DCIT CIR - 3(3), MUMBAI V. M/s. RELIANCE CAPITAL ASSET MANAGEMENT LTD., MUMBAI

ITA 6618/MUM/2006

• Counselvise Citation: 661819914 RSA 2006
• Duration Of Justice: 5 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 07-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHY NAIK
• Assessee Lawyers: JITENDRA SANGHVI
• Keywords: Capital asset; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 6269/MUM./2006 (ASSESSMENT YEAR : 2003-04 ) RELIANCE CAPITAL ASSET MANAGEMENT LTD. KAMLA MILLS COMPOUND, 7 TH FLOOR TRADE WORLD, B WING, S.B. MARG LOWER PAREL (W), MUMBAI 400 013 PAN AAACR2668G .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-3(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... RESPONDENT ITA NO. 6618/MUM./2006 (ASSESSMENT YEAR : 2003-04 ) DY. COMMISSIONER OF INCOME TAX CIRCLE-3(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S RELIANCE CAPITAL ASSET MANAGEMENT LTD. KAMLA MILLS COMPOUND, 7 TH FLOOR TRADE WORLD, B WING, S.B. MARG LOWER PAREL (W), MUMBAI 400 013 PAN AAACR2668G .... RESPONDENT ASSESSEE BY : MR. JITENDRA SANGHVI REVENUE BY : MR. PARTHASARTHY NAIK DATE OF HEARING 12.12.2011 DATE OF ORDER 23.12.2011 RELIANCE CAPITAL ASSET MANAGEMENT LTD. ITA NO. 6269 & 6618/M./2006 2 O R D E R PER J. SUDHAKAR REDDY, A.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUGN ED ORDER DATED 3 RD OCTOBER 2006, PASSED BY THE COMMISSIONER (APPEALS)- III, MUMBAI, FOR ASSESSMENT YEAR 2003-04. THE SOLE ISSUE THAT ARISES IN THESE APPEALS IS QUANTIFICATION OF DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 2. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 7,81,000. ON APPEAL, THE COMMISSIONER (APPEALS) RESTRICTED THE DISALLOWA NCE IN QUESTION TO ` 1,00,000. AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL BEFORE THE TRIBUNAL. 3. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD, WE FIND THAT THE COMMISSIONER (APPEALS) RESTRICTED THE DISA LLOWANCE TO ` 1,00,000, BY OBSERVING AS FOLLOWS:- 2.3 . HOWEVER, I AGREE WITH THE APPELLANT THAT O NLY THE EXPENSES HAVING CONNECTION WITH THE EXEMPT INCOME S HOULD BE CONSIDERED FOR DISALLOWANCE. IN THIS CASE, THE AO H AS CONSIDERED EXPENSES OF RS.7,81,000/- FOR DISALLOWANCE UNDER SE CTION 14A WHICH APPEAR TO BE HIGH CONSIDERING THE FACT THAT NO INTE REST EXPENDITURE HAS BEEN INCURRED ON THE INVESTMENT IN DEBENTURES FROM WHICH INTEREST EXEMPT UNDER SECTION 10(23G) HAS BEEN EARNED. THE O NLY ACTIVITY UNDERTAKEN BY THE APPELLANT DURING THE YEAR RELATIN G TO THE RECEIPT OF EXEMPT INCOME IS TO RECEIVE TWO INTEREST WARRANTS A ND DEPOSIT THE SAME IN ITS BANK ACCOUNT. THE ALLOCATION OF THE EXP ENDITURE OF RS.7,81,000/- FOR UNDERTAKING THIS ACTIVITY IS UNRE ASONABLE BY ANY STANDARD. FURTHER, THE DECISION IN THE CASE OF CONS OLIDATED COFFEE LTD. (SUPRA) RENDERED UNDER KARNATKA AGRICULTURAL INCOME TAX ACT, 1957 CANNOT BE APPLIED FOR WORKING OUT DISALLOWANCE IN T HE RATIO OF INTEREST INCOME TO TOTAL RECEIPTS FOR THE PURPOSE OF DISALLO WANCE UNDER SECTION 1 4A. THERE ARE SPECIFIC PROVISIONS IN THE KARNATKA AGRICULTURAL INCOME TAX ACT 1957 PERMITTING SUCH ACTION ON THE PART OF THE AO. HOWEVER, SECTION 14A DOES NOT PERMIT THE AO TO ADOPT SUCH A FORMULA. THEREFORE, ONLY THE REASONABLE EXPENSES HAVING NEXU S WITH THE EXEMPT INCOME HAVE TO BE CONSIDERED FOR DISALLOWANC E. IN MY VIEW, IT WILL BE FAIR AND REASONABLE TO APPORTION EXPENSES O F RS.1,00,000/- ON AD-HOC BASIS TOWARDS THE EXEMPT INCOME. ACCORDINGLY , THE DISALLOWANCE MADE BY THE A.O. AT RS.7,81,000/- IS R EDUCED TO ` 1,00,000. THEREFORE, THE APPELLANT GETS A RELIEF OF ` 6,81,000 ON THIS RELIANCE CAPITAL ASSET MANAGEMENT LTD. ITA NO. 6269 & 6618/M./2006 3 ACCOUNT. (RELIEF ALLOWED ` 6,81,000). ACCORDINGLY, THE GROUND TAKEN BY THE APPELLANT IN THIS REGARD IS PARTLY ALLOWED. 4. WE DO NOT FIND ANY REASON TO TAKE A VIEW OTHER THAN THE VIEW TAKEN BY THE COMMISSIONER (APPEALS) AS AFORESAID. CONSEQUENT LY, HIS ORDER IS, ACCORDINGLY, UPHELD. THE GROUND RAISED BY THE ASSES SEE AS WELL AS THE REVENUE IS DISMISSED. 5. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REVENUE S APPEAL ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 23 RD DECEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, D BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI RELIANCE CAPITAL ASSET MANAGEMENT LTD. ITA NO. 6269 & 6618/M./2006 4 DATE INITIAL 1. DRAFT DICTATED ON 13.12.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14.12.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 19.12.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 19.12.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 19.12.2011 SR.PS 6. DATE OF PRONOUNCEMENT 23.12.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 23.12.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER