ITO 3(3)(4), MUMBAI V. SOLITIARE APPLIANCES LTD, MUMBAI

ITA 5786/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 10-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 25-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BE NCH, MUMBAI , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER ./I.T.A. NO. 5786/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 THE ITO 3(3)(4), ROOM NO.672, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. / VS. M/S. SOLITAIRE APPLIANCES PVT. LTD., 171-C, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. # ./ ./PAN/GIR NO. : AABCV 0807C ( #% /APPELLANT ) .. ( &'#% / RESPONDENT ) APPELLANT BY SHRI RAVINDER SINDHU RESPONDENT BY SHRI BHUPENDRA KARKHANIS ) *+ / DATE OF HEARING :10/08/2015 ) *+ / DATE OF PRONOUNCEMENT: 10/08/2015 / O R D E R PER N.K.BILLAIYA, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-7, MUMBAI DATED 29/4/2013 PERTAINING TO ASSE SSMENT YEAR 2010- 11. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) TO RS.1,70,474/-,THEREBY ALLOWING A RELIEF OF RS.30,55,063/- . ./I.T.A. NO. 5786/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING ELECTRONIC GOODS AND IN VESTMENTS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE AO N OTICED THAT THE ASSESSEE HAS CREDITED DIVIDEND INCOME OF RS.1,97,77 ,672/-, WHICH HAS BEEN CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE ASSESSEE WAS ASKED AS TO WHY THE EXPENSES INCURRED FOR EARNING EXEMPT INCOME SHOULD NOT BE DISALLOWED UNDER SECTION 14A OF THE ACT. ON RECE IVING NO PLAUSIBLE REPLY, THE AO PROCEEDED TO COMPUTE THE DISALLOWANCE AS PE R THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R 8D AND DISALLOWED RS.3 2,25,537/- UNDER SECTION 14A OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). IT WAS STRONGLY SUBMITTED THAT THE ASSESSEE HAS INCURRED TOTAL EXP ENDITURE OF RS.5,08,737/-, THE BREAKUP OF WHICH IS EXHIBITED AT PARA-1.5 OF THE ORDER OF THE CIT(A) AT PAGE-12. ON THE BASIS OF THIS BREAK- UP, PROPORTIONATE DISALLOWANCE WAS RECOMPUTED AT RS.1,70,474/-. 4. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AN D THE RECOMPUTATION OF DISALLOWANCE, THE CIT(A) AT PARA 4.3 OBSERVED AS UNDER:- 4.3 I HAVE CONSIDERED THE AOS ORDER AS WELL AS TH E APPELLANTS SUBMISSIONS. IT IS SEEN THAT IN THE PROFIT AND LOSS ACCOUNT OF T HE COMPANY, APART FROM THE COST OF GOODS SOLD DEBITED TO THE PROFIT AND LOSS ACCOUNT, THE APPELLANT COMPANY HAS DEBITED THE FOLLOWING EXPENSES: PARTICULARS RUPEES SALARIES, WAGES & EMPLOYEES BENEFITS 84,000/- ADMINISTRATIVE EXPENSES AUDIT FEES 11,030/- BANK CHARGES 2,75,943/- ROC FEES 5,884/- OFFICE & GENERAL EXPENSES 850/- FREIGHT & FORWARDING CHARGES 1,31,030/- 4,24,737/- TOTAL EXPENDITURE AS PER P/L 5,08,737/- 4.1 ON THE AFOREMENTIONED FACTS AND DRAWING SUPPORT FROM THE DECISION OF THE TRIBUNAL DELHI BENCH IN ITA NO.267/DEL/2012 , THE CIT(A) DIRECTED ./I.T.A. NO. 5786/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 3 THE AO TO RESTRICT THE DISALLOWANCE TO RS.1,70,474/ -. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 5. LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE AO . PER-CONTRA, LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF C IT(A). 6. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW. IT IS A WELL SETTLED PROPOSITIO N OF LAW THAT UNDER SECTION 14A, THE DISALLOWANCE CANNOT BE EXTENDED TO DISALL OW SUCH EXPENDITURE WHICH IS ASSUMED TO HAVE BEEN INCURRED FOR THE PURP OSE OF EARNING TAX FREE INCOME. WE DRAW SUPPORT FROM THE DECISION OF THE T RIBUNAL DELHI BENCH IN THE CASE WIMCO SEEDLINGS LTD. 107 ITD 267(DEL). A SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL MUMBAI BENCH IN THE CASE OF UNION B ANK OF INDIA IN ITA NO.5347/MUM/2007, WHEREIN THE TRIBUNAL HAS HELD TH AT ONLY EXPENDITURE WHICH HAS BEEN PROVED TO HAVE BEEN INCURRED IN RELA TION TO THE EARNING OF TAX FREE INCOME CAN BE DISALLOWED. CONSIDERING THE FACTUAL MATRIX OF EXPENDITURE EXHIBITED HEREIN ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 10 TH DAY OF AUGUST, 2015. SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; 1 DATED : 10/08/2015 . . ./ VM , SR. PS ./I.T.A. NO. 5786/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 4 !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT. 3. 2* ( ) / THE CIT(A)- 4. 2* / CIT 5. 34 &*56 , + 56 , / DR, ITAT, MUMBAI 6. 47 / GUARD FILE. / BY ORDER, '* &* //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI