RASAYANI TRADERS P. LTD, MUMBAI V. ITO 5(3)(1), MUMBAI

ITA 4898/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5036 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 27-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: MITESH JOSHI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 80G

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI .. , ! ' # , $ ', % BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ITA NO.4898/MUM/2012 : ASST.YEAR 2009-2010 M/S.RASAYANI TRADERS PRIVATE LIMITED 602, PARAG, 6 TH FLOOR, 27 PADDER ROAD MUMBAI 400 026. PAN : AABCR5408B. THE INCOME TAX OFFICER WARD 5(3)(1) MUMBAI. ( &' / // / APPELLANT) ) ) ) ) / VS. ( *+&'/ RESPONDENT) &' , ,, , - - - - / APPELLANT BY : S/SHRI MITESH JOSHI & HITESH TRIVEDI *+&' , - , - , - , - / RESPONDENT BY : SHRI KISHAN VYAS ) , .! / / / / DATE OF HEARING : 12.09.2013 /01 , .! / DATE OF PRONOUNCEMENT : 13.09.2013 ' 2 ' 2 ' 2 ' 2 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 22.05.2012 IN RELATION TO THE ASSESSMENT YEAR 2009-2010. 2. THE FIRST ISSUE IS AGAINST CONFIRMATION OF DISAL LOWANCE OF ` 7,88,810 MADE U/S 14A READ WITH RULE 8D. BRIEFLY ST ATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE EARNED CERTAIN EX EMPT DIVIDEND INCOME AND OFFERED DISALLOWANCE U/S 14A AT ` 1,11,186 UNDER CLAUSE (III) OF RULE 8D(2) AT THE RATE OF 0.5% OF AVERAGE VALUE OF INVESTMENT. THE ASSESSING OFFICER INVOKED SECTION 14A AND MADE DISALLOWANCE UNDER RULE 8D AS PER CLAUSE (I) AMOUNTING TO ` 6,95,114; CLAUSE (II) AMOUNTING TO ` 93,696; AND CLAUSE (III) AMOUNTING TO ` 2,11,186. AS ITA NO.4898/MUM/2012. M/S.RASAYANIA TRADERS PRIVATE LIMITED. 2 THE AMOUNT AS PER CLAUSE (III) WAS VOLUNTARILY DISA LLOWED BY THE ASSESSEE, NO ADDITION WAS MADE FOR THIS SUM. THIS R ESULTED INTO ADDITION OF ` 7,88,810. THE LEARNED CIT(A) APPROVED THE ASSESSMEN T ORDER ON THIS POINT, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT THE AD DITION UNDER CLAUSE (I) OF RULE 8D(2) HAS BEEN MADE AT ` 6,95,114 BEING THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. ON A SPECIFIC QUERY AS TO HOW TH IS AMOUNT WAS DETERMINED BY THE AO, THE LEARNED AR TOOK US THROUG H ITS COMPUTATION OF INCOME WHEREIN INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS BEEN COMPUTED AT A LOSS OF ` 6,95,114. WE HAVE VERIFIED THIS COMPUTATION WITH T HE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.03.2009, A COPY OF WHICH IS AVAILABLE ON PAGE 10 OF THE PAPER BOOK. THUS, IT CA N BE SEEN THAT THERE IS BUSINESS LOSS RETURNED BY THE ASSESSEE AT ` 6.95 LAKH. IT IS THIS AMOUNT OF `BUSINESS LOSS WHICH HAS BEEN ADOPTED BY THE AO AS PER CLAUSE (I) OF RULE 8D(2). IT IS MANIFEST THAT THERE IS NO LOGIC IN CONSIDERING THE LOSS RETURNED BY THE ASSESSEE AS EX PENDITURE DIRECTLY ATTRIBUTABLE TO THE EXEMPT INCOME UNDER CLAUSE (I). THIS DISALLOWANCE IS, THEREFORE, DIRECTED TO BE DELETED. THE SECOND P ART OF THE DISALLOWANCE IS ` 93,696 TOWARDS INTEREST EXPENDITURE. IT CAN BE SEEN FROM THE ASSESSMENT ORDER THAT THE A.O. HAS TAKEN T HE AMOUNT OF INTEREST CHARGED AT ` 21,040. WHEN WE COMPARE THIS FIGURE WITH THE ITA NO.4898/MUM/2012. M/S.RASAYANIA TRADERS PRIVATE LIMITED. 3 PROFIT AND LOSS ACCOUNT, IT IS MANIFEST THAT THE TO TAL INTEREST PAID AND DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HE AD `ADMINISTRATIVE AND OTHER EXPENSES AS PER SCHEDULE 9 IS AT ` 19,440 AND NOT ` 21,040. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT E XPLAIN AS TO HOW THE FIGURE OF ` 21,040 WAS ADOPTED. BE THAT AS IT MAY IT IS SEEN FR OM THE ASSESSEES BALANCE SHEET, A COPY OF WHICH IS AV AILABLE ON PAGE 9 OF THE PAPER BOOK, THAT THERE IS NO LOAN OUTSTANDIN G AT THE END OF THE CURRENT YEAR AS WELL AS PRECEDING YEAR. THE FIGURE OF SECURED LOANS AND UNSECURED LOANS STAND AT ` NIL. THIS EXPENDITURE OF ` 19,440 DEBITED TO THE PROFIT AND LOSS ACCOUNT RELATES TO D ELAYED PAYMENT OF WAREHOUSING CHARGES. THIS SUBMISSION WAS MADE BEFOR E THE A.O. VIDE ASSESSEES LETTER DATED 24.10.2011, WHICH HAS BEEN COMPLETELY IGNORED. COPIES OF THE INVOICES RAISED BY ANTOP HIL L WAREHOUSING COMPANY TOWARDS WAREHOUSING CHARGES ARE AVAILABLE I N THE PAPER BOOK, FROM WHICH IT CAN BE SEEN THAT THEY HAVE CHAR GED THIS MUCH INTEREST ON DELAYED PAYMENT. OBVIOUSLY THIS PAYMENT OF INTEREST ON ACCOUNT OF WAREHOUSING CHARGES CAN HAVE NO RELATION WHATSOEVER WITH THE EARNING OF EXEMPT INCOME. WE, THEREFORE, ORDER FOR THE DELETION OF THIS COMPONENT OF ADDITION AS WELL. THE FINAL PI CTURE WHICH, THEREFORE, EMERGES IS THAT THE VOLUNTARY DISALLOWA NCE OFFERED BY THE ASSESSEE AT ` 1,11,186 IS CORRECT AND NO FURTHER ADDITION IS CALL ED FOR. THIS GROUND IS ALLOWED. 4. SECOND ISSUE IN THE APPEAL IS AGAINST NOT ALLOW ING DEDUCTION U/S 80G FOR A SUM OF ` 54,668 IN RESPECT OF DONATION. THE ASSESSEE CLAIMED DEDUCTION U/S 80G WHICH WAS NOT ALLOWED AS NO PROOF IN THIS ITA NO.4898/MUM/2012. M/S.RASAYANIA TRADERS PRIVATE LIMITED. 4 RESPECT WAS FILED ALONG WITH THE RETURN OF INCOME. THE LEARNED CIT(A) SUSTAINED THE DISALLOWANCE. THE LEARNED COUN SEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THE RECEIPTS FOR DEDU CTION U/S 80G WERE ADMITTEDLY NOT FILED DUE TO INADVERTENCE ALONG WITH THE RETURN OF INCOME. OUR ATTENTION WAS DRAWN TOWARDS RECEIPTS OF SUCH DONATION. IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOUL D MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AN D THE MATTER RESTORED TO THE FILE OF A.O. WE ORDER ACCORDINGLY AND DIRECT HIM TO CONSIDER THE QUESTION OF DEDUCTION U/S 80G AS PER LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. NEEDLESS TO SAY THE ASSESSEE WOULD BE AT LIBERTY TO LEAD ANY FURTHE R FRESH EVIDENCE BEFORE THE ASSESSING OFFICER IN THIS REGARD. 5. 3 .4 5 62 . 7 , 8. 9: IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 13 TH DAY OF SEPTEMBER, 2013. ' 2 , /01 ;')4 0 , < SD/- SD/- (VIVEK VARMA) (R.S.SYAL) $ ' $ ' $ ' $ ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; ;') DATED : SEPTEMBER, 2013. DEVDAS* ITA NO.4898/MUM/2012. M/S.RASAYANIA TRADERS PRIVATE LIMITED. 5 ' 2 , *$.6# = #1. ' 2 , *$.6# = #1. ' 2 , *$.6# = #1. ' 2 , *$.6# = #1./ COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. *+&' / THE RESPONDENT. 3. > () / THE CIT, MUMBAI. 4. > / CIT(A) 9, MUMBAI. 5. #A< *$.$) , , / DR, ITAT, MUMBAI 6. < B / GUARD FILE. ' 2) ' 2) ' 2) ' 2) / BY ORDER, +#. *$. //TRUE COPY// C C C C/ // /9 8 9 8 9 8 9 8 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI