S.V.Sreenivasen, Coimbatore V. DCIT, Coimbatore

ITA 892/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5776 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S SRIDHAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.892/MDS/2017 / ASSESSMENT YEAR : 2012-2013. S.V. SREENIVASEN, NO.278, ARUNACHALAM STREET, R.S. PURAM, COIMBATORE 641 002. [PAN AIQPS 8095P] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, COIMBATORE. ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SMT. S. VIJAYAPRABHA, JCIT. /DATE OF HEARING : 09-11-2017 ! /DATE OF PRONOUNCEMENT : 27-11-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ASSESSEE IN THIS APPEAL IS AGGRIEVED ON A DISALLOW ANCE MADE U/S.14A OF THE INCOME TAX ACT, 1961 R.W.R 8D(2)(II) OF THE INCOME TAX RULES, 1962. ITA NO.892/MDS/2017 :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTE D THAT TOTAL DIVIDEND INCOME CLAIMED AS EXEMPT WAS ONLY RS .1,41,447/-. AS PER THE LD. AUTHORISED REPRESENTATIVE EVEN IF ANY D ISALLOWANCE U/S. 14A OF THE ACT WAS TO BE MADE, IT HAS TO BE LIMITED TO THE EXEMPT INCOME CLAIMED. RELIANCE WAS PLACED ON THE JUDGMEN T OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT P. LTD VS. CIT 372 ITR 694 AND THAT OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF REGINDTON (INDIA) LTD VS. JCIT (2016) 97 CCH 219. LD. COUNSEL ALSO STATED THAT IF THE DISALLOWANCE WAS CURTAILED TO RS.1,41,447/- OTHER GROUNDS RAISED COULD BE CONSIDERED AS NOT ARGUED. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT IRRESPECTIVE OF THE QUANTUM OF EXEMPT INCOME CLAIME D, LD. ASSESSING OFFICER COULD MAKE DISALLOWANCE U/S.14A OF THE ACT R.W.R. 8D BY VIRTUE OF CIRCULAR NO.5/2014, DATED 11 TH FEBRUARY, 2014 OF CENTRAL BOARD OF DIRECT TAXES. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED THAT EXEMPT INCOME CLAIMED BY THE ASSESSEE WAS ONLY RS.1,41,447/-. D ISALLOWANCE MADE BY THE LD. ASSESSING OFFICER U/S.14A R.W.R 8D CAME TO RS.3,36,249/-. ITA NO.892/MDS/2017 :- 3 -: THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT P. LTD (SUPRA) HELD AS UNDER AT PARA 9 OF ITS JUDGMENT. 9. IN THE PRESENT CASE, THE AO HAS NOT FIRSTLY DI SCLOSED WHY THE APPELLANT/ASSESSEES CLAIM FOR ATTRIBUTING RS.2,97,440/- AS A DISALLOWANCE UNDER SECTION 14A H AD TO BE REJECTED. TAIKISHA SAYS THAT THE JURISDICTION TO PROCEED FURTHER AND DETERMINE AMOUNTS IS DERIVED AF TER EXAMINATION OF THE ACCOUNTS AND REJECTION IF ANY OF THE ASSESSEES CLAIM OR EXPLANATION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOU NTS BY THE AO - AN ASPECT WHICH IS COMPLETELY UNNOTICED BY THE CIT (A) AND THE ITAT. THE THIRD, AND IN THE OPI NION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INC OME IS RS.8,90,000 /- , THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110% OF THAT SUM, I.E., RS.52,56,197/-. BY NO STRETCH OF IMAGINATION CAN SE CTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT TH E ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A , AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EX EMPT INCOME. THIS PROPORTION OR PORTION OF THE TAX EXEM PT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS H AS HAPPENED IN THIS CASE. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF REGINDTON (INDIA) LTD (SUPRA) HAS HELD THAT EXPENDITURE INCURRED IN CONNECTION W ITH EXEMPT DIVIDEND INCOME WOULD RELATE ONLY TO THE PREVIOUS Y EAR WHEN THE INCOME WAS EARNED. IN OUR OPINION, THERE IS NO ROO M FOR DOUBT THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED INCO ME CLAIMED AS ITA NO.892/MDS/2017 :- 4 -: EXEMPT BY AN ASSESSEE. WE THEREFORE RESTRICT THE DI SALLOWANCE U/S.14A OF THE ACT TO RS.1,41,447/-. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREAT ED AS PARTLY ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 27TH DAY OF NOVEMB ER, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:27TH NOVEMBER, 2017 KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF