MADHU RAMESH JAIN, MUMBAI V. ITO 12(3)(3), MUMBAI

ITA 3159/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2167 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KIRAN
• Assessee Lawyers: JETENDRA SINGH
• Keywords: Salary income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 3159/MUM/2015 (ASSESSMENT YEAR : 2010-11) MADHU RAMESH JAIN, 4 TH FLOOR, EROS THEATRE BLDG., JT ROAD, CHURCHGATE, MUMBAI 400020 PAN: AAIPJ 1389H ... APPELLANT VS. THE ITO 12(3)(3), ROOM NO.123, 1 ST FLOOR, AAYKAR BHAVAN,MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI JETENDRA SINGH RESPONDENT BY : SHRI RAVI KIRAN DATE OF HEARING : 14/10/2015 DATE OF PRONOUNCEMENT : 30/10/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL IS PREFERRED BY THE ASSESSE E AND IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 16/02/2015 OF C IT(A)-28, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 21/03/2013 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961( IN SH ORT THE ACT). 2 ITA NO. 3159/MUM/2015 (ASSESSMENT YEAR : 2010-11) 2. IN THIS APPEAL THE SOLITARY DISPUTE RELATE S TO DISALLOWANCE OF RS.3,42,920/- MADE UNDER SECTION 14A OF THE ACT BY APPLYING THE FORMULA CONTAINED IN RULE 8D(2)(III) OF THE INCOME -TAX RULES,1962 ( IN SHORT THE RULES). 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE A SSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY, CAPITAL GAINS AND INCO ME FROM OTHER SOURCES. IN THE COURSE OF THE ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD DECLARED EXEMPT I NCOMES BY WAY OF DIVIDENDS OF RS.6,22,474/- AND LONG TERM CAPITAL GAIN ON SHARES OF RS.15,46,647/-. THE ASSESSEE WAS SHOW CAUSED AS TO WHY EXPENDITURE INCURRED IN RELATION TO THE EARNING OF THE EXEMPT INCOME BE NOT BE DISALLOWED IN VIEW OF SECTION 14A OF THE ACT. THE ASSESSEE CONTENDED THAT THERE WAS NEITHER ANY INTER EST RELATABLE TO THE INVESTMENT IN SHARES AND NOR THERE WAS ANY ADMI NISTRATIVE EXPENSES INCURRED FOR EARNING OF THE EXEMPT INCOME. THE ASSESSING OFFICER HOWEVER, INVOKED RULE 8D(2) OF THE RULES AN D MADE A DISALLOWANCE OF RS.4,11,200/- WHICH COMPRISED OF RS .68,280/- U/R.8D (2)(II)OF THE RULES AND RS.3,42,920/- U/R.8D(2)(III ) OF THE RULES. THE CIT(A) ALLOWED PARTIAL RELIEF AND NOT BEING SATISFI ED WITH THE ORDER OF THE CIT(A) THE ASSESSEE IS FURTHER IN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE ME, THE ONLY DISPUTE IS WITH REGARD TO THE DISALLOWANCE OF RS.3,42,920/- IN TERMS OF RULE 8D(2)(III) OF THE RULES. IN THIS CONTEXT, THE LD. REPRESENTATIVE FOR THE ASSESSEE AS SERTED THAT NO EXPENDITURE WAS CLAIMED AGAINST THE EXEMPT INCOME A S NONE WAS INCURRED . LD. REPRESENTATIVE FOR THE ASSESSEE REF ERRED TO PAGE-17 OF 3 ITA NO. 3159/MUM/2015 (ASSESSMENT YEAR : 2010-11) THE PAPER BOOK, WHEREIN HAS BEEN PLACED THE STATE MENT OF INCOME AND EXPENDITURE, WHEREBY IT IS SHOWN THAT ONLY EXPE NSES CLAIMED ARE ON ACCOUNT OF AUDIT FEE, BANK INTEREST & CHAR GES, SECURITIES TRANSACTION TAX, ETC. IT WAS POINTED OUT THAT SO FAR AS THE BANK INTEREST CHARGES IS CONCERNED, THE SAME RELATES TO THE ACTIVITY OF FUTURES AND OPTIONS BUSINESS AND IS NOT RELATED TO THE INVESTMENT IN SHARES AND SECURITIES, WHICH HAVE YIELDED THE EXEMP T INCOME. APART THEREFROM THERE IS NO EXPENDITURE CLAIMED SO AS TO JUSTIFY INVOKING OF SECTION 14A OF THE ACT. 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESEN TATIVE APPEARING FOR THE REVENUE STATED THAT ASSESSEE WAS REQUIRED TO INCUR EXPENDITURE FOR MAINTAINING THE PORTFOLIO OF SHARES AND SECURITIES, THEREFORE, DISALLOWANCE OF RS.3,42,920/ - MADE UNDER SECTION 14A R.W. RULE 8D(2)(III) IS QUITE JUSTIFIE D. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIND THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE OF RS.3,42,920/- UNDER RULE 8D (2)(III) OF THE RULES. IT IS A TRITE LAW THAT SECTION 14A OF THE A CT SEEKS TO DISALLOW EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION T O THE TAX EXEMPT INCOME. OBVIOUSLY, THE AFORESAID PRE-SUPPOSES THA T THE DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE EF FECTED ONLY IF CERTAIN EXPENDITURE HAS BEEN INCURRED. IN THE PRES ENT CASE, THE FACTS CLEARLY SHOW THAT NO EXPENDITURE HAS BEEN CLAIMED O R INCURRED BY THE ASSESSEE WHICH CAN BE SAID TO BE RELATED TO THE TAX EXEMPT 4 ITA NO. 3159/MUM/2015 (ASSESSMENT YEAR : 2010-11) INCOME. THEREFORE, ON FACTS, IN MY VIEW, THE AFORE SAID DISALLOWANCE OF RS.3,42,920/- IS NOT MERITED AND IS HEREBY DIREC TED TO BE DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/1 1/2015. SD/- (G.S. PANNU) ACCOUN TANT MEMBER MUMBAI, DATED 30/11/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS