Kirloskar Proprietary Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 14, Pune

ITA 2244/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6280 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 26-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P U N A Y; DEEPAK GARG ITA NO S
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201; 13; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI LALIET KUMAR , JM . / I TA NO. 2243 /PUN/20 17 / ASSESSMENT YEAR : 2012 - 13 KIRLOSKAR PROPRIETARY LTD. 13A, KIRLOSKAR KISAN COMPOUND, KARVE ROAD, S. NO.52/1, KOTHRUD, PUNE - 411 038. PAN : AAACK7506Q ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 14, PUNE / RESPONDENT . / ITA NO . 2244/PUN/2017 / ASSESSMENT YEAR : 2013 - 14 KIRLOSKAR PROPRIETARY LTD. 13A, KIRLOSKAR KISAN COMPOUND, KARVE ROAD, S. NO.52/1, KOTHRUD, PUNE - 411 038. PAN : AAACK7506Q ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 14, PUNE / RESPONDENT A SSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI DEEPAK GARG 2 ITA NO S . 2243 & 2244 /PUN/20 17 A.Y S . 2012 - 13 & 2013 - 14 / DATE OF HEARING : 11 .0 2 .2020 / DATE OF PRONOUNCEMENT : 11 .02 .2020 / ORDER PER LALIET KUMAR, JM : THESE TWO APPEALS PREFERRED BY THE COMMON ASSESSEE EMANATES FROM THE DIFFERENT ORDERS OF THE LD.CIT(APPEALS) - 7, PUNE DATED 15.06.2017 & 29.05.2017 FOR THE ASSESSMENT YEARS 2012 - 13 & 2013 - 14 RESPECTIVELY AS PER THE FOLLOWING COMMON GROUND OF APPEAL ON RECORD: 1. DISALLOWANCE OF EXPENSES U/S.14A. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.3,64,806/ - U/S.14A ON THE GROUND THAT THE ASSESSEE HAS NOT SHOWN ANY EXPENSE TOWARDS EARNING OF EXEMPT INCOME. HE FAILED TO APPRECIATE THE FACT THAT THE COMPANY H AD INVESTED IN THE MUTUAL FUNDS AND ANY COST INCURRED BY THE MUTUAL FUND AGENCY WAS RECOVERED BY THEM DIRECTLY AT THE TIME OF INVESTMENT OR REDEMPTION AS THE CASE MAY BE BY INCREASING OR REDUCING THE NAV WHICH WAS DIRECTLY ADJUSTED AGAINST THE PURCHASE OR SALE PRICE OF MUTUAL FUND UNITS BY THE COMPANY AND THE SAME IS NOT DEBITED TO BOOKS OF ACCOUNT. HE FURTHER FAILED TO APPRECIATE THE FACT THAT IN THE ASSESSEES OWN CASE IN AY 2010 - 11, THE HONBLE ITAT BENCH B PUNE HAD RESTRICTED THE DISALLOWANCE TO RS.75 ,000/ - . 2. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 2. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION AT PARA 9 TO THE DECISION OF CO - ORDINATE BENCH OF THE T RIBUNAL, PUNE IN ASSESSEE S OWN CASE FOR A.Y. 2010 - 11 IN ITA NO.548/PN/2014 TO THE FOLLOWING EFFECT: 9. DISALLOWANCES U/S. 14A : THE ASSESSING OFFICER HAS MADE DISALLOWANCES OF RS.5,63,520/ - U/S. 14A R.W . RULE 8D ON ACCOUNT OF ADMINISTRATIVE EXPENSES INCURRED ON INVESTMENTS. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS MADE INVESTMENT IN MUTUAL FUNDS ALONE. TO SUBSTANTIATE HIS CONTENTIONS THE ASSESSEE HAS PLACED ON RECORD ACCOUNT STATEMENTS OF VARIOUS MUTUAL FUNDS AT PAGES 3 TO 30 OF THE PAPER BOOK. ADMITTEDLY, THE ASSESSEE HAS NOT MADE ANY DISALLOWANCES 3 ITA NO S . 2243 & 2244 /PUN/20 17 A.Y S . 2012 - 13 & 2013 - 14 IN RESPECT OF INTEREST FREE INCOME EARNED ON INVESTMENT MADE. THE CONTENTION OF LD. AR IS THAT IN ALL MUTUAL FUNDS WHERE THE ASSESSEE HAS MADE INVESTMENT, DIVIDEND IS REINVESTED IN THE SCHEME. IT HAS BEEN FURTHER CONTENDED THAT MUTUAL FUND AGENCIES RECOVER THE EXPENDITURE FOR MANAGING PORTFOLIO AT THE TIME OF INVESTMENT OR REDEMPTION AS THE CASE MAY BE AND ACCORDINGLY ADJUST NAV OF UNITS PURCHASE D. THE FACT THAT THE ASSESSEE HAS INVESTED IN MUTUAL FUNDS WHERE THE DIVIDEND INCOME IS REINVESTED IN THE SCHEME HAS NOT BEEN DISPUTED BY THE DEPARTMENT. AFTER CONSIDERING THE TOTALITY OF THE FACTS WE ARE OF THE VIEW THAT THE ASSESSEE MUST HAVE BEEN INCURR ING SOME ADMINISTRATIVE COST IN MANAGING THE MUTUAL FUNDS. THEREFORE, TO MEET T HE ENDS OF JUSTICE WE DISALLOW RS. 75,000/ - U/S. 14A OF THE ACT AS EXPENDITURE TOWARDS EARNING OF INTEREST FREE INCOME. ACCORDINGLY, GROUND NO. 1 RAISED IN THE APPEAL BY THE ASSE SSEE IS PARTLY ACCEPTED. 2.1 THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THERE IS NO CHANGE IN FACTS EXCEPT THE ASSESSMENT YEARS I.E. A.YS.2012 - 13 & 2013 - 14. DURING THE ASSESSMENT YEARS UNDER CONSIDERATION, IN A.Y. 201 2 - 13, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.45,83,084/ - AGAINST WHICH THE ASSESSING OFFICER HAD MADE DISALLOWANCE OF RS.3,64,806/ - . SIMILARLY FOR THE ASSESSMENT YEAR 2013 - 14, THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.34,42,223/ - AGAINST WHICH THE ASSESSING OFFICER HAS MADE D ISALLOWANCE OF RS.2,02,385/ - BY INVOKING RULE 8D(2)(III). 3. THE LD. DR RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(APPEALS) AND SUBMITTED THAT PROVISIONS OF RULE 8D(2)(III) ARE REQUIRED TO BE APPLIED IN THE CASES OF THE ASSESS EE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN ASSESSEES OWN CASE (SUPRA.) HAS RESTRICTED THE DISALLOWANCE AND RESPECTFULLY FOLLOWING THE SAME REASONING, FO R THE ASSESSMENT YEAR 2012 - 13, DISALLOWANCE IS RESTRICTED TO RS.1,50,000/ - AND FOR THE ASSESSMENT YEAR 2013 - 14, DISALLOWANCE IS RESTRICTED TO RS.1,25,000/ - . WE ORDER ACCORDINGLY. 4 ITA NO S . 2243 & 2244 /PUN/20 17 A.Y S . 2012 - 13 & 2013 - 14 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRO NOUNCED ON 11 TH DAY OF FEBRUARY , 20 20 . SD/ - SD/ - D. KARUNAKARA RAO LALIET KUMAR ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 11 TH FEBRUARY , 2020. SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 7, PUNE. 4. THE CIT - 6, PUNE. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 5 ITA NO S . 2243 & 2244 /PUN/20 17 A.Y S . 2012 - 13 & 2013 - 14 DATE 1 DRAFT DICTATED ON 1 1 .02 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1 1 . 0 2 .20 20 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER