Amitabh Chaturvedi, New Delhi V. ACIT, New Delhi

ITA 4951/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82182 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 23-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Earning of tax free income
• Section: 14A; 10

Judgement Text

DELHI BENCH A : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4951 /DEL/ 2013 (ASSESSMENT YEAR: 2010 - 11 ) AMITABH CHTURVEDI PROP. M/S. MINE & YOUNG, C - 346, LGF, DEFENCE COLONY, NEW DELHI, PAN:AAPC4891E VS. ACIT CIRCLE - 37(1), NEW DELHI (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS APPEAL ARISES FROM AN ORDER OF THE LD CIT(A),XXVIII, NEW DELHI DATED 26.07.2013 FOR THE ASSESSMENT YEAR 2010 - 11. 2. GROUND NO.1 PERTAINS TO DENIAL OF CREDITS OF TDS OF RS.1,909/ - BY THE AO, SUSTAINED BY THE LD CIT(A) BY CONCLUDING AS UNDER: - 4.1 I H AVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND SUBMISSIONS THEREOF. THE FACTS OF THE CASE AS PER ASSESSMENT ORDER ARE THAT THE ASSESSEE HAD CLAIMED TDS AMOUNTING TO RS4,236/ - AGAINST WHICH THE INTEREST INCOME OF RS.23,170/ - HAS BEEN SHOWN ON RECEIPT BAS IS. THE AO, THEREFORE, GAVE CREDIT FOR THE TDS PERTAINING TO THE INCOME OF RS.23,170/ - AND DISALLOWED TDS CREDIT FOR THE BALANCE AMOUNT OF RS.1,909/ - . THE APPELLANT HAS CLAIMED THAT THE TDS CREDIT OF THE ENTIRE AMOUNT I.E. RS4,236/ - SHOULD BE ALLOWED EVEN THOUGH INCOME PERTAINING TO THE TDS HAS NOT BEEN REFLECTED IN THE RELEVANT ASSESSMENT YEAR. 4.2 THE DISALLOWANCE OF TDS CREDIT MADE BY THE ASSESSING OFFICER IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 199 READ WITH RULE 37BA(3) AS PER WHICH APPELLANT BY : SH. S.KRISHNAN, ADV SH. RAJA KUMAR, ADV RESPONDENT BY : GAURAV PUAEJA, SR. DR (I) CRED IT FOR TAX DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT, SHALL BE GIVEN FOR THE ASSESSMENT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. (II) WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT AND THE INCOME IS ASSESSABLE OVER A NUMBER OF YEARS, CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOSE YEARS IN THE SAME PROPORTION IN WHICH THE INCOME IS ASSESSABLE TO TAX. SINCE THE ASSESSING OFFICER HAS ALLOWED CREDIT AS PER THE PROVISIONS OF INCOME TAX ACT, THEREFORE, NO INTERVENTION IS CALLED FOR. THE GROUND OF APPEAL IS DISMISSED. 3. HAVING CONSIDERED THE RIVAL SUBMISSION WE FIND THAT THE CREDIT HAS BEEN ALLOWED BY THE AUTHORITIES BELOW, IT TERMS OF SECTION 199 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) AND RU LE 37BA(3) OF THE INCOME TAX RULES, 1962 (HEREIN AFTER THE RULES) . THE ASSESSEE DECLARED INTEREST INCOME OF RS.23,170/ - AND ACCORDINGLY CORRESPONDING CREDIT OF TDS OF RS.2 , 327/ - HAS BEEN ALLOWED AND EXCESS CREDIT CLAIMED OF RS.1,909/ - HAS BEEN DISALLOWED, WHICH IS ALSO IN TERMS OF THE REPLY DATED 14.12.2012, FURNISHED BY THE ASSESSEE, WHEREIN, IT WAS SUBMITTED AS UNDER: - HSBC BANK INTEREST RS.16,290/ - TDS RS.1,640/ - HDFC BANK INTEREST RS.25,969/ - TDS RS.2,596/ - TOTAL TDS RS.4,236 THE CLAIM OF TDS FOR THE CURRENT YEAR MAY BE ADJUSTED IN TERMS OF THE INTEREST INCOME DISCLOSED BALANCE AMOUNT MAY KINDLY BE ALLOWED IN THE SUCCEEDING ASSESSMENT YEAR. 4. HAVING REGARD TO THE ABOVE, THE CLAIM IS BEREFT OF MERIT AND THUS REJECTED. 5. GROUND NO. 2 R ELATES TO DISALLOWANCE OF RS.46,953/ - OUT OF ELECTRICITY EXPENSES. THE ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF ELECTRICITY OF RS.52,170/ - PERTAINING TO HIS RESIDENCE, WHICH WAS DISALLOWED AS PERSONAL EXPENDITURE. THE LD CIT(A) RESTRICTED THE DISALLOWANC E TO 90% OF THE EXPENDITURE I.E. RS.46,953/ - , THE REMAINING 10% WAS ALLOWED. THE LD CIT(A) HAS HELD AS UNDER: - 5.1 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND SUBMISSIONS THEREOF. THE FACTS OF THE CASE AS PER ASSESSMENT ORDER ARE THAT THE ASSES SING OFFICER DISALLOWED THE CLAIM OF THE ELECTRICITY EXPENSES PERTAINING TO THE RESIDENCE OF THE ASSESSEE AT GREATER KAILASH, NEW DELHI, CLAIMED AS PROFESSIONAL EXPENSES, ON THE BASIS THAT THESE ARE PERSONAL IN NATURE. THE APPELLANT CLAIMED THAT HE WAS AN ADVOCATE AND THE RESIDENCE WAS BEING USED AS A PLACE FOR STUDIES, PREPARATION AND CONSULTATION OF HIS PROFESSIONAL WORK. HE CLAIMED THAT THE ELECTRICITY EXPENSES FOR THE RESIDENCE SHOULD BE ALLOWED IN FULL. THE APPELLANT WAS ASKED TO CONFIRM WHETHER THE EN TIRE ELECTRICITY EXPENSES HAVE BEEN CLAIMED AS A PROFESSIONAL EXPENSE OR ONLY A PORTION OF THE EXPENSE HAS BEEN CLAIMED BEING FOR THE PURPOSE OF, THE PROFESSION. IT WAS CONFIRMED THAT THE ENTIRE ELECTRICITY EXPENSE FOR THE RESIDENCE HAVE BEEN CLAIMED AS PR OFESSIONAL EXPENSE. AT MAXIMUM A ROOM IN THE RESIDENCE CAN BE CLAIMED TO HAVE BEEN USED FOR THE PURPOSE OF THE PROFESSION AND IT CANNOT BE THE CLAIM OF THE APPELLANT THAT THE ENTIRE RESIDENCE IS BEING USED FOR THE PROFESSIONAL WORK. ON THIS BASIS, 1/10 TH OF THE ELECTRICITY EXPENSES PERTAINING TO THE RESIDENCE ARE ALLOWED AS PROFESSIONAL EXPENSES AND REST OF THE DISALLOWANCE AMOUNTING TO 90% OF THE ELECTRICITY EXPENSE MADE BY THE ASSESSING OFFICER IS SUSTAINED. 6. HAVING CONSIDERED THE RIVAL SUBMISSION, WE FIND THAT THE DISALLOWANCE SUSTAINED IS EXCESSIVE. THE ASSESSEE IS A BACHELOR AND HAS CLAIMED AS RENDERING SERVICES AS AN ADVOCATE FROM RESIDENCE. THE LD CIT(A) HAS ACCEPTED SAID FACTUAL ASPECT. THEREFORE WE RESTRICT THE DISALLOWANCE TO 50% OF THE EXPEN DITURE INCURRED AND CLAIMED PERTAINING TO ELECTRICITY EXPENSES OF THE RESIDENCE. SO, THIS GROUND IS PARTLY ALLOWED. 7. GROUND NO.3 RELATES TO DISALLOWANCE OF RS.1,15,230/ - OUT OF CLIENT DEVELOPMENT EXPENSES OF RS.11,52,302/ - . 8. THE AO AND THE LD CIT(A) H AVE SUSTAINED DISALLOWANCE AS PERSONAL EXPENDITURE. HAVING CONSIDERED THE RIVAL SUBMISSION, WE FIND THE LD CIT(A) HAS EXAMINED THE NATURE OF THE EXPENDITURE AND THE DISALLOWANCE MADE VIS - A - VIS THE EVIDENCE FURNISHED. AND HE HAS COME TO THE CONCLUSION AS UN DER: - 6.1 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND SUBMISSIONS THEREOF. THE OF THE CASE AS PER ASSESSMENT ORDER ARE THAT THE ASSESSEE HAD CLAIMED RS.11,52,302/ - AS CLIENT DEVELOPMENT EXPENSES. THE ASSESSING OFFICER DISALLOWED 10% OF THESE EXPE NSES I.E. RS.1,15,230/ - ON THE BASIS THAT SOME PERSONAL ELEMENT CANNOT BE RULED OUT AS THE EXPENSES RELATED TO PURCHASE OF GIFTS, EXPENSE ON HOTELS, RESTAURANTS ETC. THE APPELLANT CLAIMED THAT EXPENSE ON HIS PERSONAL VISIT AND PERSONAL DINNING HAS BEEN ACC OUNTED FOR FROM HIS DRAWINGS AND THERE WAS NO PERSONAL ELEMENT INVOLVED IN THESE EXPENSES. THE APPELLANT HAS FILED COPY OF TRANSACTIONS MADE THROUGH HIS CREDIT CARD WHICH HAD ALSO BEEN USED FOR PURCHASE OF GIFTS AND OTHER EXPENSES. THE DETAILS FILED BY T HE APPELLANT WERE PERUSED. IT WAS SEEN THAT THE EXPENSES ON PURCHASE OF SHOES, APPARELS, PURSES, TOYS, AIR TICKETS BESIDES HOTEL AND RESTAURANT BILLS. IT IS DIFFICULT TO ACCEPT THAT SHOES BE GIVEN AS A GIFT TO A CLIENT. THUS, SOME AMOUNT OF PERSONAL EXPENS ES IN THESE BILLS CANNOT BE RULED OUT. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS THEREFORE SUSTAINED. 9. WE FIND NO REASON TO INTERFERE WITH THE DISALLOWANCE MADE. NO EVIDENCE COULD BE LED TO DENY THE FACTUAL FINDING, THAT THE EXPENDITURE INCLUDED EXPENDITURE ON SHOES, APPARELS, PURSES, TOYS ETC. THUS SUCH EXPENDITURE DISALLOWED AS PERSONAL EXPENDITURE IS REASONABLE AND IS UPHELD. 10. GROUND NO.4 PERTAINS TO DISALLOWANCE OF RS.27,703/ - U/S 14A READ WITH RULE 8D. 11. THE LD CIT(A) HAS NOTED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS.3,22,051/ - AS DIVIDEND AND RS.1,26,205/ - AS LONG TERM CAPITAL GAIN, BUT NO EXPENSES HAS BEEN SHOWN TO HAVE BEEN INCURRED FOR EARNING THE EXEMPT INCOME. HE HAS FURTHER NOTE D THAT AO HAS RECORDED HIS SATISFACTION BEFORE RESORTING TO RULE 8D. MOREOVER HE FURTHER HAS HELD AS UNDER: - 7.3 PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS EXPRESSED HIS SATISFACTION B EFORE TAKING RECOURSE TO RULE 8. FURTHER , ON CAREFUL EXAMINATION OF THE MATTER, I FIND THAT ANY INCOME, WHETHER EXEMPT OR NOT, CAN ONLY BE EARNED AFTER INCURRING SOME EXPENDITURE. IN THE CASE OF THE APPELLANT, SUCH EXPENDITURE CANNOT BE SEGREGATED IN THE ACCOUNTS OF THE ASSES SEE AND IS CLUBBED WITH O VERALL ADMINISTRATIVE/ FINANCIAL AND OTHER EXPENSES OF THE BUSINESS AS A WHOLE. IF ANY INCOME IS EXEMPT FROM TAX BECAUSE IT IS NOT INCLUDED IN THE TOTAL INCOME BY VIRTUE OF SECTION 10 OF THE INCOME - TAX ACT, 1961, SECTION 14A OF THE ACT PROHIBITS ALLOWANCE OF ANY EXPENDITURE INCURRED IN RELATION THERETO. INCOME FROM DEPLOYMENT OF FUNDS IN SHARES EARNED BY WAY OF DIVIDEND IS NOT INCLUDED IN TOTAL INCOME BY VIRTUE OF THE PROVISIONS CONTAINED IN SECTION 10(34) OF THE ACT, WHETHER THE SHARES ARE HELD AS STOCK - IN - TRADE OR AS INVESTMENT. AS DIVIDEND INCOME DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT, THE PROVISIONS OF SECTION 14A ARE APPLICABLE. THE ALLOWANCE OF EXPENDITURE IN RELATION TO DIVIDEND INCOME IS THUS NOT ADMISSIBLE IN COMPUTING THE INCOME OF AN ASS ESSEE WHETHER THE SHARES ARE HELD AS INVESTMENT OR THEY ARE HE L D ON TRADING ACCOUNT AS - STOCK - IN - TRADE. WHEN THE EXPENDITURE OF INTEREST IS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, DISALLOWANCE IS MADE IRRESPECTIVE OF THE FA CT WHETHER ANY INCOME IS EARNED BY THE ASSESSEE OR NOT AS SECTION 14A DOES NOT ENVISAGE ANY SUCH EXCEPTION. THE PROVISIONS OF SECTION 14A, CONTROLS THE COMPUTATION OF INCOME UNDER THE PROVISIONS OF THE ACT AND HAS OVERRIDING EFFECT OVER OTHER - PROVISIONS. THEREFORE, EVEN IF THE EXPENDITURE IS ALLOWABLE UNDER ANY OTHER PROVISION OF THE ACT, DISALLOWANCE IS MADE BECAUSE OF THE OVERRIDING EFFECT OF SECTION 14A OF THE ACT. 12. ON PERUSAL OF THE MATERIAL ON RECORD AND CONTENTIONS OF THE ASSESSEE, WE FIND THAT THE ASSESSEE HAD MADE INVESTMENTS IN MUTUAL FUNDS, SHARES OF RS.85 LAKHS APPROXIMATELY, AND IN RESPECT OF WHICH AN EXEMPT INCOME IN THE SHAPE OF DIVIDEND AND LONG TERM CAPIT AL GAIN HAS BEEN CLAIMED. NO EXPLANATION HAS BEEN FURNISHED TO SATISFY THAT NO EXPENDITURE WAS INCURRED TO MANAGE THE ABOVE INVESTMENT YIELDING TAX FREE INCOME. THE BOOKS OF ACCOUNT HAVE BEEN EXAMINED BY THE AO, WHO HAS HELD THAT DISALLOWANCE UNDER RULE 8D , IS WARRANTED. IN FACT THE AO HAS HELD AS UNDER: - THE ASSESSEE HAS NOT PROVIDED ANY SEPARATE ACCOUNT FOR EARNING OF EXEMPT INCOME. THE ASSESSEE HAS MADE INVESTMENTS FOR EARNING EXEMPT INCOME AND MANAGING SUCH A LARGE PORTFOLIO ENTAIL EXPENSES RIGHT FROM DIVERSION OF MANPOWER/STAFF FOR INDULGING IN INVESTMENT ACTIVITIES TO VARIOUS ACTIVITIES LIKE VISITING BANKS, USE OF VEHICLE AND TELEPHONE, USE OF INTERNET IF PORTFOLIO MANAGEMENT IS WEB BASED, COST OF COMPUTER & ITS DEPRECIATION, COMPUTER OPERATOR, CONSEQ UENT ELECTRICITY, USE OF OFFICE PREMISES, FEE CHARGED BY MUTUAL FUND AGENTS/BANKERS (ANNUAL FEE), PORTFOLIO RECORD MAINTENANCE AND ITS TRACKING TO ENSURE TIMELY SALE/PURCHASE OF MUTUAL FUND UNITS, ETC. AS PER THE AR'S SUBMISSION DATED 10.12.2012, ASSESSEE HIMSELF HAS DEVOTED TIME ON EARNING EXEMPT INCOME WHICH IS NOT POSSIBLE WITHOUT DISCUSSION OF MANPOWER/ STAFF AND OTHER EXPENSES. 13. ON THE BASIS OF THE ABOVE, WE DECLINE TO INTERFERE WITH THE CONCLUSION OF THE AUTHORITIES B ELOW. GROUND RAISED IS REJECT ED. 14. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 .12 .2014. - SD/ - - SD/ - ( S.V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08 / 12 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI