DILIGENT INVESTMENT LTD, MUMBAI V. ITO 3(1)2, MUMBAI

ITA 2224/MUM/2013

• Counselvise Citation: 222419914 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Depreciation; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER. ITA. NO. 2224/MUM/2013 (ASSESSMENT YEAR:2009-10) M/S. DILIGENT INVESTMENT LTD., 155, MAKER TOWER J. CUFF PARAD, MUMBAI - 20 APPELLANT VS. THE INCOME TAX OFFICER 3(1)(2), MUMBAI RESPONDENT PAN: AAACD3772F /BY APPELLANT : SHRI MAHAVEER JAIN, A.R. /BY RESPONDENT :SHRI JEETENDRA KUMAR, D.R. /DATE OF HEARING :21.09.2015 /DATE OF PRONOUNCEMENT :24.09.2015 ORDER PER ASHWANI TANEJA, A.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-6, MUMBAI, DATED 12.02.2013 FOR A.Y. 2009-10 PASSED AGAINST TH E ASSESSMENT ORDER U/S.143(3) DATED 29.12.2011. ITA NO.2224/MUM/13 A.Y. 09-10 [M/S. DILIGENT INVEST MENT LTD. VS. ITO] PAGE 2 2. FOLLOWING GROUNDS RAISED BY THE ASSESSEE ALONG W ITH THE APPEAL MEMO: THE APPELLANT OBJECTS TO THE ASSESSMENT ORDER DATE D 12-02-2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL) - 6 AND THE LD. CIT (A) ERRED IN UPHOLDING THE ASSESSING OFFICER'S ORDER ON THE FOLLOWING GROUNDS :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONSIDERING THE COMPENSATION RECEIVED AS INCOME FRO M HOUSE PROPERTY IN PLACE OF INCOME FROM BUSINESS AND NOT A LLOWING THE EXPENSES INCURRED ON RUNNING AND MAINTENANCE OF THE PREMISES OF RS. 47,37,333/- AND DEPRECIATION OF RS. 22,85,64 5/-. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN ADDING RS.5,67,880 U/S14A OF IT ACT READ WITH RULE 8D. 3. EACH ONE OF THE ABOVE GROUNDS OF APPEALS IS WITH OUT PREJUDICE TO THE OTHER. 4. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO THE ABOVE GROUNDS OF APPEAL. 3. GROUND NO.1 IS NOT PRESSED BY THE ASSESSEE AND I S DISMISSED. 4. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.5,67,880/- MADE BY THE ASSESSING OFFICER U/S.14A OF INCOME TAX ACT, 1961 R .W. RULE 8D. 5. DURING THE COURSE OF ASSESSMENT PROCEEDING, IT W AS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE COMPANY HAD SHOWN INCOME OF RS.72,727/- FROM DIVIDEND WHICH DOES NOT FORM PART OF TOTAL INCOME. ACCORDINGLY, THE ASSESSING OFFICER G AVE NOTICE TO THE ASSESSEE FOR MAKING DISALLOWANCE U/S.14A WITH R ESPECT TO THE EXPENDITURE INCURRED ON EARNING THIS INCOME. IN RE SPONSE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS ENG AGED IN THE ITA NO.2224/MUM/13 A.Y. 09-10 [M/S. DILIGENT INVEST MENT LTD. VS. ITO] PAGE 3 BUSINESS OF SHARE TRADING, FINANCING, BILL DISCOUNT ING AND MAINTENANCE OF PROPERTIES. THE DIVIDEND EARNED BY THE ASSESSEE COMPANY IS OUT OF INVESTMENT MADE FROM ITS OWN FUND S AND THE COMPANY HAS NOT PAID ANY EXPENSES FOR THE SAME AND THEREFORE, THERE WAS NO REASON FOR MAKING DISALLOWANCE U/S.14A . ALTERNATIVELY, IT WAS SUBMITTED BY THE ASSESSEE THA T AT MOST RS.7,500/- AS PROPORTIONATE EXPENSES (0.5% OF THE T OTAL EXPENDITURE) CAN BE CONSIDERED AS AN AMOUNT TO BE D ISALLOWED U/S.14A. BUT THE ASSESSING OFFICER DID NOT AGREE W ITH THE SUBMISSIONS OF THE ASSESSEE AND A SUM OF RS.5,67,88 0/- WAS DISALLOWED BEING 0.5% OF THE AVERAGE INVESTMENT, AP PLYING RULE 8D. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ). BUT, LD. CIT(A) ALSO DID NOT ACCEPT THE SUBMISSIONS OF THE A SSESSEE AND DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS CONF IRMED. 7. BEFORE US, LD. COUNSEL HAS SUBMITTED THAT NO EXP ENSES HAVE BEEN INCURRED BY THE ASSESSEE ON EARNING OF THIS DI VIDEND INCOME. HE HAS MADE ALTERNATIVE PRAYER THAT IF AT ALL SOME DISALLOWANCE WAS TO BE MADE, IT COULD NOT HAVE EXCE EDED THE AMOUNT OF DIVIDEND INCOME EARNED BY THE ASSESSEE DU RING THE YEAR UNDER CONSIDERATION OF RS.72,727/-. IN SUPPOR T OF HIS ARGUMENT, HE HAS RELIED UPON LATEST JUDGMENT OF HON BLE DELHI HIGH COURT IN THE CASE OF CHEM INVEST LTD. VS. CIT [2015] 61 TAXMANN.COM 118 (DELHI) (ORDER DATED 02.09.2015), F OR THE PROPOSITION THAT NO DISALLOWANCE CAN BE MADE U/S.14 A IF NO INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE DURING THE YEAR. ITA NO.2224/MUM/13 A.Y. 09-10 [M/S. DILIGENT INVEST MENT LTD. VS. ITO] PAGE 4 8. LD. COUNSEL HAS PLACED FURTHER RELIANCE UPON THE FOLLOWING JUDGMENTS: 1. CIT VS. DEEPAK MITTAL (P&H HC) 361 ITR 131 2. DCIT VS. SUBRAMANYA CONSTRUCTION & DEVELOPMENT C O. LTD. (ITA NO. 404 OF 2013) (BANGLORE ITAT) 3. DAGA GLOBAL CHEMICALS P. LTD. VS. ACIT (ITA NO. 5592 OF 2012) (MUM ITAT) 4. CHUDGAR RANCHODLAL JETHALAL TRADE PVT. LTD. VS. DCIT (ITA NO.245/AHD/2013) (AHMEDABAD ITAT) 5. JOINT INVESTMENT P. LTD. VS. CIT (DELHI HC) (ITA NO.117 OF 2015) 6. ACIT VS. M. BASKARAN (CHENNAI ITAT) (ITA NO.1717 OF 2013) 7. CIT VS. DELITE ENTERPRISE (BOMBAY HC) (ITA NO.11 0 OF 2009) LD. COUNSEL HAS SUBMITTED THE COPIES OF JUDGMENTS A ND HAVE READ RELEVANT PARA OF THESE JUDGMENTS IN SUPPORT OF HIS ARGUMENTS. 9. ON THE OTHER HAND, LD. D.R. HAS SUPPORTED THE OR DER OF LOWER AUTHORITIES AND REQUESTED FOR UPHOLDING THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER. 10. WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH THE SIDES AND THE MATERIAL PLACED BEFORE US. IT IS NOT ED THAT HONBLE DELHI HIGH COURT IN CASE OF CHEM INVEST LTD. (SUPRA ) VIDE ORDER DATED 02.09.2015, HAS ANALYZED THIS ISSUE IN DETAIL . IT HAS BEEN HELD BY HONBLE HIGH COURT THAT THERE CAN BE NO DIS ALLOWANCE U/S.14A UNLESS THE INCOME IS RECEIVED BY THE ASSESS EE. IT HAS BEEN FURTHER NOTED BY US FROM THE FACTS OF THIS CAS E THAT NO BORROWED FUNDS HAVE BEEN USED BY THE ASSESSEE FOR M AKING INVESTMENT IN SHARES. IT IS FURTHER NOTED BY US TH AT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFF ICER IN THE ITA NO.2224/MUM/13 A.Y. 09-10 [M/S. DILIGENT INVEST MENT LTD. VS. ITO] PAGE 5 ASSESSMENT ORDER THAT ASSESSEE HAS INCURRED EXPENDI TURE ON EARNING EXEMPT INCOME WHICH ARE MORE THAN THE AMOUN T OF DISALLOWANCE OFFERED BY THE ASSESSEE. THUS, KEEPIN G IN MIND THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , IN OUR CONSIDERED VIEW THE DISALLOWANCE MADE U/S.14A IS RE STRICTED TO THE AMOUNT OF INCOME OF RS.72,727/- RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN HOLDING SO , WE TAKE HELP FROM THE DECISION OF DAGA GLOBAL CHEMICALS PVT. LTD . (SUPRA). THUS, THE ASSESSEE GETS PART RELIEF TO THIS EXTENT. 11. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED PAR TLY. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED 24/09/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE !# / ASSESSEE $ %&%'( ) / CONCERNED CIT * )+ / CIT (A) ,-./00'(1 '( 12 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / #8 1 9: ;% 1 '( 12 %&<