East West Rescue Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5417/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81589 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: MANU MONGA S; PREM NATH MONGA
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5417/DEL/2012 5417/DEL/2012 5417/DEL/2012 5417/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 M/S EAST WEST RESCUE PRIVATE M/S EAST WEST RESCUE PRIVATE M/S EAST WEST RESCUE PRIVATE M/S EAST WEST RESCUE PRIVATE LIMITED, LIMITED, LIMITED, LIMITED, 38, GOLF LINKS 38, GOLF LINKS 38, GOLF LINKS 38, GOLF LINKS, ,, , NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 003. 110 003. 110 003. 110 003. PAN : AAACE0482H. PAN : AAACE0482H. PAN : AAACE0482H. PAN : AAACE0482H. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PREM NATH MONGA AND SHRI MANU MONGA, ADVOCATES. RESPONDENT BY : SMT. PARWINDER KAUR, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXVIII, NEW DELHI DATED 28 TH AUGUST, 2012 FOR THE AY 2009-10. 2. THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AGAINST THE DISALLOWANCE OF ` 7,52,242/- MADE BY THE ASSESSING OFFICER APPLYING PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED COU NSEL FOR THE ASSESSEE ARGUED AT LENGTH. HE STATED THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE, VIDE REPLY DATED 23 RD SEPTEMBER, 2011, STATED THAT NO EXPENDITURE WAS INCUR RED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME BECAUSE THE ONLY E XEMPT INCOME IS DIVIDEND ON SHARES OR MUTUAL FUNDS. THE ASSESS EE DOES NOT HAVE TO INCUR ANY EFFORTS TO RECEIVE OR RECOVER SUCH INCOME. THE ITA-5417/DEL/2012 2 WARRANT OF THE SAME IS RECEIVED ON ITS OWN AT THE INSTA NCE OF THE RESPECTIVE COMPANIES OR MUTUAL FUNDS. HE FURTHER SUBM ITTED THAT THE ASSESSEE HAS NOT TAKEN ANY LOAN FOR THE PURPOSE OF INVESTM ENT IN SHARES OR MUTUAL FUNDS. HE ALSO REFERRED TO THE DETAIL S OF INVESTMENT BY THE ASSESSEE IN SHARES AND MUTUAL FUNDS AND POINTED OUT THAT NO FRESH INVESTMENT IS MADE IN THE SHARES THOUGH SOME INVEST MENT IS MADE IN THE MUTUAL FUNDS. HE ALSO REFERRED TO THE LI ST OF DIVIDEND RECEIVED AND POINTED OUT THAT DIVIDEND OF ONLY ` 11,85,879/- WAS RECEIVED FROM 22 MUTUAL FUNDS. HE ALSO REFERRED TO T HE ASSESSMENT ORDER AND POINTED OUT THAT THE SATISFACTION OF THE ASSE SSING OFFICER FOR APPLICABILITY OF SECTION 14A IS A BALD ASSERTION WITH OUT POINTING OUT WHICH EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNI NG OF EXEMPT INCOME. HE, THEREFORE, SUBMITTED THAT ON THESE FACTS, THE DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D IS NOT JUSTI FIED. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE FOLLOWING DECISI ONS OF ITAT:- (I) RELAXO FOOTWEARS LTD. VS. ACIT [2012] 18 TAXMANN.CO M 333 (DELHI). (II) PRIYA EXHIBITORS (P) LTD. VS. ACIT [2012] 27 TAXMAN N.COM 88 (DELHI). (III) DCIT VS. ASHISH JHUNJHUNWALA ITA NO.1890/KOL/2012 (KOLKATA BENCH ITAT). (IV) KALYANI STEELS LTD. VS. ADDL.CIT ITA NO.1733/PN/201 2 (PUNE BENCH-B, ITAT). (V) ACIT, PUNE VS. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO.LTD. [2014] 46 TAXMANN.COM 284 (PU NE). 4. HE ALSO SUBMITTED THAT THE DECISION OF COORDINATE B ENCH OF ITAT IS BINDING UPON ANOTHER BENCH OF ITAT AND IF ONE BEN CH OF ITAT DOES NOT AGREE WITH THE DECISION OF ANOTHER BENCH OF ITAT , THEN THE MATTER SHOULD BE REFERRED TO THE LARGER BENCH RATHER THAN T AKING A DIFFERENT VIEW. HE ALTERNATIVELY SUBMITTED THAT IF THE BENCH DOES NOT AGREE WITH ITA-5417/DEL/2012 3 THE CONTENTION OF THE ASSESSEE THAT ON THE FACTS OF THE ASSESSEES CASE, NO DISALLOWANCE UNDER SECTION 14A IS REQUIRED, THE W ORKING OF THE ASSESSING OFFICER AS PER RULE 8D IS DEFECTIVE BECAUSE THE INTEREST PAYMENT OF ` 1,54,187/- WAS IN RESPECT OF LATE PAYMENT OF TDS. THEREFORE, NO PART OF ITS CAN BE APPORTIONED FOR EAR NING OF DIVIDEND INCOME. SIMILARLY, WHILE WORKING OUT THE HALF PERC ENT OF AVERAGE AMOUNT OF INVESTMENT, THE ASSESSING OFFICER TOOK THE WRO NG FIGURE OF THE TOTAL ASSETS AT THE BEGINNING AS WELL AS AT THE END OF THE YEAR. HE STATED THAT THE CORRECT WORKING OF THE DISALLOWANCE U NDER RULE 8D WOULD BE ` 6,23,494/- AND NOT ` 7,52,242/-. 5. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND SHE STATED THAT PROPER SATISFACTIO N IS RECORDED BY THE ASSESSING OFFICER FOR APPLICATION OF SECTION 14A AN D HE HAS ALSO WORKED OUT THE DISALLOWANCE AS PER RULE 8D. IF THER E IS SOME CLERICAL MISTAKE IN THE WORKING OF THE DISALLOWANCE, THE ASSESSING OFFICER MAY BE DIRECTED TO VERIFY AND CORRECT THE SAME. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. SECT ION 14A OF THE ACT READS AS UNDER:- 14 1414 14A. A.A. A. [(1)] FOR THE PURPOSES OF COMPUTING THE TOTAL INCO ME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELAT ION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCO ME UNDER THIS ACT.] [(2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT O F EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM ITA-5417/DEL/2012 4 OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATIO N TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCO ME UNDER THIS ACT. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER T HIS ACT :] [PROVIDED PROVIDED PROVIDED PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREADY MADE OR OTHERWISE INCREASIN G THE LIABILITY OF THE ASSESSEE UNDER SECTION 154, FOR AN Y ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2001.]. 7. FROM SUB-SECTION (1) OF SECTION 14A, IT IS EVIDENT THAT THE LEGISLATURE HAS PROVIDED THAT NO DEDUCTION SHALL BE AL LOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. THEREFORE , INCURRING OF SOME EXPENDITURE BY THE ASSESSEE IN RELATION TO EXEMPT INCOM E IS ESSENTIAL SO AS TO INVOKE THE PROVISIONS OF SECTION 14A(1) BY THE ASSESSING OFFICER. AS PER SUB-SECTION (2) OF SECTION 14A, THE A SSESSING OFFICER IS EMPOWERED TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME PROVIDED HE IS NOT SATISFIED WITH THE C ORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RELATION TO THE INCURRING OF E XPENDITURE FOR EARNING OF EXEMPT INCOME. AS PER SUB-SECTION (3), THE ASSESSING OFFICER IS EMPOWERED TO DETERMINE THE EXPENDITURE EV EN WHEN THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO EARNING OF EXEMPT INCOME PROVIDED THE A SSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. FROM A COMBINED READING OF SUB-SECTION (2) & (3) OF SECTION 14A, IT IS EVIDENT THAT FIRST THE ASSESSEE HAS TO STATE WHETHER ANY EXPENDITU RE WAS INCURRED BY HIM FOR EARNING OF EXEMPT INCOME, IF YE S, THEN, HE HAS TO SPECIFY THE EXPENDITURE WHICH WAS INCURRED FOR EARNIN G OF EXEMPT ITA-5417/DEL/2012 5 INCOME. THEREAFTER, THE ASSESSING OFFICER IS REQUIRED T O EXAMINE THE ASSESSEES CLAIM WITH REGARD TO INCURRING OF NO EXPENDIT URE OR WITH REGARD TO THE AMOUNT OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE FOR EARNING OF EXEMPT INCOME. IF THE ASSESSIN G OFFICER IS SATISFIED WITH THE CLAIM OF THE ASSESSEE, THEN, NO FURTHE R ACTION UNDER SECTION 14A IS REQUIRED EXCEPT TO DISALLOW THE AMOUN T OF EXPENDITURE, IF ANY, WHICH ASSESSEE CLAIMED TO HAVE INCURRED FOR EA RNING OF EXEMPT INCOME. HOWEVER, WHEN THE ASSESSING OFFICER IS NOT SATISF IED WITH THE CLAIM OF THE ASSESSEE WITH REGARD TO INCURRING OF NO E XPENDITURE OR THE AMOUNT OF EXPENDITURE SPECIFIED BY THE ASSESSEE FOR EARN ING OF EXEMPT INCOME, THEN, HE IS REQUIRED TO DETERMINE THE AMOUN T OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXE MPT INCOME. SUCH EXPENDITURE IS TO BE DETERMINED BY HIM IN ACCOR DANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. 8. NOW, THE METHOD PRESCRIBED FOR WORKING OF DISALLOW ANCE IS AS PER RULE 8D OF THE INCOME-TAX RULES. THE VARIOUS DECISION S RELIED UPON BY THE LEARNED COUNSEL ALSO LAY DOWN THE SIMILAR INTERPRE TATION OF SECTION 14A AS DISCUSSED ABOVE BY US. NOW THE QUESTION WOULD BE WHETHER IN THE PRESENT CASE, THE ASSESSING OFFICER HAS RECORDED PROP ER SATISFACTION AS REQUIRED BY SECTION 14A. WE HAVE CAR EFULLY PERUSED THE ASSESSMENT ORDER IN THE LIGHT OF THE CONTENTION OF BOTH THE PARTIES. WE FIND THAT THE ASSESSING OFFICER HAS FIRST DISCUSSED THE QUEST IONNAIRE ISSUED TO THE ASSESSEE ASKING HIM TO EXPLAIN WHY THE DISAL LOWANCE UNDER SECTION 14A SHOULD NOT BE MADE BECAUSE THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF ` 11,85,879/- WHICH IS EXEMPT. HE DISCUSSED THE ASSESSEES REPLY DATED 23 RD SEPTEMBER, 2011. HE ALSO DISCUSSED THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD. VS. DCIT IN ITA NO.626 & WP 2010 AND THEREAFTER, RECORDED THE FOLLOWING FINDING:- ITA-5417/DEL/2012 6 SINCE NO DISALLOWANCE HAS BEEN DONE BY THE ASSESSEE COMPANY GOING BY THE DECISION OF HONBLE HIGH COURT OF MUMBAI AS DISCUSSED ABOVE AND AS PER THE FACTS AND CIRCUMSTANCES OF THE CASE, I HAVE REASONS TO ARRIVE AT THE SATISFACTION FOR DISALLOWANCE U/S 14A OF THE ACT, R/W R ULE 8D OF THE RULES, THAT THERE ARE EXPENSES RELATABLE TO TH E EARNING OF EXEMPT INCOME BY THE ASSESSEE COMPANY. SINCE, THE ASSESSEE COMPANY HAS INVESTED ITS MONEY FOR SUCH INVESTMENT OF SHARES, WHICH IS CAPABLE TO GENERATE INCOME WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME OF THE ASSESSEE COMPANY AND INDIRECT COST IN THE FORM OF ADMINISTRATIVE EXPENDITURES AND INTEREST IS INVOLVED IN THIS PROCESS. THERE IS DIRECT AND PROXIMAT E NEXUS BETWEEN THE EXEMPTED INCOME, WHICH THE INVESTMENTS SHALL GENERATE AND THE EXPENDITURES DIRECTL Y OR INDIRECTLY INVOLVED IN EARNING THE SAID INCOME. HENCE, I AM FULLY SATISFIED TO INVOKE THE PROVISIONS OF SECTION 14A READ WITH RULE 8D TO WORK OUT DISALLOWANCE OF EXPENDITURES. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, LE GAL POSITION ON THE ISSUE UNDER CONSIDERATION AND REASONS RECORDED IN THIS CASE, AS DISCUSSED ABOVE, A DISALLOWANCE OF RS.7,52,242/- U/S 14A OF THE ACT, R/W RULE 8D OF T HE RULES AS WORKED OUT AS UNDER IS BEING MADE AND ADDED TO THE INCOME OF THE ASSESSEE:- DISALLOWANCE AS PER 14A R/W RULE 8D RULE 8D(2)(I) 0 RULE 8D(2)(II) 101633 RULE 8D(2)(III) 650609 TOTAL 752242 9. AFTER CONSIDERING THE FACTS OF THE ASSESSEES CASE AND T HE ARGUMENTS OF BOTH THE SIDES, WE ARE UNABLE TO AGREE WI TH THE CONTENTION OF THE LEARNED COUNSEL THAT THE SATISFACTIO N OF THE ASSESSING OFFICER IS A BALD SATISFACTION WITHOUT SPECIFYING ANY PARTICULAR ITEM OF THE EXPENDITURE WHICH WAS INCURRED FOR EARNING OF DI VIDEND INCOME. THAT HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED THE MEANING OF THE EXPRESSION IN RELATION TO IN THE DECISION OF MAX OPP INVESTMENT LTD. VS. CIT [2012] 347 ITR 272 (DELHI) AND HELD A S UNDER:- ITA-5417/DEL/2012 7 THE EXPRESSION IN RELATION TO DOES NOT HAVE ANY EMBEDDED OBJECT. IT SIMPLY MEANS IN CONNECTION WITH OR PERTAINS TO. IF THE EXPENDITURE IN QUESTION HAS A R ELATION OR CONNECTION WITH OR PERTAINS TO EXEMPT INCOME IT C ANNOT BE ALLOWED AS A DEDUCTION EVEN IF IT QUALIFIES UNDER OTHER PROVISIONS OF THE ACT. THE ACTUAL EXPENDITURE THAT IS IN CONTEMPLATION UNDER SECTION 14A(1) OF THE ACT IS THE ACTUAL EXPENDITURE IN RELATION TO OR IN CONNECTIO N WITH OR PERTAINING TO EXEMPT INCOME. THE COROLLARY TO THIS IS THAT IF NO EXPENDITURE IS INCURRED IN RELATION TO THE EXEMPT INCOME, NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT. 10. THUS, IF THE EXPENDITURE INCURRED HAS CONNECTION OR SOME RELATION OR PERTAINS TO EARNING OF EXEMPT INCOME, IT HAS TO BE DISALLOWED UNDER SECTION 14A. THAT WHEN AN ASSESSEE IS CARRYING ON THE B USINESS AND AT THE SAME TIME HAS MADE INVESTMENT IN THE SHARES OR MUTUA L FUNDS, IT MAY BE PRACTICALLY IMPOSSIBLE TO SPECIFY ANY PARTICULA R ITEM OF EXPENDITURE WHICH IS INCURRED FOR THE PURPOSE OF EARN ING EXEMPT INCOME. IF AT ALL IT CAN BE SPECIFIED, IT CAN BE D ONE BY THE ASSESSEE BECAUSE ALL FACTS ARE IN HIS KNOWLEDGE. THEREFORE, UN DER SECTION 14A OF THE ACT, THE PRIMARY RESPONSIBILITY IS UPON THE ASSESS EE TO SPECIFY THE EXPENDITURE INCURRED BY HIM FOR EARNING OF EXEM PT INCOME. IN THIS CASE ALSO, THE ASSESSING OFFICER ASKED THE ASSESSEE TO STATE WH AT WAS THE EXPENDITURE INCURRED BY HIM FOR EARNING OF EXEM PT INCOME. THE ASSESSEE DENIED TO HAVE INCURRED ANY EXPENDITURE. 11. TO EXAMINE THE CORRECTNESS OF THE ASSESSEES CONTENT ION, LET US GO THROUGH THE DETAILS OF INVESTMENT MADE BY THE ASSESSE E. THE DETAILS OF SUCH INVESTMENTS ARE AT PAGES 13 & 14 OF THE ASSESSEES PAPER BOOK AND COPY OF WHICH IS ANNEXED HERETO AS ANN EXURE ANNEXURE ANNEXURE ANNEXURE- -- -A AA A FOR READY REFERENCE. WE FIND THAT THE INVESTMENT IN THE SHARES IS ONLY ` 6,46,000/- PLUS ` 2,42,648/- BUT, IT IS IN LARGE NUMBER OF COMPANIES. THE INVESTMENT IN THE MUTUAL FUNDS IS ` 14,58,81,026/-. THE ITA-5417/DEL/2012 8 INVESTMENT IN THE MUTUAL FUNDS AS ON 31 ST MARCH, 2008 WAS ` 10,17,39,223/-. IF WE SEE THE LIST, WE FIND THAT THE ASSESSEE INVESTED IN MORE THAN 50 DIFFERENT MUTUAL FUNDS. VARIOUS MUT UAL FUNDS WERE LIQUIDATED DURING THE YEAR UNDER CONSIDERATION AND T HERE WAS FRESH INVESTMENT IN 17 MUTUAL FUNDS. ON THESE FACTS, WE ARE UNABLE TO ACCEPT THE ASSESSEES CONTENTION THAT NOT A SINGLE RUPEE WAS INCURRED BY THE ASSESSEE EITHER FOR LIQUIDATING OLD MUTUAL FUNDS OR MAKING INVESTMENT IN NEW MUTUAL FUNDS OR FOR DEPOSIT OF THE DIVIDEND RECEIVED FROM 22 DIFFERENT MUTUAL FUNDS. THE ASSESSEE LIQUIDATED THE INVESTMENT IN 13 MUTUAL FUNDS DURING THE YEAR UNDER C ONSIDERATION. SIMILARLY, THERE WAS INVESTMENT IN 17 DIFFERENT MUTU AL FUNDS DURING THE YEAR UNDER CONSIDERATION. IT CANNOT BE BELIEVED THA T NO EFFORT WAS INVOLVED IN THE ENTIRE PROCESS. THE TELEPHONE EXPENSE S CLAIMED BY THE ASSESSEE ARE ` 7,11,999/-, TRAVELLING & CONVEYANCE EXPENSES ARE ` 7,72,247/-, SALARY TO THE STAFF IS ` 7,17,138/- AND DIRECTORS REMUNERATION IS ` 8,50,600. IT CANNOT BE ACCEPTED THAT NOT A SINGLE PHONE CALL WAS MADE BY THE ASSESSEE RELATING TO PURCHASE AND SALE OF MUTUAL FUNDS, NO EMPLOYEE EVER TRAVELED FOR THE PURP OSE OF EITHER MAKING INVESTMENT OR FOR LIQUIDATING MUTUAL FUNDS, NO STAFF OR THE DIRECTOR DEVOTED ANY TIME FOR THE PURPOSE OF INVESTME NT OR LIQUIDATION OF MUTUAL FUNDS. IN OUR OPINION, WHEN THERE IS INVEST MENT IN LARGE NUMBER OF MUTUAL FUNDS AND MOREOVER DURING THE YEAR UNDER CONSIDERATION VARIOUS MUTUAL FUNDS WERE LIQUIDATED AND INVESTMENT MADE IN VARIOUS NEW MUTUAL FUNDS, CERTAINLY, THE ASSESSE E MUST BE KEEPING DETAILS IN A SYSTEMATIC MANNER AND SOME STAFF MU ST BE DOING THAT JOB. FOR THE PURPOSE OF LIQUIDATION AS WELL AS I NVESTMENT IN THE MUTUAL FUNDS, SOME EFFORT AND SOME PAPER FORMALITIES AR E CERTAINLY REQUIRED. SO FAR AS ASSESSEES CONTENTION IS CONCERNED TH AT THE ASSESSING OFFICER HAS NOT SPECIFIED WHICH PART OF THE EXP ENDITURE WAS INCURRED FOR THE PURPOSE OF EARNING OF DIVIDEND INCO ME, IN OUR OPINION, WHEN THERE IS A MIXED ACCOUNT AND THE ASSESSEE IS CARRYIN G ON THE ITA-5417/DEL/2012 9 BUSINESS, IT IS PRACTICALLY IMPOSSIBLE TO SPECIFY WHICH PA RTICULAR PORTION OF THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF EA RNING DIVIDEND INCOME. FOR THIS PURPOSE ONLY, RULE 8D HAS BEEN INTRO DUCED FOR ALLOCATING THE EXPENDITURE WHEN IT IS NOT POSSIBLE TO ASCERTAIN WHICH PARTICULAR EXPENDITURE WAS INCURRED RELATING TO EXEM PT INCOME OR OTHER INCOME. CONSIDERING THE TOTALITY OF THE ABOVE FACTS, IN OUR OPINION, THE ASSERTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRE D FOR EARNING OF DIVIDEND INCOME IS A BALD ASSERTION, CONTRARY TO TH E OBVIOUS FACTS ON RECORD AND THE SATISFACTION OF THE ASSESSING OFFICER THA T SOME EXPENDITURE WAS INCURRED FOR EARNING OF EXEMPT INCO ME IS BASED UPON THE FACTS OF THE CASE. 12. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THA T A PROPER SATISFACTION AS REQUIRED BY SECTION 14A WAS DULY RECOR DED BY THE ASSESSING OFFICER AND, HE WAS FULLY JUSTIFIED IN WORKING OUT THE DISALLOWANCE AS PER RULE 8D OF THE INCOME-TAX RULES, 1 962. SO FAR AS THE ALLEGED DISCREPANCY IN THE WORKING OF RULE 8D IS CONCERNED, WE SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER A ND DIRECT HIM TO VERIFY THE WORKING OF RULE 8D AND MAKE THE DISALLOW ANCE STRICTLY AS PER RULE 8D. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DEEMED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST, 2014. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 29.08.2014 VK. ITA-5417/DEL/2012 10 COPY FORWARDED TO: - 1. APPELLANT : M/S EAST WEST RESCUE PRIVATE LIMITED , M/S EAST WEST RESCUE PRIVATE LIMITED, M/S EAST WEST RESCUE PRIVATE LIMITED, M/S EAST WEST RESCUE PRIVATE LIMITED, 38, GOLF LINKS, NEW DELHI 38, GOLF LINKS, NEW DELHI 38, GOLF LINKS, NEW DELHI 38, GOLF LINKS, NEW DELHI 110 003. 110 003. 110 003. 110 003. 2. RESPONDENT : DEPUT DEPUT DEPUT DEPUTY COMMISSIONER OF INCOME TAX, Y COMMISSIONER OF INCOME TAX, Y COMMISSIONER OF INCOME TAX, Y COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR CONTD(ANNEXURE-A)/.. ITA-5417/DEL/2012 11 ITA-5417/DEL/2012 12