M/S. WINE NOOK DEALERS PVT. LTD, MUMBAI V. ACIT CEN CIR 8(2), MUMBAI

ITA 2200/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4064 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 2200 / MUM . /2018 ( ASSESSMENT YEAR : 20 12 13 ) M/S. WINE NOOK DEALERS PVT. LTD. SHOP NO.2, NEELAM CO OPERATIVE HOUSING SOCIETY, PLOT NO.242 SECTOR 5, CHARKOPKHANDIWALI (W) MUMBAI 400 067 PAN AAACW3969K . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8(2) , MUMBAI . RESPONDENT ASSESSEEBY : SHRI ROHIT GOLECHA REVENUE BY: SHRI CHAUDHARY ARUNKUMAR SINGH DATE OF HEARING 01.08.2019 DATE OF ORDER 16.08.2019 O R D E R PER SAKTIJIT DEY. J.M. CAPTIONED APPEAL BY THE ASSESSEE ARIS ES OUT OF ORDER DATED 28 TH FEBRUARY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 50, MUMBAI, FOR THE ASSESSMENT YEAR 2012 13. 2 . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE DISALLOWANCE MADE UNDER SECTION 14A R/W RULE 8D. 2 M/S. WINE NOOK DEALERS PVT. LTD. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN LIQUOR BUSINESS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 24 TH SEPTEMBER 2012,DECLARING TOTAL INCOME AT ` 1,59,92,510. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED EXEMPT INCOME OF ` 1,05,000, WHEREAS, THE ASSESSEE WAS HAVING INVESTMENTS WORTH ` 3,25,60,000. NOTICING THE AFORESAID FACT, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE OF EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME SHOULD NOT BE MADE UNDER SECTION 14A R/W RULE 8D. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE INVESTMENTS WERE MADE LONG BACK AND THERE WAS NO FRESH INVESTMENT MADE DURING THE YEAR, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE AS THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE AFORESAID SUBMISSIONS OF THE ASSESSEE. ACCORDINGLY, HE PROCEEDED TO DISALLOW AN AMOUNT OF ` 9,96,643, COMPRISING OF INTEREST EXPE NDITURE UNDER RULE 8D(2)(II) AMOUNTING TO ` 8,33,843, AND ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III) AMOUNTING TO ` 1,62,800. THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED 3 M/S. WINE NOOK DEALERS PVT. LTD. COMMISSIONER (APPEALS) DID NOT FIND MERIT IN THEM, HENCE, SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4 . BEFORE US, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , OUT OF THE AMOUNT OF ` 1,05,000, CONSIDERED AS THE EXEMPT INCOME EARNED BY THE ASSESSEE, AN AMOUNT OF ` 30,000, ACTUALLY REPRESENTS EXEMPT INCOME BY WAY OF DIVIDEND. THUS, HE SUBMITTED , THE BALANCE AMOUNT OF ` 7 5 ,000, WAS NOT IN THE NATURE OF EXEMPT INCOME AND THE ASSESSEE HAS OFFERED IT TO TAX. WITHOUT PREJUDICE , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A R/W RULE 8D CANNOT EXCEED THE EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. THUS, HE SUBMITTED , THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D SHOU LD BE RESTRICTED TO THE EXEMPT INCOME EARNED DURING THE YEAR. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS). 6 . HAVING CONSIDERED RIVAL SUBMISSIONS AND ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE FIND MERIT IN THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE THAT THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A R/W RULE 8D CANNOT EXCEED THE QUANTUM OF EXEMPT INCOME EARNED DURING THE YEAR. EVEN , THIS IS THE VIEW EXPRESSED IN VARIOUS JUDICIAL PRECEDENTS. ACCORDINGLY, WE DIRECT THE 4 M/S. WINE NOOK DEALERS PVT. LTD. ASSESSING OFFICER TO VERIFY THE QUANTUM OF EXEMPT INCOME ACTUALLY EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND RESTRICT THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D TO THE EXTENT OF THE EXEMPT INCO ME EARNED DURING THE YEAR. WITH THE AFORESAID OBSERVATIONS, THE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 16.08. 2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 16.08.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI