KIRAN ANIL SHAH, MUMBAI V. JCIT RG 24(1), MUMBAI

ITA 5687/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93095 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2013
• Court: TRIBUNAL
• Assessee Lawyers: MRS TOR AL JITESH SHAH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.5687/M/2013 (AY:2009 - 2010 ) KIRAN ANIL SHAH, 307, PREMSONS INDL. ESTATE, TAHIRA COMPOUND, JOGESWARI (E), MUMBAI 400 060. / VS. JCIT, RANGE 24(1`), PRATYAKSHAKAR BHAVAN, MUMBAI 400 051. ./ PAN : AADPS7071G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MRS. TOR AL JITESH SHAH / RESPONDENT BY : SHRI JEEVANLAL LAVIDIYA / DATE OF HEARING : 11.06.2015 / DATE OF PRONOUNCEMENT : 30 .06.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 10.9.2013 IS AGAINST THE ORDER OF THE CIT (A) - 34, MUMBAI DATED 14.5.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) ERRED IN DISALLOWING A SUM OF RS. 2,19,887/ - U/S 14A AS EXPENSE INCURRED IN CONNECTION WITH EARNING OF DIVIDEND INCOME FAILING TO APPRECIATE THAT NO EXPENSES HAVE BEEN CLAIMED AS DEDUCTION. THE LD CIT (A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U/S 14A IS TRIGGERED ONLY WHEN TH ERE IS A CLAIM FOR DEDUCTION OF EXPENDITURE INCURRED. 2. THE LD AO AND ALSO CIT (A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U/S 14A IS FOR DENIAL OF DEDUCTION OF EXPENSES INCURRED AND CLAIMED AS DEDUCTION AND NOT FOR TAXING OTHERWISE EXEMPT INCOME BY AP POINTMENT OF NOTIONAL EXPENSES. 2. THE ONLY ISSUE RAISED IN THE ABOVE GROUNDS RELATES TO THE APPLICABILITY OF PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE ACT WHEN THE ASSESSEE HAS NOT MADE ANY CLAIM OF EXPENDITURE, WHATSOEVER, IN THE ACCOUNTS. BRI EFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 95,31,828/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT 2 AND THE ASSESSED INCOME WAS DETERMINED AT RS. 1,07,55,710/ - . IN THE ASSESSMENT, AO MADE A DISALLOWANCE OF RS. 12,23,881/ - U/S 14A R.W. RULE 8D OF THE ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE, CIT (A) UPHELD THE DECISION OF THE AO BY HOLDING THAT THE AO HAS CLEARLY RECORDED HIS SATISFACTION AND DISALLOWING THE SUM OF RS. 12,23,881/ - IS FAIR BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE ACT . AGAIN AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE FILED AN ORDER OF THE TRIBUN AL IN THE CASE OF ACIT VS. IQBAL M. CHAGALA IN ITA NO.877/MUM/2013, DATED 30.7.2014 AND MENTIONED THAT THE TRIBUNAL HAS DECIDED THE IDENTICAL CASE IN FAVOUR OF THE ASSESSEE. IT IS THE PRAYER OF THE LD COUNSEL THAT THE INSTANT APPEAL MAY ALSO BE DECIDED IN THE SAME LINES AS IN THE CASE OF IQBAL M. CHAGALA (SUPRA). 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE REL EVANT MATERIAL PLACED ON TO THE RECORD. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CITED DECISION OF THE TRIBUNAL IN THE CASE OF IQBAL M. CHAGALA (SUPRA), WE FIND PARA 5 OF THE SAID ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD, WHEREIN THE TRIB UNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 5 OF THE TRIBUNALS ORDER AND FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME IS EXTRACTED AS FOLLOWS. 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US. WE FIND FROM THE AUDIT REPORT THAT THE EXPENSES IN RESPECT OF EXEMPT INCOME WAS SHOWN AT RS. NIL, THAT THE ASSESSEE HAD DEBITED DIRECT EXPENSES ON ACCOUNT OF DEMATERIALISATION AND STT IN THE CAPITAL ACCOUNT A ND IN THE PROFIT AND LOSS ACCOUNT, THAT AO HAD PRESUMED THAT THE ASSESSEE HAD MUST HAVE INCURRED SOME EXPENDITURE UNDER THE HEADS SALARY, TELEPHONE AND OTHER ADMINISTRATIVE CHARGES FOR EARNING THE EXEMPT INCOME. IT IS FURTHER FOUND THAT THE TOTAL EXPENDIT URE CLAIMED BY THE ASSESSEE FOR THE YEAR IS ABOUT 13 LAKHS AND THE AO HAD MADE A DISALLOWANCE OF ABOUT RS.16 LAKHS. HE HAS JUST ADOPTED THE FORMULA OF ESTIMATING EXPENDITURE ON THE BASIS OF INVESTMENTS. BUT, THE JUSTIFICATION FOR CALCULATING THE DISALLOWAN CE IS MISSING. THE 3 ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN ITS P & L ACCOUNT,SO,IT THE ONUS WAS ON THE AO TO PROVE THAT OUT OF THE EXPENDITURE INCURRED UNDER VARIOUS HEADS WERE RELATED TO EARNING OF EXEMPT INCOME. NOT ONLY THIS HE HAD TO GIVE THE BASI S OF SUCH CALCULATION. IN ANY MANNER DISALLOWANCE OF RS.16.35 LAKHS, AS AGAINST THE TOTAL EXPENDITURE OF RS.13 LAKHS (APP.) CLAIMED BY THE ASSESSEE IN P & L ACCOUNT, IS NOT JUSTIFIED. PROVISIONS OF RULE 8D CANNOT AND SHOULD NOT BE APPLIED IN A MECHANICAL W AY. FACTS OF THE CASE HAVE TO BE ANANLYSED BEFORE INVOKING THEM. WE ARE OF THE OPINION THAT THE AO HAD NOT DELIBERATED UPON THE FACTS OF THE CASE BEFORE MAKING THE DISALLOWANCE, WHEREAS THE FAA HAS DECIDED THE ISSUE ON MERITS. THEREFORE , CONFIRMING HIS ORD ER, WE DECIDED THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. 7. CONSIDERING THE SETTLED NATURE OF THE ISSUE AS WELL AS RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT (SUPRA), WE ARE OF THE OPINION THAT THE ISSUE HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE . ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 30 TH JUNE, 2015. SD/ - SD/ - (I.P. BANSAL) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 30 .6 .2015 . . ./ OKK , SR. PS / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI