KRISHIRAJ TRADING LTD, MUMBAI V. ASST CIT 6(2), MUMBAI

ITA 4014/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3598 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MMURALIDR
• Keywords: Earning of tax free income; Revised return
• Section: 14A

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./ I.T.A. NO.4014/MUM/2013 / ASSESSMENT YEAR: 2009-10 M/S. KRISHIRAJ TRADING LTD. B-WING TRADE WORLD, 9 TH FLOOR KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL MUMBAI-400 013. PAN:AAACK 2257 N VS. ASSTT. CIT-6(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M-MURALI-DR A SSESSEE BY: NONE / DATE OF HEARING:29.02.2016 / DATE OF PRONOUNCEMENT: 02.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 06.03.2013 OF CIT(A)-1 2,MUMBAI,THE ASSESSEE HAD FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF TRADING AND INVESTMENT,FILED ITS RETURN OF INCOME ON 24.09.2009,DECLARING TOTAL INCO ME AT RS.1.47 CRORES.LATER ON A REVISED RETURN WAS FILED.THE ASSESSING OFFICER (AO) COMPLET ED THE ASSESSMENT ,U/S.143(3) OF THE ACT, ON 30.11.2011,DETERMINING THE INCOME OF THE ASSESSE E AT RS.4,59,08,300/-.THE MATTER WAS FIXED ON 02.09.2015,BUT NO ONE APPEARED ON BEHALF O F THE ASSESSEE.REGISTRY WAS DIRECTED TO ISSUE THE HEARING NOTICE THROUGH REGISTERED POST (A D).ACCORDINGLY,A NOTICE WAS ISSUED AND MATTER WAS FIXED FOR HEARING FOR 29.02.2016.BUT,TOD AY NONE APPEARED TO REPRESENT THE CASE OR TO SEEK AN ADJOURNMENT.CONSIDERING THESE FACTS WE A RE ADJUDICATING THE APPEAL ON THE BASIS OF AVAILABLE MATERIAL. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE M ADE U/S.14A OF THE ACT.DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.3.75 CRORES,THAT IT HAD NOT APPORTIONE D ANY EXPENDITURE RELATED TO THE ABOVE MENTIONED EXEMPT INCOME.HE HELD THAT AT LEAST A PAR T OF THE ADMINISTRATIVE EXPENSES HAD TO BE ATTRIBUTABLE TO EARNING OF THE EXEMPT INCOME.INVOKI NG THE PROVISIONS OF SECTION 14A R.W.RULE 8D OF THE INCOME TAX RULES,1962(RULES),HE MADE A DI SALLOWANCE OF RS.3.12 CRORES. 3 .AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED T HAT IT WAS ALSO ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES,THAT INVESTMENT MADE BY IT AS ON 31.03.2009 STOOD AT RS.646.46 CRORES, THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO THE EXEMPT INCOME EXCEPT STT OF RS. 1.41 LAKHS,THAT INVESTMENT WAS MADE BY THE A SSESSEE IN ACQUIRING THE CONTROLLING INTEREST IN THE GROUP COMPANIES,THAT DIVIDEND INCOM E WAS INCIDENTAL TO HOLDING OF SHARES,THAT THERE WAS NO LIVE NEXUS BETWEEN THE EXEMPT INCOME A ND EXPENDITURE INCURRED,THAT THE AO HAD NOT GIVEN ANY FINDING THAT ANY OTHER EXPENDITUR E WAS INCURRED FOR EARNING THE EXEMPT INCOME, THAT THE ASSESSEE HAD RELIED UPON A NUMBER OF CASES BUT THE AO HAD NOT OFFERED ANY 4014/13KRISHIRAJTRDG. 2 COMMENTS ON THAT, THAT DURING THE YEAR UNDER APPEAL IT HAD INCURRED EXPENSES-OTHER THAN THE FINANCE AND STT EXPENSES- ONLY OF RS.4.14 LAKHS, TH AT THE DISALLOWANCE MADE BY THE AO WAS MORE THAN THE ACTUAL EXPENDITURE INCURRED BY IT. 4. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER THE FAA HELD THAT THE PROVISIONS OF SECTION 14A WERE APPLICABLE TO THE CASE UNDER CONSIDERATION, THAT ASSESSEE WAS NOT ABLE TO PROVE THAT IT HAD MAINTAIN ED SEPARATE ACCOUNTS FOR EARNING TAXABLE AND THE NON-TAXABLE INCOME, THAT IT COULD NOT BE AC CEPTED THAT TO EARN EXEMPT INCOME OF RS.3.75 CRORES, THE ASSESSEE HAD NOT INCURRED ANY E XPENDITURE, THAT SOME PART OF THE ADMINISTRATIVE AND MANAGEMENT EXPENSES MUST HAVE BE EN INCURRED FOR EARNING EXEMPT INCOME, THAT THE PROVISIONS OF RULE 8D WERE APPLICA BLE FOR THE YEAR UNDER CONSIDERATION, THAT THE PROVISIONS OF THE SAID RULE WERE MANDATORY AND THE AO HAD NO DISCRETION IN THAT REGARD.FINALLY, HE UPHELD THE ORDERS OF THE AO. 5. THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. AS STATED EARLIER, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE FIND THAT THE AO MADE A DISALLOWANCE OF RS.3.12 CRORES AS AGAINST THE TOTAL EXPENSES OF RS.4.14 LAKHS INCURRED BY THE ASSESSEE, THAT THE AO HAD NOT GIVEN ANY REASON OR BASIS FOR DISALLOWING THE SAID AMOUNT, THAT THE AO AND THE FA A HAD MECHANICALLY APPLIED PROVISIONS OF RULE 8D.DISALLOWANCE U/S.14A COULD BE MADE IF TH E ASSESSEE CLAIMED SOME EXPENDITURE AGAINST THE EXEMPT INCOME. THE REASON BEHIND THE SE CTION 14A AND RULE 8D IS TO DENY DOUBLE BENEFIT TO THE ASSESSEE I.E. CLAIMING EXEMPTION ON ONE HAND AND CLAIMING EXPENDITURE ON THE OTHER.BUT IT WAS NEVER INTENDED BY THE LEGISLATURE THAT DISALLOWANCE SHOULD BE MADE IN A ROUTINE MANNER WITHOUT CONSIDERING THE BASIC FACT I .E. AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE.THE ASSESSEE HAD ADVANCED CERTAIN ARGUMENT S THAT ARE LISTED AT PARA 4.2 AT PG NO.3 OF THE ORDER OF THE FAA.WE FIND THAT THE FAA HAS NOT D EALT WITH THE SUBMISSIONS MADE BY THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPI NION THAT THE MATTER NEEDS FURTHER VERIFICATION AND INVESTIGATION.THEREFORE, IN THE IN TEREST OF JUSTICE WE ARE RENDERING BACK THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION WHO WOULD DECIDE THE ISSUE AFTER CONSIDERING THE LATEST JUDICIAL PRONOUNCEMENT OF THE HON'BLE JURISD ICTIONAL HIGH COURT AND THE HONBLE DELHI HIGH COURT.FIRST EFFECTIVE GROUND IS DECIDED IN FAV OUR OF THE ASSESSEE,IN PART. 6. NEXT EFFECTIVE GROUND DEALS WITH CHARGING OF INTERE ST U/S.234 OF THE ACT.AS THE ISSUE IS CONSEQUENTIAL IN NATURE, SO, THE SAME IS NOT ADJUDI CATED. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH , 2016. 2 , 2016 SD/- SD/- ( / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02. 03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . .