AJAYA JAIN HUF, MUMBAI V. ACIT CIRCLE-12(3), MUMBAI

ITA 4680/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1156 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 02-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MICHAEL JERALDLD
• Assessee Lawyers: MATRUDEV VASUDEVANLD
• Keywords: Transactions in derivatives; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

1 ITA NO.4680/MUM/2018 M/S. AJAYA JAIN HUF ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE HONBLE SHRI VIKAS AWASTHY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4680/MUM/2018 ( / ASSESSMENT YEAR: 2011-12) M/S. AJAYA JAIN HUF 31, MAKER TOWER-A CUFFE PARADE, MUMBAI-400 005. / VS. ACIT - 12( 3 ) AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AAAHA-0026-L ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MATRUDEV VASUDEVAN-LD. AR / RESPONDENT BY : SHRI S. MICHAEL JERALD- LD. DR / DATE OF HEARING : 17/12/2019 / DATE OF PRONOUNCEMENT : 17/12/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2011-12 CONTEST THE ORDER OF LD. COMMIS SIONER OF INCOME-TAX (APPEALS)-55, MUMBAI [IN SHORT REFERRED TO AS CIT( A)], APPEAL NO. CIT(A)- 55/IT-141/17-18 DATED 17/05/2018 ON FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO.4680/MUM/2018 M/S. AJAYA JAIN HUF ASSESSMENT YEAR-2011-12 THE COMMISSIONER OF INCOME TAX (APPEALS)-55, MUMBAI [HEREINAFTER REFERRED TO AS CIT (A) ERRED IN HOLDING THAT THE ASSISTANT COMMISSIONE R OF INCOME TAX, CIRCLE-12(3), MUMBAI (HEREINAFTER REFERRED TO AS THE ACIT) WAS RI GHT IN DISALLOWING A SUM OF RS.2,93,929/- UNDER SECTION 14A OF THE ACT AS PER R ULE 8D(2)(III) AS EXPENSES RELATABLE TO EARNING OF EXEMPT INCOME AND ADDING THE SAME IN COMPUTING THE INCOME FOR THE ABOVE ASSESSMENT YEAR. THE APPELLANT SUBMITS THAT: A) NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME, B) THE ACIT HAS NOT GIVEN ANY FINDINGS THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE APPELLANT'S CLAIM THAT NO EXPEND ITURE HAS BEEN INCURRED IN RELATION TO EARNING OF EXEMPT INCOME & ACCORDINGLY NO ADDITION SHOULD HAVE BEEN MADE BY RESORTING TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 14A OF THE ACT. THE APPELLANT THEREFORE PRAYS THAT THE ADDITION OF RS.2,93,929/- MADE BY THE ACIT BE DELETED. AS EVIDENT FROM GROUNDS OF APPEAL, THE SOLE SUBJECT MATTER OF PRESENT APPEAL IS DISALLOWANCE U/S 14A. 2. WE HAVE HEARD AND CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED RELEVANT MATERIAL ON RECORD AND ALSO DELIBERATED ON JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. OUR ADJUDICATION TO THE ISSUE WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 3. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE B EING RESIDENT HUF, STATED TO BE ENGAGED IN THE BUSINESS OF TRADING IN DERIVATIVES CONTRACTS, WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) O N 18/03/2014 WHEREIN THE ASSESSEE WAS SADDLED WITH DISALLOWANCE U/S 14A FOR RS.2.93 LACS IN VIEW OF THE FACT THAT IT EARNED EXEMPT DIVIDEND INC OME OF RS.7.26 LACS. THE ASSESSEE SUBMITTED THAT NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME. HOWEVER, DISREGARDING THE SAME, LD. AO MADE IMPUGNED DISALLOWANCE, IN TERMS OF RULE 8D, AS SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STAND OF LD. AO, UPON CONFIRMATION BY LEARNED FIRST APPELLATE AUTHORITY, IS UNDER CHAL LENGE BEFORE US. 3 ITA NO.4680/MUM/2018 M/S. AJAYA JAIN HUF ASSESSMENT YEAR-2011-12 4. UPON CAREFUL CONSIDERATION, WE FIND THAT IT WAS THE SUBMISSIONS OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED BY IT TO EARN THE EXEMPT INCOME. HOWEVER, LD. AO DID NOT CONSIDER THE SAME HAVING RE GARDS TO THE ACCOUNTS OF THE ASSESSEE. IN OUR CONSIDERED OPINION, IT WAS INCUMBENT ON THE PART OF LD. AO TO ARRIVE AT JUDICIOUS AND OBJECTIVE SATISFA CTION AS TO WHY THE ASSESSEES SUBMISSIONS WERE NOT ACCEPTABLE. NON-REC ORDING OF THE SAID SATISFACTION WOULD OUST THE JURISDICTION OF LD. AO TO COMPUTE THE DISALLOWANCE IN TERMS OF SEC. 14A R.W.R. 8D SINCE S TATUTORY PROVISIONS MANDATE LD. AO TO RECORD SUCH SATISFACTION BEFORE P ROCEEDING TO COMPUTE THE DISALLOWANCE IN TERMS OF RULE 8D. THE PERUSAL O F PROFIT & LOSS ACCOUNT, AS PLACED ON RECORD, WOULD REVEAL THAT, BESIDES STA TUTORY TAXES AND LEVIES, THE ASSESSEE HAS DEBITED EXPENDITURE OF RS.8,273/- ONLY ON ACCOUNT OF AUDIT FEES. THEREFORE, IN THE GIVEN FACTUAL MATRIX, THE IMPUGNED DISALLOWANCE COULD NOT BE SUSTAINED UNDER LAW. BY D ELETING THE SAME, WE ALLOW THE APPEAL. 5. THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER, 2019. SD/- SD/- (VIKAS AWASTHY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/12/2019 SR.PS:-JAISY VARGHESE 4 ITA NO.4680/MUM/2018 M/S. AJAYA JAIN HUF ASSESSMENT YEAR-2011-12 / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &'#() , ) , / DR, ITAT, MUMBAI 6. '+,- / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.