PURVAG COMMODITIES & DERIVATIVES P.LTD, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 10(3)(2), MUMBAI

ITA 6874/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1443 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 05-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHI RAM KARTIKEYAN LD
• Assessee Lawyers: NEEL KHANDELWAL LD
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA NO.6874/MUM/2017 PURVAG COMMODITIES & DERIVATIVES PVT. LTD. ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.6874/MUM/2017 ( / ASSESSMENT YEAR:2012-13) PURVAG COMMODITIES & DERIVATIVES PVT. LTD. 301-308 BHAGWATI HOUSE PLOT NO.A/19, VEERA DESAI RD. ANDHERI (W), MUMBAI-400 058. / VS. A CIT - 1 0(3)(2) 509, AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AAACS-5626-H ( ! /APPELLANT ) : ( '#! / RESPONDENT ) APPELLANT BY : NEEL KHANDELWAL- LD. AR RESPONDENT BY : ABHI RAM KARTIKEYAN - LD.DR / DATE OF HEARING : 13/03/2019 / DATE OF PRONOUNCEMENT : 18/03/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-17, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-17/IT-90/15-16 DATED 19/06/2017 ON FOLLOWING GROUNDS OF APPEAL: - ITA NO.6874/MUM/2017 PURVAG COMMODITIES & DERIVATIVES PVT. LTD. ASSESSMENT YEAR :2012-13 2 THE COMMISSIONER OF INCOME-TAX (APPEALS) - 17. MUMB AI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME-TAX -10(3)(2), MUMBAI (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN DISALLOWING A SUM OF RS 8,52,133 BEING EXPENSES INC URRED FOR EARNING DIVIDEND INCOME BY INVOKING THE PROVISIONS OF SECTION 14A REA D WITH RULE 8D(2)(III). THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) OUGHT NOT TO HAVE CONFIRMED THE A CTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED DISALLOWANCE OF RS 8,52,133 IN AS MUCH AS THE SAME IS NOT IN ACCORDANCE WITH THE PRESCRIPTION OF SECTION 14A READ WITH RULE 8D(2)(III). THE APPELLANTS FURTHER, CONTEND THAT EVEN THE SUO M OTO DISALLOWANCE OF RS.3,00,000 UNDER SECTION 14A CONSIDERED BY THEM IN THE COMPUTATION OF TOTAL INCOME OUGHT NOT TO HAVE BEEN CONSIDERED BY THE ASSE SSING OFFICER/ CIT(A) PER LAW AND FACTS OF THE CASE. 2.1 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD . ASSISTANT COMMISSIONER OF INCOME TAX-10(3)(2), MUMBAI [AO] U/ S. 143(3) ON 03/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS D ETERMINED AT RS.351.84 LACS AFTER DISALLOWANCE U/S 14A FOR RS.14 .82 LACS AS AGAINST RETURNED INCOME OF RS.337.01 LACS E-FILED BY THE AS SESSEE ON 29/09/2012. THE ASSESSEE BEING RESIDENT CORPORATE ENTITY IS STATED TO BE ENGAGED IN FINANCIAL SERVICE SECTOR. THE DISALLOWANCE MADE BY LD. AO U/R 8D IS THE SOLE SUBJECT MATTER OF PRESENT APPEAL BEFORE US. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.30 LACS AND OFF ERED SUO-MOTO DISALLOWANCE OF RS.3 LACS AGAINST THE SAME. THE LD. AO, APPLYING RULE 8D(2) WORKED OUT AGGREGATE DISALLOWANCE OF RS.17.82 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II ) FOR RS.9.30 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.8.52 LAC S. AFTER ADJUSTING THE SUO-MOTO DISALLOWANCE OFFERED BY THE ASSESSEE, THE NET DISAL LOWANCE WAS WORKED OUT TO RS.14.82 LACS, WHICH WAS ADDED TO THE INCOME OF THE ITA NO.6874/MUM/2017 PURVAG COMMODITIES & DERIVATIVES PVT. LTD. ASSESSMENT YEAR :2012-13 3 ASSESSEE. THE LD. FIRST APPELLATE AUTHORITY DELETED THE INTEREST DISALLOWANCE OF RS.9.30 LACS BY OBSERVING THAT OWN FUNDS IN THE SHAPE OF SHARE CAPITAL & RESERVES FAR EXCEEDED THE INVESTMENTS MADE BY THE ASSESSEE. HOWEVER, THE EXPENSE DISALLOWANCE OF RS.8 .52 LACS WAS CONFIRMED, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE, AGITATED THE ADDITIONS ON THE GROUND THAT LD. AO, WITHOUT REJECT ING ASSESSEES COMPUTATIONS, APPLIED RULE 8D MECHANICALLY WHICH WA S NOT IN ACCORDANCE WITH LAW. ON MERITS, IT WAS SUBMITTED TH AT THE DISALLOWANCE BY CONSIDERING THE EXEMPT INCOME YIELDING INVESTMEN TS WORKS OUT TO RS.3.75 LACS. THE LD. DR SUBMITTED THAT THE COMPUTA TIONS WERE IN ACCORDANCE WITH RULE 8D. 4. UPON CAREFUL CONSIDERATION, THE UNDISPUTED POSIT ION THAT EMERGES IS THAT THE ASSESSEE HAD OFFERED SUO-MOTO DISALLOWANCE OF RS.3 LACS AGAINST THE EXEMPT INCOME. THE LD. AO, WITHOUT RECO RDING PROPER SATISFACTION AS ENVISAGED BY SECTION 14A READ WITH RULE 8D, PROCEEDED TO APPLY RULE 8D, WHICH WAS NOT IN ACCORDANCE WITH LAW. THE ONUS WAS ON LD. AO TO REJECT THE ASSESSEES COMPUTATIONS AND RECORD A FINDING, HAVING REGARD TO ACCOUNTS OF THE ASSESSEE, AS TO HO W THOSE COMPUTATIONS WERE NOT SATISFACTORY. THE FAILURE TO DO SO OUST THE JURISDICTION OF LD. AO TO APPLY RULE 8D. ANOTHER FA CTOR TO BE NOTED IS THAT THE SAID DISALLOWANCE, CONSIDERING EXEMPT INCOME YI ELDING INVESTMENTS WORKS OUT TO RS.3.75 LACS, AGAINST WHICH THE ASSESS EE HAS ALREADY OFFERED SUO-MOTO DISALLOWANCE OF RS.3 LACS. THEREFORE, THE NET ITA NO.6874/MUM/2017 PURVAG COMMODITIES & DERIVATIVES PVT. LTD. ASSESSMENT YEAR :2012-13 4 ADDITIONAL DISALLOWANCE OF RS.5.52 LACS COULD NOT B E SUSTAINED. WE ORDER SO. 5. THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2019. SD/- SD/- (MAHAVIR SINGH) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 18/03/2019 SR.PS, JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '%- , - , / DR, ITAT, MUMBAI 6. ,./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.