ADDL CIT 11(1), MUMBAI V. HRITHIK RAKESH NAGRATH, MUMBAI

ITA 7239/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8112 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 15-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: R PRASAD RAO
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.7239 /MUM/2012 ( / ASSESSMENT YEAR : 2009-2010 ACIT 11( I ), ROOM NO. 439, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / VS. SHRI HRITHIK RAKESH NAGRATH, B-27, COMMERCE CENTRE, IST FLOOR, OFF. NEW LINK ROAD, ANDHERI (W), MUMBAI 400 053. ./ PAN : AABPN2790F ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI VIVEK PERAM PURNA R E SPONDENT BY : SHRI R. PRASAD RAO / DATE OF HEARING : 15-09-2014 / DATE OF PRONOUNCEMENT : 15-9-2014 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LD. CIT(A) -3, MUMBAI DATED 25-09-2012 FOR THE A.Y. 200 9-10 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE RE VENUE:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON U/S 14A R.W. RULE 8D EVEN WHEN THE A.O. HAD MADE A PROXIMATE CAUSE FOR DISALL OWANCE OF RS. 13,58,751/- UNDER SECTION 14A OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RELYING ON HIS OWN ORDER OF THE EARLIER YEAR ITA 7239/M/12 2 THEREBY IGNORING THE FACT THAT THE A.O. HAD DIFFERE NTIATED THE FACTS OF THE PRESENT CASE FROM THAT OF THE EARLIER YEAR. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT (APPEA LS) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED TH E RECORDS. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A FILM ARTIST BY PRO FESSION. ASSESSEE WAS IN RECEIPT OF TAX FREE INCOME. DURING THE COURSE OF AS SESSMENT, THE A.O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY SECTION 14-A READ WITH RULE 8-D OF THE INCOME TAX RULES, 1962 IS NOT APPLICABLE TO HIM, IN REPLY IT WAS SUBMITTED THAT EXEMPT INCOME COMPRISED OF PPF, INTEREST, EQUI TY DIVIDEND, INTEREST ON R.B.I. RELIEF BONDS WHICH WERE EITHER CREDITED THRO UGH ECS OR RECOVERED BY PASSING A JOURNAL ENTRY. AS SUCH, THERE WAS NO EXPE NDITURE REFERABLE TO SUCH EXEMPT INCOME WITHIN THE MEANING OF SECTION 14A OF THE ACT AND HENCE NO DISALLOWANCE IS CALLED FOR. HOWEVER, THE A.O. DID NOT AGREE WITH THE ASSESSEES CONTENTION AND DISALLOWED AN AMOUNT OF RS. 13,58,75 1/- BY OBSERVING THAT THE ASSESSEE HAS INCURRED VARIOUS EXPENSES NAMELY O FFICE IN-CHARGE, MOTOR CAR EXPENSES, COMPUTER MAINTENANCE, OFFICE MAINTENA NCE ETC. THE LD. CIT(A) VIDE HIS IMPUGNED ORDER, DELETED THE ADDITION AFTE R HAVING RECORDED THE FOLLOWING OBSERVATION:- 1.3 I HAVE CONSIDERED THE FACTS AND PERUSED THE MA TERIAL ON RECORD. THE PROVISIONS OF SECTION 14A (1) READ WITH SECTION 14A (2) PROVIDES THAT FOR THE PURPOSE OF TOTAL INCOME COMPUTED UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS CHAPTER AND THE AO WILL DETERMINE THE AM OUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME I F HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. THE PERUSAL OF PROFIT AND LOSS ACCOUNT OF THE APPELLANT SHOWS THAT THE AP PELLANT HAS NOT MADE ANY CLAIM OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME, THEREFORE, THE PROVISIONS OF SECTION 14 A (1) R.W.S . 14A(2) OF THE ACT ARE NOT ATTRACTED. THE AO HAS ALSO NOT GIVEN ANY FINDIN GS ON WHETHER THE ASSESSEE HAS MADE A CLAIM OF EXPENDITURE IN RELATIO N TO EXEMPT INCOME AND THE CLAIM IS NOT CORRECT. IT IS SEEN THAT THE A SSESSEE HAS EARNED DIVIDEND OF RS.10,245/- WHICH HAS BEEN DIRECTLY CRE DITED TO BANK THROUGH ECS. THE INTEREST OF RS.69,90L/- RECEIVED O N PPF, FOR WHICH A ITA 7239/M/12 3 JOURNAL ENTRY IS PASSED ON 31-3-09 AND SIMILARLY, I NTEREST OF RS.66,02,652/- ON TAX FREE BONDS IS CREDITED BY JOU RNAL ENTRIES PASSED ON 3 1-3-09. THUS, NO EXPENDITURE HAS BEEN EARNED F OR EARNING EXEMPT INCOME. THEREFORE, THERE IS NO PROXIMATE CAUSE FOR DISALLOWANCE IN RELATIONSHIP WITH EXEMPT INCOME AS HELD IN CIT V WA LFORT SHARES & STOCK BROKERS PVT. LTD. 326 ITRJ (SC) AND GODREJ & BOYCE MANUFACTURING CO. LTD V DCIT (2010) 328 ITR 81 (BOM )FOR ATTRACTING THE PROVISIONS OF SECTION 14A. THE HONBLE TAT HAS C ONFIRMED THE LAST YEARS ORDER IN ITA NO.61 10/MUM/201 1 (AY.2008-09) DATED 8.8.2012. IN VIEW OF THESE FACTS AND FOLLOWING THE DECISION O F JURISDICTIONAL ITAT IN ASSESSEES OWN CASE, THE DISALLOWANCE OF RS.13,58,7 51/- IS DELETED. THE GROUND NOS. 1 TO 3 ARE ALLOWED. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT EXEMPT INCOME OF ASSESSEE COMPRISED OF INTEREST ON TAX PAI D, RELIEF BONDS ACCRUED AND PPF INTEREST FOR WHICH JOURNAL ENTRIES WERE PAS SED AT THE END OF THE YEAR AND DIVIDEND INCOME WAS CREDITED IN THE BANK THROUG H ECS, HENCE, NO EXPENDITURE INCURRED WERE REFERABLE AND RELATABLE T O THE EXEMPT INCOME. THE LD. CIT(A) FURTHER OBSERVED THAT THE A.O. HAS ALSO NOT GIVEN ANY FINDING AS TO WHETHER THE ASSESSEE HAS MADE A CLAIM OF EXPENDITUR E IN RELATION TO EXEMPT INCOME AND THE CLAIM IS NOT CORRECT. THE CATEGORICA L FINDING HAS BEEN RECORDED BY THE LD. CIT(A) TO THE EFFECT THAT THE ASSESSEE H AS EARNED DIVIDEND INCOME OF RS. 10,245/- WHICH HAS BEEN DIRECTLY CREDITED TO TH E BANK THROUGH ECS. THE INTEREST OF RS. 69,901/- RECEIVED ON PPF, FOR WHICH A JOURNAL ENTRY WAS PASSED ON 31-3-09 AND SIMILARLY INTEREST OF RS. 66,02,652/ - ON TAX FREE BONDS IS CREDITED BY JOURNAL ENTRIES PASSED ON 31-3-09. THU S, NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. FROM THE R ECORDS, WE ALSO FIND THAT THE EXPENDITURE MENTIONED BY THE A.O. WAS IN RELATI ON TO THE PROFESSIONAL INCOME EARNED BY THE ASSESSEE WHICH IS TAXABLE UNDE R THE INCOME TAX ACT, THERE IS NO REASON TO DISALLOW THE EXPENSES INCURRE D FOR EARNING HE TAXABLE INCOME. THE FINDINGS SO RECORDED BY THE LD. CIT(A) AT PARA 1.3 OF HIS ORDER HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRIN GING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON OR INFIRMITY WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLO WANCE OF RS. 13,58,751/- ITA 7239/M/12 4 MADE BY THE A.O. U/S 14-A OF THE ACT. DELETION OF SIMILAR DISALLOWANCE WAS ALSO CONFIRMED BY TRIBUNAL IN THE IMMEDIATELY PRECE DING A.Y. 2008-09 VIDE ITS ORDER DATED 8-8-2012. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2014. !' # $% &! ' 15-09-2014 ( ) SD/- SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 15-09-2014 [ .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 3,, MUMBAI 4. 7 / CIT II, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI H BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI