METROPOLITAN TRADING COMPANY, MUMBAI V. ADDL CIT 18(2), MUMBAI

ITA 5129/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3768 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-07-2013
• Court: TRIBUNAL
• Department Lawyers: S R KIRTANE
• Assessee Lawyers: VASANTI B PATEL
• Keywords: Business income; Earning of tax free income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI RAM LAL NEGI , J M ./ ITA NO. 5129 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 8 - 0 9 ) METROPOLITAN TRADING COMPANY, 254 D - 2, NYLOC HOUSE, DR. A.B.ROAD, WORLI, MUMBAI - 400030 VS. JCIT - 18(2), MUMBAI ./ ./ PAN/GIR NO. : A AAFM 1474 C ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : MS. VASANTI B. PATEL /REVENUE BY : SHRI S.R.KIRTANE / DATE OF HEARING : 07/12/2015 / DATE OF PRONOUNCEMENT : 24/02 /2016 / O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), MUMBAI, DATED 15 - 4 - 2013 , FOR THE ASSESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T. ACT. 2 . THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF RS. 13,99, 799/ - U/S.14A READ WITH RULE 8D OF THE I.T. ACT . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE FIRM IS ENGAGED IN JOB WORK AND SE L LING & DEALING IN TIES, SHIRTS ETC. AND ALSO BUSINESS INCIDENTAL THERETO. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTED THAT THE ASSESSEE HAS EARNED TAX FREE INCOME OF RS.38,55,642/ - AS DIVIDEND IN MUTUAL FUNDS/SHARES AND RS.46,24,200/ - AS LONG TERM CAPITAL GAIN (LTCG) ON ITA NO. 5129/13 2 SHARES DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THAT THE ASSE SSEE ITSELF DISALLOWED RS.3,94,726/ - U/S.14A OF THE ACT ON ACCOUNT OF DIRECT EXPENSES ONLY. THE ASSESSEE FURNISHED THE CALCULATION AND SUBMITTED THAT MOST OF THE EXPENDITURE IS DIRECTLY RELATED TO THE MANUFACTURING UNIT FOR EARNING LABOUR CHARGES AND THE AMOUNT DISALLOWED SUO MOTU BY THE ASSESSEE IS THE MAXIMUM POSSIBLE CONSIDERING THE NATURE OF BUSINESS OF THE FIRM. THE ASSESSEE FURTHER SUBMITTED THAT THE DISALLOWANCE ON SIMILAR BASIS HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS EARLIER YEARS . AFTER CO NSIDERING THE SUBMISSION, THE AO STATED THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE OF RS.3,94,726/ - I.E. DIRECT EXPENDITURE IS NOT SUFFICIENT IN RELATION TO EARNING OF INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME FOR THE FINANCIAL YEAR 2007 - 08 BE CAUSE THE LEGISLATURE HAS PRESCRIBED SPECIFIC RULES I.E. RULE 8D FOR CALCULATING DISALLOWANCE U/S.14A W.E.F. 01 - 04 - 1008. ACCORDINGLY, THE AO WORKED OUT DISALLOWANCE AT RS. 13,99,799/ - APPLYING RULE 8D . SINCE THE ASSESSEE HAS ALREADY MADE DISALLOWANCE OF RS. 3,94,726/ - , THE DIFFERENCE OF RS.10,05,073/ - WAS FURTHER DISALLOWED AS EXPENSES RELATED TO EXEMPT INCOME NOT INCLUDABLE IN TOTAL INCOME AND ADDED TO THE BUSINESS INCOME OF THE ASSESSEE. 4. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF AO, AGAINS T WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ASSESSEE HAS GIVEN DETAILED WORKING OF THE AMOUNT OFFERED FOR ITA NO. 5129/13 3 DISALLOWANCE U/S.14A . FROM THE AMOUNT SO OFFERED, WE FOUND THAT E XPENDITURE WERE DIRECTLY RELATED TO THE MANUFACTURING UNIT FOR EARNING LABOUR CHARGES. THE ASSESSEE HAS OFFERED MAXIMUM AMOUNT WHICH COULD BE DISALLOWED U/S.14A CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE. WE HAD ALSO CAREFULLY GONE THROUGH THE EXPE NDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT AND FOUND THAT THE ASSESSEE HAS OFFERED THE MAXIMUM AMOUNT TO BE DISALLOWED IN RESPECT OF FULL SALARY OF ITS EMPLOYEES AMOUNTING TO RS. 3,54,254/ - AND ALSO THEIR CONVEYANCE EXPENSES OF RS.13,741/ - . WE ALSO FOUN D THAT IN THE ASSESSMENT YEAR 2009 - 2010, THE TRIBUNAL VIDE ITS ORDER DATED 20 - 11 - 2015 IN ITA NO. 3218/MUM/2014 HAD ACCEPTED THE DISALLOWANCE OFFERED BY THE ASSESSEE U/S.14A. THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, INSOFAR A S NATURE OF THE BUSINESS OF THE ASSESSEE REMAINS THE SAME, WHEREIN NO OTHER EXPENSES WERE RELATED TO THE EARNING OF EXEMPT INCOME. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE EXACTLY ON THE SAME FACTS IN THE ASSESSMENT YEAR 2009 - 2010, WE DO NOT FIND ANY MERIT FOR THE FURTHER DISALLOWANCE MADE BY THE AO. 6 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24/02 /2016 SD/ - SD/ - ( RAM LAL NEGI ) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 24/02 /2016 . . /PKM , . / PS ITA NO. 5129/13 4 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//