ASHITA PAREKH, MUMBAI V. ITO 12(1)(2), MUMBAI

ITA 2301/MUM/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7407 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2301/MUM/2014 (ASSESSMENT YEAR 200 9-10 ) MRS. ASHITA PAREKH, 608, DALAMAL HOUSE, NARIMAN POINT, MUMBAI-400023. PAN: AITPP7843J VS. ITO 12(1)(2) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. APPELLANT RESPONDENT APPELLANT BY : SHRI NEELKANTH KHANDELWAL (AR) RESPONDENT BY : SHRI RAJESH KUMAR YADAV (DR) DATE OF HEARING : 01.05.2018 DATE OF PRONOUNCEMEN T : 01.05.2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; 1. THE INSTANT APPEAL BY ASSESSEE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMM ISSIONER OF INCOME-TAX (APPEALS)-23 [LD. CIT(A)], MUMBAI DATED 10.02.2014 FOR ASSESSMENT YEAR 2009-10. THE SOLE GROUND OF APPEAL RAISED BY A SSESSEE RELATES TO ADDITION UNDER SECTION 14A. 2. BRIEF FACTS OF THE CASE ARE THAT THE DURING THE ASS ESSMENT, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD SHOWN DIVIDEND OF R S. 5,01,708/- WHICH IS CLAIMED EXEMPT UNDER SECTION 10(34) OF THE ACT. THE ASSESSEE HAS SHOWN INVESTMENT AT RS. 18,51,50,412/- DURING THE RELEVAN T FINANCIAL YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE UNDER SECTION 14A BE NOT MADE. NO EXPLANATION WAS OFFERED BY ASSESSEE. THEREFORE, THE ASSESSING OFFICER INVOKED THE PROVIS ION OF RULE 8D AND ITA NO.2301/M/14- MRS. ASHITA PAREKH 2 MADE THE DISALLOWANCE OF RS. 54,01,560/-. THE DISAL LOWANCE WORKED OUT UNDER RULE8D2 CONSIST OF RS.15,73,812/- UNDER RULE8 D2(I) AND RS.31,43,705 UNDER RULE 8D2(III). HOWEVER, NO INTER EST EXPENSES UNDER RULE 8D2(II) WAS MADE. ON APPEAL BEFORE THE LD. CI T(A), THE LD CIT(A) DIRECTED THAT DISALLOWANCE UNDER RULE 8D(2)(I), TO DISALLOW ONLY THE DIRECT EXPENSES INCURRED IN RELATION TO INCOME WHICH DOES NOT FIRM PART OF TOTAL INCOME OF ASSESSEE. THE LD. CIT(A) DIRECTED THAT TH E DIRECT EXPENSES ON ACCOUNT OF STT TRANSACTION CHARGES, DEMAT CHARGES I N RELATION TO THE TRADING ACTIVITIES OF THE ASSESSEE SHOULD NOT FIRM PART OF DISALLOWANCE UNDER RULE 8D2(I). THE OTHER DISALLOWANCE UNDER RUL E 8D(2)(I) AND 8D(2)(III) WAS UPHELD. THEREFORE, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE US. 3. WE HAVE HEARD THE LD AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AND ALSO PERUSED THE RECORD CAREFULLY. THE LD. AR OF THE ASSESSEE SU BMITS THAT A VERY SHORT POINT RELATED TO THE DISALLOWANCE UNDER SECTION 114 A IS INVOLVED IN THE PRESENT APPEAL. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE ASSESSEE EARNED THE EXEMPT INCOME OF RS. 5,01,708/- AND THE ASSESSING OFFICER DISALLOWED RS.54,01,560/-UNDER SECTION 14A R.W. RUL E 8D. THE LD AR FOR THE ASSESSEE PRAYED THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO THE EXEMPT INCOME. IN SUPPORT OF ITS SUBMISSION, THE LD . AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE DELHI HIGH COUR T IN CASE OF JOINT ITA NO.2301/M/14- MRS. ASHITA PAREKH 3 INVESTMENTS (P) LTD. VS. CIT 372 ITR 694 (DEL). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE VEHEMENTLY SUPPORTED THE ORDER O F AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THERE IS N O DISPUTE THAT ASSESSEE EARNED EXEMPT INCOME OF RS. 5,01,708/-. THE ASSESSI NG OFFICER MADE THE DISALLOWANCE OF RS. 54,01,560/-. THE LD. CIT(A) DIR ECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE ONLY TO THE EX TENT OF DIRECT EXPENSES IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME AND FURTHER DIRECTED THAT DIRECT EXPENSES ON ACCOUNT OF STT, TR ANSACTION CHARGES, AND DMAT CHARGES IN RELATION TO TRADING ACTIVITIES OF T HE ASSESSEE SHOULD NOT FORM PART OF DISALLOWANCE UNDER RULE 8D(2)(I). 5. THE HONBLE DELHI HIGH COURT IN JOINT INVESTMENTS (P.) LTD. (SUPRA) HELD THAT BY NO STRETCH OF IMAGINATION CAN SECTION 14A O R RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMP T INCOME IS TO BE DISALLOWED. THE WINDOW OF DISALLOWANCE INDICATED IN SECTION 14A IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED B Y ASSESSEE IN RELATION TO EXEMPT INCOME, THEREFORE, THE PORTION OF TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT OF EXEMPT INCOME. THEREFO RE, CONSIDERING THE FACT THAT THE ASSESSEE HAS EARNED INCOME OF RS.5,01 ,708/- AND THE ASSESSING OFFICER HAS DISALLOWED RS.54,01,560/-, WE DIRECT TH E AO TO RESTRICT THE DISALLOWANCE UNDER 14A R.W. RULE 8D TO THE EXTENT O F EXEMPT INCOME (RS.5,01,560/-). ITA NO.2301/M/14- MRS. ASHITA PAREKH 4 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.05.2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 01.05.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI