DR. ASHWIN B MEHTA, MUMBAI V. JOINT CIT RANGE 16 (2), MUMBAI

ITA 6857/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1057 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Business income; Depreciation; Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 6857/MUM/2019 (ASSESSMENT YEAR 2012-13) DR. ASHWIN B. MEHTA 3201 RAHEJA EXCELSIOR OPP SOBO CENTRAL MALL TARDEO, MUMBAI- 400 034. PAN : AACPM8363J VS. JCIT, RANGE - 16(2) AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI-400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI BRAJENDRA KUMAR DATE OF HEARING 08 .0 7 .2021 DATE OF PRONOUNCEMENT 12 .0 7 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 23.9.2019 PERTAINS TO A.Y. 2012-13. 2. GROUNDS OF APPEAL READ AS UNDER : THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)['C IT(A)'] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4,66,355/- MADE BY THE ID. AO U/S 14A OF THE ACT R.W.R.SD OF THE INCOME TAX RULES, 1962. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISALLOWA NCE MADE OUGHT TO BE DELETED. 3. BRIEF FACTS THE APPELLANT IS A PRACTICING DOCTOR (CARDIOLOGIST) AND IS AFFILIATED WITH MANY HOSPITALS. DURING THE YEAR UND ER CONSIDERATION THE ASSESSEE HAS EARNED GROSS RECEIPTS OF RS.4,20,49,82 2/- AND AFTER CLAIMING EXPENSES OF RS.39,20,906/-. HE OFFERED NET PROFESSI ONAL INCOME AT RS.3,81,28,9L6/-. APART FROM PROFESSIONAL INCOME, T HE ASSESSEE HAS ALSO OFFERED INCOME OF RS. 27,046/- FROM HOUSE PROPERLY AND INTEREST INCOME OF RS. 1,68,36,905/-. APART FROM ABOVE INCOME, THE ASSESSE E HAS EARNED EXEMPT INCOME OF RS.20,91,427/-. THE DETAILS OF THE SAID I NCOME EARNED ARE AS FOLLOWS: DR.ASHWIN B. MEHTA 2 PARTICULARS AMOUNT (RS.) PPF INTEREST (A) 4,64,096/- DIVIDEND INCOME FROM : SHARES 1,56,198/- MUTUAL FUND UNITS 14,71,133/- TAX FREE DIVIDEND (B) 16,27,331/- TOTAL EXEMPT INCOME (A+B) 20,91,427/- ON ENQUIRY BY THE AO FOR DISALLOWANCE U/S 14A, THE ASSESEE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS INCURRED ADVISORY SERVICE CHARGES OF RS.57,331/- AND SECURITIES TRANS ACTION FAX & OTHER CHARGES OF RS.40,889/- TOWARDS EARNING EXEMPT INCOME. HOWEV ER, THE SAID EXPENSES WERE DEBITED TO CAPITAL ACCOUNT OF THE ASSESSEE AND THE APPELLANT DID NOT CLAIM IT IN HIS INCOME & EXPENDITURE ACCOUNT OUT OF THE T OTAL EXPENSES OF RS.39,20,906/- AN AMOUNT OF RS.8,77,586/- IS DEPREC IATION ALLOWANCE. THAT DEPRECIATION BEING AN ALLOWANCE IS OUT OF THE PURVI EW OF DISALLOWANCE U/S I4A OF THE ACT, IN THIS REGARD, THE APPELLANT FURTHER PLACED RELIANCE ON THE DECISION OF SPECIAL BENCH OF AHMEDABAD TRIBUNAL IN THE CASE OF VISHNU ANANT MAHAJAN VS. ACIT (ITA NO.3002/AHD/2009) DATED 25.04.2012 AN D DECISION OF MUMBAI TRIBUNAL IN THE CASE OF HOSHANG D. NANAVATI V ACIT (ITA NO. 3567/MUM/2007) DATED 18.03.2011. IT WAS FURTHER PLEADED THAT WHERE AS BALANCE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY TOWARDS THE PERFORM ANCE OF PROFESSIONAL SERVICES. IF WAS FURTHER SUBMITTED THAT DISALLOWANC E U/S 14A OF THE ACT CAN BE ONLY MADE IF THERE IS A DIRECT NEXUS BETWEEN EXPEND ITURE INCURRED AND EXEMPT INCOME. IT WAS SUBMITTED THAT IN THE GIVEN CASE, AP PELLANT HAS NOT INCURRED ANY EXPENSES TO EARN DIVIDEND INCOME. THEREFORE, NO DISALLOWANCE U/S 14A R.W. RULE 3D OF THE RULES, IS REQUIRED IN THE INSTA NT CASE. HOWEVER, ON A WITHOUT PREJUDICE BASIS, AS REQUIRED BY THE LEARNED AO, 'THE APPELLANT FILED A WORKING OF 14A DISALLOWANCE AS PER RULE 8D OF RULES ) AMOUNTING TO RS.4,66,355/- VIDE LETTER DATED 30.01,2015 HOWEVER, THE AO WITHOUT PROVIDING ANY SPECIFIC FINDINGS AS TO WHICH EXPENSES ARE INCU RRED TO EARN EXEMPT INCOME AND WITHOUT RECORDING ANY REASONING TOR HIS DISSATI SFACTION TO THE WORKING OF THE ASSESSEE SIMPLY MENTIONED IN THE ORDER THAT 'US E OF INFRASTRUCTURE AND STAFF OF PROFESSION FOR EARNING THE EXEMPT INCOME C ANNOT BE DENIED'. DR.ASHWIN B. MEHTA 3 THEREAFTER, THE AO COMPUTED DISALLOWANCE U/S. 14A R .W.R 60 OF THE RULES AT RS. 4,66,353/-. 4. BEFORE THE LEARNED CIT(APPEALS) THE INTER ALIA S UBMISSION OF THE ASSESSEE NOTED WERE AS UNDER :- AT THE OUTSET, WE WOULD LIKE TO BRING TO YOUR HONO UR'S NOTICE THAT THE MUMBAI TRIBUNAL IN APPELLANT'S OWN CASE IN AYS 2008 -09 & 2009-10, HAS RESTRICTED THE DISALLOWANCE UNDER SECTION J4A OF TH E ACT TO THE EXTENT OF SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE (I.E. ADVISO R CHARGES AND STT WHICH WAS ALREADY DEBITED TO CAPITAL ACCOUNT] PLUS BANK C HARGES AND ACCOUNTING CHARGES DEBITED IN THE INCOME & EXPENDITURE ACCOUNT . THUS, RELYING UPON THE ITAT DECISION IN APPELLANT'S OWN CASE, TOR THE YEAR UNDER CONSIDERATION THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OUGHT TO BE RESTRICTED TO RS. 133,909/- (I.E. RS. 3.909/- TOWARDS BANK CHARGES AN D RS.1,30,000/- ACCOUNTING CHARGES). SINCE, ADVISORY CHARGES OF RS. 57,331/- & STT OF RS. 40,889/- IS DEBITED TO CAPITAL ACCOUNT ADDING THE S AME WOULD RESULT TO DOUBLE DISALLOWANCE. IN VIEW OF THE ABOVE STATED FACTS AND IN LAW THE DI SALLOWANCE U/S I4A READ WITH RULE 8D OUGHT TO BE RESTRICTED TO RS. 1,33,909 /-. 5. HOWEVER LEARNED CIT(APPEALS) WAS NOT CONVINCED. HE REFERRED TO THE DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD VS. CIT REPORTED IN 402 ITR 640 AND OBSERVED THAT I T HAS PUT REST TO MANY CONTROVERSIES UNDER SEC I4A OF THE ACT. THAT THE HO N'BLE SUPREME COURT HELD THAT IF EXPENDITURE IS INCURRED ON EARNING THE DIVI DEND INCOME THAT MUCH OF THE EXPENDITURE WHICH IS ATTRIBUTABLE TO THE DIVIDE ND INCOME HAS TO BE DISALLOWED AND CANNOT BE TREATED AS BUSINESS INCOME . THEREAFTER LEARNED CIT(APPEALS) CHOSE NOT TO FOLLOW ITAT DECISION IN A SSESSEE'S OWN CASE AND REFERRED TO SEVERAL OTHER ITAT DECISION AND PROCEED ED TO CONFIRM THE ORDER OF THE ASSESSING OFFICER. 6. AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE RECORDS. ON THE FACTS AS NARRATED ABOVE IT IS CLEAR THAT ITAT IN ASSESSEE'S OWN CASE FOR EARLIER YEARS HAS RESTRICTED THE DISALLOWA NCE TO THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE. THERE IS NO CHAN GE IN THE FACTS AND DR.ASHWIN B. MEHTA 4 CIRCUMSTANCES OF THE CASE. NO REASON WHATSOEVER HAS BEEN ATTRIBUTED BY THE ASSESSING OFFICER OR CIT(A) AS TO WHY THE SUOMOTO D ISALLOWANCE BY THE ASSESSEE IS NOT APPROPRIATE. THE LEARNED CIT(APPEALS) HAS RE FERRED TO THE DECISION OF SUPREME COURT IN MAXOPP FOR THE PROPOSITION REFERRE D ABOVE. FROM THE REFERENCE TO THE HONOURABLE SUPREME COURT BY THE LE ARNED CIT(APPEALS), WE FAIL TO UNDERSTAND HOW THE SAME SUPPORTS THE CASE O F THE REVENUE HERE THAT WITHOUT ASSIGNING ANY REASON WHATSOEVER AS TO WHY T HE SUOMOTO DISALLOWANCE PROPOSED BY THE ASSESSEE ON THE FACTS OF THIS CASE IS TO BE REJECTED. FURTHERMORE BY CHOOSING NOT TO FOLLOW THE ITAT DECI SION IN ASSESSEE'S OWN CASE LEARNED CIT(APPEALS) HAS DISPLAYED SCANT REGARD TO THE PRINCIPLE OF JUDICIAL DISCIPLINE. FOR THESE REASONS NARRATED ABOVE THE OR DER OF LEARNED CIT(APPEALS) CANNOT BE SUSTAINED. 8. HENCE WE SET ASIDE THE ORDER OF AUTHORITIES BELO W AND DIRECT THAT THE SUOMOTO DISALLOWANCE PROPOSED BY THE ASSESSEE IN TH E SUBMISSIONS ABOVE THAT IS RS. 1,33,909/- SHOULD BE ACCEPTED IN ACCORDANCE WITH ITAT DECISION IN ASSESSEES OWN CASE FOR EARLIER YEAR. ACCORDINGLY W E DIRECT THAT THE DISALLOWANCE UNDER SECTION 14A SHOULD BE RESTRICTED TO 1,33,909/-. 9. IN THE RESULT APPEAL BY THE ASSESSEE STANDS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12.07.2021 SD/- SD/- (PAVANKUMAR GADALE) (SHA MIM YAHYA) JUDICIAL MEMBER AC COUNTANT MEMBER MUMBAI; DATED : 12/07/2021 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. DR.ASHWIN B. MEHTA 5 BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI