ITO 14(3)(2), MUMBAI V. PRAMOD & CO, MUMBAI

ITA 7532/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84136 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI AMIT SHUKLA, JM ./ I.T.A. NO. 7532/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER-14(3)(2), 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI-400 021 / VS. PROMOD & CO., 649, MADHAVRAI LANE, M. J. MARKET, MUMBAI-400 002 ! ./' ./PAN/GIR NO. ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# & ' / APPELLANT BY : SHRI V. K. BORA $%!# & ' / RESPONDENT BY : SHRI V. G. GINDE () * & + / DATE OF HEARING : 13.11.2014 DATE OF ORDER : 28.11.2014 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI (CIT(A) FOR SH ORT) DATED 09.10.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 15.12.2011. 2.1 THE ONLY ISSUE ARISING IN THIS APPEAL IS IN RES PECT OF DISALLOWANCE U/S.14A MADE BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962 (TH E RULES HEREINAFTER). THE BRIEF FACTS 2 ITA NO.7532/MUM/2012 (A.Y. 2009-10) ITO VS. PROMOD & CO. OF THE CASE ARE THAT THERE WAS NO SUO MOTU DISALLOWANCE BY THE ASSESSEE U/S. 14A EVEN AS IT HAD EARNED DIVIDEND INCOME FOR THE YEAR AT RS.2, 90,149/-, CLAIMED EXEMPT U/S.10 OF THE ACT. IT HAVING INCURRED A HUGE EXPENDITURE ON INTER EST (RS.56.49 LACS), A PART OF WHICH COULD BE ATTRIBUTABLE TO THE INVESTMENT IN SHARES F ROM WHICH DIVIDEND INCOME HAD OR IS LIABLE TO ARISE, THE ASSESSEE WAS QUESTIONED IN THE MATTER BY THE ASSESSING OFFICER (A.O.). THE ASSESSEE, HOWEVER, DENYING HAVING INCURRED ANY EXPENDITURE, INCLUDING BY WAY OF INTEREST, I.E., IN RELATION TO INCOME NOT FORMING P ART OF THE TOTAL INCOME, VIDE ITS LETTER DATED 01.11.2011, THE A.O. PROCEEDED TO EFFECT THE DISALLOWANCE BY APPLYING RULE 8D, STATING THAT THE ASSESSEES CONTENTION WAS NOT ACCE PTABLE. RELIANCE FOR THE PURPOSE WAS PLACED BY HIM ON THE DECISIONS IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. [2009] 312 ITR (AT) 1 (MUM.) (SB); MARUTI UDYOG LTD. VS. DCIT [2005] 92 ITD 119 (DEL); AND YOGESH J. SHAH VS. CIT (VIDE ORDER DATED 08.10.2010). 2.2 THE ASSESSEE REITERATED ITS STAND IN APPEAL, WH ICH HOWEVER WAS NEGATED BY THE LD. CIT(A). SECTION 14A IS A STATUTORY DISALLOWANCE. AS EXPLAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM), THE SAID SECTION HAS WIDEN THE THEORY OF APP ORTIONMENT AND, THEREFORE, ALL EXPENDITURE, DIRECT OR INDIRECT, AS ATTRIBUTABLE TO THE EXEMPT INCOME, WOULD STAND TO BE DISALLOWED. FURTHER, EXCEPT WHERE THE ASSESSEE IS A BLE TO EXHIBIT THE EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME WITH REFERENCE TO ITS ACCOUNTS, AND WHICH WOULD ALSO INCLUDE ITS CLAIM FOR THE SAID EXPENDITURE BEING AT NIL, SO THAT THE DISALLOWANCE WOULD STAND RESTRICTED TO THE SAID AMOUNT, THE PRESCRIPTI ON OF RULE 8D, MANDATORY A.Y. 2008-09 ONWARDS, WOULD APPLY. THE ASSESSEE BEFORE HIM HAVIN G MADE A SPECIFIC PLEA OF THE INTEREST EXPENDITURE ON ADVANCES FROM KALUPUR BANK, ON VARIOUS CREDIT FACILITIES, VIZ. CASH CREDIT, TERM LOAN, OVER DRAFT AND LETTER OF CR EDIT, BEING FOR SPECIFIED PURPOSES, AS FOR FINANCING WORKING CAPITAL OR ACQUISITION OF ASSETS, SO THAT THE INTEREST IN THEIR RESPECT STANDS INCURRED WHOLLY FOR BUSINESS PURPOSES, SO TH AT NO PART THEREOF COULD BE ATTRIBUTED TO THE TAX-EXEMPT INCOME, ALLOWED THE ASSESSEES CL AIM IN ITS RESPECT SUBJECT TO THE 3 ITA NO.7532/MUM/2012 (A.Y. 2009-10) ITO VS. PROMOD & CO. NECESSARY VERIFICATION BY THE A.O., ALLOWING THE AS SESSEE, THUS, PARTIAL RELIEF. AGGRIEVED, THE REVENUE IS IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE ARE WHOLLY AT LOSS TO UNDERSTAND THE BASIS OF THE REVENUES GRIEV ANCE. IN FACT, THE A.O. HAD PROCEEDED WITHOUT REGARD TO THE ASSESSEES LETTER DATED 01.11 .2011, TO WHICH THOUGH REFERENCE STANDS MADE BY HIM (AT PARA 4.1 OF THE ASSESSMENT ORDER). THE SAID LETTER, FORMING PART OF THE STATEMENT OF FACTS BEFORE THE LD. CIT(A) (BY WAY OF ANNEXURE-C THERETO), EXPLAINS THESE FACTS CLEARLY. IT WAS, THEREFORE, INCUMBENT ON THE A.O. TO HAVE VERIFIED THE ASSESSEES CONTENTIONS WHEREBY THE PURPOSE OF THE VARIOUS LOAN S FROM ITS BANK/S STAND SPECIFIED. IT WAS OPEN FOR THE A.O. TO HAVE VERIFIED THE TRUTH OF THE ASSESSEES CLAIM/S, I.E., OF THE LOAN AMOUNTS HAVING BEEN ACTUALLY UTILIZED FOR THE SPECI FIED PURPOSES, BUT HAVING NOT DONE SO, IT WAS NOT OPEN FOR HIM TO PROCEED TO EFFECT A DISA LLOWANCE U/S.14A IN-AS-MUCH AS THE SAME IS ONLY IN RESPECT OF EXPENDITURE WHICH COULD BE DIRECTLY OR INDIRECTLY ATTRIBUTED TO THE INVESTMENT IN SHARES, I.E., YIELDING OR LIABLE TO YIELD TAX EXEMPT DIVIDEND INCOME. FURTHER, THE PLEA IN THIS REGARD WAS, THEREFORE, NO T MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) FOR THE FIRST TIME, TOWARD WHICH THE LD. AR WOULD SATISFY US DURING HEARING. ACCORDINGLY, WE FIND NO INFIRMITY WHATSOEVER IN THE DIRECTION BY THE LD. CIT(A) AND, CONSEQUENTLY, NO REASON FOR ANY INTERFERENCE THEREW ITH. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ,- . ) & , & /0 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 13, 2014 AT THE CONCLUSION OF THE HEARING ITSELF. SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 1* MUMBAI; 2( DATED : 28.11.2014 ).(../ ROSHANI , SR. PS 4 ITA NO.7532/MUM/2012 (A.Y. 2009-10) ITO VS. PROMOD & CO. !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. 5)6 7 $(89 , + 89- , 1* / DR, ITAT, MUMBAI 6. 7 ;< = * / GUARD FILE !' / BY ORDER, )/* + (DY./ASSTT. REGISTRAR) , 1* / ITAT, MUMBAI