RANJIT GOBINDRAM MALKANI, MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 7147/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1436 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 28-11-2014
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Assessee Lawyers: JAY BANSALI
• Keywords: Business income; Salary income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 7147 / MUM/20 1 4 ( ASSESSMENT YEAR : 2011 - 12 ) RANJIT GOBINDRAM MALKANI, 73, NCPA APARTMENTS, NCPA COMPLEX, NARIMAN POINT, MUMBAI 400 00 2 VS. DCIT CIR 3(3) - MUMBAI 400 020 PAN/GIR NO. AAJPM6587F APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI JAY BANSALI REVENUE BY SMT. VINITA J MENON DATE OF HEARING 04 / 04 /201 7 DATE OF PRONOUNCEME NT 06 / 04 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 7, MUMBAI DATED 29/09/2014 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE O F 0.5% OF AVERAGE VALUE OF INVESTMENT U/S.14A OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCE AND TRADING IN ACCESSORIES, DECORATIVE AND ANTIQUE GOODS AND CONSULTANCY SERVICES. THE RETURN OF INCOME WAS FILED ON 01.08.2011 DECLARING TOTAL INCOME OF RS.1,45,20,878/- CONSISTING OF BUSINESS LOSS, LONG TERM (NON STT PAID) AND SHORT TERM CAPITAL GAINS AND INCOME FROM ITA NO .7147/MUM/2014 RANJIT GOBINDRAM MALKANI 2 OTHER SOURCE. THE ASSESSEE CLAIMED EXEMPT INCO ME FROM LONG TERM CAPITAL GAIN BEING DIVIDEND, INTEREST ON TAX FREE BONDS. THE RETURN OF INCOME WAS REVISED ON THE SAME DATE I.E 01.08.2011 DECLARING TOTAL INCOME OF RS.1,55,30,878/ - INCLUDING THE SALARY INCOME OF RS. 10,10,000 / - WHICH MISSED TO BE INCLUDED IN THE ORIGINAL RETURN. TH E AO COMPLETED THE ASSESSMENT U/ S 143 (3) OF THE AC T ASSESSING TOTAL INCOME AT RS. 1,67,41,840/ - AFTER MAKING DI SALLOWANCE OF RS. 12,10,965/ - U/ S 14A BE ING EXPENSES CALCULATED AS PER RULE 8D BEING 0.5% O F AVERAGE VALUE OF INVESTMENTS. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ADDITION AND ASSESSEE IS IN APPEAL BEFORE US. 5. IT WAS CONTENDED BY LEARNED AR THAT AS PER BUSINESS BALANCE SHEET OF THE ASSESSEE THERE ARE NO INVESTMENTS EARNING EXEMPT INCOME ACC ORDINGLY IT WAS CLAIMED THAT PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO THE ASSESSEE. THE EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE FROM PERSONAL INVESTMENTS, THE RELATED EXPENSES ARE DEBITED TO PERSONAL CAPITAL ACCOUNT AND THE ASSESSEE HAS NOT CL AIMED THESE EXPENSES AGAINST THIS EXEMPT INCOME. THE ASSESSEE CONTENDED THAT WHATEVER EXPENSES ARE INCURRED AND CLAIMED ARE AGAINST THE TAXABLE INCOME AND THESE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSES OF BUSINESS HAVING NO NEXUS WITH INVESTMENTS INCOM E FROM WHICH IS EXEMPT. THI S FACT IS NOT DISPUTED BY AO. 6. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. ITA NO .7147/MUM/2014 RANJIT GOBINDRAM MALKANI 3 7. WE HAVE CONSIDERED RIVAL CON TENTION S. DISALLOWANCE U/S. 14A CAN BE MADE ONLY IN RESPECT OF THE EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT AGAINST INCOME LIABLE TO TAX MEANING THEREBY IF NO EXPENDITURE OF EXEMPT INCOME HAVE BEEN CLAIMED AGAINST THE INCOME LIABLE TO TAX, NO DISALLOWANCE IS WARRANTED FOR SUCH EXPENDITURE. AS PER LEARNED AR, THE ALLEGED EXPENDITURE W AS DEBITED BY THE ASSESSEE IN HIS PERSONAL ACCOUNT AND NOT CLAIMED IN THE P & L ACCOUNT OF BUSINESS INCOME WHICH WAS OFFERED FOR TAX . IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY IF THE EXPENDITURE S O DISALLOWED HAVE NOT BEEN CLAIMED BY ASSESSEE AGAINST THE TAXABLE INCOME AND HAVE BEEN DEBITED ONLY IN THE PERSONAL CAPITAL ACCOUNT, NO DISALLOWANCE IS WARRANTED. WE THEREFORE, DIRECT THE AO TO COMPUTE THE DISALLOWANCE AFRESH IN TERMS OF OUR ABOVE DIRECTI ON. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 06 / 04 /2017 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 06 / 04 /201 7 KARUNA SR. PS ITA NO .7147/MUM/2014 RANJIT GOBINDRAM MALKANI 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//