TUSHAD K. COOPER, MUMBAI V. ADDL CIT RG 11(3), MUMBAI

ITA 367/MUM/2012

• Counselvise Citation: 36719914 RSA 2012
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 08-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: J D MISTRY
• Keywords: Earning of tax free income; Reasonable cause
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , A CCOUNTANT MEMBER AND SHRI VIVEK VARMA, J UDICIAL MEMBER I.T.A. NO. 367/MUM/2012 ( ASSESSMENT YEAR: 2007 - 08 ) MR. TUSHAD K. COOPER. 22, MONT BLANC, DADY SETH HILL ROAD, AUGUST KRANTI MARG, KEMPS CORNER, MUMBAI - 400 036 VS. ADDL. CIT, RANGE 11(3), AAYKAR BHAVAN, MAHA RSHI KARVE ROAD, MUMBAI - 400 020 PAN/GIR NO. AAAPC 5659 F ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI J. D. MISTRY / RESPONDENT BY : SHRI ASHOK SURI DATE OF HEARING : 08.01.2014 / DATE OF PRONOUNCEMENT : 08 .01.2014 O R D E R PER R. C. SHARMA , A. M.: THIS IS AN A PPEAL FILED BY THE ASSESSEE AGAINST THE O RDER BY THE LD. CIT(A) - 2 , MUMBAI DATED 25.10.2011 , FOR T HE ASSESSMENT YEAR (A.Y.) 2007 - 08, WHEREIN THE ASSESSEE IS AGGRIEVED BY DISALLOWANCE OF RS.11,40,748/ - U/S.14A OF THE INCOME TAX ACT, 19 6 1 . THE APPEAL IS DELAYED BY THREE DAYS, KEEPING IN VIEW THE REASONABLE CAUSE SHOWN FOR THE DELAY, WE ARE SATISFIED THAT THE DELAY IS REQUIRE D TO BE CONDONE D AND THE APPEAL IS BEING HEARD ON MERITS. 2 ITA NO. 367 /MUM/ 2012 (A.Y. 2007 - 08) MR. TUSHAD K. COOPER. VS. ADDL. CIT 2. RIVAL CONTENTIONS HAVING HEARD AND PERUSED THE MATERIAL PLACED ON RECORD. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN ADVOCATE DERIVING INCOME BY WAY OF PROFESSIONAL FEES, CAP ITAL GAINS, INCOME FROM OTHER SOURCES AND EXEMPT INCOME BY WAY OF DIVIDEND FROM SHARES AND MUTUAL FUNDS. DURING THE ASSESSMENT PROCEEDINGS, IT WAS FOUND BY THE ASSESSING OFFICER (A.O.) THAT THE ASSESSEE HAD EARNED TAX FREE INCOME OF RS.3.05 CRORES DURING T HE YEAR RELEVANT TO THE A.Y. 2007 - 08. SUCH INCOME WAS EARNED MAINLY ON ACCOUNT OF TAX EXEMPT DIVIDEND INCOME EARNED ON THE INVESTMENTS IN SHARES AS WELL AS FROM MUTUAL FUNDS. DURING THE COURSE OF HEARING, THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF EXP ENDITURE INCURRED FOR EARNING TAX FREE INCOME AND THE A.O. RELIED ON THE DECISION OF THE HONBLE ITAT, MUMBAI IN THE CASE OF M/S. DAGA CAPITAL MANAGEMENT P. LTD. IN ITA NO.8057/MUM/2003 VIDE ITS ORDER DATED 20.10.2008 AND THE PROVISIONS OF SUB - SECTION 2 AN D 3 OF SECTION 14A OF THE I.T. ACT. THE LD. AR OF THE ASSESSEE FURNISHED THE DETAILS OF EXPENSES INCURRED BY THE ASSESSEE FOR EARNING TAX EXEMPT INCOME DURING THE F.Y. RELEVANT TO THE A.Y. 2007 - 08 VIDE ITS LETTER DATED 25.11.2009. THEREAFTER , THE A.O. HAS DISALLOWED RS.11,40,748/ - U/S.14A. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. SHRI J. D. MISTRY, THE LD. AR APPEARED ON BEHALF OF THE ASSESSEE HAS CONTENDED TH AT BEFORE INVOKIN G THE PROVISIONS OF SECTION 14A AND RULE 8D, THE A.O. IS FIRST REQUIRED TO RECORD THE REASONS THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEES COMPUTATION/CLAIM AND ONLY THEN HE CAN PROCEED TO MAKE A DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX RULES. IT WAS FURTHER CONTENDED THAT THE ASSESSEE HAD SUBMITTED BEFORE THE A.O. A STATEMENT SHOWING TOTAL EXPENSES NOT DIRECTLY ATTRIBUTABLE TO THE P ROFESSION OF THE ASSESSEE , THESE EXPENSES WERE SPLIT IN THE RATIO OF EXEMPT INCOME TO THE TOTAL INCOME . ACCORDINGLY , A CONTENTION WAS RAISED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE ATTRIBUTABLE TO SUCH EXEMPT INCOME. 3 ITA NO. 367 /MUM/ 2012 (A.Y. 2007 - 08) MR. TUSHAD K. COOPER. VS. ADDL. CIT 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER S OF THE LOWER AUTHORITIES AND CONTENDED THAT THE A.O. WA S JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14A IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V S . DY. CIT [2010] 328 ITR 81 (BOM). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY AND GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW . WE HAVE PERUSED THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE FILED WITH RESPECT TO THE PROFESSIONAL INCOME EARNED BY THE ASSESSEE VIS - - VIS THE EXPENSES INCURRED THEREON. WE HAVE ALSO GONE THROUGH THE DETAILS OF THE ADMINIS TRATIVE EXPENSES INCURRED BY THE ASSESSEE AS PER THE AUDITED PROFIT AND LOSS ACCOUNT. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS INCURRED TOTAL ADMINISTRATIVE EXPENSES OF RS. 79.33 LAKHS OUT OF WHICH RS. 67.39 LAKHS WERE DIRECTLY ATTRIBUTED TO PROFESSION AL INCOME WHERE AS EXPENDITURE OF RS. 11.93 LAKHS WERE NOT DIRECTLY ATTRIBUTABLE PROFESSIONAL INCOME. WE ALSO FOUND THAT OUT OF TOTAL INCOME OF RS. 564.97 LAKHS RECEIVED BY THE ASSESSEE, THE INCOME OF RS. 176.96 LAKHS ARE EXEMPT INCOME. THUS, OUT OF TOTAL INC OME, EXEMPT INCOME CONSTITUTED 31.32% AND OTHER INCOME CONSTITUTED 68.68%. IF WE MAKE ALLOCATION OF EXPENSES NOT ATTRIBUTABLE TO PROFESSION IN THE RATIO OF 68.68% : 31.32% , THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A WORKS OUT TO RS. 3,73,867/ - . WE, THEREF ORE, DIRECT THE AO TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A TO THE EXTENT OF RS. 3,73,867/ - . WE DIRECT ACCORDINGLY. 7 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 8 TH , 201 4 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI ; DATED : 08 . 0 1 .201 4 , SR. PS 4 ITA NO. 367 /MUM/ 2012 (A.Y. 2007 - 08) MR. TUSHAD K. COOPER. VS. ADDL. CIT COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / THE CIT(A) 4. / CIT - CONCERNED 5. / DR, ITAT, MUMBAI 6. GUARD F ILE / BY ORDER, (DY./ASSTT. REGISTRAR) / ITAT, MUMBAI