ASSOCIATED TRANSPORT COMPANY, MUMBAI V. ACIT 12(1), MUMBAI

ITA 3484/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92244 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.3484/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 M/S. ASSOCIATED TRANSPORT COMPANY, 901, PENINSULA TOWERS, PENINSULA CORPORATE PARK, GANPATRAO KADAM MARG, OFF. SENAPATI BAPAT MARG, LOWER PAREL (WEST), MUMBAI 400 003 / VS. THE ACIT - 12 (1), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ./ ./ PAN/GIR NO. : AAAFA 3293 ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY NONE REVENUE BY SHRI ASGHAR ZAIN ' #$ / DATE OF HEARING : 09/04/2015 ' #$ / DATE OF PRONOUNCEMENT : 09/04/2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY ASSESSEE AND IT IS DIR ECTED AGAINST ORDER PASSED BY LD. CIT(A)-21, MUMBAI DATED 23/1/2013 FO R ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN L AW THE LEARNED CIT(A) ERRED IN APPLYING PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 IN RESPECT OF DIVIDEND INCOME EARNED BY THE APPELLA NT OF THE INVESTMENT IN MUTUAL FUNDS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(APPEALS) ERRED IN MAKING DISALLOWANCE OF RS.16, 750/- UNDER ./ I.T.A. NO.3484/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 2 SECTION 14A OF THE INCOME TAX ACT, 1961 BEING EXPEN SES INCURRED TO EARN THE DIVIDEND INCOME. 2. THE CAPTIONED APPEAL WAS FIXED FOR HEARING ON 9/ 4/2015 AND NOTICE WAS GIVEN THROUGH NOTICE BOARD AS ON THE EARLIER D ATE I.E. ON 11/8/2014 NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. ON 11/8 /2014, THE MATTER WAS ADJOURNED TO 15/10/2014 ON WHICH DATE BENCH DID NOT FUNCTION, THEREFORE, NOTICE WAS GIVEN THROUGH NOTICE BOARD. THE APPEAL IS SMALL, PROBABLY ON THAT ACCOUNT THE ASSESSEE IS NOT SHOWIN G INCLINATION FOR ITS PRESENCE, THEREFORE, WE PROCEED TO DECIDE THE PRESE NT APPEAL AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND A FTER HEARING LD. DR. 3. THE ASSESSEE IN THE PRESENT CASE IS A FIRM AND I S ENGAGED IN THE BUSINESS OF TRANSPORTATION, BROKERAGE AND SHIFTING INCOME AND FORKLIFT HIRE CHARGES INCOME. DURING THE YEAR UNDER CONSIDERATI ON ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.39,480/-. THEREFORE, AO INV OKED SECTION 14A REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY THE DIS ALLOWANCE SHOULD NOT BE MADE. IT WAS SUBMITTED BY THE ASSESSEE THAT ASSE SSEE DID NOT INCUR EXPENDITURE TO EARN THE SAID DIVIDEND INCOME FROM M UTUAL FUNDS AND IT WAS SUBMITTED THAT NO DISALLOWANCE SHOULD BE MADE. IN PARA 4.1 THOUGH AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ASSESS EE DID NOT CLAIM ANY EXPENDITURE IN RESPECT OF EXEMPT DIVIDEND INCOME E ARNED, AT THE SAME TIME HE CALCULATED DISALLOWANCE OF RS.16,750/- AS PER RU LE 8D. THE RELEVANT OBSERVATION OF THE AO ARE REPRODUCED BELOW: THE ASSESSEES ABOVE SUBMISSIONS HAVE BEEN CAREFUL LY CONSIDERED. IT IS OBSERVED FROM THE BALANCE SHEET THAT AS ON 31.03.20 06 ASSESSEE HAS SHOWN INVESTMENTS IN MUTUAL FUND AT RS.35 LACS AND AS ON 31.03.2007 AT RS.32 LACS. SINCE THE ASSESSEE HAS NOT CLAIMED ANY EXPEN DITURE IN RESPECT OF THE EXEMPT DIVIDED INCOME EARNED, THE SAME IS CALCULATE D BY APPLYING THE PROVISIONS OF SECTION 14A. R.W. RULE 8D. PARTICULARS 31-03-2006 31-03-2007 1. INVESTMENTS RS.35 LACS RS.32 LACS. 2. AVERAGE VALUE OF INVESTMENT RS.33,50,000/- 3. 0.5% OF AVG. INVESTMENTS 0.5% OF 33,50,000 RS.16,750/- DISALLOWANCE U/S.14 RS. 16,750/- ./ I.T.A. NO.3484/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 3 4.2 THE ABOVE AMOUNT OF RS.16,750/- IS DISALLOWED B EING THE EXPENSES ATTRIBUTABLE TO EARNING EXEMPT INCOME AND THE SAME IS ADDED TO THE TOTAL INCOME. 4. LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE A O. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 5. LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD . CIT(A). 6. WE HAVE HEARD LD. DR AND WE HAVE CAREFULLY GONE THROUGH THE ORDER PASSED BY AO AND LD. CIT(A). THE IMPUGNED ASSESSME NT YEAR IS A.Y 2007- 08. THE DISALLOWANCE HAS BEEN CALCULATED BY AO AS PER RULE 8D WHICH ACCORDING TO THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF GODREJ & BOYCE MFG. COMPANY LTD. VS. DCIT, 328 ITR 81(BOM) IS NOT APPLICABLE TO ASSESSMENT YEARS PRIOR TO A.Y 2008-09 . THUS, THE VERY BASIS OF DISALLOWANCE BASED ON RULE 8D IS INCORRECT AND CA NNOT BE UPHELD. IN VARIOUS CASES A VIEW HAS BEEN TAKEN BY THE TRIBUNA L TO DISALLOW CERTAIN PERCENTAGE OF THE DIVIDEND INCOME. IN THE PRESENT CASE DIVIDEND INCOME OF THE ASSESSEE IS A SUM OF RS.39,480/-. WE CONSIDER IT JUST AND PROPER TO UPHOLD THE DISALLOWANCE OF 5% OF THE DIVIDEND INCO ME EARNED BY THE ASSESSEE WHICH WILL BE A SUM OF RS.1,974/-. ACCORD INGLY, THE DISALLOWANCE IS RESTRICTED TO RS.1,974/- AND THE BALANCE DISALLO WANCE IS DELETED. IN VIEW OF ABOVE DISCUSSIONS THE APPEAL FILED BY THE ASSESS EE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/04/2015 ' + ,- 09/04/2015 ' SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; , DATED 09/04/2015 ./ I.T.A. NO.3484/MUM/2013 ( / ASSESSMENT YEAR : 2007-08 4 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 , $ 34 , / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS