PARESH N. BHAGAT, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX-24(3), MUMBAI

ITA 5293/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1920 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JIGAR MEHTA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI M. BALAGANESH (ACCOUNTANT MEMBER) ITA NO. 5293 /MUM/2019 ASSESSMENT YEAR: 201 1 - 1 2 & ITA NO. 5292/MUM/2019 ASSESSMENT YEAR: 201 2 - 1 3 PARESH N. BHAGAT, 501, HERITAGE PLAZA, JP ROAD, OPP. INDIAN OIL COMPANY, ANDHERI (W), MUMBAI - 400053. VS. ADDL. COMMISSIONER OF INCOME TAX RANGE - 20(2), AAYAKARBHAVAN, MUMBAI [NOW LYING WITH ASST.CIT - 4(3)(2), MUMBAI] PAN NO. AABPB 1073 B APPELLANT RESPONDENT ASSESSEE BY : MR. JIGAR MEHTA , AR REVENUE BY : MS . SHREEKALAPARDESHI , DR DATE OF HEARING : 24/06/2021 DATE OF PRONOUNCEMENT : 01/07/2021 ORDER PER M. BALAGANESH , A.M. THESE APPEALS OF THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 39, MUMBAI [HEREINAFTER REFERRED TO AS LD. CIT(A) ] DATED 30.05.2019 FO R ASSESSMENT YEAR 2011 - 12 AND 20 .05.2019 FOR ASSESSMENT YEAR 2012 - 13 AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO) ON 28.03.2014 AND 18.03.2014 FOR ASSESSMENT YEARS 2011 - 12 AND 2012 - 13 RESPECTIVELY U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). PARESH N. BHAGAT ITA NO. 5293 & 5392/M/2019 2 2. THE ONLY EFFECTIVE ISSUE TO BE DECIDED IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE MADE U/S 14A OF THE ACT R.W.R. 8D(2) OF THE INCOME TAX RULES, 1962 (HEREAFTER REFERRED TO AS RULES). 2.1 WITH THE CONSENT OF BOTH THE PARTIES, THE APPEAL FOR THE ASSESSMEN T YEAR 2011 - 12 IS TAKEN AS THE LEAD CASE AND THE DECISION RENDERED THEREON W OULD APPLY WITH EQUAL FORCE FOR ASSESSMENT YEAR 2012 - 13 ALSO IN VIEW OF IDENTICAL FACTS EXCEPT WITH VARIANCE IN FIGURES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 HAD DERIVED DIVIDEND INCOME OF RS.13,83,891/ - AND CLAIMED THE SAME AS EXEMPT. NO DISALLOWANCE OF EXPENSES WAS MADE SUO MOTO BY THE ASSESSEE U/S 14A OF THE ACT. THE LD. AO PROCEED ED TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT IN TERMS OF RULE 8D(2)(II) OF RS.43,02,748/ - AND U/S 8D(2)(III) OF RS.21,38,332/ - . THE LD. CIT(A) UPHELD DISALLOWANCE MADE BY THE LD. AO, BUT HOWEVER, RESTRICTED THE DISALLOWANCE TO THE EXTENT OF DIVIDEND INCOME OF RS.13,83,891/ - . AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3.1. WE FIND THAT ASSESSEE IS AN INDIVIDUAL AND FROM THE PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, WE FIND THAT ASSESSEE IS HAVING CAPITAL ACCOUNT (OWN FUNDS) TO THE TUNE OF RS.88.50 CRORES WHICH IS MUCH MORE THAN THE INVESTMENTS MADE BY THE ASSESSEE AND H ENCE, IT COULD BE SAFELY PRESUMED THAT THE INVESTMENTS WERE MADE WITH OWN FUNDS AND NOT WITH BORROWED FUNDS. BY PLACING RELIANCE, IN THIS REGARD ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LTD. IN 366 ITR 505, WE DIRECT TH E LD. AO TO DELETE THE DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) WAS OF THE RULES. PARESH N. BHAGAT ITA NO. 5293 & 5392/M/2019 3 3.2. WITH REGARD TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2)(III) OF THE RULES , WE HEREBY DIRECT THE LD. AO TO CONSIDER ONLY DIVIDEND BEARING INVEST MENTS FOR THE PURPOSE OF WORKING OUT THE DISALLOWANCE IN THE LIGHT OF DECISION OF SPECIAL BENCH OF DELHI TRIBUNAL IN THE CASE OF VIREET INVESTMENTS REPORTED IN 165 ITD 27. WE FURTHER DIRECT THE LD. AO THAT THE SAID DISALLOWANCE IN ANY CASE SHALL NOT EXCEE D THE EXEMPT INCOME AND ALSO SHALL NOT EXCEED THE TOTAL EXPENSES CLAIMED AS DEDUCTION BY THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES IN VIEW OF THE ABOVEMENTIONED DIRECTIONS. 3. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 01 / 07 /2021 SD/ - SD/ - ( MAHAVIR SINGH ) ( M. BALAGANESH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED: 01 / 07 /2021 RAHUL SHARMA, SR. P.S. PARESH N. BHAGAT ITA NO. 5293 & 5392/M/2019 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSISTANT REGISTRAR) ITAT, MUMBAI