KHYATI REALTORS P. LTD, MUMBAI V. ITO 6(2)(4), MUMBAI

ITA 4130/MUM/2010

• Counselvise Citation: 413019914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MORYA
• Assessee Lawyers: VIJAY MEHTA
• Section: 14A; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 4130/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) DATE OF HEARING: 16.6.2011 KHYATI REALTORS PVT. LTD. 301, MANEK BHUVAN, PLOT NO.68 HINDU COLONY, DADAR MUMBAI 400 019 AACCK4422B .. APPELLANT V/S INCOME TAX OFFICER WARD-6(2)(4), MUMBAI .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. P.C. MORYA O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY ASSESSEE, IS DIRECTED AGAI NST THE IMPUGNED ORDER DATED 4 TH MARCH 2010, PASSED BY THE COMMISSIONER (APPEALS)-X II, MUMBAI, FOR ASSESSMENT YEAR 2007-08. THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATION IS, DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2. THE ASSESSING OFFICER APPLIED THE DECISION OF MUMBA I BENCH OF THE TRIBUNAL IN ITO V/S DAGA CAPITAL MANAGEMENT PVT. LT D. (2008) 119 TTJ (MUM.) (SB) 289. ON APPEAL, THE FIRST APPELLATE AUT HORITY, WHILE EXTRACTING HIS ORDER FOR ASSESSMENT YEAR 2006-07, VIDE PARA-3. 3, HELD THAT WHILE COMPUTING 0.5% AS ADMINISTRATIVE EXPENDITURE UNDER RULE-8D, THE AMOUNT KHYATI REALTORS PVT. LTD. ITA NO. 4130/MUM./2010 2 SHOULD BE RESTRICTED TO THE TOTAL EXPENDITURE INCUR RED BY THE COMPANY. IT HELD THAT THE OPERATIONAL EXPENSES WERE ` 9,02,000 AND FINANCIAL CHARGES WERE ` 16,02,000, AGGREGATING TO ` 25,04,000 AND THAT THE DISALLOWANCE WORKED OUT TO ` 18,60,000 ON THE GROUND THAT ` 18,06,000 IS LESSER THAN THE FINANCE CHARGES AND ADMINISTRATIVE EXPENSES. HENCE, HE DISMISSED THE ASSESSEES APPEAL. AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL. 3. LEARNED COUNSEL, MR. VIJAY MEHTA, APPEARING ON BEHA LF OF THE ASSESSEE, POINTS OUT THAT THE OPERATION INCOME OF T HE ASSESSEE IS ` 9,02,472 AND OUT OF THIS, ` 2,04,000 WAS LEGAL AND PROFESSIONAL CHARGES, ` 3,50,000 IS DONATION PAID AND ` 30,329 IS AUDITORS REMUNERATION OUT OF WHICH AN A MOUNT OF ` 22,472, WAS DISALLOWED BY THE ASSESSING OFFICER. T HUS, HE SUBMITS THAT THE TOTAL EXPENDITURE, IF AT ALL, WHICH IS TO BE CO NSIDERED IS ` 1,68,898. HE POINTS OUT PARA-3.5 OF THE ASSESSMENT ORDER, WHEREI N THE ASSESSING OFFICER HAD ACKNOWLEDGED THE FACT WITH THE ENTIRE INTEREST EXPENDITURE HAVE BEEN INCURRED FOR THE ASSESSEES BUSINESS OF FINANCE. TH US, HE SUBMITS THAT THE FINANCE EXPENDITURE CANNOT BE DISALLOWED AS THAT RE LATES TO EARNING OF DIVIDEND. THE LEARNED COUNSEL SUBMITS THAT THE ASSE SSEE HAS RECEIVED ONLY TWO CHEQUES BY WAY OF DIVIDEND ONE ON 29 TH MAY 2006 & OTHER ON 20 TH MARCH 2007 AND, HENCE, THERE IS NO EXPENDITURE THAT CAN BE SAID TO HAVE BEEN INCURRED FOR EARNING DIVIDEND BY WAY OF THESE TWO CHEQUES. HE SUBMITS THAT, AT BEST, A TOKEN DISALLOWANCE MAY BE MADE. 4. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. P.C. MOURY A, ON THE OTHER HAND, SUBMITS THAT THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH IN THE LIGHT OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO . LTD. V/S DCIT, (2010), 328 ITR 081 (BOM.). 5. LEARNED COUNSEL OPPOSED THE SAME AND SUBMITS THAT, NORMALLY, THE TRIBUNAL HAS BEEN SETTING ASIDE THE MATTER TO THE F ILE OF ASSESSING OFFICER, BUT IN THIS CASE, THE FACTS ARE IN A NARROW COMPASS AND THERE IS NO DISPUTE ON THE ISSUES, A DECISION MAY BE MADE BY THE TRIBUNAL ITSELF. KHYATI REALTORS PVT. LTD. ITA NO. 4130/MUM./2010 3 6. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS ED THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT, OUT OF OPERATION EXPENDITURE OF ` 9,02,472, THE ASSESSEE HAD ADDED BACK ` 3,50,000 TO ITS INCOME AND HAS NOT CLAIMED DEDUCTION UNDER SECTION 80G OF THE ACT, AS IT WAS A DONATION. AN AMOUNT OF ` 2,04,000 WAS INCURRED TOWARDS PROFESSIONAL FEE AND ` 1,48,000 WAS INCURRED ON TRAVELING AND CONVEYANCE EXPENDITURE. THUS, AT B EST, ADMINISTRATIVE EXPENDITURE CAN BE SAID TO BE ` 2,00,472. THE ASSESSEE HAS RECEIVED ONLY TWO CHEQUES DURING THE YEAR AND ON THESE FACTS, NO EXPENDITURE WHATSOEVER, IN OUR OPINION, CAN BE ATTRIBUTED TO THE EARNING OF THIS INCOME. AS FAR AS THE FINANCE EXPENDITURE IS CONCERNED, THE ASSESSING OFF ICER AT PAGE-4, HAS STATED THAT THE ASSESSEE HAS EXPLAINED AND PRODUCED EVIDEN CE THAT THE ENTIRE INTEREST EXPENDITURE HAS BEEN INCURRED FOR THE ASSE SSEES BUSINESS OF FINANCE WHICH FORMS PART OF THE OPERATION COST. HENCE, ON A N ANALYSIS OF THE ABOVE FACTS, WE ARE OF THE CONSIDERED OPINION THAT INTERE ST OF JUSTICE WOULD BE SERVED IF THE DISALLOWANCE IS RESTRICTED TO ` 10,000. WE ORDER ACCORDINGLY. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON 24.6.2011 SD/- D. MANMOHAN VICE PRESIDENT SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 24.6.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, A BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI