HEMANT GAMANLAL MEHTA, MUMBAI V. ACIT 22(1), NAVI MUMBAI

ITA 2424/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79206 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: ASHOK DHIRAJLAL ME HTA
• Keywords: Business income; Earning of tax free income
• Section: 14A; 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.2424/MUM/2013,A.Y. 2008-09 ITA NO.1811/MUM/2014, A.Y. 2009-10. MR. HEMANT GAMANLAL MEHTA, 603, SIDHI APARTMENT, TILAK ROAD, RAJAWADI, GHATKOPAR (E), MUMBAI 400077 PAN: AACPM 3267 (APPELLANT ) VS. THE A.C.I.T 22(1), VASHI INCOME TAX OFFICE, ABOVE VASHI RLY. STATION, 4 TH FLOOR, NAVI MUMBAI. (RESPONDENT) APPELLANT BY : SHRI ASHOK DHIRAJLAL ME HTA RESPONDENT BY : SHRI PI TAMBER DAS DATE OF HEARING : 01/07/20 14 DATE OF PRONOUNCEMENT : 01/07/2014 ORDER PER I.P.BANSAL, J.M, THESE APPEALS ARE FILED BY THE ASSESSEE AND THEY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DATED 1/2/201 3 AND 23/12/2013 FOR ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. GROUNDS OF APPEAL ORIGINALLY FILED BY THE ASSESSEE READ AS UNDER: GROUNDS OF APPEAL FOR A.Y.2008-09: 1. THE LEARNED ASSESSING OFFICER AND CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENSE AGAINST THE TAXABLE INC OME IN THE COMPUTATION OF INCOME, THEY FAILED TO APPRECIATE THAT THE ASSESSEE HAD INCURRED EXPENSES AND WERE SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT BUT WER E NOT CLAIMED AS DEDUCTION WHILE COMPUTING TAXABLE INCOME. 2. THE LEARNED ASSESSING OFFICER AND THE CIT(A) 33 FAILED TO APPRECIATE THAT SECTION 14A IS ONLY A DISALLOWANCE SECTION AND THE EXPENS ES CAN BE DISALLOWED ONLY IF THE SAME ARE CLAIMED AS A DEDUCTION FROM TAXABLE INCOME . ITA NO.2424/MUM/2013,A.Y. 2008-09 ITA NO.1811/MUM/2014, A.Y. 2009-10. 2 3. THE LEARNED ASSESSING OFFICER AND CIT (A) -33 E RRED IN MAKING ADDITION UNDER SECTION 14A BASED ON SURMISES AND CONJECTURES. 4. THE LEARNED ASSESSING OFFICER ERRED IN MAKING A DISALLOWANCE BY WAY OF EXPENDITURE OF RS.1,06,021/- U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AND THE CIT(A) 33 ERRED IN CONFIRMING THE SAME. GROUNDS OF APPEAL FOR A.Y.2008-09: 1. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED I N INVOKING THE PROVISIONS OF RULE 8D R.W. SECTION 14A WITHOUT POINTING OUT ANY ERRORS THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE CLAIMED WERE FOR EARNING TAXABLE IN COME. 2. THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED I N CONFIRMING THE DISALLOWANCE OF RS.2,34,897/- UNDER SECTION 14A WITHOUT APPRECIATIN G THAT THE EXPENDITURE INCURRED BY THE ASSESSEE AS PER PROFIT AND LOSS ACCOUNT WERE NOT CLAIMED AS A DEDUCTION IN COMPUTING TAXABLE INCOME. 3. WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEALS TH E LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN DISALLOWING RS. 2,34,897/- UNDER SE CTION 14A WHICH WAS MORE THAT THE TOTAL EXPENDITURE CLAIMED (TOTAL EXPENDITURE RS . 49,773/-, LISTED BELOW IN TABLE) IN COMPUTING THE TAXABLE INCOME. SR.NO. SECTION AMOUNT. 1. 23(1) MUNICIPAL TAXES PAID 675/- 2. 24(A) STANDARD DEDUCTION ON HOUSE PROPERTY INCOME 46,598/- 3. 37(1) PROFESSION TAX PAID 2,500/- TOTAL 49,773/- 4. WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEALS TH E LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT RESTRICTING THE DISALLOWANCE OF EXPENDITURE CLAIMED (RS.49,773/-) UNDER SECTION 14A TO THE PROPORTION OF EXEMPT INCOM E TO THE TOTAL INCOME. 2. SUBSEQUENTLY, ADDITIONAL GROUNDS HAVE BEEN FILED IN RESPECT OF A.Y 2008-09, WHEREBY GROUND NO. 6 & 7 ARE RAISED AND READ AS UND ER: 6. WITHOUT PREJUDICE TO ABOVE GROUND OF APPEALS THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN DISALLOWING RS.1,06,021/- UNDER SEC TION 14A WHICH WAS MORE THAN THE TOTAL EXPENSES INCURRED AND CLAIMED BY THE ASSE SSEE(TOTAL EXPENDITURE INCURRED RS.3175/) SR.NO. SECTION AND HEAD OF INCOME AMOUNT. 1. HOUSE PROPERTY SEC. 23(1) MUNICIPAL TAXES PAID 675/- 2. BUSINESS INCOME SEC.37(1) PROFESSION TAX PAID 2,500/- TOTAL 3,175/- ITA NO.2424/MUM/2013,A.Y. 2008-09 ITA NO.1811/MUM/2014, A.Y. 2009-10. 3 7. WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEALS THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT RESTRICTING THE DISALLOWANC E OF EXPENDITURE INCURRED AND CLAIMED ( TOTAL EXPENDITURE RS.3175/--) UNDER SECTI ON 14A TO THE PROPORTION OF EXEMPT INCOME TO THE TOTAL INCOME. 2.1 IN RESPECT OF A.Y 2009-10 GROUND NO.3 & 4 IN OR IGINAL APPEAL ARE ALTERED BY FOLLOWING GROUNDS. 3.. WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEALS THE LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN DISALLOWING RS.2,34,987/- UNDER SECTION 14A WHICH WAS MORE THAT THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE (TOTAL EXPENDITURE RS. 3175/-) SR.NO. SECTION AND HEAD OF INCOME AMOUNT. 1. HOUSE PROPERTY SEC. 23(1) MUNICIPAL TAXES PAID 675/- 2. BUSINESS INCOME SEC.37(1) PROFESSION TAX PAID 2,500/- TOTAL 3,175/- 4. WITHOUT PREJUDICE TO ABOVE GROUNDS OF APPEALS TH E LEARNED ASSESSING OFFICER AND CIT(A) ERRED IN NOT RESTRICTING THE DISALLOWANCE OF EXPENDITURE INCURRED AND CLAIMED ( TOTAL EXPENDITURE RS.3175/--) UNDER SECTION 14A T O THE PROPORTION OF EXEMPT INCOME TO THE TOTAL INCOME. 2.2 SO FAR AS IT RELATES TO THE ADMISSION OF AFOR EMENTIONED ADDITIONAL AND ALTERED GROUNDS, SINCE ALL THE FACTS ARE EXISTING O N RECORD, AFTER HEARING BOTH THE PARTIES, WE ADMIT THESE GROUNDS. 2.3 IT MAY ALSO BE MENTIONED HERE THAT IT WAS THE C ASE OF LD. AR THAT IF ADDITIONAL AND ALTERNATIVE GROUNDS ARE ADJUDICATED THEN ALSO THE GRIEVANCE OF THE ASSESSEE WILL BE ADDRESSED AND IT WILL BE SUFFICIEN T TO RESOLVE THE ISSUE RAISED IN THE PRESENT APPEALS. 3. AS IT CAN BE SEEN FROM THE GROUNDS OF APPEAL AS WELL AS ADDITIONAL GROUNDS IN RESPECT OF A.Y 2008-09 AND ALTERED GROUNDS IN RE SPECT OF A.Y. 2009-10, THE SOLE GRIEVANCE OF THE ASSESSEE IS REGARDING DISALLO WANCE MADE UNDER SECTION 14A R.W. RULE 8D OF THE INCOME TAX ACT, 1961(THE ACT). 3.1 IT IS CLEAR FROM THE AFOREMENTIONED GROUNDS THA T IT IS THE CASE OF THE ASSESSEE THAT ASSESSEE DID NOT CLAIM ANY EXPENDITUR E IN RELATION TO EXEMPTED ITA NO.2424/MUM/2013,A.Y. 2008-09 ITA NO.1811/MUM/2014, A.Y. 2009-10. 4 INCOME AND THE EXPENDITURE, IF ANY, CLAIMED BY THE ASSESSEE IS LIMITED TO RS.3175/- FOR EACH OF THE ASSESSMENT YEAR INVOLVED AND THE SAME ALSO DOES NOT RELATES TO EARNING OF EXEMPTED INCOME, THEREFORE, T HE DISALLOWANCES MADE AND UPHELD AMOUNTING TO RS.1,06,021/- AND RS.2,34,98 7/- FOR ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY IS NOT CALLED FOR. 3.2 THOUGH LD. AR HAS DEMONSTRATED THAT ASSESSEE DI D NOT CLAIM ANY EXPENDITURE AS STATED IN THE ADDITIONAL GROUNDS, A ND ALTERED GROUNDS FOR EARNING OF EXEMPTED INCOME, BUT THIS FACT HAS NOT BEEN VERI FIED BY THE A.O. 4. AS AGAINST ABOVE , IT IS THE CASE OF LD. DR THA T ASSESSEE HAS DEBITED LARGER AMOUNT OF EXPENDITURE TO ITS P&L ACCOUNT. ON THIS SUBMISSION OF LD. DR, IT WAS SUBMITTED BY LD. AR THAT THOUGH SOME EXPENDITURE ARE DEBITED TO PROFIT AND LOSS ACCOUNT BUT WERE NOT CLAIMED IN THE COMPUTAT ION OF INCOME. HE IN THIS REGARD REFERRED TO THE COMPUTATION OF INCOME, COPI ES OF WHICH HAVE BEEN FILED AND IT WAS SUBMITTED THAT LARGER PART OF INCOME OF THE ASSESSEE PERTAINS TO SHARE OF PROFITS, INTEREST AND REMUNERATION FROM FIRMS, OUT OF WHICH ONLY A SUM OF RS.2500/- HAS BEEN CLAIMED ON ACCOUNT OF PROFESSIO NAL TAX AND ANOTHER AMOUNT RELATES TO MUNICIPAL TAX PAID BY THE ASSESSEE. 5. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND PERUSED THE DETAILS FURNISHED BY THE ASSESSEE. IT IS FOUND THAT LD. AR IS RIGHT IN CLAIMING THAT APART FROM THE AMOUNT OF RS.3175/- NO EXPENDITURE HAS BEE N CLAIMED BY THE ASSESSEE. THUS, APPARENTLY NO EXPENDITURE SEEMS TO HAVE BEEN CLAIMED AGAINST EXEMPTED INCOME. THE EXPENSES RELATING TO EXEMPTED INCOME C AN BE DISALLOWED ONLY IF THEY ARE CLAIMED. THEREFORE, THE CASE OF THE ASSESSEE H AS TO BE ACCEPTED THAT WHEN NO EXPENDITURE HAS BEEN CLAIMED TO BE INCURRED FOR EAR NING EXEMPTED INCOME THEN NO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D CAN BE MADE. HOWEVER, AS THERE ARE NO FINDINGS ON RECORD EITHER BY THE AO OR BY LD . CIT(A), IT IS CONSIDERED NECESSARY AND APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF AO TO VERIFY THE FACT AS TO WHETHER OR NOT ASSESSEE HAS CLAIMED ANY EXPENDITURE IN THE ITA NO.2424/MUM/2013,A.Y. 2008-09 ITA NO.1811/MUM/2014, A.Y. 2009-10. 5 COMPUTATION OF INCOME FOR EARNING EXEMPTED INCOME. IF, AFTER VERIFICATION, THE AO FINDS THAT NO SUCH EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE THEN NO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D SHOULD BE MADE. WITH THESE DIRECTIONS WE RESTORE THE ISSUE IN BOTH THE APPEALS TO THE FILE OF AO. 6. THE APPEALS FILED BY THE ASSESSEE ARE CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 01/07/2014 ! ' #$ % &'( 01/07/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; &' DATED 01/07/2014 ! ! ! ! ' '' ' *+, *+, *+, *+, - - - -,$+ ,$+,$+ ,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS