ESJAY INTERNATIONAL P. LTD, MUMBAI V. ITO 15(3)(2), MUMBAI

ITA 6458/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4209 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R K GUPTA, JUDICIAL MEMBER & SHRI N K BILLAIYA, ACCOUNTANT MEMBER ITA NO.6458/MUM/2011: ASST.YEAR :2008-09 ESJAY INTERNATIONAL P. LTD., 48 LAXMI INDL. ESTATE, OFF FURGUSON ROAD, HANUMAN GALI, LOWER PAREL, MUMBAI- 400 103. PAN AAACE1066B VS. THE DY. CIT 6(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NISHANT THAKKAR RESPONDENT BY : MS. JOTHILAKSHMI NAYAK DATE OF HEARING : 25.06.2013 DATE OF PRONOUNCEMENT : 05.07.2013 O R D E R PER N.K.BILLAIYA (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-12, MUMBAI, DATED 21.06.2011, PERTAINING TO A.Y. 2008-0 9. 2. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE AND E XPORT OF READYMADE GARMENTS/FABRICS, MANUFACTURE AND RETAIL SALES OF R EADYMADE GARMENTS/FABRICS, JOB WORKING OF GARMENTS FOR OTHERS AND INVESTMENT IN SH ARES, SECURITIES AND IN MUTUAL FUNDS. FOR THE YEAR UNDER CONSIDERATION, THE ASSES SEE FILED RETURN OF INCOME ON 29.09.2008 DECLARING TOTAL INCOME AT RS.66,82,650/- , THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DECLARED EXEMPT INCOM E OF RS.38,74,014/- ON ACCOUNT OF DIVIDEND. THE ASSESSEE WAS ASKED TO GIVE DETAILS OF DIVIDEND AND ALSO THE DETAILS 2 ITA NO.6458/MUM/2011 AY:2008-09 OF THE EXPENDITURE IN THE LIGHT OF THE PROVISIONS O F SECTION 14A R.W. RULE 8D. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 0 4.11.2010 AND EXPLAINED WHY INTEREST SHOULD NOT BE CONSIDERED FOR THE DISALLOWA NCE OF EXPENDITURE U/S. 14A R.W. RULE 8D. THE ASSESSEE FURTHER SUBMITTED DETAILS OF WORKING OF EXPENSES ATTRIBUTABLE TO THE EARNING OF BUSINESS INCOME AT RS.4,48,779/-. THE SUBMISSIONS/DETAILS FILED BY THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE ASSES SING OFFICER WHO WENT ON TO COMPUTE THE DISALLOWANCE U/S. 14A R.W. RULE 8D @0.5 % OF AVERAGE VALUE OF INVESTMENT AND COMPUTED THE TOTAL DISALLOWANCE AT R S.24,83,987/-. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT SUCCESS. THE CIT(A) WAS CONVINCED THAT THE ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVI SIONS OF SECTION 14A(2) R.W. RULE 8D. THE ASSESSEE IS AGGRIEVED BY THIS FINDING OF T HE CIT(A) AND IS BEFORE US. 3. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE C IT(A) GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 24,83,987/- AS MADE BY THE ASSESSING OFFICER U/S. 14A R.W. RULE 8D OF THE I.T.ACT. BEFORE US THE COUNSEL FOR THE ASSESSEE FILED THE DETAILS OF EXPENSES, WHICH ACCORDING TO THE ASSESSEE IS ATT RIBUTABLE FOR EARNING THE EXEMPT INCOME. IT IS THE SAY OF THE COUNSEL THAT THE SAME WAS FILED BEFORE THE ASSESSING OFFICER. THE COUNSEL PLEADED THAT THE ASSESSEE HAS DISALLOWED THE EXPENSES, WHICH WERE DIRECTLY/INDIRECTLY ATTRIBUTABLE TO THE EARNIN G OF EXEMPT INCOME AND, THEREFORE, THERE WAS NO NEED TO WORK OUT THE DISALLOWANCE AS P ER RULE 8D. THE LEARNED DR RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THAT U /S. 14A THE ASSESSING OFFICER HAS BEEN GIVEN THE POWER TO DETERMINE THE AMOUNT OF EXP ENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL I NCOME. HOWEVER, THIS RIGHT TO DETERMINE THE AMOUNT OF EXPENDITURE IS FOLLOWED BY A RIDER WHICH PROVIDES THAT THE ASSESSING OFFICER CAN ASSUME THE POWERS ONLY WHEN H E IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SAID EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL IN COME UNDER THIS ACT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. A PERUSAL OF THE DETAILS FILED BY THE ASSESSEE 3 ITA NO.6458/MUM/2011 AY:2008-09 EXHIBITED AT PAGE 1 OF THE PAPER-BOOK SHOW THAT THE ASSESSEE HAS DISALLOWED ENTIRE SALARY PAID TO THREE OF ITS STAFF MEMBERS, ENTIRE R ENT PAID, ELECTRICITY CHARGES, TELEPHONE EXPENSES AND OTHER GENERAL EXPENSES TO WO RK OUT THE DISALLOWANCE AT RS.4,48,779/-. THE ASSESSING OFFICER WITHOUT ASSIG NING ANY SPECIFIC REASONS HAS SIMPLY BRUSHED ASIDE THE WORKING OF THE ASSESSEE. WE FIND THAT EVEN THE CIT(A) HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HAS SIMPLY CONFIRMED THE ASSESSMENT. IN OUR CONSIDERATE VIEW, BOTH THE LOWE R AUTHORITIES ERRED IN DISREGARDING THE SPECIFIC WORKING GIVEN BY THE ASSE SSEE. CONSIDERING THE FACTS IN TOTALITY, WE DIRECT THE ASSESSING OFFICER TO RESTRI CT THE DISALLOWANCE AT RS.4,48,779/- AS COMPUTED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JULY 2013. SD/- SD/- (R K GUPTA) (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 5 TH JULY, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, MUMBAI 4. THE CIT (A)-12 MUMBAI 5. THE DR, E- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI