JANAK D. DWARKADAS, MUMBAI V. ADDLCIT RG 11(2), MUMBAI

ITA 6763/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3005 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH PATNADE
• Assessee Lawyers: PRADIP J JOSHI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.6763/M/2014 ASSESSMENT YEAR: 2010-11 SHRI JANAK D. DWARKADAS, MULLA HOUSE, 3 RD FLOOR, 51, MAHATMA GANDHI ROAD, MUMBAI 400 001 PAN: AAEPD 8303R VS. ADDL. CIT, RANGE 11(2), AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PRADIP J. JOSHI, A.R. REVENUE BY : SHRI PRAKASH PATNADE, D.R. DATE OF HEARING : 22.06.2016 DATE OF PRONOUNCEMENT : 16.09.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 19.09.2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE IN THIS AP PEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF A SUM OF RS.3896520 /- UNDER SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 IN RELATION TO THE EXPENDITURE SUPPOSED TO BE INCURRED FOR EARNING OF TAX FREE DIVIDEND INCOME. THE ASSESSEE IS AN ADVOCATE BY PR OFESSION AND DURING THE YEAR HAS SHOWN PROFESSIONAL RECEIPTS OF RS.24.81 CR ORES WHEREAS THE EXPENDITURE CLAIMED AGAINST THE SAID RECEIPTS WAS A T RS.82.61 LAKHS. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) OBSERVED THAT THE ASSESSEE DURING THE YEAR HAD EARNED TAX EXEMPT INCOME OF RS. 3,76,66,541/-. HOWEVER, THE ASSESSEE HAD NOT OFFERED THE DISALLOWANCE UNDER SECTION 14A AS PER THE ITA NO.6763/M/2014 M/S. JANAK D. DWARKADAS 2 FORMULA AS PRESCRIBED UNDER RULE 8D OF THE INCOME T AX RULES. HE, THEREFORE, MADE THE IMPUGNED DISALLOWANCE. 3. THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE M ADE BY THE AO. THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE WHICH WAS DIRE CTLY RELATABLE TO THE EARNING OF THE PROFESSIONAL INCOME. IT HAS BEEN FU RTHER SUBMITTED ON BEHALF OF THE ASSESSEE THAT NO EXPENSES WERE CLAIMED BY THE A SSESSEE AGAINST EITHER THE DIVIDEND INCOME OR EXEMPT CAPITAL GAINS. IT HAS AL SO BEEN SUBMITTED THAT SCRUTINY TRANSACTION TAX AND CUSTODIAN AND OTHER PM S CHARGES WERE DEBITED TO THE ASSESSEES CAPITAL ACCOUNT AND NO DEDUCTION WAS CLAIMED FOR SUCH EXPENSES EITHER FROM TAX FREE OR TAXABLE INCOME. T HE ASSESSEES P& L ACCOUNT REFLECTED EXPENSES ONLY RELATED TO THE ASSESSEES P ROFESSION AND NO OTHER EXPENSES AGAINST EXEMPT INCOME. THE LD. A.R. HAS F URTHER SUBMITTED THAT THE ASSESSEE DID NOT USE HIS OFFICE FOR THE PURPOSE OF ACTIVITIES TO EARN EXEMPT INCOME AND NO EXPENSES SUCH AS COMPUTER, ELECTRICIT Y, STATIONERY, TELEPHONE EXPENSES ETC. WERE INCURRED TO EARN EXEMPT INCOME. THE ASSESSEES PORTFOLIO MANAGERS LOOKED AFTER HIS INVESTMENTS PORTFOLIO FOR WHICH THEY WERE PAID PMS FEES WHICH WAS DEBITED TO THE ASSESSEES CAPITAL AC COUNT. HOWEVER, THE ASSESSEE HAD SUO MOTO OFFERED A SUM OF RS.15,000/-A S DISALLOWANCE ON ESTIMATE BASIS U/S.14A OF THE ACT,1961 IN THE COMPU TATION OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE E VEN DID NOT INCUR ANY EXPENDITURE BY WAY OF INTEREST DURING THE YEAR AS H E HAD NO BORROWING/LOAN FUNDS. THE LD. A.R. HAS FURTHER BROUGHT OUR ATTENT ION TO THE ORDER DATED 06.04.2016 OF THE LD. CIT(A) IN RELATION TO SUBSEQU ENT ASSESSMENT YEAR 2012- 13 WHEREIN THE SIMILAR CONTENTIONS WERE RAISED BY T HE ASSESSEE AND THE LD. CIT(A) CONSIDERING THE SAME HAS ACCEPTED THE APPEAL OF THE ASSESSEE. THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINST SAID OR DER OF THE LD. CIT(A). CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, WE DO NOT FIND JUSTIFICATION ITA NO.6763/M/2014 M/S. JANAK D. DWARKADAS 3 ON THE PART OF LOWER AUTHORITIES FOR MAKING THE DIS ALLOWANCE AS PER THE FORMULA PRESCRIBED UNDER RULE 8D TOTALLY IGNORING THE ABOVE CONTENTIONS OF THE ASSESSEE. EVEN ON IDENTICAL FACTS THE LD. CIT(A) HAS DELETED THE DISALLOWANCE IN THE SUBSEQUENT YEAR. 5. IN VIEW OF THE ABOVE SUBMISSIONS OF THE ASSESSEE AND OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE, IN THI S CASE IS RESTRICTED TO THAT HAS BEEN SUO-MOTO OFFERED BY THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.09.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.