ABHINAV CAPITAL SERVICES LTD, MUMBAI V. ASST CIT 9(1), MUMBAI

ITA 5033/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5826 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5033/MUM/2012 ASSESSMENT YEAR: 2009-10 ABHINAV CAPITAL SERVICES LTD. ATHENA HOUSE, ROW HOUSE, RAJNIGANDHA, GOKULDHAM GOREGAON (E), MUMBAI-400 063 VS. ASST. CIT -9(1) AAYAKAR BHAVAN, M.K. MARG CHURCHGATE MUMBAI-400 020 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :AAACA 3437 E ASSESSEE BY : SHRI SANJAY PARIKH REVENUE BY : SHRI M.L. PERUMAL DATE OF HEARING : 20.03.2014 DATE OF PRONOUNCEMENT : 28.03.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -19, MUMBAI DATED 25.05.2012 FOR THE ASSE SSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE ASSESSEE HAS AGITATED THE AC TION OF THE LD.CIT(A) IN CONFIRMING THE ORDER OF THE AO MAKING AN ADDITIONAL DISALLOWANCES OF RS.4,96,826/- U/S 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME-TAX RULES. 3. BRIEFLY STATED, THE ASSESSEE, A COMPANY HAD CRED ITED DIVIDEND INCOME AMOUNTING TO RS.13,37,000/- IN ITS P/L A/C AND THE CLAIMED THE SAME AS EXEMPT INCOME. WHILE COMPUTING THE TAXABLE INCOME, THE ASS ESSEE HAD DISALLOWED AN AMOUNT OF RS.66,841/- BEING 5% OF DIVIDEND INCOME. ACCORDING TO THE ASSESSEE, THE ASSESSEE HAD NOT INCURRED ANY EXPENSE TO EARN DIVID END INCOME AND LONG TERM CAPITAL GAINS. HOWEVER, THE AO DID NOT ACCEPT THE C ONTENTION AND THE MENTIONED THAT THE COMPOSITE NATURE OF THE ASSESSEES BUSINESS SHO WS THAT ACTIVITY CARRIED ON WOULD INVOLVE SOME EXPENDITURE IN REGARD TO THE EARNING O F DIVIDEND INCOME AND ITA NO. 5033/MUM/2012 ABHINAV CAPITAL SERVICES LTD. ASSESSMENT YEAR: 2009-10 2 ACCORDINGLY AN AMOUNT OF RS.4,96,826/- WAS DISALLOW ED BY THE AO UNDER SECTION 14A OF THE ACT READ WITH RULE 8D. ON APPEAL, THE LD.CIT (A) CONFIRMED IMPUGNED DISALLOWANCE MADE BY THE AO. AGGRIEVED BY THE IMPUG NED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS MADE A S ELF DISALLOWANCE OF AN AMOUNT OF RS.66,841/-. HOWEVER, WHILE MAKING A FURTHER DIS ALLOWANCE, THE AO HAS NOT RECORDED ANY SATISFACTION ON HOW THE ASSESSEES CAL CULATION IS INCORRECT. THE AO CANNOT APPLY RULE 8D WITHOUT POINTING OUT ANY INACC URACY IN THE METHOD OF APPORTIONMENT OR ALLOCATION OF EXPENSES. FURTHER, T HE ONUS IS ON THE AO TO SHOW THAT EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR E ARNING THE EXEMPT INCOME. WITHOUT DISCHARGING THE ONUS, THE AO IS NOT ENTITLE D TO MAKE ANY AD HOC DISALLOWANCE. A CLEAR FINDING OF INCURRING OF EXPEN DITURE IS NECESSARY AND NO DISALLOWANCE CAN BE MADE ON THE BASIS OF PRESUMPTIO NS. THE MERE FACT THAT SOME EXPENSES MIGHT HAVE BEEN INCURRED BY THE ASSESSEE C ANNOT BE THE REASON FOR DISALLOWANCE UNLESS THE NEXUS BETWEEN EXPENSES AND EXEMPT INCOME IS ESTABLISHED. IN VIEW OF THAT MATTER, WE DELETE THE IMPUGNED DISA LLOWANCE OF RS.4,96,826/- MADE/CONFIRMED BY THE AO/LD.CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 8 TH DAY OF MARCH, 2014. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.03.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR A BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.