DARASHAW KEKI MEHTA, MUMBAI V. DCIT RG 2(1), MUMBAI

ITA 2280/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3268 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO.2280/MUM/2014 (ASSESSMENT YEAR: 2010 - 2011 ) SHRI DARASHAW KEKI MEHTA, FLAT NO.3, 1 ST FLOOR, RAJESH MANSION, SIR DINSHAW VACHHA ROAD, CHURCHGATE, MUMBAI 400 020. / VS. DCIT, RANGE 2(1), MUMBAI. ./ PAN : AACPM1850C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MR. RYAN SALDANHA / RESPONDENT BY : SHRI. B.S. BIST, DR / DATE OF HEARING : 12.01.2016 / DATE OF PRONOUNCEMENT : 29 .01.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 4.4.2014 IS AGAINST THE ORDER OF THE CIT (A) - 4, MUMBAI DATED 10.2.2014 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WHEREBY PROVISION OF SECTION 14A HAVE BEEN INVOKED AND DISALLOWANCE HAS BEEN MADE AS PER THE RULE 8D WITHOUT APPRECIATING THAT NO EXPENDITURE DIRECTLY OR INDIRECTLY HAS BEEN IN CURRED FOR EARNING EXEMPT INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING DISALLOWANCE U/S 14A EVEN ON DEBT SECURITIES WHICH GENERATES ONLY TAXABLE INCOME, THEREBY, MADE HIGHER DISALLOWANCE. 2. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE ACT. IN THIS REGARD, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 6,24,738/ - UNDER CLAUSE (III) OF RULE 8D(2) OF IT RULES, 1962 IE 0.5% OF THE AVERAGE INVESTMENT. IN OUR OPINION, SUCH DISALLOWANCE IS UNFAIR. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE 2 BROUGHT OUR ATTENTION TO PAGE 9 OF THE PAPER BOOK AND SUBMITTED THAT THE TOTAL EXPENDITURE DEBITED TO THE P & L ACCOUNT ON ACCOUNT OF COMMON ACCOUNT WORKS OUT TO ONLY RS. 86,949/ - . HE FURTHER SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO HAS EXCEEDED THE TOTAL DEBIT IN THE P & L ACCOUNT, WHICH SHOULD BE THE SUBJECT MATTER OF DISALLOWANCE. BRINGING OUR ATT ENTION TO VARIOUS DECISIONS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE, IF ANY, UNDER THE SPECIAL PROVISIONS MUST NOT EXCEED THE TOTAL DEBITS CREDITED TO THE P & L ACCOUNT. THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. JAYSHR EE PETROCHEMICALS PVT LTD IN ITA NO.7292/M/2011 (AY 2008 - 2009), DATED 29.11.2013 AND THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF GILLETTE GROUP INDIA (P) LTD VS. ACIT [2012] 22 TAXMANN.COM 61 (DELHI) ARE SOME OF THE DECISIONS CITED BY THE LD COUNS EL FOR THE ASSESSEE. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE DECISIONS CITED BY THE LD COUNSEL FOR THE ASSESSEE. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CITED DECISION OF THE TRIBUNAL (SUPRA), WE FIND THE ORDER OF THE ITAT, DELHI BENCH IN THE CASA OF GILLETTE GROUP INDIA (SUPRA) IS RELEVANT FOR THE PROPOSITION THAT DISALLOWANCE UNDER 14A CANNOT EXCEED EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. IN THIS REGARD, WE FIND PARA 6 OF T HE SAID TRIBUNALS ORDER IS RELEVANT AND THE SAME IS EXTRACTED AS UN DER FOR THE SAKE OF COMPLETENESS OF THIS ORDER: 6. FROM THE ABOVE, IT IS EVIDENT THAT AS PER THE SUB - SECTION (1) OF SECTION 14A, NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF EXPENDITURE IN CURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. SUB - SECTION (2) OF SECTION 14A PROVIDES THE PROCEDURE FOR DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER. THE BOARD HAS ALSO PRESCRIBED RULE 8D FOR DETERMI NING THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. THUS, THE DISALLOWANCE CAN BE MADE UNDER SUB - SECTION (1) FOR THE EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME. IN THE CASE UNDER APPEAL BEFORE US, FROM THE PERUSAL OF THE AS SESSEES PROFIT & LOSS ACCOUNT, IT IS EVIDENT THAT THE TOTAL EXPENDITURE INCURRED WAS RS. 49,04,028/ - ONLY. THUS, THE ASSESSEE CLAIMED THE DEDUCTION FOR THE EXPENDITURE OF RS. 49,04,028/ - WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE DISALLOWANCE CA NNOT EXCEED THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. WE, THEREFORE, ACCEPT THE ASSESSEES CONTENTION THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD CIT (A) IN EXCESS OF TOTAL EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT WAS UNAD JUSTED. ACCORDINGLY, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE IE RS. 49,04,028/ - . 4. SIMILAR PROPOSITION WAS ADOPTED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. JAYSHREE PETROCHEMICALS PVT LT D (SUPRA), WHEREIN ONE OF US (AM) IS A 3 PARTY TO THE SAID ORDER. WHILE ADJUDICATE THE IDENTICAL ISSUE, ITAT MUMBAI HAS EXTRACTED THE ABOVE SAID PARA 6 OF THE DELHI BENCH OF THE TRIBUNALS ORDER IN THE CASE OF GILLETTE GROUP INDIA (P) LTD (SUPRA). PARA 6 OF THE TRIBUNALS ORDER IN THE CASE OF M/S. JAYSHREE PETROCHEMICALS PVT LTD (SUPRA) IS RELEVANT IN THIS REGARD. CONSIDERING THE SETTLED LEGAL PROPOSITION THAT THE DISALLOWANCE UNDER SECTION 14A CANNOT EXCEED EXPENDITURE ACTUALLY CLAIMED BY ASSESSEE, AS WELL AS RESPECTFULLY FOLLOWING THE CITED DECISIONS OF THE TRIBUNAL, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF THE AO FOR QUANTIFYING THE DISALLOWANCE IN THE LIGHT OF THE ABOVE CITED BINDING DECISIONS OF THE TRIBUNAL. WE O RDER ACCORDINGLY. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN T HE OPEN CO URT ON 2 9 T H JANUARY, 2016. S D / - S D / - ( SANDEEP GOSAIN ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 9 .1.2016 . . ./ 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