R.K. JHUNJHUNWALA, MUMBAI V. ITO 11(3)(2), MUMBAI

ITA 4930/MUM/2010

• Counselvise Citation: 493019914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIC G K NAIR
• Assessee Lawyers: S C TIWARI MS NATASHA MANGAT
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH DMUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.4930/MUM/2010 ASSESSMENT YEA R 2006-07 SHRI R.K. JHUNJHUNWALA, M/S. R.K. JHUNJHUNWALA& ASSOCIATES, 151, NARIMANBHAVAN, NARIMAN POINT, MUMBAI-400 021 PAN-AABPJ 9214G VS. THE ITO-11(3)(2), AAYAKARBHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.C. TIWARI& MS. NATASHA MANGAT RESPONDENT BY: SHRIC.G.K. NAIR DATE OF HEARING :25.8.2011 DATE OF PRONOUNCEMENT:30.8.2011 O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 27.4.2010 PASSED BY THE LD. CIT(A)-2 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS A PROFESSIONAL CHARTERED ACCOUNT ANT. THE ASSESSING OFFICER MADE A DISALLOWANCE U/S. 14A OF AN AMOUNT O F RS. 1,21,442/- OUT OF EXPENSES FOR EARNING EXEMPT INCOME. THE AO DISALLO WED 5% OF THE TOTAL EXPENSES AS BEING RELATABLE TO EARNING OF TAX FREE INCOME. 3. BEFORE THE LD. CIT(A) THE ASSESSEE ARGUED THAT THE AO HAS ALREADY MADE DISALLOWANCE ON ACCOUNT OF PERSONAL ELEMENT OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AND THEREFORE DISALLOWANCE U/S. 14A WOULD TANTAMOUNT ITA NO. 4930/M/10 2 TO DOUBLE DISALLOWANCE OF THE SAID EXPENSES. HE FUR THER ARGUED BEFORE THE LD. CIT(A) THAT NONE OF THE EXPENSES DEBITED TO THE PRO FIT AND LOSS ACCOUNT HAVE ANY NEXUS WITH INVESTMENT IN SHARES OR WITH EARNING OF LONG TERM CAPITAL GAINS. HE SUBMITTED THAT THE DISALLOWANCE IS BASED ENTIRELY ON CONJECTURES AND SURMISES AND IS NOT SUPPORTED BY ANY EVIDENCE A ND IS THEREFORE NOT JUSTIFIED AT ALL. HE FURTHER SUBMITTED THAT IF AT ALL ANY EXPENSES HAVE BEEN INCURRED TOWARDS EARNING OF TAX FREE INCOME, THESE ARE INSIGNIFICANT AND NO ADDITION IS CALLED FOR. 4. THE LD. CIT(A) HELD THAT THE TRIBUNAL IN SEVERAL CASES HAVE HELD THAT RULE 8D HAS RETROSPECTIVE APPLICABILITY AND THAT TH E AO HAS MADE AN ADHOC ADDITION WHICH IS NOT JUSTIFIED. HE THEREFORE DIRE CTED THE AO TO WORK OUT THE DISALLOWANCE BY INVOKING RULE 8D. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THERE IS DOUBLE DISALLOWANCE. 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. AS THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE IS 2006-07 AND RULE 8D IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008-09, THEREFORE, TH E MATTER NEEDS TO GO BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION I N THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ BOYCE MFG. CO. LTD VS DCIT REPORTED IN 328 ITR 81. 6. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE SHRI S .C. TIWARI SUBMITTED THAT HE WILL BE UNDERGOING AN UNNECESSARY EXERCISE OF APPEARING BEFORE THE AO WITH RESPECT TO DISALLOWANC E U/S. 14A OF THE I.T. ACT. HE ARGUED THAT ONCE MORE IF THE SAME IS S ENT BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE IN THE LIGHT OF THE D ECISION IN THE CASE OF GODREJ BOYCE MFG. CO. LTD VS DCIT REPORTED IN 328 ITR 81(SUPRA). IN THESE CIRCUMSTANCES HE STATED THAT THE ASSESSEE WOU LD OPT TO ACCEPT THE DISALLOWANCE AT 5% OF THE TOTAL EXPENSES AS BEI NG RELATABLE TO ITA NO. 4930/M/10 3 EARNING OF TAX FREE INCOME AS HAS BEEN HELD BY THE AO BY HIS ORDER U/S. 143(3) DT.21.10.2008. 7. WE SEE MERITS IN THE PLEA OF THE ASSESSEE. AS T HE ASSESSEE HAS ACCEPTED DISALLOWANCE MADE BY THE AO IN ORIGINAL AS SESSMENT PROCEEDINGS, AND AS RULE 8D, IN VIEW OF GODREJ & BO YCE DECISION (SUPRA), IS NOT APPLICABLE ON THE FACTS OF THE CASE , NO USEFUL PURPOSE WILL BE SERVED BY REMITTING THE MATTER TO THE FILE OF TH E AO. WE, THEREFORE, DIRECT THE AO TO ACCEPT THE DISALLOWANCE AS MADE BY HIM AND LET THE MATTER REST THERE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED IN THE TERMS INDICATED SUBJECT TO ABOVE OBS ERVATION. ORDER PRONOUNCED ON THIS 30TH DAY OF AUGUST, 2011 SD/ - SD/ - ( PRAMOD KUMAR ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30TH AUGUST, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 4930/M/10 4 DATE INITIALS 1. DRAFT DICTATED ON: 26.8.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26.08.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: