ITO 3(1)(3), MUMBAI V. EVEREST FINVEST (I) P.LTD, MUMBAI

ITA 253/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92761 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2014
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: RAJESH CHAMARIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 253 / MUM/20 1 4 ( / ASSESSMENT YEAR : 20 10 - 11 ) ITO 3(1)(3), MUMBAI - 20 VS. M/S EVEREST FINVEST (INDIA) PVT. LTD. (MERGED WITH FLALAK INVESTMENT PVT. LTD.), 11 - A, MITTAL CHAMBERS, DR. RAJANI PATEL MARG, NARIMAN POINT, MUMBAI - 400021 ./ ./ PAN/GIR NO. : AA ACE 0291 Q ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : SHRI RAJESH CHAMARIA / DATE OF HEARING : 16/06 / 2015 / DATE OF PRONOUNCEMENT 16 /06 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAIN ST THE ORDER OF CIT(A) - 6 , MUMBAI , DATED 7 - 10 - 2013 , FOR THE ASSESSMENT YEAR 20 10 - 2011 IN THE MATTER ORDER PASSED U /S. 143(3) OF THE I.T.ACT, WHEREIN THE REVENUE IS AGGRIEVED FOR RESTRICTING DISALLOWANCE UNDER RULE 8D TO RS. 1,28,631/ - MADE BY THE AO AT RS.49,90,048/ - . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. IN THIS CASE, THE AO UNDER RULE 8D MADE DISA LLOWANCE BASICALLY BY COMPUTING ITA NO. 253 /1 4 2 5% ON THE AVERAGE INVESTMENT, HOWEVER, NO DISALLOWANCE ON ACCOUNT OF INTEREST WAS MADE. 3. BY THE IMPUGNED ORDER, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 1,28,631/ - AFTER HAVING THE FOLLOWING OBSERVATION : - 4.5 I HAVE C ONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS AND THE ARGUMENTS OF THE LD. AR AS WELL AS THE ORDER PASSED BY THE AO. THE APPEAL PERTAINS TO AY 2010 - 11; HENCE PROVISIONS OF SECTION 14A R.W.R. 8 D ARE APPLICABLE IN THE INSTANT CASE AS HELD BY JURISDICTIONA L BOMBAY HIGH COURT DECISION IN THE CASE OF GODREI & BOYCE MFG. CO. LTD (328 ITR 81). IT IS ALSO AN ACCEPTED FACT THAT THE APPELLANT HAS EARNED TAX FREE INCOME OF RS.2,01,94,238/ - (RS.1,85,33,675/ - + RS.16.60,563/ - ) AND TAXABLE INCOME OF RS.76,33,699/ - . TH E APPELLANT HAS CITED DECISIONS OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREI & BOYCE MFG. CO. LTD (SUPRA), PUNJAB & HARYANA HIGH COURT IN THE CASE OF HERO CYCLES (323 ITR 513) AND MUMBAI ITP - .T DECISION IN THE CASE OF JUSTICE SAM BHARUCHA (NO CITATIO N GIVEN) AND HAS CONTENDED THAT DISALLOWANCE U/S 14A OF THE ACT CANNOT BE MADE AS THE AO HAS NEITHER PROVED THAT EXPENSES INCURRED BY THE APPELLANT HAVE LIVE NEXUS WITH THE EXEMPT INCOME/INVESTMENTS NOR RECORDED HIS SATISFACTION FOR REJECTING THE CLAIM OF THE APPELLANT. 4.6 IT MAY HOWEVER BE SEEN THAT THE PROVISIONS OF SECTION 14A ARE AMPLY CLEAR THAT DISALLOWANCE U/S.14A IS REQUIRED TO BE MADE AS PER RULE 8D AND THE AOS APPROACH IS CORRECT. HOWEVER, I DO NOT AGREE WITH THE AO THAT THE DISALLOWANCE 14A IS REQUIRED TO BE MADE MECHANICALLY AS PER RULE 8 D WITHOUT CONSIDERING THE FACTS OF THE CASE, PARTICULARLY WHEN THE EXPENSES CLAIMED BY THE APPELLANT ARE MUCH LESS THAN THE EXPENSES DISALLOWED BY THE AO AS PER RULE 8D. SINCE THE EXPENSES CLAIMED ARE ONLY RS. 1,2 8 ,631/ - (INCLUSIVE OF DEMAT CHARGES), THE ADDITIONAL DISALLOWANCE UNDER RULE 8 D HAS TO BE RESTRICTED TO RS.1,2 8 ,631/ - . I ORDER ACCORDINGLY. AGAINST THIS ORDER OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT DISALLOWANCE HAS BEEN MADE ONLY BY APPLYING RULE 8D BY DISREGARDING THE ACTUAL EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE AS PER PROFIT AND LOSS ACCOUNT PLACED ON RECORD. WE FOUND THAT TOTAL EXPENDITURE IN THE PROFIT AND LOSS ITA NO. 253 /1 4 3 ACCOUNT AMOUNTS TO RS. 1,28,631/ - , THEREFORE, DISALLOWANCE UNDER RULE 8D CANNOT BE MORE THAN THE EXPENDITURE DEBITED BY ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR RESTRICTING THE DISALLOWANCE TO THE EXTENT OF ACTUAL EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT BY TREATING THE SAME AS HAVING BEEN INCURRED FOR EARNING THE EXEMPT INCOME. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RD ER PRONOUNCED IN THE OPEN COURT ON THIS 16 /06 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 16 /06 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASS TT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//