SHAH KHETAJI DHANAJI & CO, MUMBAI V. ASST CIT 18(1), MUMBAI

ITA 658/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0271 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN DR SHRI BHARAT KUMAR
• Assessee Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Depreciation; Earning of tax free income
• Section: 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 658 / MUM/ 201 6 ( / ASSESSMENT YEAR: 20 1 2 - 1 3 ) M/S. SHAH KHETAJI DHANAJI & CO., 111/119, THAKURDAS ROAD, THAKU RDAS. MUMBAI - 400002 / VS. ACIT - 18(1), MUMBAI ./ ./ PAN/GIR NO. : AACFS 4277 M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 28 .1 1 .2017 / DATE OF PRONOUNCEMENT : 14 . 02 .2018 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 22 . 12 .201 5 PASSED BY THE COMMI SSIONER OF INCOME TAX (APPEALS) - 29 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 1 2 - 1 3 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. 1. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW, THE LD CIT(A) ERRED IN CONFIR MING DISALLOWANCE OF RS, 14,45,595/ - U/S 14A R.W,R 8D OF INCOME TAX ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW THE LD, CIT(A) FAILED TO C ONSIDER THAT DISALLOWANCE U/S 14A CANNOT EXCEED EXEMPT INCOME. REVENUE BY : SHRI V. JUSTIN (DR) ASSESSEE BY: SHRI BHARAT KUMAR ITA NO. 658 /M/2016 A.Y. 201 2 - 13 . 2 3. ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW, THE LD. C1T(A) ERRED IN CONFIRMING AD - HOC 10% DISALLOWANCE OF AMOUNT RS.2,12,921/ - OF FOLLOWING EXPENSES. 1. TELEPHONE CHARGES RS.2,83,577/ - 2. DEPRECIATION ON TELEPHONE RS.10,701/ - 3. MOTOR EXPENSES RS.8,32,264/ - 4. DEPRECIATION (MOTOR CAR) EXPENSES RS,7,4L,8 5L/ - 5. INTEREST ON MOTOR CAR EXPENSES RS.2,45,415/ - 6. INSURANCE ON MOTOR CAR RS.15,398/ - TOTAL RS.21,29,206 / - 4 - ON THE FACTS AND CIRCUMSTANCES OF CASE AND LAW, THE LD. C1T(A) ERRED IN CONFIRMING CHARGING INTEREST U/S 234 A/B/C OF THE INCOME TAX ACT, 5 - THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND THE EXISTING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3 . THE BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 15 .09.201 2 DECLARING TOTAL INCOME TO THE TUNE OF RS. 3,50,72,953 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE ACT DATED 13.08.201 3 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, THE NOTICE U/S 142(1) OF THE ACT DATED 08.07.2014 ALONG WITH QUESTIONNAIRE WAS ALSO ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORTERS, TRADERS & CONSIGNORS IN FE RROUS & NON - FERROUS METALS. ON VERIFICATION , THE ASSESSEE WAS FOUND TO BE EARNED THE EXEMPT INCOME TO THE TUNE OF RS.9,82,816/ - . THE ASSESSING OFFICER APPLIED THE PROVISION OF SECTION 14A R.W. RULE 8D OF THE ACT AND ASSESSED THE EXPENDITURE TO EARN THE EXE MPT INCOME TO THE TUNE OF RS.16,40,808/ - . THE ASSESSEE ALSO CLAIMED THE TELEPHONE EXPENSES, DEPRECIATION ON TELEPHONE, MOTOR EXPENSES, DEPRECIATION ON MOTOR CAR, INTEREST ON MOTOR CAR LOAN AND INSURANCE ON MOTOR CAR WHICH WAS DISALLOWED TO THE EXTENT OF 10 %. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 3,73,31,532/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ITA NO. 658 /M/2016 A.Y. 201 2 - 13 . 3 PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BUT THE ASSESSEE WAS NOT SATISFIED , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 4 . UNDER THIS ISSUE, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE OF RS.14,45,595/ - U/S 14A R.W. RULE 8D OF THE I.T. ACT. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE DISA LLOWANCE U/S 14A R.W. RULE 8D OF THE ACT IS NOT REQUIRED TO BE EXCEED MORE THAN THE DIVIDEND INCOME AND IN SUPPORT OF THIS CONTENTION. T HE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW SETTLED IN (2017) 83 TAXMANN.COM 242 (AHMEDABAD T RIBUNAL ) AND PRINCIPAL CIT VS. EMPIRE PACKAGE P. LTD. (P&H H IGH COURT) ITA. NO. 415 OF 2015. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTA NCES, IT IS NOW WELL - SETTLED THAT THE EXPENSES INCURRED TO EARN THE EXEMPT INCOME IS NOT REQUIRED TO BE EXCEED ED MORE THAN THE EXEMPT INCOME. THERE ARE VARIOUS JUDGMENTS OF THE TRIBUNAL AND HIGH COURTS ARE ON THIS ISSUE. THE LAW RELI ED BY THE LD. REPRESENTATIVE OF THE ASSESSEE ALSO SPEAKS THAT THE EXPENDITURE TO INCUR THE EXEMPT INCOME IS NOT LIABLE TO BE EXCEEDED MORE THAN EXEMPT INCOME. THEREFORE, IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES AND KEEPING IN VIEW OF LAW R ELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTRICTED THE EXPENSES TO INCUR THE EXEMPT INCOME TO THE EXTENT OF EXEMPT INCOME ONLY. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE RE VENUE. ISSUE NO.2 : - ITA NO. 658 /M/2016 A.Y. 201 2 - 13 . 4 5 . UNDER THIS ISSUE THE LD. REPRESENTATIVE OF THE ASSESSEE HAS CHALLENGED THE ADHOC DISALLOWANCE TO THE EXTENT OF 10% IN CONNECTION WITH TELEPHONE CHARGES, DEPRECIATION ON TELEPHONE, MOTOR EXPENSES, DEPRECIATION ON MOTOR CAR, INTEREST ON MOTOR CAR LOAN AND INSURANCE ON MOTOR CAR . IT IS INCUMBENT UPON THE ASSESSEE TO PROVE HIS CLAIM BY ADDUCING THE SUFFICIENT MATERIAL/EVIDENCE ON RECORD. THE ADHOC ESTIMATION CAN ONLY BE COMING TO THE EXISTENCE WHEN THE ASSESSEE FAILED TO SATISFY HIS CLAI M BY ADDUCING SUFFICIENT EVIDENCE ON RECORD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF 10%. TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE VIEW THAT 10% OF THE ADDITION IS ON THE HIGHER S IDE WHICH SEEMS TO BE JUSTIFIABLE TO THE EXTENT OF 5% OF THE EXPENSES . THEREFORE, IN THE SAID CIRCUMSTANCES, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND RESTRICTED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF ABOVE SAID EXPENSES TO THE EXTENT OF 5 %. ACCORDINGLY, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 14 .0 2 . 201 8 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 14 . 02 . 201 8 VIJAY ITA NO. 658 /M/2016 A.Y. 201 2 - 13 . 5 / 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