TICKERPLANT LTD, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 251/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2618 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SATHYA MOORTHYDR
• Assessee Lawyers: CHETAN KARIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/251/MUM/2014, /ASSESSMENT YEARS: 2010-11 M/S. TICKERPLANT LIMITED FT TOWER, 4 TH FLOOR, CTS NO.256 & 257, SUREN ROAD, CHAKALA, ANDHERI(E) MUMBAI-400 093. PAN:AACCT 3014 G VS. DCIT, CENTRAL CIRCLE-46 MUMBAI ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N. SATHYA MOORTHY-DR ASSESSEE BY: CHETAN KARIA / DATE OF HEARING: 13.07.2016 / DATE OF PRONOUNCEMENT: 13.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DT.11.12.13,OF THE CIT(A)-38 THE ASSESSEE HAS FILED THE PRESENT APPEAL RAISING VARIOUS GROUNDS. HOWEVER THE EFFECTIVE GROU ND OF APPEAL IS ABOUT CONFIRMING THE DISALLOWANCE OF RS.4.40 LAKHS U/S.14A OF THE ACT R. W R. 8D OF THE INCOME TAX RULES, 1962. ASSESSEE -COMPANY, ENGAGED IN THE BUSINESS OF DATA DISSEMINATION SERVICE,FILED ITS RETURN OF INCOME ON 18.9.2010 DECLARING LOSS OF RS.26.71 CROR ES.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT ON 31.1.2003 U/S. 143(3) OF THE ACT DETERMINING THE INCOME AT RS. (-)26.64 LAKHS. 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND,AMOUNTING TO RS.16.6 2 LAKHS. HE DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF EXPENSES INCURRED TO EARN TH E EXEMPT INCOME AND TO FURNISH THE WORKING FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATI ON TO THE INCOME WHICH WAS NOT INCLUDIBLE IN THE TOTAL INCOME. HE WORKED OUT THE DISALLOWANCE U/S. 14A R.W.R 8D OF THE RULES AT RS.7.76 LAKHS.SINCE THE ASSESSEE HAD ALREADY DISALLOWED SU M OF RS.3.36 LAKHS, THE DIFFERENCE OF RS.4.40 LAKHS WAS DISALLOWED AND WAS ADDED TO THE T OTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HIM, IT WAS ARGUED THAT IT H AD MADE INVESTMENT INTO VARIOUS SCHEMES OF MUTUAL FUNDS AND HAD EARNED DIVIDEND INCOME, THA T THE ENTIRE INVESTMENT WAS MADE OUT OF 251/MUM/2014(TICKERPLANT) 2 OWN FUNDS,THAT NO INTEREST WAS PAID FOR ANY LOAN TO EARN EXEMPT INCOME, THAT THERE WAS NO INVESTMENT HELD AS ON 31.03.10, THAT THE QUESTION O F INVESTMENT OUT OF BORROWED FUNDS WOULD NOT ARISE,THAT IT HAD NOT PAID ANY INTEREST EXCEPT THE INTEREST FOR SPECIFIC PURPOSES, THAT NO DISALLOWANCE COULD BE MADE WHEN THE INVESTMENTS WER E MADE FROM OWN FUNDS, THAT THE ASSESSEE HAD APPLIED THE PROVISIONS OF SECTION 14A( 2) R.W.R 8D WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE ITSELF HAD DISALLOWED INDIRECT E XPENSES TO THE EXTENT OF RS.3.36 LAKHS, THAT THE AO DID NOT RECORD ANY REASON FOR NOT ACCEPTING THE CLAIM OF THE ASSESSEE, THAT THE ASSESSEE HAD DISALLOWED RENT, SALARY, ELECTRICITY EXPENSES, REPAIRS ETC. WHILE MAKING THE DISALLOWANCE AS PER SECTION 14A(1) OF THE ACT, THAT IT HAD MADE THE DISALLOWANCE ON PRO-RATA BASIS, THAT THE WORKING WAS PRODUCED BEFORE THE AO. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND THE ASSESSMENT ORDER, HE HELD THAT DISALLOWANCE FOR COMMON ADMINISTRATIVE EXPENSE WAS NECESSARY, THAT THE SUBMISSION OF THE ASSESSEE THAT AFTER VOLUNTARY DISALLOWANCE MADE BY IT, NO ADDITION SHOULD HAVE BEEN MADE WAS NOT A VALID ARGUMENT, THAT THE HON'BLE BOMBAY H IGH COURT HAD, IN THE CASE OF GODREJ & BOYCE(328ITR81) HAD HELD THAT RULE 8D WAS APPLICABL E FOR THE AY 2008-09 ONWARDS, THAT ASSESSEE HAD AVAILED THE SERVICES OF MUTUAL FUND DI STRIBUTORS, THAT TO CARRY OUT SUCH WORK STAFF SUPPORT WAS NECESSARY, THAT ROLE OF ASSESSEE WOULD ALWAYS BE THERE IN INVESTMENT DECISIONS, THAT IT REQUIRED MAINTENANCE AND MONITORING OF SUCH ACTIVITIES BY ITS OWN STAFF. FINALLY, HE UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT THE AO HAD MADE DISALLOWANCE OF RS.4.76 LAKHS UNDER THE HEAD INTEREST EXPENDITURE, THAT THE DISALLOWANCE UNDER THE HEAD ADMINISTRATIVE AND MANA GERIAL EXPENSES WAS RS.2.99 LAKHS, THAT THE ASSESSEE HAD SUFFICIENT FUNDS TO MAKE INVESTMEN TS, THAT AO HAD NOT ASSIGNED THE REASON FOR REJECTING THE DISALLOWANCE MADE BY THE ASSESSEE . THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD MADE A DISALLOWANCE OF RS.7.76 LAKHS, THAT H E DISALLOWED AN AMOUNT OF RS.4.4LAKHS ON ACCOUNT OF INTEREST PAYMENT, THAT THE ASSESSEE HAD MADE A SUO MOTO DISALLOWANCE OF RS.3. 36 LAKHS ON PRORATA BASIS, THAT WHILE MAKING THE DI SALLOWANCE THE AO HAD NOT MENTIONED AS TO WHY THE DISALLOWANCE MADE BY THE ASSESSEE, AMOUNTIN G TO RS.3,36,454/- WAS NOT ACCEPTABLE . WITHOUT EXPRESSING ANY DISSATISFACTION OVER THE MET HOD FOLLOWED BY THE ASSESSEE FOR THE 251/MUM/2014(TICKERPLANT) 3 DISALLOWANCE, HE SHOULD NOT HAVE APPLIED THE PROVIS IONS OF RULE 8D R.W.S. 14A(2).WE FURTHER FIND THAT ASSESSEE HAD OWN FUNDS OF RS.14.24 CRORE S AND INVESTMENT MADE BY IT STOOD AT R.11. 99 CRORES.THEREFORE, INCURRING OF INTEREST EXPENDIT URE FOR MAKING INVESTMENT HAD TO BE PROVED BY THE AO.WE FIND THAT HE HAS NOT DEALT THE ISSUE A T ALL AND MECHANICALLY APPLIED THE PROVISIONS OF SECTION 14A R.W.R 8D. FOR DISALLOWING ANY EXPENDITURE FIRST THE AO HAS TO PROVE INCURRING OF EXPENDITURE AND ITS RELATION WITH EARN ING OF EXEMPT INCOME. IF THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE NO DISALLOWANCE CAN BE MADE. ASSESSEE HAS MADE DISALLOWANCE OF RS.3.36 LAKHS UNDER THE HEAD ADMINISTRATIVE/MANA GERIAL EXPENDITURE WHICH IS MORE THAN THE DISALLOWANCE MADE BY AOI.E. RS.2.99 LAKHS.CONSI DERING THE ABOVE FACTS, WE ARE REVERSING THE ORDER OF THE FAA. EFFECTIVE GROUND OF APPEAL RA ISED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN T HE OPEN COURT ON 13TH JULY,2016. 13 , , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.