M/s. Uzind Corporation, New Delhi V. ACIT, New Delhi

ITA 3718/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7052 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.3718/DEL/2015 ASSESSMENT YEAR : 2007-08 UZIND CORPORATION, 305, 3 RD FLOOR, PRAKASH DEEP BUILDING 7, TOLSTOY MARG, NEW DELHI. VS. ACIT, CIRCLE- 61(1), NEW DELHI. PAN : AAAFU1597J (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. SWEETY KOTHARI, CA DEPARTMENT BY : SHRI ARUN KUMAR YADAV, SR.DR DATE OF HEARING : 12-07-2018 DATE OF PRONOUNCEMENT : 13-07-2018 O R D E R PER P. M. JAGTAP, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)- 20, NEW DELHI DATED 20.04.2015 AND THE SOLI TARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS.2,47,023/- MADE B Y THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE I.T. ACT , 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 31.10.20 07 DECLARING A TOTAL INCOME OF RS.1,58,73,004/-. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) VIDE ORDER DATED 30.12.2009, THE TOTAL INCOME OF THE ASS ESSEE WAS DETERMINED BY THE ASSESSING OFFICER AT RS.1,62,60,402/- AFTER MAKING ADDITION INTER-ALIA ON 2 ITA NO.3718/DEL/2015 ACCOUNT OF DISALLOWANCE U/S 14A OF THE I.T. ACT, 19 61 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. ON CONFIRMATION OF THE SAI D ADDITION BY THE LD. CIT(A), THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 11.07.2012 PASSED IN ITA NO.12 43/DEL/2010 RESTORED THE ISSUE RELATING TO THE DISALLOWANCE OF RS.2,47,023/- MADE U/S 14A R.W. RULE 8D TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING T HE SAME AFRESH BY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS. HERO CYCLES LTD., 323 ITR 518. AS PER THE DIRE CTION OF THE TRIBUNAL, THE ASSESSING OFFICER DECIDED THE ISSUE AFRESH. WHILE DOING SO, HE FOUND FROM THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE THAT EXPENDITURE OF RS.2,89,410/- WAS INCURRED BY THE AS SESSEE ON ACCOUNT OF SERVICES CHARGES PAID ON SECURITIES. ACCORDING TO HIM, THIS EXPENDITURE WAS RELATABLE TO THE EXEMPT INCOME. HE ALSO FOUND THAT APART FROM THE SAID EXPENDITURE, THE ASSESSEE HAD ALSO CLAIMED EXPENSES ON ACCOUNT OF SERVICE TAX PAID, TELEPHONE & TELEX, PROFESSIONAL AND LEGAL CHA RGES, OFFICE EXPENSE AND INTEREST AMONGST OTHERS. HE HELD THAT THESE EXPENS ES WERE ALSO RELATED INDIRECTLY TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. IN OR DER TO COMPUTE THE DISALLOWANCE TO BE MADE U/S 14A ON ACCOUNT OF THESE EXPENSES DIRECTLY AND INDIRECTLY RELATED TO THE EXEMPT INCOME ON PROPORTI ONATE BASIS, THE ASSESSING OFFICER ADOPTED THE METHOD PRESCRIBED IN RULE 8D(2) (III) AND MADE A DISALLOWANCE OF RS.2,47,023/-. ON APPEAL, LD. CIT( A) CONFIRMED THE SAID 3 ITA NO.3718/DEL/2015 DISALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT( A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER AS PER THE DIR ECTION OF THE TRIBUNAL SHOULD HAVE CONSIDERED THE ISSUE RELATING TO THE DISALLOWA NCE U/S 14A BY APPLYING THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF HERO CYCLES LTD. (SUPRA). SHE HAS CONTENDED THAT T HE ASSESSING OFFICER, HOWEVER, DID NOT FOLLOW PROPERLY THE DIRECTION SPEC IFICALLY GIVEN BY THE TRIBUNAL AND MADE DISALLOWANCE U/S 14A BY APPLYING RULE 8D WHICH IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE INVOLVING AS SESSMENT YEAR 2007-08. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. COU NSEL FOR THE ASSESSEE. AS HELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF HERO CYCLES LTD. (SUPRA), WHERE ANY EXPENDITURE WAS INCURRED IN RELA TION TO THE EARNING OF EXEMPT INCOME OR NOT IS A QUESTION OF FACT AND DISALLOWANC E U/S 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE. IN THIS REGARD, IT IS NO TED FROM THE ORDER OF THE ASSESSING OFFICER THAT THE EXPENDITURE INCURRED BY THE ASSESSEE DIRECTLY OR INDIRECTLY IN RELATION TO THE EXEMPT INCOME WAS IDE NTIFIED BY THE ASSESSING OFFICER AND AFTER RECORDING A FINDING TO THIS EFFEC T, THE DISALLOWANCE 14A WAS MADE BY HIM. AS REGARDS THE APPLICABILITY OF THE R ULE 8D, IT IS TRUE THAT THE SAID RULE IS NOT APPLICABLE IN THE PRESENT CASE INVOLVIN G ASSESSMENT YEAR 2008-09 AS 4 ITA NO.3718/DEL/2015 RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESS EE. IT IS HOWEVER ALSO TRUE THAT ONLY THE METHOD PRESCRIBED IN THE SAID RULE WAS ADO PTED BY THE ASSESSING OFFICER TO WORK OUT THE EXPENSES INDIRECTLY INCURRE D BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME ON PROPORTIONATE BASIS. IN OU R OPINION, THE DISALLOWANCE OF RS.2,47,023/- MADE BY THE ASSESSING OFFICER U/S 14A THUS WAS WORKED OUT AS PER THE DIRECTIONS GIVEN BY THE TRIBUNAL AND LD. CI T(A) WAS FULLY JUSTIFIED IN CONFIRMING THE SAME. IN THAT VIEW OF THE MATTER, W E UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THIS AP PEAL FILED BY THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JULY, 2018. SD/- SD/- (SUCHITRA KAMBLE) (P. M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13-07-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI