Rakesh K. Patel (HUF), Vadodara V. DCIT, Circle-1(2), Vadodara

ITA 246/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7677 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER, & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 246/AHD/2018 ( / ASSESSMENT YEAR: 2013-14) RAKESH K. PATEL (HUF) A-401, SPRING RETREAT-1, NR. SPRING EXOTICS, VASNA BHAYLI ROAD, VASANT VIHAR, BARODA- 391410 / VS. DCIT CIRCLE-1(2), INCOME TAX DEPARTMENT, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA- 390007 ./ ./ PAN/GIR NO. : AAF HR4 877 M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. DR / DATE OF HEARING 15/07/2019 !'# / DATE OF PRONOUNCEMENT 23/07/2019 $%/ O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-2, VADODARA (CIT(A) IN SHORT) , DATED 24.11.2017 ARISING IN THE ASSESSMENT ORDER DATED 3 0.12.2015 PASSED BY THE ASSESSING OFFICER UNDER S. 143(3) OF THE INC OME TAX ACT, 1961 (THE ACT) CONCERNING A.Y. 2013-14. ITA NO.246/AHD/2018 [RAKESH K. PATEL (HUF) VS. DCIT] A.Y. 2013-14 - 2 - 2. THE CAPTIONED APPEAL HAS FILED BY THE ASSESSEE SEEKING TO IMPUGN THE DISALLOWANCE SUSTAINED BY THE CIT(A) AMO UNTING TO 1,83,184/- UNDER S. 14A R.W.R. 8D (2)(III) OF THE I . T. RULES. THE ASSESSEE IS A PARTNER IN M/S. KAMLESH GANDHI INFRAS TRUCTURE. HIS SHARE OF HOLDING IS OF 40% DURING THE YEAR UNDER CO NSIDERATION. THE ASSESSEE HAS NOT RECEIVED ANY INTEREST ON CAPITAL F ROM THE FIRM. HOWEVER, THE ASSESSEE HAS EARNED RS. 38,66,171/- AS ITS SHARE OF PROFIT IN THE PARTNERSHIP FIRM. THE SHARE OF PROFI T IS EXEMPT IN THE HANDS OF THE PARTNER UNDER S. 10(2A) OF THE ACT. T HE AO INTER ALIA INVOKED UNDER S. 14A OF THE ACT AND DISALLOWED RS. 1,83,184/- BEING 0.5% OF THE AVERAGE VALUE OF INVESTMENT IN THE PART NERSHIP FIRM WHICH ACTION OF THE AO WAS AFFIRMED BY THE CIT(A) I N FIRST APPEAL. 3. THE ASSESSEE FILED BEFORE THE TRIBUNAL AGAINST T HE AFORESAID DISALLOWANCE. 4. NONE APPEARED FOR THE ASSESSEE BEFORE THE TRIBUN AL. ACCORDINGLY, THE MATTER WAS PROCEEDED EX-PARTE. 5. LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO AND THE CIT(A). 6. WE HAVE PERUSED THE ORDER OF THE LOWER AUTHORITI ES. WE FIND THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 32,155/- ON ITA NO.246/AHD/2018 [RAKESH K. PATEL (HUF) VS. DCIT] A.Y. 2013-14 - 3 - INVESTMENT IN MUTUAL FUNDS. THE ASSESSEE HAS ALSO CLAIMED EXEMPT INCOME OF RS. 38,66,171/- FROM THE PARTNERSHIP FIRM IN WHICH THE ASSESSEE IS A PARTNER. THE INVESTMENT IN MUTUAL FU ND DOES NOT PER SE CALL FOR ANY SEPARATE ADMINISTRATIVE EXPENDITURE HA VING REGARD TO THE FACT THAT THE MUTUAL FUNDS ARE RUN BY PROFESSIONAL WHO SEPARATELY CHARGES ADMINISTRATIVE EXPENSES FROM THE ASSESSEE F OR MANAGEMENT OF THE FUNDS. LIKEWISE, INVESTMENTS IN PARTNERSHIP FIRM WOULD NOT ATTRACT DISALLOWANCE UNDER S. 14A UNLESS IT IS SHOW N BY THE AO THAT CERTAIN EXPENSES HOWSOEVER SMALL HAVE BEEN INCURRED FOR THE PURPOSES OF PARTNERSHIP FIRM AND CLAIMED IN THE ASS ESSEES ACCOUNTS. NO SUCH OBSERVATION IS FOUND IN THE ORDER OF THE AO . NEEDLESS TO SAY APPLICATION OF SEC. 14A IS NOT AUTOMATIC AND IT INHERES IN IT THE CONCEPT OF REASONABLENESS. THE AO IN THE INSTANT C ASE IS NOT FOUND TO HAVE SATISFIED HIMSELF ABOUT INCURRING OF ANY AD MINISTRATIVE EXPENSES. THE PARTNERSHIP FIRM IS AN INDEPENDENT E NTITY AND REQUIRES TO RUN ITS AFFAIRS SEPARATELY. THE PARTNERS ARE HO LDING THE MUTUAL AGENCY IN THE PARTNERSHIP FIRM AND UNLESS THE PARTN ERS ARE SHOWN TO BE DRAWING REMUNERATION FROM THE ASSESSEE CONCERN A ND AT THE SAME TIME INVESTING ITS ATTENTION IN THE PARTNERSHIP FIR M, THERE IS NO PERCEPTIBLE REASON TO DISBELIEVE THE ASSESSEE FOR N OT INCURRING IN EXPENDITURE. WE, THUS, FIND NO REASON TO THRUST ME CHANICAL APPLICATION OF RULE 8D(2)(III) OF THE ACT IN THE GI VEN FACTS. THE ITA NO.246/AHD/2018 [RAKESH K. PATEL (HUF) VS. DCIT] A.Y. 2013-14 - 4 - ORDER OF THE CIT(A) IS CONSEQUENTLY SET ASIDE AND T HE AO IS DIRECTED TO REVERSE THE DISALLOWANCE MADE IN RULE 8D(2)(III) R.W.S 14A OF THE ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ACCOR DINGLY ALLOWED EX- PARTE . SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 23/07/2019 TANMAY TRUE COPY !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. ) *+ , / CONCERNED CIT 4. ,- / CIT (A) 5. 012 33*+, *+#, 56$)$ / DR, ITAT, AHMEDABAD 6. 289 : / GUARD FILE. BY ORDER / $% , ;/5 *+#, 56$)$ < 1.DATE OF DICTATION ON 15.07.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 16.07.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 16.07.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 16.07.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR . P.S./P.S 23.07.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.07.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 2 3/07/2019