TIME TECHNOPLAST LTD, MUMBAI V. PR CIT 11, MUMBAI

ITA 2460/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1262 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE
• Keywords: Rule of consistency; Earning of tax free income; Source of fund; Reasonable cause
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 2395/M/2014 ( 2010 - 2011 ) DR. SUDHANSU BHATTACHARYA, 42, WHITE HALL, 143, AUGUST KRANTI MARG, KEMPS CORNER, MUMBAI - 400036. / VS. ACIT - 11(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ./ PAN : AABPB4376R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANUJ KISNADWALA / RESPONDENT BY : SHRI VISHWAS MUNDHE, DR / DATE OF HEARING : 20 .04.2017 / DATE OF PRONOUNCEMENT : 21 .04.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 10.04.2014 IS AGAINST THE ORDER OF THE CIT (A) - 2, MUMBAI DATED 29.11.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. IN THIS APPEAL, ASSESSEE RAISED TWO MAIN GROUNDS. THE CORE ISSUE RAISED IN THE APPEAL (GROUND NO.2) RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT. 3. BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THERE IS A DELAY OF 3 DAYS IN FILI NG THE APPEAL BEFORE THE TRIBUNAL . IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE AFFIDAVIT FILED AND DEMONSTRATED THAT THE DELAY IS NOT A DELIBERATED ONE AND THE REASON FOR THE SAID DELAY IS THAT THE AR OF THE ASSESSEE WAS BUSY IN THE TIME BARRING ASSESSMENTS AND OUT OF SIGHT MISSED THE APPEAL FILING DATE (PARA 3 OF THE AFFIDAVIT DATED 21.8.2015). AFTER HEARING THE LD AR AND ON PERUSAL OF THE SAID AFFIDAVIT, WE FIND, THERE IS A REASONABLE AND SUFFICIENT CAUSE FOR NOT FILING THE APPEAL BEFORE THE TRIBUNAL WITHIN THE PRESCRIBED TIME LIMIT. THEREFORE, CONSI DERING THE SUFFICIENT AND REASONABLE CAUSE AS WELL AS THE SMALLNESS 2 OF THE DELAY OF 3 DAYS, WE FIND, IT IS A FIT CASE TO CONDONE THE DELAY. WE ORDER ACCORDINGLY AND PROCEED TO ADJUDICATE THE APPEAL ON MERITS. 4. REFERRING TO GROUND NO.1, LD COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE SAID GROUND IS NOT PRESSED. T HEREFORE, THE SAID GROUND NO.1 IS DISMISSED AS NOT PRESSED. 5 . RELEVANT FACTS RELATING TO THE CORE ISSUE INCLUDE THAT THE ASSESSEE IS A PROFESSIONAL CARDIOLOGIST AND ALSO EARNED EXEMPT INCOME FRO M THE INVESTMENTS. IN THE YEAR UNDER CONSIDERATION, ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR PROFESSIONAL RECEIPTS AS WELL AS FOR THE INVESTMENTS. BRINGING OUR ATTENTION TO PAGE 25 ONWARDS OF THE PAPER BOOK, RELATING TO INVESTMENT FINAL ACCOUN TS LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE EARNED OTHER INCOME AMOUNTING TO RS. 6.33 CRS, THE DETAILS OF WHICH ARE GIVEN IN SCHEDULE - 6 OF THE ACCOUNTS (PAGE 33 OF THE PB IS RELEVANT). OUT OF THE SAID OTHER INCOME OF RS. 6.33 CRS, A SUM OF RS . 4.83 CRS CONSTITUTES AN EXEMPT INCOME. ASSESSEE SPEND RS. 14,08,933/ - TOWARDS ADMINISTRATIVE AND OTHER EXPENSES FOR EARNING THE SAID AMOUNT OF RS. 6.33 CRS. ASSESSEE DID NOT CLAIM THE SAID EXPENDITURE AS ALLOWABLE EXPENDITURE. IN OTHER WORDS, ASSESSEE DISALLOWED THE SAID EXPENDITURE SUO MOTO U/S 14A READ WITH RULE 8D OF THE IT RULES, 1962. HOWEVER, ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D(2)(III) OF THE RULES, AND MADE DISALLOWANCE AMOUNTING TO RS. 37,94,262/ - . AO CON SIDERED THE OTHER EXPENDITURES INCURRED FOR EARNING OF THE MEDICAL RECEIPTS IN THIS REGARD. ON APPEAL, CIT (A) CONFIRMED THE DECISION OF THE AO. 6 . BEFORE US, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE FACTS AND SUBMITTED THAT THE ASSE SSEE HAS NOT CLAIMED ANY EXPENDITURE INCURRED IN CONNECTED WITH THE EARNING OF THE EXEMPT INCOME. FURTHER LD AR MENTIONED THAT THE ASSESSEE CONSIDERED THE EXPENDITURE INCURRED FOR EARNING OF THE MEDICAL RECEIPTS FOR INVOKING RULE 8D OF THE RULES. IN THE PROCESS, AO IGNORED THE FACT OF MAINTAINING THE SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT SOURCES OF INCOME IE MEDICAL RECEIPTS, OTHER INCOME, EXEMPT INCOME ETC. FURTHER, LD AR SUBMITTED THAT SIMILAR ISSUE WAS THE SUBJECT MATTER OF THE APPEAL IN THE PAST, IN THE AY 2008 - 2009 VIDE ITA NO. 6920 /M/2011 AND ITA NO.6379/M/2012 FOR THE AY 2009 - 2010, DATED 16.09.2015. BRINGING OUR ATTENTION TO PARAS 7 AND 7.1 OF THE SAID ORDER OF THE 3 TRIBUNAL (SUPRA), LD AR DEMONSTRATED THAT THE TRIBUNAL UPHELD THE SIGNIFICANCE OF MAINTAINING SEPARATE BOOKS OF ACCOUNTS, SOURCES OF INCOME WISE, AND DELETED THE ENTIRE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D FOR THE SAID TWO AYS. 7 . WE HAVE HEARD THE LD REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US AND ALSO THE CITED DECISION OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL (SUPRA), WE FIND, PARAS 7 AND 7.1 OF THE TRIBUNALS ORDER ARE RELEVANT IN THIS REGARD. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE PROCEED TO EXTRACT THE CONTENTS OF PARA 7.1 OF THE SAID TRIBUNALS ORDER WHICH READ AS UNDER: - 7.1. WE FIND THAT THE DETAILS OF EXPENDITURE PLACED BEFORE US APART FROM DIRECT EXPENSES, NO OTHER EXPENSES HAVE LIVE NE XUS FOR EARNING EXEMPT INCOME AND NO DIRECT EXPENSES HAVE BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. IN OUR CONSIDERED VIEW, THE DISALLOWANCE OF INDIRECT EXPENSES BY APPLYING RULE 8D ON THE FACTS OF THE PRESENT CASE IS NOT JUSTIFIED. OBVIOUSLY, THE ASS ESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR THE PURPOSE OF PROFESSION AND THESE INVESTMENTS ARE IN HIS PERSONAL CAPACITY REFLECTED IN THE PERSONAL BALANCE SHEET. CONSIDERING THE PECULIAR FACTS IN TOTALITY, THE DISALLOWANCE MADE BY THE AO U/S 14A IS DIRECTED TO BE DELETED....... 8 . CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AS WELL AS RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL AND ALSO FOLLOWING THE PRINCIPLE OF CONSISTENCY , WE ARE OF THE OPINION, THE RELEVANT GROUND NO.2 RAISED BY THE ASSESSEE IS REQUIRED TO BE ALLOWED. WE ORDER ACCORDINGLY. THUS, GROUND NO.2 IS ALLOWED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNC ED IN THE OPEN COURT ON 2 1 S T APRIL, 2017. S D / - S D / - ( RAM LAL NEGI) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 21.04.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI