DCIT CEN CIR 8(3), MUMBAI V. VRINDAVAN SERVICES P.LTD, MUMBAI

ITA 234/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2320 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPKANT PRASHANT
• Keywords: Earning of tax free income

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA , AM ./ I.T.A. NO. 234/MUM/2015 ( / ASSESS MENT YEAR: 2010 - 11 ) DY. CIT, CENTRAL CIRCLE 8(3) (ERSTWHILE DCIT, CC - 46) , R. NO. 659, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 0 20 / VS. VRINDAVAN SERVICES PVT. LTD. 54A, JINDAL MANSION, DR. G. DESHMUKH MARG, MUMBAI - 400 026 . / ./ PAN/GIR NO. AAACV 8987 V ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DEEPKANT PRASHANT / RESPONDENT BY : NONE / DATE OF HEARING : 16.11.2015 DATE OF ORDER : 0 4 .12 .2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 36 , MUMBAI (CIT(A) FOR SHORT) DATED 13.10.2014 , PARTLY ALLOWING THE A SSESSEES AP PEAL CONTESTING ITS ASSESSMENT U/S.143(3) R/W S. 153C OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 28.3.2013 . 2 ITA NO. 234/ MUM/ 2015 (A.Y. 2010 - 11) DY. CIT VS. VRINDAVAN SERVICES PVT. LTD. 2. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE - RESPONDENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING, NOR EVEN AN Y ADJOURNMENT MOTION STANDS MOVED. THIS , DESPITE THE DATE OF HEARING BEING COMMUNICATED TO THE ASSESSEES COUNSEL, SHRI RISHABH S HAH , CA ON THE LAST DATE OF HEARING, I.E., 04.11.2015 . IT WAS ACCORDINGLY CONSIDERED PROPER THAT THE HEARING IN THE MATTER BE PROCEEDED WITH, DECI DING THE INSTANT APPEAL AFTER HEARING THE APPELLANT, TAKING THE MATERIAL ON RECORD INTO ACCOUNT . 3. THE ONLY ISSUE ARISING PER THE APPEAL IS THE QUANTUM OF DISALLOWANCE EXIGIBLE U/S.14A OF THE ACT. T HE FACTS , TO THE EXTENT RELEVANT , ARE THAT THE ASSESSEE , PER ITS RETURN FILED IN RESPONSE TO NOTICE U/S.153C , REVISED THE DISALLOWANCE U/S.14A MADE IN RESPECT OF ITS EXEMPT DIVIDEND INCOME OF RS.166.34 LACS TO RS.42,62,962/ - , AS AGAINST THE DISALLOWANCE O F RS.1,09,56,131/ - EFFECTED PER THE ORIGINAL RETURN. THE ASSESSING OFFICER (A.O.) RESTORED THE DISALLOWANCE TO THAT MADE EARLIER ON THE GROUND THAT NO SATISFACTORY JUSTIFICATION HAD BEEN GIVEN FOR THE SAID RE DUCTION. IN APPEAL, IT WAS EXPLAINED BY THE AS SESSEE THAT THE WORKING OF THE DISALL OWANCE WAS IN TERMS OF RULE 8D OF THE INCOME TAX RULES, 1962 ( THE RULES HEREINAFTER). THERE WAS IN FACT NO DIFFERENCE BETWEEN THE FIRST AND THE SECOND WORKING (OF THE DISALLOWANCE) IN RESPECT OF THE AMOUNTS WORKED OUT UNDER R ULE 8D(2)(I) AND (II), I.E., QUA DIRECT EXPENDITURE AND INDIRECT, INTEREST EXPENDITURE RELATABLE TO THE EXEMPT INCOME /S . THE ONLY DIFFERENCE IS QUA THE INDIRECT , ADMINISTRATIVE EXPENDITURE, REFERABLE TO R ULE 8D(2)(III). THE SAME WAS INITIALLY WORKE D AT RS.77,74,965/ - , I.E., AT 0.5% OF THE AVERAGE VALUE OF THE INVESTMENTS (RS.155.50 LACS), WHILE PER THE SUBSEQUENT (S . 153C) RETURN WAS LIMITED TO THE ACTUAL ADMINISTRATIVE EXPENDITURE DEB I T ED TO THE PROFIT AND LOSS ACCOUNT. THE SAME FOUND FAVOUR WITH TH E LD. CIT(A), WHO HELD AS UNDER: 6.4 THE AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE U/S.14A APPLYING RULE 8D AND RESTRICTING THE DISALLOWANCE UNDER RULE 8D(III) TO THE ADMINISTRATIVE EXPENSES ACTUALLY CLAIMED IN P & L ACCOUNT. THE GROUND OF APPEAL IS A LLOWED. 3 ITA NO. 234/ MUM/ 2015 (A.Y. 2010 - 11) DY. CIT VS. VRINDAVAN SERVICES PVT. LTD. AGGRIEVED, THE REVENUE IS IN APPEAL. 4 . THE APPELLANT WAS HEARD , AND THE MATERIAL ON RECORD PERUSED. D URING HEARING , THE B ENCH EXAMINED THE ASSESSEES WORKING OF THE DISALLOWANCE UNDER R ULE 8D(2)(III) (PB PGS.28 - 29), AS ALSO THE PROFIT AND LO SS ACCOUNT (PB PG. 2), TO FIND THAT IT HAD INCLUDED THE ENTIRE ADMINISTRATIVE EXPENDITURE DEBITED T HEREIN IN COMPUTING THE DISALLOWANCE U/ R .8D(2)(III). THE LD. D EPARTMENTAL REPRESENTATIVE (D R ) COULD NOT D I SP U TE THE FACTS AND FIGURES. THE PROFIT AND LOSS AC COUNT ITSELF BEARS A TOTAL LOAD OF RS.10,81,795/ - , I.E., ON ACCOUNT OF INDIRECT , ADMINISTRATIVE EXPENDITURE. BY NO SUCH STRETCH OF IMAGINATION THE DISALLOWANCE U/S.14A COULD EXCEED THE SAID AMOUNT. RATHER, THE SAID EXPENDITURE COULD NOT , IN THE OR DINARY CO URSE OF EVENTS , BE SAID TO BE E N TIRE LY AGAINST THE TAX - EXEMPT INCOME, WHICH WOULD IMPLY THAT NO PART OF IT IS TOWARD THE ASSESSEES OTHER, REGULAR INCOME, WHICH IS ALSO SUBSTANTIAL. BE THAT AS IT MAY, IN VIEW OF THE DEEMING OF R ULE 8D(2)(III), THE SAID EXP ENDITURE BEING LOWER THAN THE STATUTORY ESTIMATE AT 0 .5% OF THE AVERAGE INVESTMENT, THE ASSESSEE HAS ADOPTED THE ENTIRE SUCH EXPENDITURE WHILE WORKING THE DISALLOWANCE UNDER R ULE 8D(2)(III), WHICH HAS LED TO THE VARIATION BETWEEN THE DISALLOWANCE RETURNED BY THE ASSESSEE PER ITS TWO RETURNS. HOW, IT IS WONDERED, COULD THE SAME BE DISPUTED? THE DISALLOWANCE U/S.14A IS ONLY OF THE EXPENDITURE INCURRED AND CLAIMED TOWARD THE INCOME CHARGEABLE TO TAX, I.E., TO THE EXTENT IT CAN BE REGARDED AS TOWARD INCOME NOT FORMING PART OF THE T OTAL INCOME. THE LD. CIT(A) HAS IN FACT NOT EVEN QUANTIFIED SUCH EXPENDITURE, I.E., O N ACCOUNT OF INDIRECT ADMINISTRATIVE EXPENDITURE, OR ISSUED ANY FINDING IN ITS RESPECT, EVEN AS IT DOES NOT APPEAR TO BE IN DISPUTE, ONLY ISSUING DIR ECTI ONS TO THE A SSESSING OFFICER IN THE MATTER. I FIND NO INFIRMITY WHATSOEVER IN HIS DIRECTION . N O GROUND FOR IN TER FERENCE IS MADE OUT. I DECIDE ACCORDINGLY. 4 ITA NO. 234/ MUM/ 2015 (A.Y. 2010 - 11) DY. CIT VS. VRINDAVAN SERVICES PVT. LTD. 5 . IN THE RESULT, THE R EVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 16 , 201 5 SD / - (S ANJAY ARORA) / A CCOUNTANT MEMBER MUMBAI ; DATED : 0 4 .12. 201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNE D 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI