HINDUSTAN DIAMOND CO. P.LTD, MUMBAI V. ASST CIT 14(2)(1), MUMBAI

ITA 3844/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7746 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 29-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2016
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: MITESH N SHAH
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 3844 / MUM/20 1 6 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. HINDUSTAN DIAMOND CO. PVT. LTD., OFFICE NO.DE - 6010, BHARAT DIAMOND BOURSE, BANDRA KURL A COMPLEX, BANDRA (E), MUMBAI 400 051 VS. ASST. COMMISSIONER OF INCOME TAX 14(2)(1), MUMBAI 400 020 PAN/GIR NO. AAACH0400Q APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI MITESH N SHAH REVENUE BY SHRI SAURABH DESHPANDE DATE OF HEARING 29 / 03 /201 7 DATE OF PRONOUNCEME NT 29 / 03 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 22, MUMBAI DATED 23/03/2016 FOR THE ASSESSMENT YEAR 2012 - 13 IN THE MATTER O F ORDER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF RS.5,29,605/ - UNDER RULE 8D(2)(II) R.W.S.14A OF THE ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT ASSESSEE H AS MADE INVESTMENT IN MUTUAL FUND FOR WHICH IT HAS OFFERED DISALLOWANCE OF 25% OF SALARY OF SHRI RAJESH VOHRA WHOSE SALARY WAS TO THE TUNE OF RS.7,06,140/ - BEING INCURRED FOR EARNING EXEMPT INCOME. B Y OBSERVING THAT IN THE PRECEDING YEAR ASSESSEE HAS ITA NO. 3844/MUM/2016 M/S. HINDUSTAN DIAMOND CO. PVT. LTD., 2 INCUR RED EXPENDITURE O N PMS FOR MAINTAINING THOSE OF INVESTMENT PORTFOLIO AND NOW ALL THIS WORK IS DONE BY THE ACCOUNTANT, THE AO DISALLOWED 100% OF THE SALARY OF SHRI RAJESH VOHRA. BY THE IMPUGNED ORDER , THE CIT(A) C ONFIRMED THE ACTION OF THE AO. 4. IT WAS CO NTENDED BY LEARNED AR THAT FROM THE DETAILS OF THE EXPENDITURE, IT WAS CLEAR THAT THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE HAD DIRECT NEXUS WITH THE BUSINESS INCOME OF THE ASSESSEE . THAT IT WAS NOT THE CA SE OF THE AO THAT THE ASSESSEE HAS USED ITS OFFICIAL MACHINERY AND ESTABLISHMENT FOR E ARN ING THE EXEMPT INCOME. THAT THE AO HAS NOT GIVEN ANY FINDING THAT ANY OF THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE WAS ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME. IN OTHER WORDS WHEN THE AO HAS N OT POINTED OUT THAT CERTAIN EXPENDITURE WAS NOT INCURRED FOR EARNING THE BUSINESS INCOME; BUT WERE INCURRED IN RELATION TO DIVIDEND INCOME OR SUCH EXPENDITURE WAS INCURRED FOR INSEPARABLE AND INDIVISIBLE ACTIVITIES COMPRISING PROFESSIONAL AS WELL AS THE AC TIVITIES ON WHICH EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE, THEN IN THE ABSENCE OF ANY SUCH INSTANCE OF EXPENDITURE, FINDING OF AO OR ANY MATERIAL TO SHOW THAT THE EXPENDITURE INCURRED AND CLAIMED BY THE ASSESSEE AGAINST THE TAXABLE INCOME HAD ANY REL ATION FOR EARNING THE EXEMPT INCOME, THE PROVISIONS OF SECTION 14A COULD NOT BE APPLIED. 5. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW . F ROM THE RECORD WE FOUND THAT THE ACCOUNTANT OF THE ITA NO. 3844/MUM/2016 M/S. HINDUSTAN DIAMOND CO. PVT. LTD., 3 COMPANY WAS DOING SO MANY OTHER WORKS OF THE COMPANY, RESULTING INTO EARNING OF TAXABLE INCOME THEREFORE, HIS ENTIRE SALARY CANNOT BE ATTRIBUTED TO EARNING OF EXEMPT INCOME. 7. KEEPING IN VIEW THE TOTAL ITY OF FACTS AND CIRCUMSTANCES, WE CONSIDER IT REASONABLE TO DISALLOW 40% OF THE SALARY AS ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME. WE DIRECT ACCORDINGLY. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 29 / 03 /2017 S D/ - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 29 / 03 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//