DCIT CEN CIR 3(3) , MUMBAI V. PASSIONATE INVESTMENT MANAGEMENT P. LTD, MUMBAI

ITA 6932/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1473 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTIKEYANDR
• Assessee Lawyers: MALAV P SHETHAR
• Keywords: Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.6931-32/MUM/2017 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.6932/MUM/2017 ( / ASSESSMENT YEAR: 2013-14) & ./ I.T.A. NO.6931/MUM/2017 ( / ASSESSMENT YEAR: 2014-15) D CIT - CENTRAL CIRCLE - 3(3) ROOM NO.1923 AIR INDIA BUILDING, 19 TH FLOOR NARIMAN POINT MUMBAI-400 021 / VS. M/S. PASSIONATE INVESTMENT MANAGEMENT PVT.LTD. MOTILAL OSWAL TOWER OPP. PAREL S.T. DEPOT NEAR PRABHADEVI, DADAR(W) MUMBAI-400 025. ./ ./PAN/GIR NO. AAACM-7085-N ( ! /APPELLANT ) : ( '#! / RESPONDENT ) APPELLANT BY : ABHIRAMA KARTIKEYAN-DR RESPONDENT BY : MALAV P. SHETH-AR / DATE OF HEARING : 12/03/2019 / DATE OF PRONOUNCEMENT : 19/03/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEAR S [IN SHORT REFERRED TO AS AY] 2013-14 AND 2014-15 CONTEST SE PARATE ORDERS OF FIRST APPELLATE AUTHORITY ON COMMON GROUNDS OF APPEAL AND THEREFORE, DISPOSED-OFF BY WAY OF THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE ITA NO.6931-32/MUM/2017 2 AND BREVITY. THE SOLE ISSUE INVOLVED UNDER APPEALS IS DISALLOWANCE U/S 14A. ITA NO.6932/MUM/2017- AY :2013-14: 2.1 THE APPEAL ARISES OUT OF THE ORDER OF LD. COMMI SSIONER OF INCOME TAX (APPEALS)-51, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-51/DC CC- 3(3)/IT-233/2016-17 DATED 01/09/2017. FACTS QUA THE ISSUE ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS NON-BANKING FINANCIAL INTERMEDIARY DURING IMPUGNED AY WAS ASSESSED IN SCRUTINY ASSESSMENT U/S 143(3) ON 23/03/2016 BY LD. DEPUTY COMMISSIONER OF INCOME TAX-CIRCLE 3(3), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AS RS.253.53 LACS UNDER NORMAL PROVISIONS AFTER SOLE DISALLOWANCE U/S 14A F OR RS.148.97 LACS AS AGAINST RETURNED INCOME OF RS.104.56 LACS FILED BY THE ASSESSEE ON 27/09/2013. THE BOOK PROFITS U/S 115JB WERE COMPUTED AT RS.12.72 CRORES, INTER-ALIA, AFTER ADJUSTMENT OF DISALLOWANCE U/S 14A FOR RS.148 .97 LACS. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED EXEMPT INCOME OF RS.17.42 CRORES AND DID NOT OFFER ANY SUO- MOTO DISALLOWANCE AGAINST THE SAME. IT WAS NOTED THAT TH E ASSESSEE WAS MAINTAINING CONSOLIDATED ACCOUNTS FOR EXEMPT INCOME YIELDING INVESTMENTS AS WELL AS BUSINESS ASSETS IN THE BALANCE SHEET. THERE WAS COMMON POOL OF FUNDS AND THE ASSESSEE COULD NOT EST ABLISH THAT THE ENTIRE INVESTMENTS WERE OUT OF OWN FUNDS. ALL THESE FACTORS LED THE LD. AO TO FORM AN OPINION THAT DISALLOWANCE U/S 14A WAS CALLED FOR UNDER THE GIVEN CIRCUMSTANCES. ACCORDINGLY, APPLYING RULE 8D( 2)(III), THE ITA NO.6931-32/MUM/2017 3 ADMINISTRATIVE EXPENSE DISALLOWANCE WAS WORKED OUT TO RS.148.97 LACS, BEING 0.5% OF AVERAGE INVESTMENTS HELD BY THE ASSES SEE. 3. BEFORE FIRST APPELLATE AUTHORITY, IT WAS POINTED OUT THAT OUT OF COMMON ADMINISTRATIVE EXPENSES OF RS.117.10 LACS AS CLAIMED IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS CLAIMED EXP ENDITURE ONLY TO THE EXTENT OF RS.0.73 LACS IN THE COMPUTATION OF INCOME AND ALREADY DISALLOWED THE BALANCE EXPENDITURE OF RS.116.37 LAC S AND THEREFORE, THE DISALLOWANCE WAS UNJUSTIFIED. AFTER CAREFUL EXAMINA TION OF FACTUAL MATRIX, LD. FIRST APPELLATE AUTHORITY CONCURRED WITH ASSESS EES SUBMISSIONS BY OBSERVING AS UNDER: - 9. IN THIS CASE, THE ASSESSEE HAS NOT DEBITED / CL AIMED ANY DIRECT EXPENSES RELATED TO EARNING OF EXEMPT INCOME, THEREFORE, NO DISALLOW ANCE CAN BE MADE BY INVOKING RULE 8D(2)(I). FURTHER, THE ASSESSEE HAS NOT DEBITE D / CLAIMED ANY INTEREST EXPENDITURE, THEREFORE, NO DISALLOWANCE CAN BE MADE BY INVOKING RULE 8D(2)(II). AS REGARDS DISALLOWANCE U/S 14A BY INVOKING RULE 8D(2) (III), IT IS OBSERVED THAT THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE IN ITS P & L AC COUNT IS OF RS 165.22 LAKHS (COMPRISING OF 'ADMINISTRATIVE AND OTHER EXPENSES' OF RS 117.10 LAKHS AND 'DEPRECIATION' OF RS 48.11 LAKHS). IT IS FURTHER OB SERVED THAT OUT OF 'ADMINISTRATIVE AND OTHER EXPENSES' OF RS 117.10 LAKHS, THE ASSESSE E IN THE COMPUTATION OF INCOME HAS CONSIDERED DONATION (RS 100 LAKHS), SECURITY TR ANSACTION TAX (RS 5.84 LAKHS) AND OTHER EXPENSES (RS 10.53 LAKHS), TOTALLY AGGREGATIN G TO RS 116.37 LAKHS FOR DISALLOWANCE AND ADDED IT BACK. THUS, OUT OF THE TO TAL ADMINISTRATIVE AND OTHER EXPENSES, ONLY AN AMOUNT OF RS 0.73 LAKHS HAS NOT B EEN CONSIDERED FOR DISALLOWANCE AND ADD BACK BY THE ASSESSEE IN THE COMPUTATION OF INCOME. FURTHER, THE BALANCE AMOUNT RS 0.73 LAKHS HAS BEEN INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE OF SHARE BROKING. THUS, NO AMOUNT OUT OF THE ADMINISTRATIVE AND OTHER EXPENSES OF RS 117.1 LAKHS CAN BE CONSIDERED FOR DI SALLOWANCE U/S 14A BY INVOKING RULE 8D(2)(III). IT IS ALSO OBSERVED THAT IN THE COMPUTA TION OF INCOME, THE ENTIRE DEPRECIATION CLAIMED OF RS 48.11 LAKHS HAS BEEN ADDED BACK AND S EPARATELY NO DEPRECIATION AS PER THE PROVISIONS OF I T ACT HAS BEEN CLAIMED. THUS, NO AM OUNT CAN BE CONSIDERED FOR DISALLOWANCE ALSO OUT OF THE DEPRECIATION OF RS 48.11 LAKHS CLAI MED IN THE P & L ACCOUNT. 10. IN VIEW OF THE ABOVE DISCUSSION, NO AMOUNT CAN BE DISALLOWED AS PER THE PROVISIONS OF SEC 14A. ACCORDINGLY, GROUND NO 1 OF THE APPEAL IS ALLOWED. AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE U S. 4. ALTHOUGH LD. DEPARTMENTAL REPRESENTATIVE [DR], S UPPORTED THE COMPUTATIONS MADE BY LD. AO, HOWEVER, FAILED TO CON TROVERT THE ABOVE ITA NO.6931-32/MUM/2017 4 FACTUAL MATRIX. THE LD. AUTHORIZED REPRESENTATIVE F OR ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE FIRST APPELLATE AUTH ORITY. 5. UPON CAREFUL CONSIDERATION, THE UNDISPUTED POSIT ION THAT EMERGES IS THAT THE ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPEND ITURE ONLY TO THE EXTENT OF RS.0.73 LACS IN THE COMPUTATION OF INCOME AND ALREADY DISALLOWED THE BALANCE EXPENDITURE. THE EXPENDITURE OF RS.0.73 LACS IS STATED TO BE INCURRED TOWARDS BROKING BUSINESS AND THE SAID FACT REMAIN UNREBUTTED AND THEREFORE, THE SAME WAS FULLY ALLOWA BLE TO THE ASSESSEE. THIS BEING THE CASE, NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER. 6. THE APPEAL STANDS DISMISSED. ITA NO.6931/MUM/2017- AY :2014-15: 7. THE ASSESSEE HAS SIMILARLY BEEN ASSESSED FOR THI S AY ON 23/12/2016 WHEREIN IT HAS BEEN SADDLED WITH DISALLO WANCE U/R 8D(2)(III) FOR RS.180.25 LACS. THE SAME HAS BEEN DELETED BY FI RST APPELLATE AUTHORITY BY OBSERVING THAT THE ASSESSEE HAS CLAIME D EXPENDITURE ONLY TO THE EXTENT OF RS.0.34 LACS IN THE COMPUTATION OF IN COME. FACTS AND CIRCUMSTANCES BEING PARI-MATERIA THE SAME, TAKING THE SAME VIEW, WE DISMISS THE APPEAL. CONCLUSION: 8. BOTH THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 19/03/2019 SR.PS, JAISY VARGHESE ITA NO.6931-32/MUM/2017 5 !'! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '% , , / DR, ITAT, MUMBAI 6. ,./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.