M/s. Goel Brothers, Pune V. Deputy Commissioner of Income-tax,

ITA 961/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4362 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASEEM SHARMA
• Assessee Lawyers: KRISHNA GUJRATHI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 961 /P U N/201 6 / ASSESSMENT YEAR : 20 10 - 11 M/S. GOEL BROTHERS, SAN MAHU COMPLEX, 5, BUND GARDEN ROAD, OPP. POONA CLUB, PUNE 411001 PAN : AADFG7008F ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, PUNE / RESPONDENT ASSESSEE BY : SHRI KRISHNA GUJRATHI REVENUE BY : SHRI ASEEM SHARMA / DATE OF HEARING : 29 - 05 - 201 8 / DATE OF PRONOUNCEMENT : 08 - 0 8 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 5, PUNE DATED 18 - 03 - 2016 FOR THE ASSESSMENT YEAR 20 10 - 11. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST CONFIRMING OF DISALLOWANCE RS.10,92,618/ - U/S. 14A OF THE ACT R.W. RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962. 2 ITA NO . 961/PUN/2016, A.Y. 2010 - 11 2. SHRI KRISHNA GUJRATHI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN REAL ESTATE DEVELOPMENT BUSINESS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.14,07,200/ - (RS.3,14,582/ - + RS.10,92,618/ - ) U/S. 14A R.W. RULE 8D . 2.1 THE ASSESSEE CHALLENGED THE DISALLOWANCE MADE BY ASSESSING OFFICER BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER APPRECIATING THE FACTS OF THE CASE AND AFTER CONSIDERING VARIOUS JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT DELETED THE DISALLOWANCE MADE BY ASSESSING OFFICER UNDER RULE 8D(2)(II) I.E. RS.3,14,582/ - . HOWEVER, THE COMMISSI ONER OF INCOME TAX (APPEALS) CONFIRMED THE DISALLOWANCE OF RS.10,92,618/ - UNDER RULE 8D(2)(III). THE LD. AR SUBMITTED THAT THE ASSESSEE HAD CATEGORICALLY STATED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT DISALLOW ANCE U/S. 14A CANNOT EXCEED THE A CTUAL EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. THE LD. AR POINTED THAT INDIRECT EXPENDITURE INCURRED BY THE ASSESSEE AND DEBITED TO P & L ACCOUNT IS TO THE TUNE OF RS. 25,78,927/ - . OUT OF THE AFORESAID EXPENDITURE , EXPENDITURE TO THE TUNE OF RS.22, 43,620/ - IS UNRELATED TO EARNING OF EXEMPT INCOME. TH US, DISALLOWANCE UNDER RULE 8D(2)(III) CANNOT EXCEED RS.3,35,307/ - (RS.25,78,927/ - - RS.22,43,620/ - ). IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I . GILLETTE GROU P INDIA (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, 16 ITR 57; II . INCOME TAX OFFICER VS. PIONEER RADIO TRAINING SERVICES PVT. LTD., 43 CCH 62 (DEL. - TRIB.); III . M/S. SEARCH ENVIRO LTD. VS. ACIT, 2012 (3) TMI 509 (MUM. - TRIB.). 3 ITA NO . 961/PUN/2016, A.Y. 2010 - 11 3. ON THE OTHER HAND SHRI ASE EM SHARMA REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. 4. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE ONLY ISSUE IN APPEAL BY THE ASSESSEE IS AGAINST CONFIRMING OF DISALLOWANCE OF RS.10,92,618/ - U/S. 14A R.W. RULE 8D(2)(III) . THE SHORT CONTENTION OF THE ASSESSEE IS THAT THE DISALLOWANCE U/S. 14A CANNOT BE MADE BEYOND THE EXPENDITURE DEBITED TO P & L ACCOUNT IN RELATION TO EARNING OF EXEMPT INCOME. THE LD. AR HAS REFERRED TO THE P & L ACCOUNT AT PAGE 32 OF THE PAPER BOOK AND THE DETAILS OF INDIRECT EXPENDITURE AT PAGE 34 OF THE PAPER BOOK. THE TOTAL INDIRECT EXPENDITURE DE BITED BY THE ASSESSEE TO P & L ACCOUNT IS TO THE TUNE OF RS.25,78,927/ - . THE CLAIM OF THE ASSESSEE IS EXPENDITURE TO THE TUNE OF RS.22,43,620/ - IS NOT IN RELATION TO EARNING OF EXEMPT INCOME. THEREFORE, THE EXPENDITURE THAT MAY BE CONSIDERED FOR MAKING D ISALLOWANCE U/S. 14A IS RS.3,35,307/ - (RS.25,78,927/ - - RS.22,43,620/ - ). WE OBSERVE THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF INDIRECT EXPENDITURE BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE ON THIS ASPECT. WE FIND THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GILLETTE GROUP INDIA (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) HAS RESTRICTED THE DISALLOWANCE U/S. 14A TO THE EX TENT OF EXPENDITURE DEBITED TO P & L ACCOUNT. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF INCOME TAX OFFICER VS. PIONEER RADIO TRAINING SERVICES PVT. LTD. (SUPRA) AND IN THE CASE OF M/S. SEARCH ENVIRO LTD. VS. ACIT (SUPRA). IN LI GHT OF THE DECISIONS REFER RED ABOVE, IN PRINCIPLE WE AGREE WITH THE PROPOSITION MOOTED 4 ITA NO . 961/PUN/2016, A.Y. 2010 - 11 BY THE LD. AR. HOWEVER, WE ARE OF CONSIDERED VIEW THAT THE INDIRECT EXPENDITURE REFERRED TO BY THE LD. AR NEEDS VERIFICATION. ACCORDINGLY, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE EXPENDITURE RELATABLE TO EARNING EXEMPT INCOME AND THEREAFTER MADE DISALLOWANCE U/S. 14A, IN ACCORDANCE WITH THE DECISIONS DISCUSSED ABOVE. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE , ACCORDINGL Y . 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 08 TH DAY OF AUGUST, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 08 TH AUGUST, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 5, PUNE 4. THE PR. CIT - 4, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE