ASSOCIAED CONTAINER LINE P.LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 5079/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0977 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./ I.T .A. NO. 5079 / MUM/ 2012 ( / ASSESSMENT YEAR : 2005 - 06 ) ASSOCIATED CONTAINER LINE PVT. LTD., 901, PENINSULA TOWERS, GANPATRAO KADAM MARG, LOWER PAREL (W), MUMBAI - 4000013 / VS. ASSTT.COMMISSIONER OF INCOME TAX - 5(1), A A YAKAR BHA VAN, M.K.ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACA9239L / APPELLANT BY SHRI ATUL M DESHPANDE, OFFICE CLERK. / RSPONDENT BY SHRI SOM ANATH S UKKALI / DATE OF HEARING : 2. 7 . 201 5 / DATE OF PRONOUNCEMENT : 2. 7. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDE R DATED 3.5. 2012 PASSED BY LD CIT(A) - 9 , MUMBAI FOR ASSESSMENT YEAR 2005 - 06 , WHEREIN HE HAS CONFIRMED THE DISALLOWANCE OF RS. 5 0,000/ - MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) 2. THE ASSESSEE IS CARRYING ON THE BUSINESS OF INTERNATIONA L FREIGHT FORWARDING. DURING THE COURSE OF ASSESSMENT PROCEEDING S , THE AO NOTICED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.15.29 LAKHS , WHICH ITA NO. 5079 / MUM/20 12 2 WAS CLAIMED TO BE EXEMPT FROM TAXATION . SINCE THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT TOWARDS EXPENSES INCURRED FOR EARNING THE EXEMPT ED DIVIDEND INCOME , T HE AO DISALLOWED AN AMOUNT OF RS.50 ,000 / - FROM OUT OF EXPENSES UNDER SECTION 14A OF THE ACT. THE MATTER TRAVELLED UP TO THE TRIBUNAL AND THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR MAKING REASONABLE DISALLOWANCE AS PER THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO. LTD (2 34 CTR 1)(BOM). IN THE SET ASIDE PROCEEDINGS, THE AO NOTICED THAT THE TRIBUNAL , IN THE CASE OF VIP IND USTRIES LIMITED , HAS COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT @ 5% OF THE EXEMPT ED INCOME . IN THE INSTANT CASE, 5% OF EXEMPT INCOME WORKED OUT TO RS.76,462/ - . HOWEVER, SINCE THE AO HAD MADE DISALLOWANCE OF RS.50,000 / - ONLY IN THE ORIGINAL ASSESSMENT P ROCEEDINGS, THE AO MADE DISALLOWANCE OF RS.50,000/ - ONLY IN THE SET ASIDE PROCEEDING S ALSO. THE SAME WAS CONFIRMED BY THE LD. CIT(A ) AND HEN CE , THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. SHRI ATUL M DESHPANDE, AN EMPLOYEE OF THE ASSESSEE APPEARED BEFORE US AND SUBMITTED THAT ABOUT 99.8% DIVIDEND INCOME HAS BEEN RECEIVED BY THE ASSESSEE FROM MUTUAL FUND S AND THE SAID DIVIDEND INCOME WERE DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE APPELLANT BY ECS. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSEE DID N OT INCUR ANY EXPENDITURE IN EARNING THE DIVIDEND INCOME AND HENCE NO DISALLOWANCE IS REQUIRED TO BE MADE U/S 14A OF THE ACT. 4 . ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.15.29 LAKHS AND HENCE, SOME PORTION O F EXPENSES INCURRED BY THE ASSESSEE IS REQUIRED TO BE DISALLOWED U/S 14A OF THE ACT . ITA NO. 5079 / MUM/20 12 3 5 . WE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO PERUSED THE PAPER BOOK FILED BY THE ASSESSEE AND WE NOTICE THAT THE ASSESSEE HAS INCURRED AGGREGATE EXPENSES OF RS.1.17 CRORES . WE FURTHER NOTICE THAT THE ASSESSEE HAS MADE FRESH INVESTMENT S IN 9 SCHEMES OF MUTUAL FUNDS DURING THE YEAR UNDER CONSIDERATION AND IT HAS CLOSED INVESTMENTS MADE IN SIX SCHEMES , WHICH WERE STANDING AT THE BEGINNING OF THE YEAR . THE A SSESSEE HAS ALSO RECEIVED DIVIDEND INCOME TO THE TUNE OF RS.15.29 LAKHS. THUS WE NOTICE THAT THE ASSESSEE HAS INDULGED IN QUITE NUMBER OF TRANSACTIONS DURING THE YEAR AND HENCE, WE SEE NO MERIT IN THE CONTENTION S OF THE ASSESSEE THAT IT DID NOT INCUR ANY EXPENSES FOR EARNING THE DIVIDEND INCOME. 6. CONSIDERING TH E NUMBER OF TRANSACTIONS , QUANTUM OF AGGREGATE EXPENDITURE AS WELL AS FACT TH AT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.15.29 LAK HS , WE ARE OF THE VIEW THAT A REASONABLE DISALLOWANCE SHOULD BE MADE AS REQUIRED UNDER THE PROVISIONS OF SECTION 14 A OF THE ACT. HOWEVER, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS.50,000/ - MADE BY THE AO IS ON THE HIGHER SIDE . HENCE , ON CONSPECTUS OF THE MATTER, WE HOLD THAT A DISALL OW ANCE OF RS.25,00 0/ - WOULD BE REASONABLE IN THE FACTS AND CIRCUMSTANCE OF THE CASE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO RS.25000/ - , AS REFERRED ABOVE . ITA NO. 5079 / MUM/20 12 4 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 2 ND JULY , 2015. 2 ND JULY , 2015 SD SD ( . . / I.P. BANSAL ) ( . . / B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 2 ND JULY, 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARD ED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD F ILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI