Binoy Jacob, New Delhi V. ACIT, New Delhi

ITA 4506/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81687 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: VIKAS SRIVASTAVA
• Keywords: Capital asset; Earning of tax free income
• Section: 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4506/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) BINOY JACOB 45A FRIENDS COLONY EAST NEW DELHI. - 110065 PAN:AATPJ5379C VS. ACIT CIRCLE 7(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VIKAS SRIVASTAVA , A DV. RESPONDENT BY : MS. Y. KAKKAR , SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A), X, DATED 27.05.2013 RELATED TO ASSESSMENT YEAR 2009 - 10. 2. GROUND NO.1 IS GENERAL IS THEREFORE DISMISSED. 3. GROUND NO.2 , 3 AND 4 PERTAINS TO ADDITI ON OF RS.9,49,244/ - U/S 14(A) READ WITH RULE 8D. 4. THE ASSESSEE IS AN INDIVIDUAL AND I S CHAIRMAN OF TRUINE GROUP. HE IS ENGAGED IN THE BUSINESS OF FINANCIAL CONSULTANCY. THE AO HAS NOTED THAT THE ASSESSEE HAS MADE A DISALLOWANCE OF RS.4,43,666/ - U/S 14(A) BEING 10% OF THE DIVIDEND INCOME OF RS.44,36,661/ - . THE AO DID NOT AGREE WITH THE COMPUTATION OF THE ASSESSEE AND COMPUTED THE DISALLOW ANCE AT RS.9,49,244/ - . HE HAS COMPUTED THE DISALLOWANCE AT RS.7,12,415/ - BEING THE EXPENDITURE DIRECTLY INCURRED FOR EARNING EXEMPT INCOME AND RS.6,80,295/ - B EING THE EXPENDITURE INDIRECTLY INCURRED FOR EXEMPT INCOME I.E. 0.5% OF THE AVERAGE INVESTMENT. IN OTHER WORDS HE MADE DISALLOWANCE OF RS.13,92,710/ - AND SINCE THE ASSESSEE HAS ALREADY MADE A DISALLOWANCE OF RS.4,43,666/ - , THEREFORE AO MADE FURTHER DISALLOWANCE OF RS.9,49,244/ - . PAGE NO. 2 ITA NO. 4506/DEL/2013 5. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD CIT(A) WHO WAS PLEASED TO CONFIRM THE IMPUGNED ORDER AND CONCLUDED AS UNDER: - 2.5. AFTER CONSIDERING THE FACTS OF THE CASE, OBSERVATIONS OF THE A.O., SUBMISSIONS OF THE A.R. OF THE APPELLANT AND VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS ISSUE, THIS GR OUND IS BEING FINALIZED BY MAKING THE FOLLOWING OBSERVATIONS: (A) ON GOING THROUGH THE FACTS OF THE PRESENT CASE, FROM THE ASSESSMENT ORDER, IT IS ABUNDANTLY CLEAR THAT THE APPELLANT HAD MADE THIS DISALLOWANCE OF EXPENDITURE RELATING TO INCOME NOT CHARGEABLE TO TAX, ONLY ON THE BASIS OF ESTIMATION @ 10 0 /0 OF SUCH INCOME. THIS CLEARLY IMPLIES THAT IT WAS ONLY AN ESTIMATED DISALLOWANCE OF EXPENDITURE AND NOT THE ACTUAL EXPENDITURE. (B) IT IS ALSO CLEAR FROM THE ASSESSMENT ORDER THAT THE APPELLANT HAD HIMSELF MADE A SUBMISSION AND GIVEN AN ESTIMATE WHICH WAS ACCEPTED AS THE DISALLOWANCE AS PER RULE 8D OF THE INCOME TAX ACT. THE ASSESSMENT ORDER IS, THEREFORE, ITSELF MENTIONS THAT THE ESTIMATE GIVEN BY THE ASSESSEE AT THE TIME OF ASSESSMENT WAS NOT ACCE PTABLE TO THE ASSESSING OFFICER BECAUSE OF WHICH, THE ASSESSEE HAD REVISED THE ESTIMATE BASED ON RULE 8D AND HAD ALSO STATED THAT THE EARLIER ESTIMATE GIVEN BY HIM SHOULD BE REVISED. (C) ON GOING THROUGH THE VARIOUS JUDICIAL PRONOUNCEMENTS LIKE MAXOPP (S UPRA), THE FACTS OF THE CASE WERE DIFFERENT THAN THE PRESENT ONE. IN THE PRESENT CASE, THE COMPUTATION AS PER RULE 8D WAS BEING APPLIED AND ALSO ACCEPTED BY THE ASSESSEE' SINCE THE EARLIER DISALLOWANCE HAD ALSO BEEN MADE ONLY ON ESTIMATE BASTS AND NOT ON A CTUAL EXPENDITURE. IF THE ESTIMATED DISALLOWANCE HAD TO BE MADE, THEN, THE PROVISIONS OF RULE 80 MUST BE APPLIED, SINCE IT IS STIPULATED BY THE LAW THAT THIS RULE SHOULD BE INVOKED ONCE THE ACTUAL DISALLOWANCE OF EXPENDITURE IS NOT PROPERLY MADE BY THE ASS ESSEE. ACCORDINGLY, IN MY OPINION, SINCE THE APPELLANT HAD HIMSELF AGREED TO SUCH COMPUTATION UNDER RULE 80, AS HE DID NOT MAINTAIN SEPARATE DETAILS OF SUCH EXPENDITURE, AND HE ALSO ACCEPTED THAT THE NEW COMPUTATION SHOULD BE SUBSTITUTED FOR THE ESTIMATED DISALLOWANCE MADE BY THE ASSESSEE EARLIER, THE OTHER JUDICIAL PRONOUNCEMENTS ARE CLEARLY DIFFERENTIATED. 2.6. ACCORDINGLY, IN VIEW OF THE ABOVE OBSERVATIONS, I AM INCLINED TO AGREE WITH THE ADDITION MADE BY THE AS SESSING OFFICER ON THIS AMOUNT. 6. AGGRIEVED BY THE SAID ORDER OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. THE LD AR SUBMITS THAT THE AUTHORITIES BELOW HAV E ERRED IN DISALLOWING EXPENSES AMOUNTING TO RS.9,49,244/ - UNDER SECTION 14A OF THE ACT WHICH ARE IN EXCESS OF TOTAL EXPENSES CLAIMED BY THE APPELLANT , WHILE COMPUTING INCOME UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS AND PROFESSION. IT WAS FURTHER SUBMITTED THAT THEY HAVE ALSO DISALLOWED CERTAIN EXPENSES U/S 14A OF THE ACT READ WITH PAGE NO. 3 ITA NO. 4506/DEL/2013 RULE 8D OF THE RULES WHICH HAVE NO NEXUS WITH THE EXEMPT INCOME EARNED BY THE APPELLANT THEREFORE THE LD. AR PRAYS THAT THE ORDER OF THE LOWER AUTHORITIES BE SET ASIDE . ON THE OTHER HAND T HE LD DR SUPPORTED THE ACTION OF THE AUTHORITIES BELOW. 7 . WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECOR DS OF THE CASE. THE ASSESSEE HAS SUO - MOTTO MADE A DISALLOWANCE OF RS.4,43,666/ - U/S 14A OF THE ACT. THUS APPLICABILITY OF SECTION 14A IS NOT IN DISPUTE. AS REGARDS THE COMPUTATION IT IS ALSO NOT IN DISPUTE THAT THE FIGURE COMPUTED BY THE ASSESSEE U/S 14A N EITHER IS BASED ON SEPARATE BOOKS OF ACCOUNT N OR IN TERMS OF RULE 8D. IN THE FACE OF THIS FACTUAL POSITION, THE AO WAS CORRECT IN COMPUTING THE DISALLOWANCE IN TERMS OF RULE 8D. THE AO HAS DISALLOWED A SUM OF RS.7,12,415/ - BEING AN EXPENSES DIRECTLY INCURR ED FOR EARNING EXEMPT INCOME. THERE IS NO MATERIAL LED BEFORE US TO SUGGEST THAT SUCH EXPEN S ES WERE NOT INCURRED FOR EARNING EXEMPT INCOME. AS SUCH DISALLOW ANCE OF RS.7,12,415/ - IS NOT INCORRECT. SO FAR AS DISALLOWANCE UNDER CLAUSE 3 OF RULE 8D IS CONCERNED, AO HAS COMPUTED THE SAME AT RS.6,80,295/ - . THE COMPUTATION OF WHICH IS NOT IN DISPUTE , THUS AGGREGATE DISALLOWANCE WAS ARRIVED AT RS.13,92,710/ - . HOWEVER, SI NCE THE ASSESSEE HAD ALREADY MAD E A DISALLOWANCE OF RS.4,43,666/ - , THE DISALLOWANCE IS S USTAINED AT RS.9,49,244/ - . THE ASSESSEE HAS CLAIMED BEFORE US, THAT EXPENSES DISALLOWED ARE MORE THAN THE TOTAL EXPENSES CLAIMED. HE HAS SUPPORTED HIS SUBMISSION BY RELYING UPON THE DECISION IN THE CASE OF 1. M / S GILLETTE GROU P INDIA PVT. LTD. VS. ACIT [ITA NO. 267/DEL/2012 , 2. M/S SEARCH ENVIRO LTD. VS. ACIT [ITA NO. 3464/MUM/2011, 8 . IN THE CASE OF GILLETE GROUP (SUPRA) IT WAS OBSERVED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DTD. 23 RD MARCH 2012 HELD AS UNDER: - 6. FROM THE ABOVE, IT IS EVIDENT THAT AS PER SUB - SECTION (1) OF SECTION 14A, NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. SUB - SECTION (2) OF SECTION 14A PROVIDES THE PROCEDURE F OR DETERMINATION OF SUCH EXPENDITURE BY THE ASSESSING OFFICER. THE BOARD HAS ALSO PRESCRIB ED RULE 8D FOR DETERMINING THE EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. THUS, THE DISALLOWANCE CAN BE MADE UNDER SUB - SECTION (1) FOR THE EXP ENDITURE INCURRED FOR EARNING OF PAGE NO. 4 ITA NO. 4506/DEL/2013 EXEMPT INCOME. IN THE CASE UNDER APPEAL BEFORE US, FROM THE PERUSAL OF THE ASSESSEE'S PROFIT & LOSS ACCOUNT, IT IS EVIDENT THAT THE TOTAL EXPENDITURE INCURRED WAS RS. 49,04,028/ - ONLY. THUS, THE ASSESSEE CLAIMED THE DEDUCTIO N FOR THE EXPENDITURE OF RS. 49,04,028/ - WHICH IS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE DISALLOWANCE CANNOT EXCEED THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. WE, THEREFORE, ACCEPT THE ASSESSEE'S CONTENTION THAT THE DISALLOWANCE MADE BY THE ASSES SING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) IN EXCESS OF TOTAL EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT WAS UNJUSTIFIED. ACCORDINGLY, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE I.E. RS. 49.04.028/ - . 9 . HAVING REGARD TO THE ABOVE, DECISION WE SET ASIDE THE IMPUGNED ORDER AND WE RESTORE THE MATTER TO THE FILE OF AO AND DIRECT HIM TO RESTRICT THE DISALLOWANCE TO THE TOTAL EXPENSE S CLAIMED BY THE ASSESSEE AFTER GIVING OPPORTUNITY TO THE ASSESSEE . 1 0 . IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11 . GROUND NO.5 AND 6 IS REGARDING OF ADDITION OF RS.3,78,480/ - REPRESENTING LONG TERM CAPITAL GAIN ACCRUED TO THE ASSESSEE IN THE INSTANT CASE. 12 . THE ASSESSEE HAS SUBMITTED THAT THE SAID SU M HAS BEEN ALREADY OFFERED FOR TAX IN THE RETURN OF INCOME AND THEREFORE IT AMOUNTS TO DOUBLE TAXATION. IT HAS ALSO BEEN CONTENDED THAT THE AFORESAID GAIN WAS ALTERNATIVELY ELIGIBLE FOR SET - OFF AGAINST LOSS INCURRED ON SALE OF SHORT - TERM CAPITAL ASSET U/S 78 OF THE ACT. THE LD DR RELIED UPON THE FINDINGS OF THE LD CIT(A) TO CONTEND THAT THE ADDITION WAS CORRECTLY MADE BY THE AO. 13 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS OF THE CASE. 14 . THE LD CIT(A) HAS UPHELD THE ADDITION AND ALSO REJECTED THE ALTERNATIVE SUBMISSION BY OBSERVING AS UNDER: - (A) ON THE BASIS OF THE OBSERVATIONS OF THE ASSESSING OFFICER, IT IS SEEN THAT THE A.O. HAS MADE THE DISALLOWANCE BY STATING THAT IT WAS NOT POSSIBLE TO MAKE ADJUSTMENTS OF LONG - TERM CAPITAL GAI N AND LONG TERM CAPITAL LOSS BETWEEN ITEMS WHICH WERE SIT PAID AND THOSE WHICH WERE NOT SIT PAID. IN THIS REGARD, NO FURTHER DETAILS WERE HOWEVER, MENTIONED IN THE ASSESSMENT ORDER. (B) DURING THE APPELLATE PROCEEDINGS, THE A.R. OF THE APPELLANT HAS ARG UED THAT THERE WAS FACTUAL MISTAKE WITH REGARD TO THIS ADDITION MADE BY THE ASSESSING OFFICER AND THE LONG TERM CAPITAL GAIN WHICH HAD BEEN PAGE NO. 5 ITA NO. 4506/DEL/2013 ADDED BY THE ASSESSING OFFICER HAD ALREADY BEEN SHOWN BY THE APPELLANT IN HIS RETURN OF INCOME. HOWEVER, THE A.R. OF THE APPELLANT HAS ALSO NOT CLEARLY SUBMITTED DETAILS OF ANY FACTS FROM HIS RETURN OF INCOME WHICH SUBSTANTIATE HIS CONTENTIONS THAT THE LONG TERM CAPITAL GAIN ADDED BY THE ASSESSING OFFICER HAS ALREADY BEEN REFLECTED IN HIS COMPUTATION OF INCOME. (C) T HE A.R. HAS NOT BEEN ABLE TO CONTROVERT THE OBSERVATIONS OF THE ASSESSING OFFICER REGARDING SIT PAID LONG TERM GAIN AND NON STT PAID LONG TERM CAPITAL GAIN. FURTHER, THE ONUS WAS ON THE APPELLANT TO CLARIFY THE FACTS AND ANY SPECIFIC ERROR MADE BY THE ASSE SSING OFFICER WHILE MAKING THIS ADDITION. THE A.R. OF THE APPELLANT HAS NOT BEEN IN A POSITION TO CONVINCE ON THE BASIS OF CLARITY OF FACTS AS TO HOW AND WHY THIS LONG TERM CAPITAL GAIN ADDED BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. THOUGH THE APPELLANT HAS MENTIONED VARIOUS JUDICIAL PRONOUNCEMENTS, THERE WERE NO INSTANCES OF SIMILAR FACTS AS THOSE OF THE APPELLANT ON THE BASIS OF WHICH ANY RELIEF COULD BE CONSIDERED. (D) IT IS ALSO DIFFICULT TO UNDERSTAND AS TO WHY THE A.R. OF THE APPELLANT MAKING AN ALTERNATIVE ARGUMENT WITH REGARD TO ADJUSTMENTS OF THE LONG TERM CAPITAL GAIN AGAINST SHORT TERM CAPITAL LOSS, IF THERE WAS AN APPARENT MISTAKE MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE COMPUTATION OF INCOME. ACCORDINGLY, THE ARGUMENTS OF THE A.R. OF THE APPELLANT ARE NOT BASED ON FACTUAL EVIDENCES OR ABSTRACTS FROM THE COMPUTATION OF INCOME. THEREFORE, THESE SUBMISSIONS DO NOT CARRY ENOUGH WEIGHT TO DESERVE ANY RELIEF. 1 5 . T HE LD AR VEHEMENTLY SUBMITTED THA T THE ASSESSEE HAS ALREADY PAID T A XES ON THE IMPUGNED SUM OF RS.3,78,480/ - . WE HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW, BUT WE DO NOT FIN D ANY SPECIFIC REJECTION OF THE ABOVE EXPLANATION OF THE ASSESSEE. IN SUCH A SCENARIO, WE SET - ASIDE THE IMPUGNED ORDER AND REMIT THE ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION TAKING INTO CONSIDERATION THE CONTENTION OF THE ASSESSEE THAT HE HAS ALREADY PAID TAX ON SAID AMOUNT AND PASS FRESH ORDER AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 1 6 . GROUND 7 IS REGARDING AD - HOC AD DITION OF RS.2 LAKH, ON ACCOUNT OF HOUSE HOLD EXPENSES. 1 7 . THE LD CIT(A) HAS NOTED THAT AO MADE AN ADDITION OF RS.5 LAKH ON ACCOUNT OF HOUSEHOLD AND PERSONAL EXPENSES. LD CIT(A) HAS OBSERVED THAT THE ASSESSEE IS 60 YEARS OLD AND TRAVELS ALMOST 5 MONTHS O UTS IDE THE COUNTRY AND RESIDES IN HOUSE AT FRIENDS COLONY. AND HE IS THE CHAIRMAN OF HUGE GROUPS WITH TURN OVER OF SEVERAL CRORES OF RUPEES. THE LD. CIT(A) TH US HELD THAT THE DISCLOSURE PAGE NO. 6 ITA NO. 4506/DEL/2013 AT RS. 1 LAKH ON ACCOUNT OF HOUSE HOLD WITHDRAWAL, KEEPING IN VIEW OF THE STATUS OF ASSESSEE IS NOT ACCEPTABLE SINCE THERE IS INDEPENDENT INC OME OF WIFE AND TWO DAUGHTER OF THE ASSESSEE, HE RESTRICTED AND DETERMINED THE HOUSEHOLD WITHDRAWALS AT RS.25,000/ - PER MONTH. THUS HE UPH E LD THE ADDITION AT RS.2 LAKH. 1 8 . ON CONSIDER ATION OF THE RIVAL SUBMISSION WE ARE NOT ABLE TO F I ND ANY INFIRMITY IN THE REASONABLE APPROACH ADOPTED BY THE LD CIT(A). AS SUCH WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER AND THEREFORE, THIS GROUND IS REJECTED. 19 . IN THE RESULT THE APPEAL IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 . 09 .2014. - S D / - - S D / - ( N. K. SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 7 / 09 /2014 A K KEOT / A.K. VERMA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI