Ramgopal O. Maheshwari, JAMNAGAR V. The Assistant Commissioner of Income Tax, Circle-1, JAMNAGAR

ITA 351/RJT/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1290 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V J BORICHA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 351/RJT/2013 (ASSESSMENT YEAR: 2009-10) SHRI RAMGOPAL O MAHESHWARI, PROP OF SIYARAM METAL UDHYOG B- 18, GIDC, STU, JAMNAGAR V/S THE COMMISSIONER OF INCOME TAX (APPEALS), ACIT, CIRCLE-1, JAMNAGAR (APPELLANT) (RESPONDENT) PAN: ABIPM7169H APPELLANT BY : SHRI SAGAR SHAH, C.A. RESPONDENT BY : SHRI V.J. BORICHA, SR. D.R. ( )/ ORDER DATE OF HEARING : 03 -05-201 6 DATE OF PRONOUNCEMENT : 05-05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A), JAMNAGAR DATED 24.07.2013 PERTAINING TO A.Y . 2009-10. ITA NO. 351R JT/2013 . A.Y. 2009-10 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE REVOLVES AROUND THE DISALLOWANCE OF RS. 1,33,885/- MADE U/S. 14A OF THE ACT. 3. ASSESSEE IS A METAL MERCHANT & COMMISSION AGENT. TH E RETURN OF INCOME WAS FILED ON 30.11.2009, DECLARING INCOME OF RS. 46,49,950/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. WH ILE SCRUTINIZING THE RETURN OF INCOME, THE A.O OBSERVED THAT THE ASSESSE E HAS EARNED DIVIDEND INCOME OF RS. 42,973/-. THE A.O WAS OF THE FIRM BELIEF THAT CERTAIN EXPENSES NEED TO BE DISALLOWED FOR EARNING THE EXEMPT INCOME. THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROVI SION OF SECTION 14A SHOULD NOT BE INVOKED. ASSESSEE FILED A DETAILE D REPLY CLAIMING THAT NO EXPENSES HAVE BEEN INCURRED FOR EARNING EXE MPT INCOME AND, THEREFORE, NO DISALLOWANCE NEED TO BE MADE. IN ALTE RNATIVE, THE ASSESSEE CLAIMED THAT THE DISALLOWANCE SHOULD BE RE STRICTED TO THE TAX FREE DIVIDEND INCOME OF RS. 42,073/-. 4. THE CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O WHO PROCEEDED BY COMPUTING THE DISALLOWANCE AT RS. 1,33 ,885/-. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER C ONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHOR ITIES. IT IS THE SAY OF THE LD. D.R. THAT DISALLOWANCE HAVE TO BE MADE U/S. 14A AS PER CBDT CIRCULAR. 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIV AL CONTENTIONS. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT ON IDENTICAL SET OF FACTS AND ON SIMILAR ISSUE THE CO-ORDINATE ITA NO. 351R JT/2013 . A.Y. 2009-10 3 BENCH IN THE CASE OF K. RATANCHAND & CO. ITA NO. 26 60/AHD/2011 DATED 24.09.2015 HAS FOLLOWED THE DECISION OF ANOTH ER CO-ORDINATE BENCH IN ITA NO. 866/AHD/2012. THE RELEVANT POTION READ AS UNDER:- 7. FURTHER IN THE CASE OF JIVRAJ TEA LTD. VS. DCIT , CIRCLE-1, SURAT IN ITA NO.866/AHD/2012 AND OTHERS, THE CO-ORDINATE BENCH H ELD THAT DISALLOWANCE UNDER SECTION 14A CANNOT BE MORE THAN THE EXEMPT IN COME. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED BELOW- ASST. YEAR 2008-09 '20. WE HAVE HEARD THE RIVAL SUB MISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS A VAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE RECEIVED EXEMPT DIVIDEND INCOME OF RS.900/-. THE ASSESSING OFFICER WAS OF THE OPINION THAT EXPENDITU RE INCURRED FOR EARNING THE EXEMPT DIVIDEND INCOME WAS NOT ALLOWABLE TO THE ASS ESSEE AND THE ASSESSEE HAS NOT DISALLOWED ANY EXPENDITURE TOWARDS THE EARN ING OF THE EXEMPTED DIVIDEND INCOME, HE BY INVOKING THE PROVISIONS OF S ECTION 14A COMPUTED EXPENDITURE ATTRIBUTABLE TO THE EARNING OF EXEMPT D IVIDEND INCOME UNDER RULE 8D OF THE INCOME-TAX RULES AND MADE DISALLOWAN CE FOR INTEREST EXPENDITURE OF RS. 1,49,710/- AND ADMINISTRATIVE EX PENSES OF RS.12,750/-. THE ASSESSEE UNSUCCESSFULLY APPEALED BEFORE THE CIT (A). THE CONTENTION OF THE ASSESSEE IS THAT THE INTEREST FREE FUNDS AVAILA BLE WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL AND FREE RESERVES AS ON THE D ATE OF BALANCE- SHEET WAS RS.17,86,69,501/- AND THE INVESTMENTS AT THE END OF THE YEAR WAS AT RS.1,26,00,538/- ONLY. THEREFORE, IN VIEW OF THE DE CISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF HITACHI HOME AND LIFE SOLUTIONS (I) LTD. (SUPRA) AND TORRENT POWER LTD. (SUPRA), NO DISALLOW ANCE TOWARDS INTEREST EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME CAN BE MADE. REGARDING THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS. 12,7 50/-, WE FIND THAT THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF A.C .I.T. VS. PUNJAB STATE COOP & MARKETING FED. LTD. IN ITA NO. ITA NO.548/C HD/2011 FOR AY 2007-08 HAS HELD THAT DISALLOWANCE U/S. 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT DIVIDEND INCOME. THEREFORE, WE RESTRICT THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES TO RS.900/- ONLY, BEING THE EXEMPT DIVIDEND INCOME ITA NO. 351R JT/2013 . A.Y. 2009-10 4 EARNED BY THE ASSESSED. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT ON R ECORD BY THE LD. D.R. IN FAVOUR OF THE REVENUE. RESPECTFULLY FOLLOWI NG THE FINDINGS OF THE CO-ORDINATE BENCH, WE DIRECT THE A.O TO RESTRICT TH E DISALLOWANCE TO RS. 42,073/- BEING DIVIDEND INCOME EXEMPT FROM TAX. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05- 05 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKO T