DARSHAN D. SHAH, MUMBAI V. ASST CIT 21(1), MUMBAI

ITA 4959/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1043 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Assessee Lawyers: DHIVENDRA M SHAH
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 4959/MUM/2016 ( / ASSESSMENT YEAR: 2011 - 12 ) SHRI DARSHAN D. SHAH KUMKUM, S. V. ROAD, VILE PARLE (W), MUMBAI - 400 056 / VS. ASST.CIT - 21(1) C - 10, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 ./ ./ PAN/GIR NO. AAIPS 2990 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DHIVENDRA M. SHAH / RESPONDENT BY : SHRI M. V. RAJGURU / DATE OF HEARING : 02.11.2017 / DATE OF PRONOUNCEMENT : 04.01 .2018 / O R D E R PER SHAMIM YAHYA , A. M.: T HIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 37, MUMBAI DATED 10.06.2016 AND PERTAINS TO ASSESSMENT YEAR 2011 - 12. 2. T HE GROUNDS OF APPEAL READ AS UNDER: 1 . ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE OF RS.9,97,032/ - U/S.1 4A OF THE ACT, WHICH ADDITION SHOULD BE DELETED. 2 ITA NO. 4959/MUM/2016 (A.Y.2011 - 12) SHRI DARSHAN D. SHAH VS. ASST.CIT 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT, THE EXPENDITURE INCURRED IS IN EARN ING OF THE TAXABLE INCOME AND THAT THE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED. 3. THE LEARNED ASSESSING OFFICER AND THE CIT(A) HAS FAILED TO POINT OUT WHICH OF THE EXPENSES RELATE TO THE EXEMPT INCOME. 4. WITHOUT PREJUDICE, AND ANYTHING BEING ADMIT TED TO THE CONTRARY THE CIT(A) ERRED IN CONFIRMING THE WHOLE OF THE ADDITION WHICH AMOUNT SHOULD BE REDUCED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS AN INDIVIDUAL. HE IS A PARTNER IN THE FIRM M/S. VIKMAN STEEL BALL INDUSTRIES. THE ASSES SEE HAS SHARE OF PROFIT, REMUNERATION AS WORKING PARTNER AND INTEREST ON ITS CAPITAL. THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.9,97,032/ - DURING THE COURSE OF BUSINESS AND CLAIMED EXPENDITURE ACCORDINGLY. THE ASSESSING OFFICER HAS HELD THAT AS PER THE P ROVISION OF SECTION 14A OF I. T. ACT FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 4. B EFORE THE LD. COM MISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE SUBMITTED THAT DURING THE APPELLATE PROCEEDINGS THE ASSESSEE HAD STATED THAT THE DISALLOWANCE OF WHOLE OF THE EXPENSES OF RS.9,97,032/ - U/S. 14A IS NOT ONLY CONTRARY TO THE FACTS AND EVIDENCE ON RECORD BUT AL SO CONTRARY TO THE PROVISIONS OF SECTION 14A OF THE ACT AND, HENCE, BAD IN LAW. THE PROVISIONS OF SECTION 14A ARE ATTRACTED ONLY IN CASE WHERE AN 3 ITA NO. 4959/MUM/2016 (A.Y.2011 - 12) SHRI DARSHAN D. SHAH VS. ASST.CIT EXPENDITURE INCURRED BY AN ASSESSEE IN RELATION TO INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME UNDER TH E ACT COULD ONLY BE DISALLOWED. 5. HOWEVER, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT CONVINCED. HE UPHELD THE ACTION OF THE ASSESSING OFFICER, BY HOLDING AS UNDER : THE EXPENDITURE CAN BE CONSIDERED AS INCURRED BY THE APPELLAT FOR EARNING SALAR Y, REMUNERATION AS WELL AS SHARE PROFIT OF PARTNERSHIP FIRM. SINCE PARTNERSIP FIRM, FOR THE PURPOSE OF INCOME TAX ACT, IT IS SEPARATE ASSESSABLE ENTITY THEREFORE INDIRECT EXPENDITURE INCURRED FOR EARNING SALARY, REMUNERATION AS WELL AS SHARE OF PROFIT FROM THE FIRM WAS ALLOWABLE TO THE EXTENT INCURRED BY THE FIRM. AND EXPENDITURE INCURRED BY THE PARTNER IS TO BE TAXED IN THE HANDS OF THE PARTNER. INCOME CHARGED IN THE HANDS OF PARTNERSHIP FIRM CANNOT BE TREATED AS BEING A NON EXEMPT INCOME IN THE HANDS OF P ARTNER OF SUCH FIRM. RELYING ON ABOVE DECISION, PROVISION OF 14A OF I. T. ACT WOULD BE APPLICABLE FOR COMPUTING THE TOTAL INCOME OF PARTNER. HENCE, DISALLOWANCE MADE BY THE A.O. IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 6. AGAINST THIS ORDER , THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE HAS EARNED SALARY FROM THE PARTNERSHIP FIRM WHICH IS ASSESSABLE AS BUSINESS INCOME. IN SUCH SCENARIO , THE ENTIRE EXPENDITURE CLAIMED BY THE ASSESSEE CANNOT BE SAID TO BE IN RESPECT OF EARNING EXEMPT SHARE OF PROFITS FROM THE PARTNERSHIP F I RM. IN THESE CIRCUMSTANCES , IN OUR CONSIDERED OPINION , THE ISSUE NEEDS TO BE REMITTED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE AFRESH AND ALLOW THOSE EXPENDITURES WHICH ARE NOT IN RELATIONSHIP TO THE EARNING OF EXEMPT INCOME FROM THE PARTNERSHIP FIRM. 8. BOTH THE COUNSEL FAIRLY AGREED TO THIS PROPOSITION. 4 ITA NO. 4959/MUM/2016 (A.Y.2011 - 12) SHRI DARSHAN D. SHAH VS. ASST.CIT 9. IN THE RESULT , THIS APPEAL BY THE ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 04.01.2018 SD/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 04.01.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPON DENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER , / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI