Doshi Housing, CHENNAI V. ITO, CHENNAI

ITA 3175/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8180 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 03-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2016
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Assessee Lawyers: A S SRIRAMAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.3175/MDS/2016 / ASSESSMENT YEAR : 2012-013 M/S. DOSHI HOUSING, NO.3H, CENTURY PLAZA, NO.560, ANNA SALAI, TEYNAMPET, CHENNAI 600 018. [PAN: AAFFD 6620 A] V. THE INCOME TAX OFFICER, NON-CORPORATE WARD-3, CHENNAI. ( /APPELLANT) ( !' /RESPONDENT) # / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE !' # /RESPONDENT BY : SHRI B. SAHADEVAN, JCIT # /DATE OF HEARING : 03.01.2017 # /DATE OF PRONOUNCEMENT : 13.01.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : 1.0 THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 31.08.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 4, CHENNAI, IN ITA NO.52/2015-16/A.Y.2012-13/ CIT(A)-4 FOR THE AY 2012 -13. I.T.A. NO.3175/MDS/2016 :-2-: 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT). DURING THE ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS RECEIVED EXEMPT ED INCOME IN THE FORM OF DIVIDEND AND PROFIT ON SALE OF UNITS OF MUTUAL F UNDS AND DISALLOWED RS.25,947/- U/S.14A OF INCOME TAX ACT. THE ASSESS EE MADE TOTAL INVESTMENT OF 865.65 LAKHS AS ON 31.03.2012 AND CONTENDED THAT TH E ASSESSEE IS HAVING INTEREST FREE FUNDS TO THE EXTEN T OF 2,541.73 LAKHS FROM WHICH INVESTMENTS ARE MADE, HENCE NO DISALLOWA NCE U/S.14A OF THE ACT IS CALLED FOR. THE ASSESSING OFFICER NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE DISALLOWED A SUM OF 3,13,036/- U/S.14A R/W RULE 8D OF THE INCOME TAX ACT. THE ASSESSEE WENT T O APPEAL BEFORE THE CIT (APPEALS) AND THE CIT (APPEALS) CONFIRMED THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER. 3.0 THE ASSESSEE ASSAILED FOR DISALLOWANCE U/S14A WITH OUT RECORDING SATISFACTION BY THE A.O. AS PER SECTION 14A OF THE ACT, THE DISALLOWANCE REQUIRED TO BE MADE IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTA L INCOME. FOR READY REFERENCE, WE EXTRACT SECTION 14A AS UNDER: EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUD IBLE IN TOTAL INCOME 24 . 25 14A. 26 [(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL INCOM E UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F EXPENDITURE INCURRED 27 BY I.T.A. NO.3175/MDS/2016 :-3-: THE ASSESSEE IN RELATION TO 27 INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME 27 UNDER THIS ACT.] 26 [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE P RESCRIBED 28 , IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THIS ACT. 4.0 IN THE APPELLANTS CASE, THE ASSESSING OFFICER IN PARA NO.7CLEARLY STATED THAT THE CIRCULAR IS SQUARELY APPLICABLE AND THE EXPEND ITURE COULD NOT BE ASCERTAINED CORRECTLY . THIS CLEARLY SHOWS THAT THE AO HAS APPLIED HIS MIND AND NOT SATISFIED WITH REGARD TO THE CORRE CTNESS OF THE EXPENDITURE. THEREFORE WE DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE LD.A.R. ON THIS ISSUE AND THE SAME IS REJECTED. 5.0 THE LD.AR OF THE ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE THE AO AND THE LD.CIT(A). ON THE OTHER HAND, THE L D.DR RELIED ON THE LOWER AUTHORITIES ORDER. 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED ON RECORD. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF 51,89,458/-. THOUGH THE ASSESSEE IS HAVING INTEREST FREE FUNDS, THE ASSESSE E HAS BORROWED THE FUNDS AND INVESTED FROM THE COMMON POOL OF FUNDS AN D THE ASSESSEE HAS PAID THE INTEREST ON BORROWED FUNDS. WHEN THE ASSE SSEE HAS MADE INVESTMENT FROM THE COMMON POOL OF FUNDS WITHOUT DE MARCATING INTEREST I.T.A. NO.3175/MDS/2016 :-4-: BEARING FUNDS AND INTEREST FREE FUNDS, THOUGH THE ASSESSEE IS HAVING SUBSTANTIAL SUM OF INTEREST FREE FUND, THIS TRIBUNA L HAS CONSISTENTLY TAKEN A DECISION THAT DISALLOWANCE UNDER RULE 8D (2) APPL IES. THE ASSESSEE RELIED ON BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CIT V HDFC BANK LTD RELATING TO THE ASSESSMENT YEAR 2001-02 TO 2005 -06. THE HONBLE BOMBAY HIGH COURT HAS RENDERED THE JUDGMENT IN RELA TION TO DISALLOWANCE U/S14A BUT NOT CONSIDERED THE RULE 8D IN THE JUDGME NT STATED SUPRA, SINCE THE RULE 8D WAS INTRODUCED W.E.F. ASSESSMENT YEAR 2008-09. SIMILARLY THE ASSESSEE ALSO RELIED ON CIT V RELIANC E UTILITIES AND POWER LTD WHICH WAS ALSO RENDERED BEFORE INTRODUCTION OF RULE 8D OF THE ACT. THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE CLEARLY D ISTINGUISHABLE AND THE FACTS ARE NOT APPLICABLE IN THE ASSESSEES CASE. T HE RULE 8D OF THE ACT WAS INTRODUCED WITH A CLEAR INTENTION TO DISALLOW T HE INTEREST AND EXPENDITURE RELATING TO INVESTMENT MADE PERTAINING TO EXEMPTED INCOME. WITH THE INTRODUCTION OF RULE 8D OF THE ACT, IT IS MANDATORY TO DISALLOW THE INTEREST RELATABLE TO THE INVESTMENTS MADE FOR EAR NING THE EXEMPTED INCOME UNLESS THE ASSESSEE PROVES BY TRANSACTION BY TRANSACTION. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT DI SALLOWANCE UNDER RULE 8D (2) APPLIES IN THIS CASE AND WE CONFIRM THE ADDI TION MADE BY THE ASSESSING OFFICER. I.T.A. NO.3175/MDS/2016 :-5-: 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . . ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, /DATED: 13 TH JANUARY, 2017. TLN !' #$!% /COPY TO: 1. #'&'( /APPELLANT 4. ) /CIT 2. * '( /RESPONDENT 5. !+,& -. /DR 3. ) ( #'& ) /CIT(A) 6. 1 2 /GF