ASHISHKUMAR J BAIRAGRA, MUMBAI V. ITO 14(2)(2), MUMBAI

ITA 5730/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71706 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: RAKHI OSWAL
• Keywords: Business expenditure; Earning of tax free income
• Section: 10; 143(3); 14A

Judgement Text

, , ,, , INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDR A, ACCOUNTANT MEMBER /. ITA NO.5730/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR-2009-10 ASHISHKUMAR J BAIRAGRA F-11, 3 RD FLOOR, MANEK MAHAL, 90 VEER NARIMAN ROAD, CHURCHGATE MUMBAI-400020 VS ITO 14(2)(2) EARNEST HOUSE, 3 RD FLOOR, NARIMAN POINT MUMBAI-400021 PAN: AAIPB6211G ( &' / APPELLANT) ( ()&' / RESPONDENT) $*+ $*+ $*+ $*+ , , , , ' '' ' / APPELLANT BY : RAKHI OSWAL ! - , ' / REVENUE BY : SHRI SURENDRA KUMAR $ $ $ $ - -- - +. +. +. +. / DATE OF HEARING : 07-11-2013 /0% - +. / DATE OF PRONOUNCEMENT : 13-11-2013 $ $ $ $ , 1961 - -- - 254 )1( ' '' ' +1+ +1+ +1+ +1+ '2 '2 '2 '2 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM: CHALLENGING THE ORDER DATED 02.07.2012 OF CIT(A)-25 ,MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE U/S 14A AS PER RULE 8D, EVEN THOUGH HE HAD GIVEN THE FINDING THAT NO EXPENSES INCLUDING IN TEREST ARE INCURRED FOR MAKING INVESTMENT IN THE SHARES AND EARNING THE DIVIDEND INCOME. 2. THE APPELLANT COMPANY CRAVES TO ADD TO, ALTER OR AM END THE FOREGOING GROUNDS, WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER, AT THE TIME OF HEARING. 2. ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF INCOME O N 16.9.2009 DECLARING TOTAL INCOME AT RS.6.65 LACS.ASSESSING OFFICER (AO) FINALISED THE ASSESSMEN T ON 14.11.2011 U/S 143(3) OF THE ACT DETERMI -NING THE TOTAL INCOME OF THE ASSESSEE AT RS. 8.81 LACS.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD CLAIMED EXEMPTION U/S 10 OF THE ACT FOR THE DIVIDEND INCOME (RS.1,18, 723/-) AND SHARE OF PROFIT FROM FIRM (RS.18,89,167/ -),THAT EXPENSES RELATING TO THE EARNING OF THE EXEMPT INCOME WERE NOT DISALLOWED BY THE ASSESSEE.H E ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE EXPENDITURE INCURRED FOR EARNING OF DIVIDEND IN COME SHOULD NOT BE DISALLOWED U/S.14A OF THE ACT R.W.RULE 8D OF INCOME-TAX RULE 1962(RULES).INVO KING THE PROVISIONS OF RULE 8D OF THE RULES AO MADE A DISALLOWANCE OF RS.2,15,719/-. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.IT WAS SUBMITTED BEFORE HIM THAT ASSESSEE HAD OWN FUND OF RS. 2.28 CRORES THAT WAS UTILISED FOR I NVESTING IN SHARES (RS.1.6 CRORS), THAT BORROWED FUND WAS ONLY RS. 29.77 LACS ON WHICH INTEREST AMOU NTING TO RS. 2.22 LACS WAS PAID, THAT ASSESSEE HAD EARNED INTEREST OF RS.4.57 LACS FROM LENDING MA DE BY HIM DURING THE YEAR UNDER CONSIDERATION, THAT ASSESSEE DID NOT CARRY OUT ANY PROPRIETARY BUS INESS ACTIVITY, THAT HE HAD NOT CLAIMED ANY EXPENDITURE, THAT HE HAD PAID INTEREST @ 10% WHEREA S HE RECEIVED INTEREST @ 12%,THAT INTEREST 2 ITA NO. 5730/MUM/2012 ASHISHKUMAR J BAIRAGRA . . EXPENSES CLAIMED BY HIM WERE INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF EARNING INTEREST INCOME,THAT INTEREST INCOME WAS DISCLOSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THAT THERE WAS DIRECT NEXUS BETWEEN THE BORROWING AND ITS UTIL IZATION.ALTERNATIVELY, IT WAS ARGUED THAT INTEREST EXPENSE SHOULD BE EXCLUDED FROM THE WORKIN G OF DISALLOWANCE UNDER RULE 8D OF THE RULES. 2.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING HIS SUBMISSIONS AND THE ASSESSMENT ORDER,FAA HELD THAT THAT THE ASSESSEE HAD NOT CLAIMED ANY OTHER BUSINESS EXPENSES,THAT HE HAD DISCLOSED INTEREST IN COME UNDER THE HEAD INCOME FROM OTHER SOURCES THAT IT WAS NOT REASONABLE TO ATTRIBUTE INTEREST EX PENSE OF RS.2.20 LACS WITH THE INVESTMENT IN SHARES. 2.3. BEFORE US AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT ASSESSEE HAD NOT INCURRED ANY EXPEND -ITURE FOR EARNING EXEMPT INCOME,THAT HE HAD SUFFIC IENT FUNDS TO MAKE INVESTMENT,THAT INTEREST INCOME WAS OFFERED FOR TAXATION UNDER THE APPROPRIA TE HEAD,THAT FAA HAD DIRECTED THE AO TO MAKE DISALLOWANCE U/S.14A OF THE ACT AFTER HOLDING THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE TO EARN DIVIDEND INCOME.DEPARTMENTAL REPRE SENTATIVE(DR)SUPPORTED THE ORDER OF THE FAA TO THAT EXTENT. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL,FAA HAD HELD THAT THE ASSESSEE WAS NOT CARRYING OUT ANY PROPRIETARY BUSINESS ACTIVITY,THAT HE HAD NOT CLAIMED ANY OTHER BUSINESS EXPENSES,THAT HE HAD DISCLOSED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND HAD CL AIMED INTEREST EXPENSE OF RS.2.20 LACS AGAINST THE INTEREST INCOME,THAT HE HAD OWN CAPITAL OF RS.2.28 CRORES WHEREAS HE HAD MADE INVESTMENT OF RS. 1.44 CRORES IN SHARES AND MUTUAL FUNDS,THAT IT WAS NOT REASONABLE TO ATTRIBUTE INTEREST EXPENSE OF RS.2.20 LACS WITH THE INVESTMEN T IN SHARES.WE FURTHER FIND THAT AFTER GIVING THE FINDING THAT THERE WAS NO NEXUS BETWEEN THE INVESTM ENT AND THE INTEREST EXPENDITURE INCURRED BY HIM,HE DIRECTED THE AO TO COMPUTE DISALLOWANCE U/S. 14A OF THE ACT.WE ARE UNABLE TO UNDERSTAND AS HOW ANY OTHER DISALLOWANCE CAN BE MADE,AS DIRECT ED BY THE FAA,WHEN ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE FOR EARNING EXEMPT INCOME O R HAD NOT BORROWED ANY MONEY FOR MAKING INVESTMENT IN SHARES.IN OUR OPINION,FAA WAS NOT JUS TIFIED IN PARTLY ALLOWING THE APPEAL FILED BY THE ASSESSEE.HE SHOULD HAVE GIVEN RELIEF AS PRAYED BY THE ASSESSEE.THEREFORE, REVERSING HIS ORDER, TO THAT EXTENT,WE DECIDE GROUND NO.1 IN FAVOUR OF T HE ASSESSE,IN PART.AO IS DIRECTED NOT TO MAKE ANY DISALLOWANCE U/S.14A OF THE ACT R.W.RULE 8D. AS A RESULT,APPEAL FILED BY THE ASSESSEE STAND S PARTLY ALLOWED. * +3 $*+ 4 5 - 1 2 6 ' !7 - !+ 89. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER,2013 . '2 - /0% ' : ;$ 13 UOECJ UOECJ UOECJ UOECJ , 2013 0 - 1 < SD/- SD/- ( . = = = = . . B.R.MITTAL) ( !'# !'# !'# !'# / RAJENDRA) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, ;$ /DATE: 13 TH NOVEMBER,2013 SK '2 '2 '2 '2 - -- - (+> (+> (+> (+> ?'>%+ ?'>%+ ?'>%+ ?'>%+ / COPY OF THE ORDER FORWARDED TO : 3 ITA NO. 5730/MUM/2012 ASHISHKUMAR J BAIRAGRA . . 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / @ A , 4. THE CONCERNED CIT / @ A 5. DR A BENCH, ITAT, MUMBAI / >B1 (+$ , ,, , , . . . 6. GUARD FILE/ 1 C )>+ )>+ )>+ )>+ (+ (+(+ (+ //TRUE COPY// '2$ / BY ORDER, D / 8 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI