DSP HMK HOLDINGS PVT. LTD., MUMBAI V. D.C.I.T. RG.2(1), MUMBAI

ITA 7623/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75334 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM) . . , , ./I.T.A. NO.7623/MUM/2011 ( / ASSESSMENT YEAR:2008-09) DSP HMK HOLDINGS PVT.LTD., 11 TH FLOOR, MAFATLAL CENTRE, NARIMAN POINT, MUMBAI-400021 / VS. DY.CIT, RANGE 2(1) AAYAKAR BHAVAN, M K MARG, MUMBAI-400020. ( ' / APPELLANT) .. ( ( ' / RESPONDENT) ./ ./PAN/GIR NO. : AAACH1037K ' / APPELLANT BY : S/ SHRI PERCY PARDIWALA & MADHUR AGARWAL ( ' + /RESPONDENT : SHRI SANJEEV JAIN + . / DATE OF HEARING : 13.01.2013 + . /DATE OF PRONOUNCEMENT : 22.1.2014 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESSM ENT YEAR 2008-09 AGAINST THE ORDER OF LD. CIT(A) DATED 11.8.2011 VIDE WHICH LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (T HE ACT) MADE BY AO OF RS.11,60,083/-. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE P ARTIES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. 3. THE ASSESSEE IS A COMPANY REGISTERED AS A NON-BA NKING FINANCE COMPANY WITH RESERVE BANK OF INDIA WITH THE MAIN OBJECT TO MA KE INVESTMENT IN VARIOUS CLASSES OF ASSETS. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME ON ACCOUNT OF FOLLOWING HEADS : DIVIDEND ON UNITS OF MUTUAL FUNDS RS.12,06,75,902 DIVIDEND ON SHARES RS.17,706 PROFIT ON SALE OF INVESTMENTS RS.7,15,494 INTEREST INCOME ON INTER-CORPORATE DEPOSITS RS.15, 66,782 BANK INTEREST INCOME RS.33,80,20,125 OTHER INTEREST RS.9,852 OTHER INTEREST RS.30 PROVISION FOR DOUBTFUL LOAN WRITTEN OFF RS.30,00,00 0 I.T.A. NO.7623/MUM/2011 2 AO STATED THAT THE ASSESSEE CLAIMED DIVIDEND INCOM E OF RS.12,14,09,101/- WHICH IS EXEMPT UNDER THE ACT. THE ASSESSEE IN ITS PROFI T AND LOSS ACCOUNT DEBITED THE EXPENDITURE OF RS.11,60,083/-. THE ASSESSEE ON ITS OWN MADE DISALLOWANCE OF RS.4,77,890/- U/S 14A OF THE ACT OUT OF EXPENSES OF RS.11,60,083/ DEBITED BY ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE AO AP PLIED RULE 8D OF THE INCOME TAX RULES, 1962 (THE RULES) TO MAKE DISALLOWANCE U/S 14 A OF THE ACT AND WORKED OUT THE DISALLOWANCE AT RS.1,35,12,590/-. THERE IS NO DIS PUTE THAT THERE IS NO INTEREST EXPENSE DEBITED BY ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT FOR MAKING AFORESAID INVESTMENTS AND EARNING DIVIDEND INCOME ETC. SINCE ASSESSEE DEBI TED TO PROFIT AND LOSS ACCOUNT RS.11,60,083/-, AS AGAINST WORKING MADE BY ASSESSE E OF RS.4,77,890/-, THE AO MADE TOTAL DISALLOWANCE U/S 14A R.W.RULE 8D OF THE RULE S OF RS.11,60,083/-. THE ASSESSEE DISPUTED THE ABOVE ACTION OF THE AO BEFORE THE FI RST APPELLATE AUTHORITY AND SUBMITTED THAT REASONABLE ALLOCATION OF EXPENDITURE HAS TO BE MADE IN PROPORTION TO THE INCOME NOT FORMING PART OF TOTAL INCOME UNDER THE ACT. THE LD. CIT(A) CONFIRMED THE ACTION OF AO. IT IS RELEVANT TO STATE THAT THE LD. CIT( A) ITSELF HAS MENTIONED IN ORDER THAT RESTRICTING THE DISALLOWANCE TO TOTAL EXPENDITURE CLAIM MAY NOT HAVE BEEN CORRECT IF THERE IS A OTHER INCOME WHICH ALSO REQUIRED ADMINI STRATIVE EFFORTS AND EXPENSES, BUT THE LD. CIT(A) HAS STATED THAT THE OTHER INCOME OF THE ASSESSEE RELATES TO MERELY BANK INTEREST, THEREFORE ENTIRE EXPENDITURE COULD BE SA ID TO HAVE BEEN INCURRED FOR EARNING DIVIDEND INCOME ONLY. 4. DURING THE COURSE OF HEARING BEFORE US, LD. AR REFERRED THE STATEMENT OF FACTS WHICH WAS FILED BEFORE THE LD. CIT(A) AND COPY PLA CED ALONG WITH FORM NO.35 GIVING DETAILS OF THE EXPENDITURE WHICH INCLUDES AUDITOR R EMUNERATION RS.6,62,924/-, PROFESSIONAL FEES RS.2,24,513/-, SUNDRY EXPENSES RS.31,609/-, BESIDES OTHER EXPENSES LIKE BANK CHARGES, PROFESSION TAX, FILING FEES, E TC. CONSIDERING THE NATURE OF EXPENSES AND THE INCOME SHOWN BY THE ASSESSEE, WE AGREE WITH LD. AR THAT ENTIRE EXPENDITURE DEBITED BY ASSESSEE IN ITS PROFITS AND LOSS ACCOUNT COULD NOT BE SAID TO HAVE BEEN INCURRED ONLY FOR EARNING EXEMPT INCOME UNDER THE A CT. 5. WE ARE OF THE CONSIDERED VIEW THAT A REASONABLE ALLOCATION OF EXPENDITURE HAS TO BE MADE WHICH CAN BE ATTRIBUTED TO THE INCOME WHICH IS CHARGEABLE TO TAX PARTICULARLY BANK INTEREST INCOME OF RS.33.80 CROR ES AS AGAINST DIVIDEND INCOME OF RS.12.07 CRORES (APPROXIMATELY). CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT EXPENDITURE OF RS.4,77,890/- AS WORKED OUT BY ASSESSEE, THE DETAILS OF WHICH ARE MENTIONED BY A O AT PAGE 2 OF THE ASSESSMENT ORDER, IS REASONABLE TO MAKE DISALLOWANCE U/S 14A WITH R ULE 8D. ACCORDINGLY, WE RESTRICT THE I.T.A. NO.7623/MUM/2011 3 DISALLOWANCE TO RS.4,77,890/- BY REVERSING THE ORDE RS OF AUTHORITIES BELOW AND THUS, ALLOW THE GROUNDS OF APPEAL TAKEN BY ASSESSEE. HENC E, THE GROUNDS OF APPEAL TAKEN BY ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF JANUARY, 2014 + 2 3 22 ND JANUARY, 2014 + SD SD ( /RAJENDRA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 3 DATED 22/1/2014 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. ( ' / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 (: , . : , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) . : , /ITAT, MUMBAI