CHANDRA FINANCIAL SERVICES PVT. LTD., MUMBAI V. INCOME TAX OFFICER 2(1)(2), MUMBAI

ITA 7583/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71175 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI RAJENDRA SINGH , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7583 /MUM/1 1 ASSESSMENT YEAR: 200 8 - 09 M/S. CHANDRA FINANCIAL SERVICES PVT. LTD. ACHAL BUILDING, 3 RD FLOOR, 21, MODY STREET, FORT, MUMBAI - 400 0 01 PAN: AA B CC5331Q VS. INCOME TAX OFFICER 2 (1) (2) , MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : S/ SHRI RAJIV KHANDELWAL, MANSI SHINGALA REVENUE BY : SHRI JITENDRA YADAV (D.R.) DATE OF HEARING : 23 .07.13 DATE OF PRONOUNCEMENT : 18.09.13 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) DATED 08.08.2011 RE LEVANT TO ASSESSMENT YEAR 2008 - 09 . THROUGH ITS SOLE GROUND OF APPEAL , T HE APPELLANT HAS AGITATED THE CONFIRMATION OF DISALLOWANCE OF RS. 1375743 / - MADE BY THE AO UNDER SECTION 14 A OF THE INCOME TAX ACT. 2. THE BRIEF FACTS ARE THAT DURING THE RELEVANT ASS ESSMENT YEAR THE ASSESSEE HAD EARNED CERTAIN DIVIDEND INCOME WHICH WAS CLAIMED EXEMPT FROM INCOME TAX . T HE AO DETERMINED THE AMOUNT OF EXPENDITURE AS PER THE PROVISIONS OF RULE 8D AT RS. 13 , 75 , 743/ - AND ADDED BACK THE SAME INTO THE INCOME OF THE APPELLANT. ITA NO. 7583 /MUM/1 1 M/S . CHANDRA FINANCIAL SERVICES PVT. LTD. 2 IN FIRST APPEAL, T HE L D. CIT (A) OBSERVING THAT RULE 8 D WAS APPLICABLE FROM A.Y. 2008 - 09, CONFIRMED THE ADDITION SO MADE BY THE A.O. 3. BEFORE US THE SUBMISSIONS OF THE LD. AR HA VE BEEN THAT THE ASSESSE E EARNED DIVIDEND INCOME OF RS. 3.34 LAKHS ONLY WHE REAS THE A.O. H AD MADE THE DISALLOWANCE OF RS. 14 LAKH, WHICH WAS MUCH MORE THAN THE DIVIDEND INCOME CLAIMED TO BE EXEMPT BY THE ASSESSEE. HE HAS FURTHER CONTENDED THAT EVEN THE CALCULATIONS UNDER RULE 8D OF THE INCOME TAX RULES HAD BEEN WRONGLY MADE BY THE A.O. HE HAS FURTHER CONTENDED THAT T HE PROVISIONS OF SECTION 14A/RULE 8D WERE NOT APPLICABLE IN THE CASE OF THE APPELLANT AS NO EXPENDITURE HAD BEEN INCURRED TO EARN TAX FREE DIVIDEND INCOME. ON THE OTHER HAND THE LD. DR HAS RELIED UPON THE AUTHORITIES B ELOW. 4 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT UNDER SECTION 14A OF THE INCOME TAX ACT RESORT CAN BE MADE TO RULE 8D (2) OF THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME , IF , THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. HOWEVER, A PERUSAL OF THE ASSESSMENT YEAR REVEALS THAT THE AO WITHOUT RECORDING ANY DISSATISFACTION WITH REGARD T O THE CALCULATIONS AND COMPUTATION MADE BY THE ASSESSEE , STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. W E MAY OBSERVE THAT NO DETAILS WERE CALLED FOR BY THE AO FROM THE ASSESSEE WHILE MAKING THE DI SALLOWANCE UNDER CONSIDERATION. AS OBSERVED ABOVE, HE STRAIGHTWAY APPLIED RULE 8D. THE LD. CIT(A) ALSO CONFIRMED THE DISALLOWANCE MADE BY THE A.O. WITHOUT CONSIDERING THE ABOVE ASPECT OF THE CASE IN HAND. 5. SO KEEPING IN VIEW THE OVERALL FACTS AND CIR CUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO WILL EXAMINE THE COMPUTATION/CALCULATION MADE IN THIS REGARD BY THE ASSESSEE. THE A.O. WILL GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND PR ODUCE DOCUMENTS, IF ANY, THE ASSESSEE MAY WANT TO PRODUCE ON FILE. THE AO WILL BE AT LIBERTY TO CALL FOR ANY RECORD/EVIDENCES OR STATEMENT ETC. FROM THE ASSESSEE AS MAY BE REQUIRED BY HIM FOR DECIDING THE ISSUE UNDER CONSIDERATION. AFTER GOING THROUGH THE DETAILS ITA NO. 7583 /MUM/1 1 M/S . CHANDRA FINANCIAL SERVICES PVT. LTD. 3 PROVIDED BY THE ASSESSEE, IF THE AO WILL BE SATISFIED WITH THE CO M PUTATION /CALCULATION S MADE BY THE ASSESSEE , THEN HE WILL ASSESS THE INCOME ACCORDINGLY . HOWEVER, IF THE AO DOES NOT AGREE WITH THE COMPUTATION MADE BY THE ASSESSEE, IN THAT EVENT H E WILL HAVE TO RECORD HIS DISSATISFACTION WITH REASONING FOR THE SAME BY WAY OF A SPEAKING ORDER. THEN HE WILL BE AT LIBERTY TO RESORT TO THE PROVISIONS OF RULE 8D. NEEDLESS TO SAY THAT THE ASSESSEE WILL CO - OPERATE AND PROMPTLY SU PPLY THE NECESSARY DETAI LS ETC. TO THE AO FOR DECIDING THE ISSUE UNDER CONSIDERATION. 6. SUBJECT TO OUR OBSERVATIONS MADE ABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.09. 2013. SD/ - SD/ - (RAJENDRA SINGH) ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.09. 2013. * KISHORE COPY TO: THE APPELLANT THE RESP ONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.