WELSPUN FINTRADE LTD. (WELSPUN FINTRADE PVT. LTD.), MUMBAI V. DCIT - 8(3)(2), MUMBAI

ITA 6172/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1011 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA NO.6172 OF 2016 FOR M/SWELSPUN FINTRADE PVT. LT D. 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH S OOD, JUDICIAL MEMBER /.ITA NO.6172/MUM/2016, /ASSESSMENT YEAR: 2012-13 M/S.WELSPUN FINTRADE LIMITED, (NOW WELSPUN FINTRADE PVT. LTD), TRADE WORLD, B-WING, 9 TH FLOOR, KAMALA MILL COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL,MUMBAI-400 013. PAN: AAACW2877J VS. DY. COMMISSIONER OF INCOME TAX, 8(3)(2), ROOM NO.615, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY : SHRI SAURABH DESHPANDE-DR ASSESSEE BY : SHRI MITESH N. SHAH / DATE OF HEARING: 08/11/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 , 1961 254 )1( ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , -PER RAJENDRA,AM: CHALLENGING THE ORDER DTD. 19/08/2016 OF THE CIT(A) -14A,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF TRADING AND INVESTMENT FILED ITS RETURN OF INCOME ON,13/09/2012,DECLARING LOSS OF RS .5.72 CRORES.THE ASSESSING OFFICER(AO) COMPLETED THE ASSESSMENT ON,13/03/2015,U/S.143(3)OF THE ACT,DETERMINING ITS INCOME AT RS.(-) 5, 40,77,445/- 2. EFFECTIVE GROUND OF APPEAL FIRST GROUND OF APPEAL I S ABOUT CONFIRMING THE ADDITION OF RS.31.57 LAKHS MADE BY THE AO U/S. 14A R.W.R. 8D OF THE INC OME TAX RULES,1962 (RULES).DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESS EE HAD EARNED DIVIDEND INCOME OF RS. 3.23 CRORES,THAT SAME HAD BEEN CLAIMED EXEMPT U/S.10(34) OF THE ACT.HE DIRECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DISALLOWANCE U/S. 14A R.W.R.8D OF THE RULES SHOULD NOT BE MADE.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO REFER TO THE CASE OF CITICORP FINANCE INDIA LTD.(12 SOT 248) AND HELD THAT ALL THE EXPENSES CON NECTED EXEMPT INCOME HAD TO BE DISALLOWED U/S.14A REGARDLESS OF WHETHER THEY WERE DIRECT OR I NDIRECT, FIXED OR VARIABLE,MANAGERIAL OR FINANCIAL.INVOKING THE PROVISIONS OF RULE 8D(2)(III ) OF THE RULES,HE MADE A DISALLOWANCE OF RS. 31.58 LAKHS (RS.1,132-DIRECT EXPENSES (STT)+ RS.31. 57 LAKHS-0.5% OF AVERAGE INVESTMENTS).AS THE ASSESSEE HAD ALREADY DISALLOWED RS.1,132 IN THE COMPETITION OF INCOME,SO,HE RESTRICTED THE DISALLOWANCE TO RS.31.57 LAKHS U/S. 14A R.W.R. 8D. ITA NO.6172 OF 2016 FOR M/SWELSPUN FINTRADE PVT. LT D. 2 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE DETAILED SUBMISSIONS.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE AO HAD DULY DISCUSS THE REASONS FOR DISALL OWANCE,THAT HE HAD APPLIED HIS MIND BEFORE INVOKING THE PROVISIONS OF SECTION 14A,THAT IN THE EARLIER YEARS THE THEN FAA.S HAD DEALT WITH THE ISSUE OF MAKING INVESTMENT IN THAT SUBSIDIARY COMPA NIES,THAT IT HAD CLAIMED EXPENDITURE OF RS. 56.10 LAKHS IN THE P&L ACCOUNT,THAT THE AO HAD MADE DISALLOWANCE OF RS. 31.58 LAKHS ONLY, THAT THE ASSESSEE HAD INCLUDED ONLY THE REMUNERATION OF THE AUDITORS, PRINTING AND STATIONARY CHARGES AND MISCELLANEOUS EXPENSES (RS.41,559/-)UNDER THE H EAD ADMINISTRATIVE EXPENSES,THAT IT COULD NOT BE SUBSTANTIATED THAT ALL EXPENSES UNDER THE HE AD OTHER EXPENSES WERE NOT WHOLLY OR PARTLY RELATED TO EARNING OF EXEMPT INCOME,THAT THERE WAS NO EVIDENCE THAT EXPENDITURE INCURRED UNDER THE HEADS LEGAL AND PROFESSIONAL FEES WERE NOT LINK ED TO EARNING OF EXEMPT INCOME,THAT THE DISALLOWANCE MADE BY THE AO WAS LESS THAN THE EXPEN SES CLAIMED UNDER THE HEAD. FINALLY,THE FAA UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US THE AUTHORIS ED REPRESENTATIVE (AR) STATED THAT AS PER SCHEDULE 19 THE ASSESSEE HAD INCURRED TOTAL EXPENSE S OF RS.56.10 LAKHS,THAT EXPENSES INCURRED UNDER THE HEADS RATES,TAXES,LEGAL AND PROFESSIONAL CHARGES AMOUNTED TO RS.MORE THAN 55 LAKHS, THAT THE BALANCE EXPENSES WERE ABOUT 41,000/-(APPRO XIMATELY).THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE INVOKING THE PROVISIONS OF RULE 8D(2)(III)THE AO HA D NOT CONSIDERED THE DETAILS OF THE EXPENSES, THAT HE HAD NOT ESTABLISHED NEXUS BETWEEN THE EXEMP T INCOME AND THE EXPENDITURE INCURRED FOR EARNING THE SAID INCOME.AFTER CONSIDERING THE DETAI LS OF SCHEDULE 19,WE ARE OF THE OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR WAS NOT RELATED TO EARNING OF TAX FREE INCOME.PROVISIONS OF SECTION 14A CAN BE INVOKED ONL Y WHEN SOME EXPENDITURE IS CLAIMED AGAINST THE EXEMPT INCOME.AS IN THE CASE UNDER CONS IDERATION THE AO /FAA HAD NOT SPECIFIED THE ITEMS OF EXPENSED INCURRED FOR EARNING EXEMPT INCOM E,SO,WE ARE ABLE TO PERSUADE OURSELVES TO ENDORSE THE VIEWS OF THE FAA.REVERSING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA NO.6172 OF 2016 FOR M/SWELSPUN FINTRADE PVT. LT D. 3 AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2018. 03 , 2018 SD/- SD/- / RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03. 01.2018. S.GANGADHARA RAO, SR.PS./JV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.