PRANAV SECURITIES PVT. LTD., MUMBAI V. ACIT CIR.4(2), MUMBAI

ITA 7637/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3992 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: B B JOKHAKAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH , MUMBAI , !!' !!' !!' !!' , , # # # # BEFORE SHRI RAJENDRA SINGH, AM, AND SHRI SANJAY GARG, JM /. I.T.A. NO.7637/MUM/2011 ( $' $' $' $' %' %' %' %' / ASSESSMENT YEAR: 2008-09) PARANAV SECURITIES PRIVATE LIMITED 17-B1/2, RAJA BAHADUR MANSION 8, AMBALAL DOSHI MARG, MUMBAI 400 001 $ $ $ $ / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(2), MUMBAI . & /. ' /. PAN/GIR NO. : AABCP4651L ( &( / APPELLANT ) : ( )*&( / RESPONDENT ) &( + / APPELLANT BY : SHRI B.B.JOKHAKAR )*&( + / RESPONDENT BY : SHRI JITENDRA YADAV $ - / DATE OF HEARING : 24. 07. 2013 /0% - /DATE OF PRONOUNCEMENT : 24 .07. 2013 1 / O R D E R PER :RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 4.10.2011 OF CIT(A)-9 MUMBAI, FOR THE ASSESSMENT YEAR 2008-09. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING DISALLOWANCE OF EXPENSES RELATI NG TO EXEMPT INCOME U/S 14A OF THE INCOME TAX ACT. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDING NOTED THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS. 67,975 /- WHICH WAS EXEMPT FROM TAX. THE AO, 2 7637 M 2011,(AY 2008-09) PRANAV SECURITIES PVT LTD. VS. ACIT THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE EXPENSES RELATING TO DIVIDEND INCOME SHOULD NOT BE DISALLOWED. THE ASSESSEE SUBMITTED TH AT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EARNING OF DIVIDEND INCOME. THE AO HOWE VER DID NOT ACCEPT THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT CERTAIN PERCENTA GE OF THE EXPENSES CLAIMED BY THE ASSESSEE COMPANY WOULD DEFINITELY BE ATTRIBUTABLE TO THE TAX FREE INCOME. HE, THEREFORE, COMPUTE DISALLOWANCE AS PER RULE 8D. THE ASSESSEE HAD NOT C LAIMED ANY EXPENDITURE ON ACCOUNT OF INTEREST. THE AO THEREFORE, COMPUTED DISALLOWANCE OF OTHER EXPENSES AT THE RATE OF . 5% OF AVERAGE INVESTMENT AS PROVIDED IN RULE 8D WHICH CAM E TO RS. 89949/- THE ASSESSEE HAD MADE DISALLOWANCE OF ONLY RS. 6797/-. THE AO THEREFORE, ADDED THE BALANCE AMOUNT TO THE TOTAL INCOME. IN APPEAL CIT(A) CONFIRMED THE ORDER OF AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE THAT THE ASSESSEE HAD RECEIVED OF DIVIDEND INCOME OF ONLY RS. 67,975/- AGAINST WHICH DISALLOWA NCE MADE BY AO WAS RS. 8,31,154/- IT WAS SUBMITTED THAT THERE WERE ONLY NOMINAL EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF DIVIDEND INCOME. REFERRING TO THE RELEV ANT PORTION OF BALANCE SHEET FILED BEFORE US, HE POINTED OUT THAT THE ASSESSEE WAS HOLDING ONLY T WO SHARES THAT IS SHARES OF NSE LIMITED AND SHARES OF BSE. REGARDING THE DIVIDEND INCOME, I T WAS POINTED OUT THAT IT HAD BEEN DIRECTLY ERECTED TO THE CASH ACCOUNT AND THEREFORE, THERE WERE HARDLY, ANY EXPENSE. ON THE OTHER HAND, THE LD. DR PLACED RELIANCE ON THE ORDER S OF THE LOWER AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATERIAL ON RECORDS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF EXPENSES IN RE LATION TO EXEMPT DIVIDEND INCOME OF RS.67,975/- . THE AO HAS MADE DISALLOWANCE AS PER R ULE 8D. THE COMPUTATION OF DISALLOWANCES MADE BY AO SHOWS THAT THE AO HAS NOT MADE ANY DISALLOWANCE IN RELATION TO INTEREST EXPENDITURE, AS THE SAME HAS BEEN TREATED AS NILL. HE HAS MADE DISALLOWANCE ONLY IN RESPECT OF OTHER EXPENSES AT THE RATE OF .5% AVERAG E INVESTMENTS WHICH CAME TO RS. 89949/-. HOWEVER, HE HAD DISALLOWED TOTAL EXPENDITURE RS. 83 1154/- WHICH APPARENTLY IS A MISTAKE. THE DISALLOWANCE HAS ACTUALLY BEEN MADE BY AO ONLY AT RS. 89,949/- AGAINST DISALLOWANCE OF 3 7637 M 2011,(AY 2008-09) PRANAV SECURITIES PVT LTD. VS. ACIT RS. 67,975/- MADE BY THE ASSESSEE. HOWEVER, EVEN T HIS DISALLOWANCE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IS EXCESSIVE. THE DIS ALLOWANCE HAS TO BE COMPUTED UNDER RULE 8D ONLY IF AO IS NOT SATISFIED WITH THE CLAIM OF TH E ASSESSEE THAT NO EXPENDITURE HAD BEEN INCURRED OR THE EXPENDITURE INCURRED WAS LOWER. SUC H SATISFACTION HAS TO BE BASED ON MATERIAL ON RECORDS. IN OUR VIEW, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE EXPENDITURE HAS TO BE REASONABLY ESTIMATED AT RS. 25,000. WE OR DERED ACCORDINGLY. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. -3 $'- 44 14 5- - 6 4 ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF JULY, 2013 . 1 /0% $3 24.07.2013 0 ! SD/- SD/- 4 ( SANJAY GARG ) ( RAJENDRA SINGH ) /JUDICIAL MEMBER 4 / ACCOUNTANT MEMBER MUMBAI: $4 DATED : 24. 07.2013 $ . /. PRAMOD KUMAR, PS 1 1 1 1 )- )- )- )- 9%- 9%- 9%- 9%- / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. : ) ( / THE CIT(A) 4. : / CIT - CONCERNED 5. ;! )-$ , , / DR, ITAT, MUMBAI 6. !<' = / GUARD FILE 1$ 1$ 1$ 1$ / BY ORDER, > >> > / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.