SHASHIKIRAN J. SHETTY, MUMBAI V. DCIT CEN CIR 8(1), MUMBAI

ITA 5080/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0656 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 28-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: B V JHAVERI; MAYANK V THOS
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM ITA NO.5080/MUM/2017 : ASST.YEAR 2012-2013 SHRI SHASHIKIRAN J.SHETTY 5H FLOOR, DIAMOND SQUARE CST ROAD, KALINA, SANTACRUZ (EAST) MUMBAI 400 098. PAN : AMEPS5601B. / VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 8(1) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : S/SHRI B.V.JHAVERI & MAYANK V.THOS AR /RESPONDENT BY : SHRI CHAUDHARY ARUNKUMAR SINGH / DATE OF HEARING : 04.12.2018 / DATE OF PRONOUNCEMENT : 04.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 21.03.2017 PASSED BY THE LEARNED CIT(A)-50, MUMBAI AND IT RELATES TO ASST.YEAR 2012-2013. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.8.81 LAKH MADE BY THE ASSESSING OFFICER U/S 14A OF THE I.T.ACT. 3. FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF . THE ASSESSEE IS AN INDIVIDUAL AND RECEIVED SALARY FROM M/S.ALL CARGO G LOBAL LOGISTICS LIMITED. BESIDES THE ABOVE, THE ASSESSEE ALSO DECLARED INCOM E UNDER THE HEAD ITA NO.5080/MUM/2017. SHRI SHASHIKIRAN J.SHETTY. 2 HOUSE PROPERTY, BUSINESS, CAPITAL GAINS AND OTHER S OURCES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS.3145.93 LAKH, INTEREST FROM PPF OF RS.0.98 LAKH AGGREGATING TO RS.3146.91 LAKH. THE ASSESSEE CLAIMED THE SAME AS EXEMPT. THE A.O. NOTIC ED THAT THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. H ENCE, THE A.O. PROCEEDED TO COMPUTE THE DISALLOWANCE OUT OF ADMINI STRATIVE EXPENSES UNDER RULE 8D(2)(III) OF THE I.T.RULES AND COMPUTED DISALLOWABLE AMOUNT OF RS.21.12 LAKH. SINCE THE ASSESSEE HAD CLAIMED EXPEN DITURE TO THE TUNE OF RS.8.81 LAKH ONLY IN THE PROFIT AND LOSS ACCOUNT, T HE A.O. RESTRICTED THE DISALLOWANCE TO RS.8.81 LAKHS. THE LEARNED CIT(A) C ONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS D EBITED EXPENSES RELATING TO SHARE TRANSACTIONS TO HIS CAPITAL ACCOU NT, MEANING THEREBY, THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE RELATING TO SHARE TRANSACTION IN HIS INCOME AND EXPENDITURE ACCOUNT. THE LEARNED AR INVI TED OUR ATTENTION TO THE CAPITAL ACCOUNT OF THE ASSESSEE, PLACED AT PAGE 8 O F THE PAPER BOOK AND SUBMITTED THAT THE SECURITY TRANSACTION TAX, DP AND OTHER CHARGES AND PMS EXPENSES HAVE BEEN DEBITED TO THE CAPITAL ACCOUNT. FURTHER, INVITING OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT, PLACED AT PAGE 6 OF THE PAPER BOOK, THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS CLAI MED EXPENSES TO THE TUNE OF RS.8.86 LAKH WHICH CONSISTED OF MAINTENANCE EXPENSES OF RS.6 LAKH, STAMP DUTY OF RS.1.32 LAKH, PROFESSIONAL TAX OF RS. 2,500. THE LEARNED AR SUBMITTED THAT THE ABOVE SAID EXPENSES ARE NOT RELA TABLE TO THE EXEMPT INCOME EARNED BY THE ASSESSEE. THE REMAINING EXPENS ES CONSISTED OF PROFESSIONAL FEES OF RS.1 LAKH AND BANKING CHARGES OF RS.14,358. HE ITA NO.5080/MUM/2017. SHRI SHASHIKIRAN J.SHETTY. 3 SUBMITTED THAT THE ABOVE SAID EXPENSES WOULD HAVE B EEN INCURRED BY THE ASSESSEE EVEN IF THE ASSESSEE DID NOT RECEIVE ANY E XEMPT INCOME. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAS APPLIED THE PROVISIONS OF RULE 8D IN A MECHANICAL MANNER AND ALSO DID NOT APPLY HIS MIND TO THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE PROFIT A ND LOSS ACCOUNT. RELYING ON THE DECISION RENDERED BY THE CO-ORDINATE BENCH I N THE CASE OF ACIT V. IQBAL M.CHAGALA [(2014) 52 TAXMANN.COM 94 (MUM-TRIB .)] , THE LEARNED AR SUBMITTED THAT THE IMPUGNED DISALLOWANCE IS LIABLE TO BE DELETED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS INCURRED VARIOUS EXPENSES AND HAS CLAIMED THEM IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE COULD NOT PROVE THAT THESE EXPENSES ARE NOT RELATABLE TO EXEMPT INCOME. ACCORD INGLY, THE LEARNED DR SUBMITTED THAT, IN THE FACTS OF THE CASE, THE DISAL LOWANCE MADE BY THE A.O. SHOULD BE SUSTAINED. 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORDS. WE NOTICED THAT THE ASSESSEE HAS DEBITED HIS CAPITAL ACCOUNT W ITH THE EXPENSES RELATING TO SHARE TRANSACTION, VIZ., PMS EXPENSES, DP AND OT HER CHARGES AND SECURITY TRANSACTION TAX. AS SUBMITTED BY THE LEARNED AR, OU T OF THE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT, THE EXPENSES INCURR ED TOWARDS MAINTENANCE, PROFESSIONAL TAX AND STAMP DUTY ARE NOT RELATABLE T O THE SHARE TRANSACTIONS. THE REMAINING TWO EXPENSES, VIZ., PROFESSIONAL FEES AND BANK CHARGES CAN BE CONSIDERED AS COMMON EXPENSES INCURRED BY THE AS SESSEE TOWARDS BOTH EXEMPT INCOME AND TAXABLE INCOME. THOUGH THE LEARNE D AR CONTENDS THAT THESE EXPENSES ARE ALSO NOT RELATABLE TO EXEMPT INC OME, YET WE ARE NOT ABLE TO AGREE WITH THE SAME. THE PURPOSE OF INTRODUCTION OF SECTION 14A IS TO ITA NO.5080/MUM/2017. SHRI SHASHIKIRAN J.SHETTY. 4 DISALLOW EXPENSES WHICH ARE RELATABLE TO THE EXEMPT INCOME. CONSIDERING THE FACTS THAT THE ASSESSEE HAS INCURRED A SUM OF R S.1.14 LAKH AS COMMON EXPENSES, WE ARE OF THE VIEW THAT A PORTION OF THE SAME SHOULD BE APPORTIONED TOWARDS EXEMPT INCOME AS HELD BY THE HO NBLE SUPREME COURT IN THE CASE OF CIT V. MAXOPP INVESTMENTS LTD (391 ITR 218). UNDER THE FACTS OF THE CASE, WE AGREE WITH THE CONTENTION OF THE LE ARNED AR THAT THE PROVISIONS OF RULE 8D CANNOT BE APPLIED, AS MAJOR P ORTION OF EXPENSES ARE RELATED TO OTHER ACTIVITIES OF THE ASSESSEE. ACCORD INGLY, WE ARE OF THE VIEW THAT A SUM OF RS.10,000/- OUT OF COMMON EXPENSES OF RS.1.14 LAKH MAY BE APPORTIONED TOWARDS EXEMPT INCOME AND THE SAME WOUL D MEET THE REQUIREMENTS OF SEC. 14A OF THE ACT. ACCORDINGLY, W E SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE ASSESSING OFFIC ER TO RESTRICT THE ADDITION U/S 14A OF THE ACT TO RS.10,000/-. WE ORDER ACCORDI NGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS PARTLY ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 04.12.2 018 SD/- SD/- (AMARJIT SINGH) (B.R.BASKARAN) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; DATED : 04 TH DECEMBER, 2018. DEVDAS* # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-50, MUMBAI 5. %&' (()* , ! )* , / DR, ITA NO.5080/MUM/2017. SHRI SHASHIKIRAN J.SHETTY. 5 ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI