SHRI SHRENIK NALIN ZAVERI, MUMBAI V. ACIT-19(3), MUMBAI

ITA 2319/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4057 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2013-2014
• Appeal Filed On: 13-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: PRAVIN K CHHEDA
• 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. PRAHDN, ACCOUNTANT MEMBER ITA NO. 2319 / MUM . /2018 ( ASSESSMENT YEAR : 20 13 14 ) SHRI SHRENIKNALIU ZAVERI 54, DREMLAND BUILDING M.P. MARG, OPERA HOUSE MUMBAI 400 004 PAN AAAPZ1721B . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 19(3), MUMBAI . RESPONDENT ASSESSEE BY : SHRI PRAVIN K. CHHEDA REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH DATE OF HEARING 31.07.2019 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 14 TH FEBRUARY 2018 , PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 30 , MUMBAI, FOR THE ASSESSMENT YEAR 2013 14. 2 . THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO THE DISALLOWANCE OF ` 3,40,419, MADE UNDER SECTION 14A R/W RULE 8D. 2 SHRI SHRENIKNALIU ZAVERI 3 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE FILED HIS RETURN OF INCOM E ON 17 TH SEPTEMBER 2013, DECLARING TOTAL INCOME OF ` 67,86,280. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED EXEMPT INCOME OF ` 25,98,520, WHEREAS , THE ASSESSEE HA S NOT DISALLOWED ANY EXPENDITURE INCURRED FOR EARNING SUCH EXEMPT INCOME. BEING OF THE VIEW THAT THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE FOR EARNING EXEMPT INCOME, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 3,40,469, UNDER RULE 8D(2)(II I ). 4 . THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, HE DID NOT INTERFERE. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE DISALLOWANCE UNDER SECTION 14A IS NOT AUTOMATIC. THE ASSESSING OFFICER MUST RECOR D A SATISFACTION THAT ASSESSEES CLAIM THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME IS NOT CORRECT HAVING REGARD TO THE BOOKS OF ACCOUNT. HE SUBMITTED , UNLESS THE ASSESSING OFFICER ESTABLISHE S A NEXUS BETWEEN THE EXEMPT INCOME AND EXPENDITURE, NO DISALLOWANCE CAN BE MADE. HE SUBMITTED , THE EXPENDITURE INCURRED BY THE ASSESSEE IS SHOWN IN THE CAPITAL ACCOUNT AND IT WAS NOT CLAIMED AS DEDUCTION FROM SHORT TERM CAPITAL GAIN. FURTHER, HE SUBMITTED , ASSESSEE HAS NOT BORROWED ANY FUND F O R ITS 3 SHRI SHRENIKNALIU ZAVERI INVESTMENT ACTIVITIES, THEREFORE, THERE IS NO INTEREST EXPENDITURE. THUS, HE SUBMITTED , IN SUCH CIRCUMSTANCES, NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS O F THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS PER THE PROVISION OF SECTION 14A(3) R/W SUB SECTION (2), EVEN IN A CASE WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE W AS INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME , STILL , THE PROVISION OF SUB SECTION ( 2 ) WILL APPLY AND DISALLOWANCE OF EXPENDITURE CAN BE MADE. FURTHER, FROM THE COMPUTATION OF DISALLOWANCE UNDER SECTION 14A, IT IS OB SERVED THAT THE ASSESSING OFFICER HAS NOT DISALLOWED ANY INTEREST EXPENDITURE AND HAS ONLY DISALLOWED ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), THEREFORE, THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE IS IMMATERIAL. HOWEVE R, WHILE COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)((III), THE ASSESSING OFFICER CAN ONLY CONSIDER THOSE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME DURING THE YEAR. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO FACTUALLY VERIFY THE AFORESAID ASPECT AND COMPUT E DISALLOWANCE UNDER RULE 8D(2)(III) BY TAKING INTO ACCOUNT ONLY SUCH INVESTMENT S WHICH HAVE YIELDED EXEMPT 4 SHRI SHRENIKNALIU ZAVERI INCOME DURING THE YEAR. GROUNDS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL IS PARTLY 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