RAMCHAND K POPELY, MUMBAI V. DCIT 9(2), MUMBAI

ITA 2683/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62557 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 07-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: INDRA ANAND
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI P.M.JAGTAP, AM & SHRI AMIT SHUKLA, JM ITA NO.2683/MUM/2011 ASSESSMENT YEAR: 2008-2009 RAMCHAND K POPELY, 188-A, TURNER RD, BANDRA(W), MUMBAI-400 050. PAN NO.AAKP6952A DCIT 9(2) MUMBAI. APPELLANT VS. RESPONDENT APPELLANT BY : MR. INDRA ANAND RESPONDENT BY : MR. D.S.SUNDER SINGH DATE OF HEARING : 24 TH APRIL 2012 DATE OF PRONOUNCEMENT : 15 TH JUNE, 2012 O R D E R PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 11-3-2011, PASSED BY THE CIT( A)-20, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2008-2009. 2 . THE ONLY ISSUE IN THIS APPEAL IS DISALLOWANCE OF RS.9,39,691/- MADE UNDER SECTION 14A. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSI NESS OF TRADING IN SHARES AND SECURITIES. ON PERUSAL OF THE PROF IT LOSS AND ACCOUN T, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.33,52,462/- DURING THE YEAR WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10(34). IN RESPONSE TO S HOW CAUSE NOTICE AS TO WHY THE PROVISION OF SECTION 14A, READ WITH RULE 80D SHOULD NOT BE INVOKED, IT ITA NO : 2683/M/11 2 WAS SUBMITTED THAT NO EXPENSES HAS BEEN SPECIFICALLY INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME , HENCE, NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A. THE ASSESSI NG OFFICER REJECTED THE SAID CONTENTION OF THE ASSESSEE AND AFTER APPLYING THE DECISION OF SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF M/S DAGA CAPITAL MANAGEMENT PVT. LTD AND OTHERS , PASSED IN ITA NO.8057/2003, HELD THAT THE AMOUNT IS DISALLOWABLE UNDER SECTION 14A READ WITH RULE 8D AND ACCORDINGLY COMPUTED THE DISALLOWANCE OF RS.9,639,691/-. 3. IN THE FIRST APPEAL, AS NOTED BY CI T(A), IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAD INCURRED EXPENDI TURE OF RS.23,83,306/-, WHICH RELATED TO ONLY TO BUYING AND SELLING OF SHARES AND DISALLOWANCE UNDER SECTION 14A CAN BE MADE ONLY WHERE THERE IS DOMINANT AND IMMEDIATE CONNECTION BETWEEN THE EXPENDITURE INCURRED AND THE EXEMPT INCOME EARNED. SINCE NO NEXUS HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER, THE ADDITION MADE UNDER SECTION 14A SHOULD BE DELETED. 4 . LEARNED CIT(A) DID NOT FIND ANY SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE AND HELD THAT RULE 8D IS ATTRACTED WHEN THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNT S OF THE ASSESSEE OF A PREVIOUS YEAR IS NOT SATISFIED EITHER WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE OR THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTA L INCOME. THERE IS NO PRESCRIPTION AS TO HOW THIS SATISFACTION HAS TO BE ARRIVED. THE ONUS IS ON THE ITA NO : 2683/M/11 3 ASSESSEE TO ESTABLISH THAT THE PARTI CULAR ITEM OF EXPENDITURE IS LINKED TO A PARTICULAR HEAD OF INCOME, WHICH THE ASSESSEE HAS FAILED TO DO SO AND, THEREFORE, THE ASSESSING OFFICER WAS WELL WITHIN THE POWER TO ESTIMATE SUCH EXPENDITURE AFTER INVO KING THE PROVISION OF RULE 8D. THE CIT(A), THUS, RELYING UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUF ACTURING CO. LTD. VS. DCIT, REPORTED IN 234 CTR (BOM) 1 , HAS UPHELD THE DISALLOWANCE UNDER SECTION 14A. 5 . LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A TRADER IN SHARES AND HAS EARNED DIVIDEND ON THE CLOSING STOCKS OF THE SHARES AND THE EXPENS ES INCURRED ARE ONLY RS.5,66,680/- . HE RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S CCI LTD. VS. JCIT , PASSED IN ITA NO.359/2011, VIDE ORDER DATED 28-2-2012. 5.1 ON THE OTHER HAND, LEARNED CIT DR SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. LT D. VS. DCIT, 328 ITR (BOM.) , DISALLOWANCE MADE UNDER RULE 8B READ WITH SECTION 14A IS FULLY JUSTIFIED SPECIFICALLY FROM THE ASSESSMENT YEAR 2008-2009 ONWARDS. HE FURTHER RELIED UPON THE FINDINGS AND OBSERVATION GIVEN BY THE CIT(A). ITA NO : 2683/M/11 4 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE FINDING GIVEN BY THE CI T(A) AS WELL AS THE ASSESSING OFFICER. NOWHERE FROM THE RECORDS, IT IS BORNE OUT AS WHAT ARE THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE AND WHETHER THEY WERE ANYWHERE RELATED TO EARNING OF EX EMPT INCOME. THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT A PARTICU LAR ITEM OF EXPENDITURE IS LINKED TO A PARTICULAR HEAD OF INCOME AND IS NOT DI RECTLY OR INDIRECTLY RELATED TO EARNING OF EXEMPT INCOME. UNDER THESE FACTS AND CIRCUMSTANCES, THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER, WHO WILL EXAMINE THE ISSUE AFRESH AFTER TAKI NG INTO CONSIDERATION THE NATURE OF EXPENSES AND WHETHER ANY SUCH EXPENDITURE CAN BE ASSIGNED TO EARNING OF EXEMPT INCOME. WE, HOWEVER, MAKE IT VERY CLEAR THAT DISALLOWANCE IF ANY IS CALLED FOR UNDER SECTION 14A, THE SAME SHOULD NOT EXCEED THE EXPENSES INCURRED BY THE ASSESSEE AS HAS BEEN CLAIMED BEFORE US BY THE AR THAT EXPENSES WERE ONLY ` .5,66,680/-. IT IS NEEDLESS TO SAY THAT THE ASSESS ING OFFICER WILL PROVIDE DUE AND EFFECTIVE OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE DETAIL AND EXPLAIN HIS CASE IN DECIDING THE ISSUE. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 15 TH DAY OF JUNE, 2012. SD/- SD/- (P.M.JAGTAP) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 15 TH JUNE, 2012 ITA NO : 2683/M/11 5 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PKM