DCIT, New Delhi V. M/s Superrex Income Industries, New Delhi

ITA 3713/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77779 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHALINI VERMA
• Assessee Lawyers: SALIL AGGARWAL SHAILESH GU PTA
• Keywords: Business expenditure
• Section: 37

Judgement Text

ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.3713/DEL/2013 ASSESSMENT YEAR : 2006-07 DY.COMMISSIONER OF INCOME TAX, VS SUPERREX IN COME INDUSTRIES, CIRCLE 22(1), NEW DELHI. F-89/24, OKHLA INDL. AREA, PHASE-I, NEW DELHI. (PAN: A AAFS8073M) (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. SHALINI VERMA, SR. DR RESPONDENT BY : S/SHRI SALIL AGGARWAL, SHAILESH GU PTA O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE CIT(A)-XXIII, NEW DELHI DATED 15.03.2013 IN APPEAL NO. 249/08-09 FOR AY 2006-07. 2. THE REVENUE HAS RAISED FOLLOWING FOUR GROUNDS IN THIS APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ELECTRICITY EXPENSES OF RS. 6,73,947/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF LE GAL AND PROFESSIONAL EXPENSES OF RS.33,000/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 2 2 RS.1,61,761/- MADE BY THE AO ON ACCOUNT OF MOBILE EXPENSES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE O F RS.83,108/- MADE BY THE AO ON ACCOUNT OF MUTUAL FUNDS. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND EXPORT O F ENGINEERING COMPONENTS INCLUDING HOSES, CLAMPS, AUTO PARTS, ETC . THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2006 DISCLOSING TOT AL INCOME OF RS. 90,33,000/-. SUBSEQUENTLY, DURING THE SCRUTINY ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT LEGAL AND PROFESSIONAL CHARGES OF RS. 33,000/- HAD BEEN PAID TO AN ADVOCAT E IN CONNECTION WITH THE CASE TITLED AS SUPEREX STEEL PRODUCTS PVT . LTD. VS DESU AND AS THE ASSESSEE COULD NOT ESTABLISH THE NEXUS O F SUCH EXPENSES WITH ITS BUSINESS, THE CLAIM OF EXPENDITURE WAS DIS ALLOWED. THE ASSESSING OFFICER ALSO FOUND THAT THE TELEPHONE EXP ENSES OF RS.4,57,160/- HAD BEEN DEBITED TO THE PROFIT AND LO SS ACCOUNT OUT OF WHICH RS. 49,947/- RELATED TO THE RESIDENTIAL TELEP HONES AND RS. 2,23,627/- WERE RELATED TO PAYMENT OF MOBILE PHONES OF THE PARTNERS. THE ASSESSING OFFICER DISALLOWED ENTIRE EXPENSES OF RESIDENTIAL TELEPHONES, AND DISALLOWED 50% OF THE EXPENDITURE O F MOBILE PHONES ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 3 3 OF THE PARTNERS, AND MADE A DISALLOWANCE OF RS. 1, 61,761/-. THE AO FURTHER FOUND THAT ELECTRICITY EXPENDITURE CLAIMED INCLUDE PROVISION OF RS. 6,73,947/-, WHICH WAS DISPUTED BEFORE THE DELHI HIGH COURT IN LITIGATION. THE AO TREATED THE SAME AS A CONTINGENT LIABILITY AND MADE A DISALLOWANCE OF RS. 6,73,947/-. THE AO FURTHER H ELD THAT THE DIVIDEND INCOME DISCLOSED FROM MUTUAL FUNDS OF RS. 83,108/- WAS NOT EXEMPT U/S 10(35) OF THE INCOME TAX ACT, 1961, HAVI NG BEEN RECEIVED FROM AMERICAN EXPRESS BANK IN THE NATURE OF FLOATIN G INTEREST, AND NOT BEING DIVIDEND RECEIVED FROM A MUTUAL FUND AS P ER PROVISIONS OF THE ACT. THE AO ASSESSED THE SAME AS INCOME FROM OTHER SOURCES AND MADE AN ADDITION TO THE RETURNED INCOME OF THE ASSE SSEE. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) WHICH WAS ALLOWED ON ALL FOUR ISSUES/GROUNDS RAISED BY THE REVENUE IN THIS APPEAL. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. GROUND NO. 1 5. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES APROPO S GROUND NO. 1 AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACE D ON RECORD. ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 4 4 6. FROM CAREFUL READING OF IMPUGNED ORDER, WE OBSER VE THAT THE CIT(A) HAS GRANTED RELIEF FOR THE ASSESSEE WITH FOL LOWING OBSERVATIONS AND FINDINGS:- 7. AT GROUND OF APPEAL NO, 5, THE APPELLANT HAS DISPUTED THE DISALLOWANCE OF RS. 6,73,947/- OUT OF ELECTRICITY EXPENSES CLAIMED. IT HAS BEEN EXPLAINED THAT THE ELECTRICITY CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR IS ONLY RS. 8,19,537/, INCLUDING THE SUM OF RS. 6,73,947/-. ON DISPOSAL OF THE WRIT FILED BEFORE THE DELHI HIGH COURT BY THE APPELLANT, DESU RAISED A BILL OF RS. 13,12,347/- ON 05.03.2006 WHICH INCLUDED THE ARREARS OF EARLIER YEARS. THE AMOUNT OF RS. 6,73,947/- WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT AGAINST THE BILL OF ARREARS, AFTER ADJUSTMENT OF PROVISION OF RS. 6,38,400/- CREATED BETWEEN FINANCIAL YEARS 2000- 01 AND 2003-04. THE AMOUNT PAID DURING THE CURRENT YEAR WAS RS. 7,50,000/-, AND THE BALANCE ARREARS OF RS. 5,62,347/- WAS PAID IN THE FOLLOWING VEAR. HENCE THE FINDING OF THE ASSESSING OFFICER THAT THE CLAIM OF RS. 6,73,947/- COMPRISED A CONTINGENT. LIABILITY, IS MISCONCEIVED. AS THE LIABILITY HAD CRYSTALLISED IN THE YEAR UNDER CONSIDERATION, AND BEEN PAID ON 21.03.2006, HENCE THE DISALLOWANCE IS FOUND TO BE UNJUSTIFIED. ACCORDINGLY, THE APPELLANT SUCCEEDS AT GROUND OF APPEAL NO. 5. 7. LD. DR SUBMITTED THAT THE AMOUNT DISCLOSED BY TH E ASSESSEE ABOUT DISPUTED OUTSTANDING ELECTRICITY BILL OF RS.1 3,12,347/- WAS INCLUSIVE OF RS. 6,73,947 WHICH WAS A PROVISION BEI NG IN THE NATURE OF CONTINGENT LIABILITY WHICH CANNOT BE ALLOWED AS ALL OWABLE EXPENSES IN ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 5 5 THE YEAR UNDER CONSIDERATION. THE DR FURTHER CONTE NDED THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITHOUT ANY COGENT AND JUSTIFIED BASIS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ON DISPOSAL OF WRIT FILED BEFORE THE HONBLE DELHI HIGH COURT, DESU RAI SED A BILL OF RS.13,12,347/- ON 5.3.2006 WHICH INCLUDED THE ARREA RS OF EARLIER YEARS AND THE IMPUGNED AMOUNT WAS DEBITED TO PROFIT AND L OSS ACCOUNT AGAINST THE ARREARS. THEREFORE, IT WAS NOT A CONTI NGENT LIABILITY. LD. COUNSEL OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDE R AND SUBMITTED THAT THE AO WAS MISCONCEIVED ABOUT THE FACTS OF THE CASE, THEREFORE, THE BASELESS DISALLOWANCE WAS RIGHTLY ALLOWED BY TH E CIT(A). 8. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E OBSERVE THAT THE ELECTRICITY CHARGES DEBITED TO THE P&L ACCOUNT OF THE FINANCIAL YEAR UNDER CONSIDERATION INCLUDED THE IMPUGNED AMOUNT WH ICH WAS RELATED TO THE ARREARS OF THE EARLIER YEARS. IN TH IS SITUATION, WE ARE OF THE CONSIDERED OPINION THAT THE CLAIM OF THE ASSESS EE CANNOT BE SAID TO BE COMPRISED OF CONTINGENT LIABILITY AND THE CIT (A) RIGHTLY DELETED THE DISALLOWANCE AND ADDITION THEREUNDER. WE ARE U NABLE TO SEE ANY AMBIGUITY OR PERVERSITY IN THE IMPUGNED ORDER AND W E UPHOLD THE SAME BY DISMISSING GROUND NO. 1 OF THE REVENUE. ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 6 6 GROUND NO.2 9. APROPOS GROUND NO.2, LD. DR SUBMITTED THAT THE A SSESSEE COULD NOT ESTABLISH THAT THE PAYMENT OF RS.33,000 AS LEGA L AND PROFESSIONAL CHARGES MADE TO SHRI K.C.MITTAL HAD A DIRECT NEXUS WITH THE EARNINGS OF THE BUSINESS OF THE ASSESSEE AS THE CASE WAS ASS AILED BY M/S SUPEREX STEEL PRODUCTS PVT. LTD.. THE DR FURTHER C ONTENDED THAT THE AO DISALLOWED THE SAME ON JUSTIFIED BASIS WHICH WAS DELETED BY THE CIT(A) WITHOUT ANY COGENT REASONING. 10. LD. COUNSEL OF THE ASSESSEE REPLIED THAT THE PR EMISES SITUATED AT F-89/24, OKHLA PHASE 1 BELONGING TO M/S SUPEREX STE EL PRODUCTS PVT. LTD. HAD BEEN TAKEN ON LEASE BY THE ASSESSEE. LD. COUNSEL FURTHER SUBMITTED THAT THE ELECTRICITY CHARGES BEING DISPUT ED WERE PAYABLE BY THE ASSESSEE BUT SINCE THE OWNER OF THE PREMISES WA S M/S SUPEREX STEEL PRODUCTS PVT. LTD. AND THE ELECTRICITY BILLS WERE RAISED IN THEIR NAME, THEREFORE, THE CASE FILED BEFORE THE HONBLE DELHI HIGH COURT WAS IN THE NAME OF M/S SUPEREX STEEL PRODUCTS PVT. LTD., THEREFORE THE EXPENSES INCURRED ON THE DISPUTE RELATED TO THE ELECTRICITY BILL PERTAINING TO THE PREMISES WHICH WAS OBTAINED ON LE ASE BY THE ASSESSEE. LD. COUNSEL FURTHER SUBMITTED THAT THE A O IGNORED THESE ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 7 7 FACTS AND MADE DISALLOWANCE OF LEGAL AND PROFESSION AL CHARGES PAID TO SHRI K.C. MITTAL WHICH WAS RIGHTLY ALLOWED BY THE C IT(A). 11. FROM BARE READING OF THE IMPUGNED ORDER, WE OBS ERVE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE ON THIS ISSU E WITH FOLLOWING CONCLUSION:- THE ABOVE WRITTEN SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. GROUNDS OF APPEAL NOS. 1 AND 7 TO 10 AR E GENERAL/CONSEQUENTIAL IN NATURE. AT GROUND OF APPEA L NO. 2, THE APPELLANT HAS OBJECTED TO THE DISALLOWANCE O F LEGAL AND PROFESSIONAL EXPENSES OF RS. 33,000/-. IT IS CONTENDED THAT THE LAWYER'S FEE PERTAINED TO LITIGA TION WITH DESU REGARDING EXCESS RATES CHARGED FOR ELECTR ICITY IN THE SHAPE OF TEMPORARY .CONNECTION CHARGES. THE PREMISES AT F-89/24,OKHLA PHASE I, BELONGING TO M/S SUPEREX STEEL PRODUCTS PVT. LTD., HAD BEEN LEASED B Y THE APPELLANT WHICH WAS THE ONLY FIRM OPERATING IN THES E PREMISES. THE ELECTRICITY CHARGES BEING DISPUTED WE RE PAYABLE BY THE APPELLANT, BUT THE OWNER OF THE PREM ISES WAS M/S SUPEREX STEEL PRODUCTS PVT. LTD. AND THE, ELECTRICITY BILLS WERE IN THEIR NAME, HENCE THE CAS E BEFORE THE DELHI HIGH COURT WAS ALSO IN THE NAME OF THE COMPANY CONCERNED. HOWEVER THE LEGAL BILLS PERTAINE D TO THE APPELLANT FIRM, AND COPY OF THE BILL OF ADVOCAT E K. C. MITTAL HAS BEEN FILED IN EVIDENCE THEREOF. CONSIDER ING THE EXPLANATION FILED, IT IS HELD THAT THE LEGAL DISPUT E PERTAINED TO THE ELECTRICITY BILLS OF THE APPELLAN T, AND THEREFORE THE DISALLOWANCE MADE OUT OF LEGAL EXPENS ES AMOUNTING TO RS. 33,000/- IS DELETED. 12. IN VIEW OF ABOVE, WE OBSERVE THAT THE AO HAS NO T DISPUTED THE FACT THAT THE ASSESSEE OBTAINED PREMISES SITUATED A T F-89/24, OKHLA PHASE I ON LEASE FROM M/S SUPEREX STEEL PRODUCTS PV T. LTD. WHO WAS ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 8 8 RECORDED OWNER OF THE PREMISES. WE FURTHER OBSERVE THAT THE AO HAS NOT DISPUTED THE FACT THAT THE ASSESSEE HAD TO FILE A LITIGATION BEFORE HONBLE DELHI HIGH COURT RELATED TO DISPUTE ON PAYM ENT OF ELECTRICITY CHARGES. ACCORDINGLY, WE ARE INCLINED TO HOLD THAT WHEN THE IMMOVEABLE PROPERTY/PREMISES BELONGED TO A PARTICUL AR PERSON OR ENTITY AND THE SAME IS LEASED AND HANDED OVER TO AN OTHER PERSON OR ENTITY, THEN IN CASE OF ANY DISPUTE PERTAINING TO T HE ELECTRICITY PAYMENT RAISED, THE DISPUTE WOULD BE TITLED IN THE NAME OF THE OWNER OF THE PROPERTY/PREMISES AND THE SAME FACTS HAVE EM ERGED IN THE PRESENT CASE. IN THIS SITUATION, IT CANNOT BE SAID THAT THE EXPENSES INCURRED BY THE ASSESSEE ON LEGAL AND PROFESSIONAL CHARGES PAID TO SHRI K.C. MITTAL WERE NOT PERTAINING TO THE ASSESSE E FIRM. PER CONTRA, WE ARE OF THE VIEW THAT THE LEGAL AND PROFESSIONAL CHARGES PAID BY THE ASSESSEE IN THE CASE BEFORE HONBLE DELHI HIGH COUR T WHICH WAS TITLED IN THE NAME OF RECORDED OWNER OF THE PREMISES ARE C ERTAINLY THE EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE WHICH IS ALLOWABLE U/S 37 OF THE ACT. THE AO MADE DISALLOWANCE WITHOUT ANY SOUND REASON WHICH WAS RIG HTLY DELETED BY THE CIT(A). WE ARE UNABLE TO SEE ANY AMBIGUITY OR PERVERSITY IN THE ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 9 9 IMPUGNED ORDER AND WE UPHOLD THE SAME. FINALLY, GR OUND NO. 2 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. GROUND NO.3 13. APROPOS GROUND NO.3, WE HAVE CONSIDERED ARGUMEN T OF BOTH THE SIDES AND CAREFULLY PERUSED THE MATERIAL PLACED ON RECORD. LD. DR SUBMITTED THAT THE EXPENSES INCURRED ON PAYMENT OF RESIDENTIAL TELEPHONE BILLS AND MOBILE PHONE BILLS OF THE PARTN ERS WERE RIGHTLY DISALLOWED BY THE AO NOT BEING BUSINESS EXPENDITURE . THE DR FURTHER CONTENDED THAT IT WAS NOT THE CASE OF THE ASSESSEE THAT THE PARTNERS HAD OTHER MOBILE PHONES WHOSE BILLS WERE NOT DEBITE D IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE CONCERNED, THEREFORE, THE AO RIGHTLY ADOPTED THE PRAGMATIC VIEW IN DISALLOWING 50% OF THE TELEPH ONE BILLS AND ENTIRE AMOUNT OF RESIDENTIAL TELEPHONE BILLS. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN GRAN TING RELIEF ON THIS ISSUE FOR THE ASSESSEE. THE DR FINALLY SUBMITTED T HAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO IN THIS REGARD. LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE PARTNE RS HAVE TO CONDUCT BUSINESS WITH OVERSEAS CLIENTS WHO RESIDE IN DIFFER ENT TIME ZONES AND THE RESIDENTIAL TELEPHONES AS WELL AS MOBILE PHONES OF THE PARTNERS WERE LARGELY USED FOR INTERNATIONAL CALLS FOR THE P URPOSE OF BUSINESS OF ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 10 10 THE ASSESSEE FIRM. LD. COUNSEL FURTHER SUBMITTED T HAT THE FRINGE BENEFIT TAX HAS ALSO BEEN PAID ON THE TELEPHONE EXP ENSES, THEREFORE, THE SAME CANNOT BE DISALLOWED AND ADDITION MADE THE REUNDER IS NOT SUSTAINABLE. LD. COUNSEL SUPPORTED THE IMPUGNED OR DER AND SUBMITTED THAT THE REVENUE HAS RAISED A BASELESS GR OUND. 14. FROM IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) HAS GRANTED RELIEF FOR THE ASSESSEE ON THIS ISSUE OF TELEPHONE EXPENSES WITH FOLLOWING CONCLUSION:- 6. GROUND OF APPEAL NO. 4 RELATES TO DISALLOWANC E OF RS. 1,61,761/- OUT OF TELEPHONE EXPENSES BEING TREATED AS PERSONAL IN NATURE. THE APPELLANT HAS ARGUED THAT ADHOC DISALLOWANCE OF EXPENDITURE WITHOUT IDENTIFYING THE PERSONAL EXPENSES REQUIRES TO BE DELETED. IT HAS ALSO BEEN SUBMITTED THAT DISALLOWANCE OUT OF SUCH EXPENSES IN THE ASSESSMENT YEAR 2004--05 WAS RESTRICTED TO 10% OF THE EXPENSES BY THE LEARNED CITCA) VIDE ORDER DATED 18.02.2008. THE APPELLANT HAS ARGUED THAT THE PARTNERS HAVE TO CONDUCT BUSINESS WITH OVERSEAS CUSTOMERS WHO ARE IN DIFFERENT TIME ZONES, AND THE RESIDENTIAL TELEPHONES AS WELL AS MOBILE PHONES OF THE PARTNERS ARE LARGELY USED FOR INTERNATIONAL CALLS AND INTERNET. MOREOVER IT IS SE EN THAT FRINGE BENEFIT TAX HAS BEEN PAID ON THE TELEPHONE EXPENSES. AFTER CONSIDERING THAT THE VALUE OF USE OF TELEPHONES HAS BEEN INCLUDED IN THE RETURN OF FRINGE BENEFIT TAX, THE DISALLOWANCE OF R S. 1,61,761/- IS DELETED. ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 11 11 15. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSI ONS AND CONCLUSION OF THE CIT(A), WE OBSERVE THAT THE AO HA S NOT DISPUTED THE FACT THAT FRINGE BENEFIT TAX HAS BEEN PAID BY T HE ASSESSEE FIRM ON TELEPHONE EXPENSES. THE AO HAS NOT ALSO DISPUTE D THE FACT THAT THE PARTNERS OF THE ASSESSEE FIRM HAVE TO OPERATE T HE BUSINESS OF THE ASSESSEE WITH OVERSEAS CLIENTS AND CUSTOMERS WH O RESIDE IN DIFFERENT TIME ZONES AROUND THE WORLD. IN THIS SIT UATION, THE EXPLANATION OF THE ASSESSEE IS ACCEPTABLE THAT THE RESIDENTIAL TELEPHONES AS WELL AS MOBILE PHONES OF THE PARTNERS WERE LARGELY USED FOR INTERNATIONAL CALLS AND INTERNET. UNDER TH ESE CIRCUMSTANCES, THE CIT(A) RIGHTLY GRANTED RELIEF FO R THE ASSESSEE AND WE DECLINE TO APPROVE AND UPHOLD THE CONCLUSION OF THE AO IN THIS REGARD. ACCORDINGLY, WE HAVE NO REASON TO INT ERFERE WITH THE IMPUGNED ORDER. HENCE, GROUND NO. 3 OF THE REVENUE BEING DEVOID OF MERITS IS ALSO DISMISSED. GROUND NO.4 16. APROPOS GROUND NO.4, LD. DR SUBMITTED THAT THE RECEIPT IN ISSUE WAS FROM LIQUID PLUS DIVIDEND INVESTMENT PLAN OF AMERICAN EXPRESS BANK LTD. WHICH WAS IN THE NATURE OF DIVIDE ND AND NOT IN THE NATURE OF RECEIPT FROM MUTUAL FUND. THE DR FUR THER CONTENDED ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 12 12 THAT THE RECEIPT IN THE HANDS OF ASSESSEE CANNOT BE SAID TO BE AN INCOME ELIGIBLE FOR EXEMPTION U/S 10(35) OF THE ACT . LD. DR FINALLY SUBMITTED THAT THE AMOUNT ALLOWED IN ISSUE WAS A RE CEIPT FROM AMERICAN EXPRESS BANK LTD. AND WAS IN THE NATURE OF FLOATING INTEREST OF INVESTMENT WITH THE BANK IN THE CAPACIT Y OF FUND MANAGER AND NOT IN THE NATURE OF DIVIDEND AS DEFINE D IN THE ACT. THE DR ALSO POINTED OUT THAT IN THE LIGHT OF ABOVE FACTS, THE ASSESSEES CLAIM OF EXAMINATION WAS NOT TENABLE AND THE AO WAS RIGHT IN TREATING THE SAME AS INCOME FROM OTHER SOU RCES. THE DR CONTENDED THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THAT OF THE AO. 17. LD. COUNSEL OF THE ASSESSEE REITERATED ITS SUBMISSIONS/ARGUMENTS PLACED BEFORE THE CIT(A) WHIC H READ AS UNDER:- THAT THE LD. ADDL. COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING EXEMPTION U/S 10(35) OF THE INCOME TAX ACT, 1961 IN RESPECT O F DIVIDEND ON MUTUAL FUNDS AMOUNTING TO RS.83,108/- ARBITRARILY AND WITHOUT ANY JUSTIFICATION. THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE AMOUNT RECEIVED IS IN THE NATURE OF FLOATI NG KIND OF INTEREST ON INVESTMENT WITH THE BANK IN THE CAPACITY OF FUND MANAGER AND NOT IN THE NATURE OF DIVIDEND AS DEFINED IN THE ACT. ' ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 13 13 IT IS RESPECTFULLY SUBMITTED AS UNDER:- AMERICAN EXPRESS BANK LTD. HAS NO 'LIQUID PLUS DIVIDEND INVESTMENT PLAN'. THE FIRM HAS NOT DIRECT LY MADE THE INVESTMENT OF FUNDS TO TEMPLETON MUTUAL FUND LIQUID PLAN, BUT HAS GIVEN INSTRUCTION AND MANDATE TO AMERICAN EXPRESS BANK TO TRANSFER ANY AMOUNT IN EXCESS OF RS. 2,00,000 LYING IN THE APPELLANTS ACCOUNT TO MUTUAL FUND INVESTMENT ACCOUNT OF TEMPLETON. THE DIVIDEND INCOME ON THESE INVESTMENTS IS RECEIVED DIRECTLY INTO THE APPELLANT S BANK ACCOUNT AND IS ELIGIBLE FOR EXEMPTION U/S 10(3 5) ONLY BY APPELLANT AND NOT BY AMERICAN EXPRESS AS IS SUGGESTED BY THE ASSESSING OFFICER, AS IT IS AN INVESTMENT MADE IN THE NAME OF THE APPELLANT. ASSESSING OFFICER ADMITS THAT THE INFORMATION AVAILABLE TO HIM UNDER AIR SHOWS INVESTMENT TRANSACTIONS ON VARIOUS DATES DURING THE YEAR IN TH E NAME OF THE APPELLANT. ASSUMPTION THAT THE DIVIDEND RECEIVED ON THESE INVESTMENT TRANSACTIONS 'IS IN TH E NATURE OF FLOATING KIND OF INTEREST ON INVESTMENT' RECEIVED FROM AMERICAN EXPRESS IS FACTUALLY INCORRECT. SINCE, THE INVESTMENT HAS BEEN MADE IN THE NAME OF THE APPELLANT AND DIVIDEND IS ALSO CREDITED IN THE BANK ACCOUNT OF THE APPELLANT, THE APPELLANT IS ENTITLED TO EXEMPTION U/S 10 (35) OF THE ACT AND NO ADDITION ON THIS ACCOUNT IS CALLED FOR. 18. FROM A GLANCE AT THE IMPUGNED ORDER, WE SEE THA T THE CIT(A) HAS GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING CONCLUSION AND FINDINGS:- 8. GROUND OF APPEAL NO. 6 RELATES TO, THE DISALLOWANCE OF EXEMPTION U/S 10(35) IN RESPECT OF ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 14 14 DIVIDEND ON MUTUAL FUNDS OF RS. 83,108/-. IT HAS BEEN EXPLAINED BY THE APPELLANT THAT IT HAD GIVEN MANDATE TO AMERICAN EXPRESS BANK TO TRANSFER ANY AMOUNT IN EXCESS OF RS. 2,00,000/- LYING IN THE APPELLANT'S CURRENT ACCOUNT TO THE FRANKLIN TEMPLETON MUTUAL FUND. THE APPELLANT HAS FILED COPIES OF THE MUTUAL FUND STATEMENT IN THE NAME OF THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION, SHOWING THE EARNING OF DIVIDEND, WHICH HAS BEEN DIRECTLY CREDITED TO THE APPELLANT'S BANK ACCOUNT. THE APPELLANT HAS ALSO FILED COPY OF STATEMENT OF I TS ACCOUNT WITH AMERICAN EXPRESS BANK SHOWING THE CREDITS OF DIVIDEND. IN VIEW OF THE EVIDENCES FILED , THE INCOME OF RS. 83,108/- IS CLEARLY SEEN TO BE IN THE NATURE OF DIVIDEND FROM MUTUAL FUNDS, ELIGIBLE FOR EXEMPTION U/S 10(35). ACCORDINGLY, THE APPELLANT SUCCEEDS AT GROUND OF APPEAL NO. 6. 19. ON CAREFUL CONSIDERATION OF ABOVE CONTENTIONS A ND SUBMISSIONS OF BOTH THE SIDES, WE OBSERVE THAT AS PER COPIES OF THE MUTUAL FUND STATEMENT IN THE NAME OF THE ASSESSEE FOR THE PERIO D UNDER CONSIDERATION, IT IS CLEAR THAT THE EARNING OF DIVI DEND WHICH WERE DIRECTLY CREDITED TO THE ASSESSEES BANK ACCOUNT AR E RECEIPTS IN THE NATURE OF DIVIDEND FROM MUTUAL FUNDS WHICH ARE ELIG IBLE FOR EXEMPTION U/S 10(35) OF THE ACT. ACCORDINGLY, WE R EACH TO A CONCLUSION THAT THE CIT(A) RIGHTLY GRANTED RELIEF F OR THE ASSESSEE AND WE ARE UNABLE TO SEE ANY JUSTIFIED REASON TO INTERF ERE WITH THE IMPUGNED ORDER IN THIS REGARD. THEREFORE, WE CONCL UDE THAT THE AO MADE DISALLOWANCE ON MISCONCEIVED REASONING WHICH W AS ORIGINALLY ITA NO. 3713/DEL/2013 ASSTT.YEAR: 2006-07 15 15 CORRECTED BY THE CIT(A) AND WE UPHOLD THE CONCLUSIO N OF THE IMPUGNED ORDER IN THIS REGARD. FINALLY, LAST GROUN D OF THE REVENUE IS ALSO DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED ON ALL FOUR GROUNDS. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY 2014. SD/- SD/- (S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 18 TH JULY 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR