S. GANESH, MUMBAI V. ACIT 11(2), MUMBAI

MA 186/MUM/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2231 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET S DUGGAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 254(2); 13; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT G BENCH , MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI, JM MA NO.186/MUM/2020 (ARISING OUT OF ITA NO.2024/MUM/2017 ) ( ASSESSMENT YEAR :2008 - 09 ) MA NO.187/MUM/2020 (AR ISING OUT OF ITA NO.2025/MUM/2017 ) (ASSESSMENT YEAR:2009 - 10) MA NO.188/MUM/2020 (ARISING OUT OF ITA NO.2032/MUM/2017 ) (ASSESSMENT YEAR:2010 - 11) MA NO.189/MUM/2020 (ARISING OUT OF ITA NO.6384/MUM/2017 ) (ASSESSMENT YEAR: 2012 - 13) & MA NO.190/MUM/2020 (ARIS ING OUT OF ITA NO.6745/MUM/2017 ) (ASSESSMENT YEAR: 2013 - 14) SHRI S. GANESH 10, 2 ND FLOOR FAIR JS. MALANI ROAD CHURCHGATE MUMBAI 400 007 VS. ASSISTANT COMMISSIONER OF INCOME TAX 11(2) MUMBAI PAN/GIR NO.AAGPS5047M (APPELLANT ) .. (RESPONDENT ) ASSESSE E BY SHRI SRINIVASAN GANESH, SENIOR ADVOCATE ASSESSEE IN PERSON REVENUE BY SHRI MANPREET S DUGGAL - SR. DR DATE OF HEARING 27/11 /2020 DATE OF PRONOUNCEMENT 03 /1 2 /2020 MA NO.186 - 190/MUM/2020 SHRI S. GANESH. 2 / O R D E R PER M.BALAGANESH, AM : BY VIRTUE OF THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE PRAYS TO SEEK RECTIFICATION OF THE ORDER PASSED BY THIS TRIBUNAL ON 08/07/2020 ON THE FOLLOWING ASPECTS : - ( A ) WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THA T THE LD. AO IS NOT REQUIRED TO RECORD SATISFACTION WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME ? ( B ) WITHOUT PREJUDICE TO THE AFORESAID CLAIM, THIS TRIBUNAL HAVING REJECTED THE COMPUT ATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WHETHER IT WAS JUSTIFIED TO DISALLOW 25% OF CERTAIN SPECIFIED EXPENSES WITHOUT TAKING RECOURSE TO THE EARLIER TRIBUNAL DECISIONS PASSED IN ASSE SSEES OWN CASE ? ( C ) WHETHER THE QUESTIONS RAISED IN (A) AND (B) ABOVE WOULD CONSTITUTE MISTAKE APPARENT FROM RECORD WARRANTING RECTIFICATION U/S 254(2) OF THE ACT? 2. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND TH AT THE ISSUE INVOLVED IS DISALLOWANCE MADE U/S.14A OF THE ACT R.W.R. 8D(2)(III) OF THE RULES. WE FIND THAT THE LD. AO HAD MADE THE DISALLOWANCE BY APPLYING THE THIRD LIMB OF RULE 8D(2) OF THE RULES TOWARDS INDIRECT EXPENSES. WE FIND THAT THE ASSESSEE HAD M ADE A P RIMARY PLEA BEFORE THE LD. AO IN WRITING THAT ALL THE EXPENSES DEBITED IN MA NO.186 - 190/MUM/2020 SHRI S. GANESH. 3 THE INCOME AND EXPENDITURE ACCOUNT WERE INCURRED ONLY IN NEW DELHI IN CONNECTION WITH HIS PROFESSIONAL PRACTI C E CARRIED OUT IN NEW DELHI AND THAT THE INVESTMENTS WERE MADE LON G BACK AND NO EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING DIVIDEND ON SUCH INVESTMENTS IN MUMBAI. IT WAS ALSO SPECIFICALLY POINTED OUT BY THE ASSESSEE THAT THE ENTIRE DIVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE ONLY IN MUMBAI. IT WAS ALSO SUBMITT ED THAT THE INVESTMENTS WERE MANAGED BY ASSESSEES FATHER STATIONED IN MUMBAI AND NO COMPENSATION WAS PAID BY THE ASSESSEE TO HIM FOR MANAGING THE INVESTMENTS. IT WAS ALSO POINTED OUT AND REITERATED THAT THERE WAS NO CHURNING OF INVESTMENTS OR SALE OF ANY INVESTMENTS WARRANTING INDULGENCE BY THE ASSESSEE SITTING IN NEW DELHI. IN THIS FACTUAL BACKGROUND, THE ASSESSEE HAD MADE A VOCIFEROUS PLEA THAT NO EXPENSES WERE INCURRED BY HIM FOR THE PURPOSE OF EARNING EXEMPT INCOME IN THE FORM OF DIVIDEND AND HENCE, TH ERE CANNOT BE ANY DISALLOWANCE MADE U/S.14A OF THE ACT IN HIS CASE. 2.1. WE FIND THAT THE LD. AO WITH REGARD TO THE DISALLOWANCE MADE U/S.14A OF THE ACT, HAD MADE THE FOLLOWING OBSERVATIONS FOR THE A.Y.2008 - 09 IN HIS ASSESSMENT ORDER : - DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE WAS ASKED AS TO WHY PROVISIONS OF SECTION 14A READ WITH RULE 8D SHOULD NOT BE APPLIED AS THE ASSESSEE HAS EXEMPT INCOME. IN RESPONSE THERETO, THE A.R. OF THE ASSESSEE HAS ARGUED THAT DISALLOWANCE U/S 14A SHOULD NOT BE MADE IN THIS CASE AS THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE WHATSOEVER TO EARN THE EXEMPT INCOME. THE A.R. OF THE ASSESSEE FURTHER STATED THAT THE INVESTMENTS ARE LOOKED AFTER BY THE FATHER OF THE ASSESSEE TO WHOM HE HAD NOT MADE ANY PAYMENT AT ANY TIME AND THE DIVIDENDS ARE MOSTLY TRANSFERRED DIRECTLY TO HIS BANK A/C WITHOUT INCURRING ANY EXPENDITURE. AS PER THE FINDING MADE IN THE ASSESSMENT YEAR 2007 - 08, AN ADDITION OF RS . 50 , 000A IS MADE U/S 14A R.W. R.8D. 2.2. THE AFORESAID DISALLOWANCE OF RS.50,000/ - WAS LATER MODIFIED IN THE PROCEEDINGS U/S.154 OF THE ACT DATED 05/09/2013 WHEREIN THE MA NO.186 - 190/MUM/2020 SHRI S. GANESH. 4 DISALLOWANCE U/S.14A OF THE ACT R.W.RULE 8D(2) (III) OF THE RULES WAS WORKED OUT AT RS.22,18,870/ - . 2.3. WE FIND THAT THE ASSE SSEE HAD MADE A PRELIMINARY OBJECTION THAT ABSOLUTELY NO SATISFACTION WAS RECORDED BY THE LD. AO EITHER IN HIS ORIGINAL ASSESSMENT ORDER FRAMED U/S.143(3) OF THE ORDER OR IN THE RECTIFICATION PROCEEDINGS U/S.154 OF THE ACT. HE PLACED RELIANCE ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD., VS. DCIT REPORTED IN 394 ITR 449. HE DREW THE ATTENTION OF THE BENCH THAT RELIANCE WAS HEAVILY PLACED ON THIS JUDGEMENT AT THE TIME OF HEARING, MORE ESPECIALLY TO PAR A 37,38 AND 39 THEREON , BUT THIS TRIBUNAL WHILE DISPOSING OF THIS APPEAL HAD NOT CONSIDERED THE SAME WHILE ADDRESSING THE ISSUE IN DISPUTE. ACCORDINGLY, LD. COUNSEL POINTED OUT THAT NON - CONSIDERATION OF THE HONBLE SUPREME COURT JUDGEMENT WOULD CONSTITUTE A MISTAKE APPARENT ON RECORD WITHIN THE MEANING OF SECTION 254(2) OF THE ACT. 2.4. THE LD. AR ALSO MADE AN ALTERNATIVE PLEA ON WITHOUT PREJUDICE BASIS THAT THIS TRIBUNAL HAVING DECIDED THAT COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES C OULD NOT BE CARRIED OUT IN THE INSTANT CASE AS IT RESULTS IN ABSURDITY, OU GHT TO HAVE RESTRICTED THE DISALLOWANCE TO RS.50,000/ - IN CONSONANCE WITH THE ORIGINAL DISALLOWANCE MADE BY THE LD. AO HIMSELF IN PROCEEDINGS FOR A.Y.2008 - 09 U/S.143(3) OF THE ACT WHICH W AS ALSO IN LINE WITH THE DECISION TAKEN BY THIS TRIBUNAL UP TO A.Y.2007 - 08 IN ASSESSEES OWN CASE. 3. THE LD. DR PER CONTRA, VEHEMENTLY ARGUED THAT THERE WAS NO MISTAKE AT ALL WARRANTING RECTIFICATION U/S.254(2) OF THE ACT. MA NO.186 - 190/MUM/2020 SHRI S. GANESH. 5 4. WE FIND ON PERUSAL OF RECO RDS AND LOG BOOK THAT ADMITTEDLY ASSESSEE HAD INFACT MADE REFERENCE TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LIMITED AND THE SAME HAD NOT BEEN CONSIDERED BY THIS TRIBUNAL WHILE ADDRESSING THE ISSUE IN DI SPUTE. HENCE, WE DEEM IT FIT THAT THIS IS A MISTAKE APPARENT ON RECORD WARRANTING RECTIFICATION U/S. 254(2) OF THE ACT. SINCE, WE HOLD THAT THE ORDER DESERVED TO BE RECALLED ON THE AFORESAID GROUND, THE ALTERNATIVE GROUND RAISED BY THE ASSESSEE I.E. RESTR ICTING DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT TO RS.50,000/ - ALONE, IS HEREBY LEFT OPEN IN VIEW OF RECALLING OF THE ORDER. ACCORDINGLY, THE ORDER FOR A.Y.2008 - 09 PASSED BY THIS TRIBUNAL IS HEREBY RECALLED. 5. THE DECISION RENDERED FOR A.Y.2008 - 09 WOU LD APPLY WITH EQUAL FORCE FOR A.Y.2009 - 10, 2010 - 11, 2012 - 13 AND 2013 - 14 ALSO IN VIEW OF THE IDENTICAL FACTS EXCEPT WITH VARIANCE IN FIGURES. ACCORDINGLY, ALL THE ORDERS FOR THE AFORESAID ASSESSMENT YEARS ARE HEREBY RECALLED. 6. THE REGISTRY IS DIRECTED TO FIX THE MAIN APPEALS FOR FRESH HEARING ON 25/01/2021. 7. IN THE RESULT, MISCELLANEOUS APPLICATIONS PREFERRED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD ON 03 / 1 2 / 2020 SD/ - (RAM LAL NEGI) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 03 /1 2 /2020 KARUNA , SR.PS MA NO.186 - 190/MUM/2020 SHRI S. GANESH. 6 COPY OF THE ORDER FORWAR DED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//