INSTANT HOLDINGS LTD, MUMBAI V. DCIT RG 6(2), MUMBAI

ITA 5838/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1461 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 05-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 17-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI , , , , ' BEFORE SHRI C.N.PRASAD, JM AND SHRI RAJESH KUMAR, AM / I.T.A. NO. 5838/MUM/2014 ( # $# / ASSESSMENT YEAR: 2008-09) INSTANT HOLDINGS LIMITED (FORMERLY KNOWN AS KEC HOLDING LTD.) RPG HOUSE, 1 ST FLOOR, 463, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400030 / VS. THE DY. COMMISSIONER OF INCOME TAX OFFICER RANGE 6(2) MUMBAI ./ ./PAN/GIR NO. : AACCK5600M ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 05.01.2017 /DATE OF PRONOUNCEMENT: 04.04.2017 / O R D E R PER C.N.PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 25.06.2014 FOR THE A.Y. 2 008-09 ARISING OUT OF THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT). ASSESSEE BY: SHRI SANJAY DESAI REVENUE BY: S HRI SAURABHKUMAR RAI ITA NO.5838/M/14 A.Y.2008-09 2 2. THE FIRST GRIEVANCE OF THE ASSESSEE IN ITS APPEA L IS THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN DISALLOWING EXPENSES OF RS.20,00,000/- OUT OF RS.29,05,000/- DE BITED TO ITS PROFIT AND LOSS ACCOUNT U/S.14A OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INVESTMENT COMPANY FILED RETURN OF INCOME ON 29.09.2008 DECLARING INCO ME OF RS.1,04,23,294/-. THE ASSESSMENT WAS COMPLETED ON 10.12.2010 U/S.143( 3) OF THE ACT BY DETERMINING THE INCOME AT RS.1,24,23,300/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER DISALLOWED RS.20, 00,000/- U/S.14A READ WITH RULE 8D OF THE ACT. THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.3,09,35,678/- AN D CLAIMED AS EXEMPT U/S.10(34) OF THE ACT. HOWEVER, SINCE NO EXPENDIT URE RELATING TO THIS INCOME WAS DISALLOWED WHILE COMPUTING THE RETURNED INCOME THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE UNDER RULE 8D(I II) OF THE ACT I.E. 0.5% OF AVERAGE VALUE OF INVESTMENTS AND ARRIVED THE DIS ALLOWANCE OF RS.75,07,337/-. HOWEVER, SINCE THE ASSESSEE DEBITE D TOTAL EXPENDITURE OF RS.29.05 LACS TO THE PROFIT AND LOSS ACCOUNT FOR TH E YEAR UNDER CONSIDERATION THE DISALLOWANCE U/S.14A WAS RESTRICT ED TO RS.20,00,000/- SAID TO HAVE BEEN WORKED OUT IN PROPORTION OF DIVID END INCOME TO TOTAL INCOME. ON APPEAL THE CIT(A) SUSTAINED THE DISALLO WANCE MADE BY THE ASSESSING OFFICER. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITS THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNIN G DIVIDEND INCOME EXCEPT D-MAT CHARGES OF RS.414/-. IT WAS FURTHER S UBMITTED THAT IN THE COMPUTATION OF INCOME THE ASSESSEE DISALLOWED RS.14 ,37,377/- OUT OF TOTAL ITA NO.5838/M/14 A.Y.2008-09 3 EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT OF R S.29.05 LACS AND WHAT WAS CLAIMED TOWARDS EXPENDITURE IS ABOUT RS.14.67 L ACS ONLY. THEREFORE, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE DISAL LOWANCE U/S.14A OF THE ACT SHOULD NOT EXCEED THE EXPENDITURE CLAIMED IN TH E RETURN OF INCOME I.E. RS.14.67 LACS. 5. THE DR SUPPORTED THE ORDERS OF THE AUTHORITIES B ELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER WHILE COM PLETING THE ASSESSMENT DISALLOWED RS.20,00,000/- BEING THE EXPENDITURE ATT RIBUTABLE FOR EARNING DIVIDEND INCOME. THE ASSESSING OFFICER THOUGH CALC ULATED THE DISALLOWANCE TO BE MADE UNDER RULE 8D(III) OF THE A CT AT RS.75,07,337/- SINCE THE ASSESSEE DEBITED EXPENDITURE TO THE EXTEN T OF RS.29.05 LACS TO THE PROFIT AND LOSS ACCOUNT HE RESTRICTED THE DISALLOWA NCE TO RS.20,00,000/- WHICH THE CIT(A) SUSTAINED. IT IS THE CONTENTION O F THE ASSESSEE BEFORE US THAT IN THE COMPUTATION OF INCOME THE ASSESSEE DISA LLOWED RS.14,37,337/- AND ONLY THE REMAINING RS.14.67 LACS WAS CLAIMED AS ALLOWABLE EXPENDITURE, THEREFORE THE DISALLOWANCE SHOULD NOT EXCEED RS.14.67 LACS. ON A PERUSAL OF COMPUTATION OF INCOME WE FIND THAT ASSESSEE ADDED BACK THE FOLLOWING EXPENDITURES TO THE INCOME RETURNED:- SR. NO. PARTICULARS AMOUNT (I) PROVISION FOR NPA 9,84,233/- (II) INVESTMENT WRITTEN OFF 4,00,000/ - (III) DIALLOWANCE OF RENTAL CHARGES 53,444/- TOTAL 14,33,377 ITA NO.5838/M/14 A.Y.2008-09 4 7. WE ALSO FIND THAT THE ASSESSEE DEBITED ITS PROFI T AND LOSS ACCOUNT ONLY WITH RS.29.05 LACS AS EXPENDITURE. SINCE THE ASSESSEE ADDED BACK RS.14,37,377/- TO ITS INCOME RETURNED INFACT THE EX PENDITURE CLAIMED BY THE ASSESSE IS ONLY THE BALANCE OF RS.14.67 LACS. PERC ENTAGE OF EXEMPTED INCOME TO TOTAL INCOME COMES TO 75%, AS THE EXEMPT INCOME IS RS.3,09,35,678/- AND THE TOTAL INCOME IS RS.4,00,84 ,462/-. THEREFORE, THE DISALLOWANCE IN THE RATIO OF EXEMPT INCOME TO TOTAL INCOME I.E.75% OF THE EXPENDITURE OF RS.14.67 LACS CLAIMED BY THE ASSESSE E WORKS OUT TO RS.11,00,000/- EVEN ACCORDING TO METHOD ADOPTED BY THE ASSESSING OFFICER THEREFORE IN OUR CONSIDERED VIEW THE DISALLOWANCE S HOULD NOT EXCEED RS.11,00,000/-. IN THE FACTS AND CIRCUMSTANCES WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS.10,00,00 0/- U/S.14A OF THE ACT AS THE EXPENDITURE ATTRIBUTABLE FOR EARNING EXEMPT INC OME. 8. COMING TO THE SECOND ISSUE IN THE APPEAL OF THE ASSESSEE, THE ASSESSEE IS CHALLENGING THE ORDER OF THE CIT(A) IN DISREGARDING THE CREDIT FOR TDS NOT ALLOWED BY THE ASSESSING OFFICER TO THE EXTENT OF RS.4,02,439/- THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT A SSESSEE HAS FILED PETITION U/S.154 OF THE ACT FOR GRANTING CREDIT FOR TDS WHIC H IS STILL PENDING BEFORE THE ASSESSING OFFICER. HE ALSO SUBMITS THAT CIT(A) DID NOT ADJUDICATE ON THIS ISSUE FOR THE REASON THAT ASSESSEE FILED RECTI FICATION PETITION AND THE SAME IS PENDING BEFORE THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED BEFORE US TO GIVE DIRECTION TO DISP OSED OFF PETITION U/S.154 OF THE ACT AND TO CONSIDER FOR GRANTING CREDIT FOR TDS. THE DR HAS NO SERIOUS OBJECTION IN DIRECTING THE ASSESSING OFFICE R TO CONSIDER THE PLEA OF THE ASSESSEE. ITA NO.5838/M/14 A.Y.2008-09 5 9. ON HEARING BOTH THE SIDES WE DIRECT THE ASSESSIN G OFFICER TO DISPOSED OFF THE RECTIFICATION PETITION FILED BY TH E ASSESSEE FOR GRANTING CREDIT FOR TDS. THE GROUND RAISED BY THE ASSESSEE IS ALSO RESTORE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL WAS DECIDE IN AC CORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD. 7. THE GROUND NO.3 IN THE GROUNDS OF APPEAL IS RELA TED TO LEVY OF INTEREST U/S.23A, 234B, 234C AND 234D OF THE ACT. CHARGING OF INTEREST IS ONLY CONSEQUENTIAL. THEREFORE THIS GROUND BEINGONL Y CONSEQUENTIAL THE SAME IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH APRIL, 2017 . SD/- SD/- (RAJESH KUMAR) (C.N.PRASAD) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 4 TH #! , 2017 MP ITA NO.5838/M/14 A.Y.2008-09 6 % &$% / 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./ASSTT. REGISTRAR) , / ITAT, MUMBAI