Dr. Murugesh Shantveerya Hiremath, Pune V. Addl. CIT Rg-5 Pune., Pune

ITA 765/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67116 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y K BHASKAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 765/PN/2012 (ASSESSMENT YEAR 2008-09) DR.MURUGESH SHANTVEERYA HIREMATH, 1126/B, MODEL COLONY ROAD, SHIVAJINAGAR, PUNE 411 016. .. APPELLANT PAN NO.AADPH 0605H VS. ADDL.CIT, RANGE-5, PUNE. .. RESPONDENT APPELLANT BY : SHRI M.R. BHAGWAT RESPONDENT BY : SHRI Y.K. BHASKAR DATE OF HEARING : 15-07-2013 DATE OF PRONOUNCEMENT : 15-07-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 15-09-2011 OF THE CIT(A)-III, PUNE RELATING TO ASSE SSMENT YEAR 2008- 09. 2. GROUNDS OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : THE LD. COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF INTEREST AT RS.1,70,911/- UNDER THE PROVISIONS OF SECTION 14A. 2.1 FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSES SEE IS A DOCTOR BY PROFESSION AND FILED HIS RETURN OF INCOME ON 08-10- 2008 DECLARING TOTAL INCOME OF RS.2,50,04,570/- FOR THE IMPUGNED ASSESSM ENT YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS CLAIMED SHORT TERM CAPITAL GAIN OF RS. 3,89,146/- AND 2 DIVIDEND INCOME OF RS.31,430/- AS EXEMPT. HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE SHOULD NOT BE MADE U /S.14A R.W.R.8D OF THE INCOME TAX RULES. IT WAS SUBMITTED THAT NO EXPE NDITURE HAS BEEN INCURRED FOR GETTING DIVIDENDS WHICH ARE DIRECTLY CREDITED TO ASSESSEES BANK ACCOUNT BY ECS. 2.2 SO FAR AS THE LONG TERM CAPITAL GAIN IS CONCERN ED IT WAS SUBMITTED THAT THE BROKERAGE AND SECURITY TRANSACTION TAX ARE DEDUCTED FROM THE SALE PROCEEDS BY THE SHARE BROKER HIMSELF AND NO OTHER E XPENDITURE HAS BEEN INCURRED FOR EARNING THE LONG TERM CAPITAL GAIN. R EFERRING TO CERTAIN DECISIONS IT WAS SUBMITTED THAT FOR ATTRACTING PROV ISIONS OF SECTION 14A THERE HAS TO BE A PROXIMATE CASE FOR DISALLOWANCE W HICH IS ITS RELATIONSHIP WITH THE TAX EXEMPT INCOME. PAY BACK OR RETURN OF INVESTMENT IS NOT SUCH A PROXIMATE CASE AND THEREFO RE PROVISIONS OF SECTION 14A CANNOT BE APPLIED. IT WAS FURTHER SUBM ITTED THAT THE ASSESSEE HAS APPOINTED SRI MUKESH BROKERAGE FINANCI ALS INDIA LTD. AND NIRMAL BANG SECURITIES LTD. WHO HAVE ENTIRELY MANAG ED ASSESSEES PORTFOLIOS. FURTHER NO PART OF BORROWED MONEY HAS BEEN UTILISED FOR INVESTMENT IN SHARES THE INCOME OF WHICH HAS BEEN C LAIMED AS EXEMPT. THEREFORE, NO DISALLOWANCE U/S.14A IS CALLED FOR. 2.3 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND DISALLOWED AN AMOUNT OF RS.1,70,911/- BY APPLYING THE PROVISIONS OF SECTION 14A R.W.R. 8D OF INCOME TAX RULES. 3 2.4 IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER. WHILE DOING SO, HE HELD THAT THE ASSESSIN G OFFICER WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE THAT NO EX PENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO EXEMPT INCOME. 2.5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPEAL PROCEEDINGS IT WAS DE MONSTRATED BY THE ASSESSEE THAT NO PART OF THE BORROWED MONEY HAS BEE N UTILISED FOR PURCHASE OF SHARES, THE INCOME OF WHICH IS EXEMPT. HE SUBMITTED THAT WHATEVER LOANS HAVE BEEN OBTAINED FROM THE BANKS AN D FINANCIAL INSTITUTIONS ARE TOWARDS PURCHASE OF VEHICLES AND E QUIPMENTS FOR THE NURSING HOME/CLINIC. NO PART OF THE BORROWED FUNDS HAS BEEN DIVERTED TOWARDS PURCHASE OF SHARES, THE INCOME OF WHICH IS CLAIMED AS EXEMPT. HE SUBMITTED THAT THE ASSESSING OFFICER AND THE LD. CIT(A) HAVE COMPLETELY IGNORED THE SUBMISSIONS MADE BY THE ASSE SSEE. 3.1 RELYING ON THE DECISION OF THE CALCUTTA BENCH O F THE TRIBUNAL IN THE CASE OF REI AGRO LTD. VS. DCIT AND VICE VERSA V IDE ITA NO.1331/KOL/2011 AND ITA NO.1423/KOL/2011 ORDER DAT ED 19-06-2013 FOR A.Y. 2008-09 HE SUBMITTED THAT UNDER SOMEWHAT S IMILAR CIRCUMSTANCES THE TRIBUNAL HAD HELD THAT NO DISALLO WANCE U/S.14A R.W.R. 8D(2)(I) AND (II) CAN BE MADE. HE SUBMITTED THAT EI THER DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT (A) BE DELETED OR 4 THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSES SING OFFICER WITH A DIRECTION TO CONSIDER THE DETAILS GIVEN BY THE ASSE SSEE PROVING THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING SUCH EXEM PT INCOME. 4. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT H E HAS NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE IS IN CURRED OR ATTRIBUTABLE TOWARDS EARNING OF SUCH EXEMPT INCOME. 5. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSI NG OFFICER DISALLOWED AN AMOUNT OF RS.1,70,911/- BEING EXPENDI TURE U/S.14A R.W. RULE 8D WHICH HAS BEEN UPHELD BY THE LD.CIT(A). IT IS THE CASE OF THE ASSESSEE THAT NO PART OF THE BORROWED FUNDS HAS BEE N UTILISED BY THE ASSESSEE FOR PURCHASE OF SHARES, THE INCOME OF WHIC H IS EXEMPT. FURTHER, IT IS ALSO THE CASE OF THE LD. COUNSEL FOR THE ASSE SSEE THAT NO ADMINISTRATIVE EXPENDITURE HAS BEEN INCURRED FOR EA RNING SUCH TAX FREE EXEMPT INCOME. IT IS NOT DISCERNIBLE FROM THE ORDE R OF THE ASSESSING OFFICER OR THE CIT(A) SUBSTANTITATING THAT ANY PART OF THE BORROWED FUND HAS BEEN DIVERTED TOWARDS PURCHASE OF THE INVESTMEN TS, THE INCOME OF WHICH IS EXEMPT. 5.1 ON A POINTED QUERY BY THE BENCH TO THE LD. COUN SEL FOR THE ASSESSEE TO DEMONSTRATE THAT THE LOAN FUNDS HAVE NO T BEEN UTILISED OR DIVERTED FOR PURCHASE OF SHARES HE SUBMITTED THAT T HE FULL DETAILS WERE GIVEN BEFORE THE ASSESSING OFFICER AS WELL AS THE C IT(A) WHICH HAS NOT BEEN PROPERLY APPRECIATED. HE, HOWEVER, EXPRESSED HIS INABILITY TO 5 SUBSTANTIATE THE SAME IMMEDIATELY AND SUBMITTED THA T FULL DETAILS WERE ALREADY FILED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) AND NOTHING HAS BEEN EXPRESSED BY THE ASSESSING OFF ICER OR THE CIT(A) EITHER ACCEPTING OR REJECTING SUCH SUBMISSIONS. CO NSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE DEEM IT PROPER TO REST ORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE O NE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS S ATISFACTION THAT NO PART OF THE BORROWED MONEY HAS BEEN UTILISED TOWARDS INV ESTMENT IN SHARES, THE DIVIDEND INCOME OF WHICH IS CLAIMED AS EXEMPT. THE ASSESSEE IS ALSO REQUIRED TO PROVE BEFORE THE ASSESSING OFFICER THAT NO OTHER EXPENDITURE HAS BEEN INCURRED FOR EARNING SUCH TAX FREE DIVIDEN D INCOME. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HARD TO T HE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE ASSESSE E IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 6. GROUNDS OF APPEAL NO.2 BY THE ASSESSEE RELATES T O THE DISALLOWANCE OF RS.22,49,905/- U/S.40(A)(IA) BY THE ASSESSING OF FICER AND UPHELD BY THE CIT(A). 6.1 THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING DID NOT PRESS THIS GROUND FOR WHICH THE LD. DEPARTMENTAL RE PRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THIS GROUND BY THE ASSESSE E IS DISMISSED AS NOT PRESSED. 6 7. THE THIRD GROUND BY THE ASSESSEE RELATES TO DISA LLOWANCE OF RS.20,000/- BEING PROFESSIONAL FEES PAID TO DR. SAC HIN LOKADE AS REFERRAL FEES. 7.1 THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO VE RIFY THE CONTENTION OF THE ASSESSEE FOR DELETING THE DISALLOWANCE SUBJECT TO VERIFICATION. HE ACCORDINGLY SUBMITTED THAT HE IS ALSO NOT PRESSING THIS GROUND FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTIO N. ACCORDINGLY, THIS GROUND BY THE ASSESSEE IS ALSO DISMISSED. 8. GROUNDS OF APPEAL NO. 4, 5 AND 6 BY THE ASSESSEE BEING GENERAL IN NATURE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARIN G ITSELF, I.E. 15- 07-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA ) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 15TH JULY 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-III, PUNE 4 CIT-III, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE