CRESENT TRADING P.LTD, MUMBAI V. ASST CIT 9(1), MUMBAI

ITA 4915/MUM/2012

• Counselvise Citation: 491519914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AJAY NAGPAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND DR. S. T. M.PAVALAN (JM) ./I.T.A.NO.4915/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) M/S CRESE NT TRADING PVT.LTD. 45-C, MANDHANA MANOR, MOGHUL LANE, MATUNGA ROAD, MUMBAI-400016 / VS. ASSTT. COMMISSIONER OF INCOME TAX, 9(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) ( / RESPONDENT) ./ ./PAN/GIR NO. : AABCC6898A / APPELLANT BY : SHRI AJAY NAGPAL /RESPONDENT BY SHRI RAJESH KUMAR # / DATE OF HEARING : 9.4.2014 # /DATE OF PRONOUNCEMENT : 22.5.2014 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-19, MUMBAI DATED 8.6.2012 AND THE SOLITARY ISSUE ARISI NG OUT OF THE SAME, AS PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US, RELATES TO A DISALLOWANCE OF RS.11,31,374/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE INCOME TAX ACT, 1961 (THE ACT) READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF INVESTMENT AND TRADING. THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 24.9.2009 DECLARING TOTAL LOSS OF RS.4,90,57,128/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.6,66,274/- RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT FROM TAX BY THE ASSESSEE. NO DISALLOWANCE ON ACCOUNT OF I.T.A.NO.4915/MUM/2012 2 EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME HOWEVER, WAS OFFERED BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SECTION 14A OF THE ACT. THE AO, THEREFORE, WORKED OUT THE SUCH EXPENDITURE AT RS.11,31,374/ - BY APPLYING THE RULE 8D OF THE RULES AND DISALLOWANCE TO THAT EXTENT WAS MADE BY HIM U/S 14A OF THE ACT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOW ANCE MADE BY AO. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS PREFERRED TH IS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE REPRESENTATIVES OF BOTH THE SI DES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSES SEE HAS INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION PLACED AT PAGE 10 OF THE PAPER BOOK AND POINTED O UT THAT OUT OF THE TOTAL EXPENDITURE OF RS.14,65,12,905/- DEBITED BY THE ASSESSEE COMPA NY TO ITS PROFIT AND LOSS ACCOUNT, THE MAJOR EXPENDITURE INCURRED ON LOSS ON SALE OF INVESTMENT AMOUNTING TO RS.11,34,52,663/-, LOSS ON SPECULATION OF SHARES AMOUNTING TO RS.3,28,00,318/- AND SECURITY TRANSACTION TAX ON INVESTMENT AMOUNTING TO RS.1,67,805/- WAS ADDED BACK IN THE COMPUTATION OF TOTAL INCOME. HE HAS SUBMITTE D THAT OUT OF THE BALANCE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT , THE TOTAL AMOUNT OF ONLY RS.17,640/- ACTUALLY INVOLVED THE EXPENDITURE CLAI MED BY THE ASSESSEE WHICH CAN BE DISALLOWED U/S 14A OF THE ACT. HE HAS CONTENDED T HAT THE DISALLOWANCE MADE BY THE AO U/S 14A R.W.RULE 8D AND CONFIRMED BY THE LD. CI T(A) THUS IS MUCH MORE THAN THE ACTUAL EXPENDITURE CLAIMED BY THE ASSESSEE WHICH I S NOT JUSTIFIED. RELYING ON THE DECISION OF THE D BENCH OF THE DELHI TRIBUNAL I N THE CASE OF M/S GILLETTE GROUP INDIA V/S ACIT IN ITA NO.267/DEL/2012 (AY-2008-09) DATED 23.3.2012, HE HAS CONTENDED THAT THE DISALLOWANCE U/S 14A MAY BE DIRECTED TO BE REST RICTED TO THE EXTENT OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. THE LD. DR, ON T HE OTHER HAND, HAS RELIED ON THE ORDERS OF AUTHORITIES BELOW IN SUPPORT OF REVENUE S CASE ON THIS ISSUE. I.T.A.NO.4915/MUM/2012 3 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND MERIT IN THE CONTENTION RAISED BY T HE LD.COUNSEL FOR THE ASSESSEE. IT IS OBSERVED THAT THE DISALLOWANCE MADE IN THE CASE OF THE ASSESSEE U/S 14A BY APPLYING RULE 8D IS MUCH MORE THAN THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. IN THE CASE OF M/S GILLETTE GROUP INDIA (SUPRA), THE CO -ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED TH E EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. KEEPING IN VIEW THE SAID DECISION OF THE TRIBUNAL, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A ONLY TO THE EXTEN T OF EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE . 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2ND MAY, 2014 ( * + 22ND MAY, 2014 SD SD ( DR. S. T. M.PAVALAN) (P .M.JAGTAP) ( / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 22ND DAY OF MAY, 201 4 . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT /APPLICANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , # 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) # 3 , /ITAT, MUMBAI