RS.3,09,995/ - . 2. THE BRIEFLY STATED FACTS ARE UNDER. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF JOB WORK ACTIVITY OF AUTOMOBILE PARTS. THE ASSESSEE FILED THE RETURN OF INCO ME DECLARING TOTAL INCOME OF RS.2,15,11,330/ - FOR THE A.Y. 2008 - 09. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED DIVIDEND INCOME OF RS.58,17,263/ - WHICH WAS CLAIMED AS EXEMPT. IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE SHOULD HAVE DISALLOWED THE S O ME EXPENDITURE AS PER THE PROVISIONS OF SEC.L4A OF THE INCOME - TAX ACT R.W. RULE 8D. THE ASSESSEE RESISTED THE ACTION OF THE ASSESSING OFFICER AND FILED OBJECTIONS / WRITTEN SUBMISSIONS STATING THAT THE ASSESSEE HAS INCURRED THE FOLLOWING EXPENDITURE: 2 ITA NO . 1766 /PN/2012, JAYANT AVINASH DAVE, PUNE SR. NO. PARTICULARS AMOUNT 1 PORTFOLIO MANAGEMENT FEES RS.6,37,884/ - 2 SECURITIES TRANSACTION TAX AND OTHER EXPENSES LIKE DEMAT ACCOUNT MAINTENANCE CHARGE AND TRANSACTION CHARGE ETC. RS.74,123/ - TOTAL RS.7,12,007/ - 2.1. HE ALS O STATED THAT THE ABOVE EXPENDITURES HAVE BEEN DIRECT LY DEBITED TO THE CAPITAL ACCOUNT OF THE ASSESSEE AS DRAWINGS AND NO DEDUCTION OF THE SAID EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE. HE FURTHER STATED THAT MOST OF THE INVESTMENT IN THE MUTUAL FUNDS AND PART IN THE SHARES WHICH ARE REFLECTED IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE. HE FURTHER STATED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT BORROWED FUNDS FOR INVESTMENTS NOR HAS PAID ANY INTEREST. HE, THEREFORE, PLEADED FOR NOT M AKING ANY DISALLOWANCE FROM THE EXPENDITURE OF THE TAXABLE INCOME. ALTERNATIVELY, HE PLEADED THAT IN CASE THE DISALLOWANCE IS TO BE MADE U/S. 14A R.W. RULE 8D THEN THE SAME SHOULD BE TO THE EXTENT OF RS.3,09,995/ - . THE ASSESSEE CONTESTED THE SAID DISALLO WANCE BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. NOWHERE, IT IS CONTROVERTED BEFORE US THAT THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR MAKING THE INVESTMENTS. IT IS ALSO NOT DISPUTED BEFORE US THAT NO EXPENDITURE IN RESPECT OF THE PORTFOLIO MANAGEMENT FEES (PMF) AND SECURITIES TRANSACTION TAX (STT) AND OTHER EXPENSES TO THE EXTENT OF RS.7,12,007/ - IS CLAIMED AS EXPENDITURE. THE ASSESSING OFFICER IS REQUIRED TO GIVE THE FINDING THAT TH E EXPENDITURE CLAIMED AGAINST THE TAXABLE INCOME COMPRISES THE ELEMENT OF THE EXPENDITURE WHICH HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME. ON THE PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW, WE FIND THAT MERELY BECAUSE THE ASSESSEE HAS EARNED THE EXEMPT INCOME IN THE FORM OF DIVIDEND , T HE ASSESSING OFFICER HAS MADE THE DISALLOWANCE. THE ASSESSEE'S CASE IS COVERED U/S. 14A(2) AT THE 3 ITA NO . 1766 /PN/2012, JAYANT AVINASH DAVE, PUNE FIRST INSTANCE AND HENCE, AT LEAST THE PRIMA - FACIE FINDING SHOULD HAVE BEEN GIVEN THAT THERE IS AN ELEMENT OF EXPENDI TURE CLAIMED AGAINST THE TAXABLE INCOME WHICH IS INCURRED FOR EARNING THE TAXABLE INCOME. AS PER THE FACTS ON RECORD, WE ARE OF THE OPINION THAT NO DISALLOWANCE IS REQUIRED TO BE MADE AS THE EXPENDITURE FOR TO EARN THE EXEMPT INCOME IS DIRECTLY DEBITED TO THE CAPITAL ACCOUNT. WE, ACCORDINGLY, ALLOW THE GROUND NO. 1 AND DELETE THE ADDITION. 4. SO FAR AS GROUND NO. 2 IS CONCERNED WHICH IS IN RESPECT OF THE INTEREST CHARGED U/S. 234B. BOTH THE PARTIES AGREED THAT THIS ISSUE MAY BE REMITTED TO THE FI LE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. WE, ACCORDINGLY, REMIT THE ISSUE OF INTEREST U/S. 234B TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME DE NOVO AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, G ROUND NO. 2 IS ALLOWED FOR THE STATISTICAL PURPOSES. 5. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21 - 03 - 201 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTAN T MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 21 ST MARCH, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I , PUNE 4 THE CIT - I , PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE