ANIL LAXMICHAND SHAH, MUMBAI V. JCIT CIR 24(1), MUMBAI

ITA 4561/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3753 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURALI
• Keywords: Salary income; Earning of tax free income
• Section: 14A

Judgement Text

2/- , ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDERSINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A. NO.4561/MUM/2013 , / ASSESSMENT YEAR: 2001-02 ANIL L SHAH,307,PREMSONS INDL.ESTATE, TAHIRA COMPOUND,CAVES ROAD, JOGESHWARI(EAST),MUMBAI-400000 PAN:AADPS7072F VS. JCIT(24)(1) B K C,BANDRA (EAST) MUMBAI-400 050. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SH.M MURALI ASSESSEE BY: NONE / DATE OF HEARING: 15.03.2016 / DATE OF PRONOUNCEMENT: 15.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. - CHALLENGING THE ORDER,DTD.17.04.2013,OF CIT(A)-34,M UMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,DERIVING INCOME FROM SALARY AND SHARE TRADING,FILED HIS RETURN OF INCOME ON 31.07.2008,DECLARING INCOME OF RS.1,64,41 ,831/-.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT ON 30. 09.2011,U/S.143(3)O F THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.1.79 CRORES. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWING A SUM OF RS.2.42 LAKHS U/S.14A OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T ASSESSEE HAD RECEIVED TAX-FREE DIVIDEND INCOME OF RS. 1.20 CRORES AND INTEREST INCOME OF RS . 1.01 LAKHS. HE ASKED THE ASSESSEE TO FURNISH NOTE ON APPLICABILITY OF THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSE SSEE STATED THAT HE HAD NOT INCURRED AN EXPENDITURE FOR EARNING TAX FREE INCOME, THAT QUEST ION OF DISALLOWANCE UNDER SECTION 14 A WOULD NOT ARISE AT ALL. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO HELD THAT ASSESSEE HAD INCURRED EXPENDITURE OF RS. 1.72 LAKHS TOWARDS PORT FOLIO MANAGEMENT FEES, THAT HE HAS NOT CLAIMED THE SAID EXPENDITURE, THAT HE HAS EARNED EX EMPT INCOME OF RS. 1.21 CRORES. HE MADE A DISALLOWANCE OF RS. 14, 93, 971/-, INVOKING THE PRO VISIONS OF SECTION 14 AR.W.RULE 8D. 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 THAT THE A O HAD WRONGLY APPLIED THE FORMULA LAID DOWN UNDER RULE 8D WITHOUT APPRECIATING THE FACTS, ASSESSEE HAD NOT CLAIMED THE EXPENDITURE OF RS. 1.72 LAKHS UNDER THE HEAD PORTFOLIO MANAGEMENT FEES, THAT DURING THE YEAR UNDER CONSIDERATION HE HAD NOT AVAILED THE SERVICES OF PO RTFOLIO MANAGEMENT SCHEME, THAT HE HAD NOT INCURRED AN EXPENDITURE IN CONNECTION WITH EARNING OF EXEMPT INCOME, THAT THE EXPENSES OF DEMAT CHARGES BANK CHARGES AND THE PROFESSIONAL FEE S HAD BEEN DIRECTLY DEBITED TO HIS CAPITAL ACCOUNT, THAT HE HAD NOT CLAIMED ANY EXPENDITURE AN D THAT THEREFORE NO DISALLOWANCE COULD BE MADE UNDER SECTION 14 A OF THE ACT.AFTER CONSIDERIN G THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THAT THE FAA REFERRED TO THE CASE OF GODREJ AND BOYCE LTD. (328 ITR 81) AND HELD THAT A REASONABLE DISALLOWANCE COULD BE MADE B Y THE AO UNDER SECTION 14 A OF THE ACT. HE RESTRICTED THE DISALLOWANCE TO 2% OF THE TOTAL EXEM PT INCOME I.E. TO RS. 2.42 LAKHS. ITA NO.4561/M/1 3 /ALS 2 4. BEFORE US,NONE APPEARED ON BEHALF OF THE ASSESSEE,A S STATED EARLIER.THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ASSESSE E HAD NOT CLAIMED ANY EXPENDITURE FOR EARNING THE EXEMPT INCOME,THAT THE AO HIMSELF HAD ADMITTED THAT EXPENDITURE UNDER THE HEAD PORTFOLIO MANAGEMENT SERVICE WERE NOT ROUTED THROUGH THE P&L ACCOUNT,THAT SAME WERE TAKEN TO THE CAPITAL ACCOUNT OF THE ASSESSEE. CONSIDERING THESE FACTS,IN OUR OPINION, THERE WAS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCE. THE PROVISIONS OF SECT ION 14A WERE INTRODUCED TO PREVENT AN ASSESSEE TO AVAIL DOUBLE BENEFIT I.E. CLAIMING THE EXEMPTION ON CERTAIN INCOMES AND CLAIMING EXPENDITURE FOR EARNING SUCH INCOMES. IF THE ASSESS EE DOES NOT CLAIM ANY EXPENDITURE FOR EARNING EXEMPT INCOME THEN,IN OUR OPINION,NO DISALLOWANCE S HOULD BE MADE. IN THE CASE UNDER CONSIDERATION ,THE AO HAD NOT POINTED OUT AS TO WHI CH WERE THE EXPENDITURE THAT WERE INCURRED BY THE ASSESSEE FOR EARNING THE EXEMPT INCOME. THER EFORE REVERSING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APP EAL FILED BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH,2016. 15 , 2016 SD/- SD/- ( /JOGINDERSINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 15.03.2016. 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 / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.