ANAND DESAI (ADVOCATE), MUMBAI V. ASST CIT 11(2), MUMBAI

ITA 6418/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4274 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ITA/6418/MUM/2013 , / ASSESSMENT YEARS: 2009-10 SHRI ANAND DESAI(ADVOCATE) 64, SUVAS APARTMENT 68F, L. JAGMOHAN MARG,MUMBAI-400 006. PAN:AABPD 2050 N VS. ACIT-11(2) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI ARVIND KUMAR ASSESSEE BY: SH. P.J. PARDIWALA & MS. AARTI SATHE / DATE OF HEARING: 04.04.2016 / DATE OF PRONOUNCEMENT: 04.04.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER DT.14.8.2018 OF CIT(A)-3,MUMB AI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,FILED HIS RETURN OF I NCOME ON 30.9.2009,DECLARING TOTAL INCOME OF RS.2.84 CRORES.THE ASSESSING OFFICER(AO)COMPLETE D THE ASSESSMENT ON 23.12.2011 U/S. 143(3)OF THE ACT,DETERMINING THE INCOME OF THE ASSE SSEE AT RS.2.91 CRORES.THE SOLITARY GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE U/S. 14 A OF THE ACT. 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES AND MUTUAL FUNDS AT RS.14.76 CRORES, THAT HE HAD EARNED EXEMPT INCOME.VIDE HIS ORDER SHEET ENTRY,DT.9.9.2011,HE ASKED THE ASSESSEE TO S UBMIT COMPUTATION OF DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962 (RULES). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO MADE A DISALLOWANCE OF RS.6,39,80 2/-. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.BEFORE HIM,IT WAS CONTENDED THAT THERE WAS NO P ROXIMATE CONNECTION BETWEEN THE EXEMPT INCOME AND EXPENDITURE,THAT THE AO HAD NOT R ECORDED HIS SATISFACTION WITH THE CLAIM MADE BY THE ASSESSEE, THAT DIRECT EXPENSES LIKE STT , DEPOSITORY CHARGES HAD BEEN DEBITED TO CAPITAL ACCOUNT OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE AO THE FAA HELD THAT ONUS WAS ON THE ASSESSEE TO PROV E THAT NO EXPENSE HAD BEEN INCURRED ON EXEMPT INCOME.REFERRING TO THE PROVISIONS OF SECTIO N 14A OF THE ACT,HE UPHELD THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) SUBMI TTED THAT ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE, THAT ALL THE DIRECT EXPENSES WERE PART OF THE CAPITAL ACCOUNT OF THE ASSESSEE , HE REFERRED TO PAGE NO.19 OF THE PAPER BOOK AND RELIED UPON THE CASE OF JUSTICE SAM P. BHARUCHA (ITA/3889/MUM/2011-AY 2008-09) DATED 25 TH JULY 2012.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5. WE FIND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOM E,THAT IT HAD NOT CLAIMED ANY EXPENDITURE FOR EARNING EXEMPT INCOME,THAT THE AO H AD DISALLOWED RS.6.39 LAKHS U/S.14 A OF THE ACT R.W.RULE 8D OF THE ACT,THAT IN THE AUDIT RE PORT THE AUDITORS HAD SPECIFICALLY MENTIONED THAT THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE R ELATABLE TO EXEMPT INCOME IN THE P&L 6418/M/2013-ANAND DESAI 2 ACCOUNT.THE AO HAD IGNORED THE VERY BASIC FACT I.E. NON INCURRING OF ANY EXPENDITURE FOR EARNING TAX FREE INCOME.IN THE CASE OF HERO CYCLE ( 323ITR518)OF HONBLE P&H HIGH COURT HAS HELD AS UNDER: DISALLOWANCE UNDER SECTION 14A REQUIRED FINDING OF INCURRING OF EXPENDITURE AND WHERE IT WAS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPEN DITURE HAD BEEN INCURRED, DISALLOWANCE UNDER SECTION 14A COULD NOT STAND. CONSEQUENTLY, TH E DISALLOWANCE WAS NOT PERMISSIBLE. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT AND CONSI DERING THE FACT THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE TO EARN DIVIDEND INCOME,WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE.EFFECTIVE GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH ,APRIL, 2016. 04 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04.04.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.