Income Tax Appellate Tribunal - Mumbai
Hrithik Rakesh Nagrath, Mumbai vs Department Of Income Tax on 15 September, 2014
आयकर अपील य अ धकरण "H" यायपीठ मब
ंु ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER &
SHRI SANJAY GARG, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.7239 /Mum/2012
( नधारण वष / Assessment Year : 2009-2010
ACIT - 11(I), बनाम/ Shri Hrithik Rakesh
Room No. 439, Nagrath,
Vs.
Aayakar Bhavan, B-27, Commerce Centre,
M.K. Marg, Ist Floor,
Mumbai - 400 020. Off. New Link Road,
Andheri (W),
Mumbai - 400 053.
थायी ले खा सं . /PAN : AABPN2790F
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Appellant by Shri Vivek Peram Purna
Respondent by : Shri R. Prasad Rao
ु वाई क तार ख / Date of Hearing
सन : 15-09-2014
घोषणा क तार ख /Date of Pronouncement : 15-9-2014
[
आदे श / O R D E R
PER R.C. SHARMA, A.M. :
This appeal filed by the Revenue is directed against the order of ld. CIT(A) -3, Mumbai dated 25-09-2012 for the A.Y. 2009-10 in the matter of order passed u/s 143(3) of the Income Tax Act, 1961.
2. The following grounds have been taken by the Revenue:-
"1. On the facts and in the circumstances of the case and in law, whether the ld. CIT(A) was justified in deleting the addition u/s 14A r.w. Rule 8D even when the A.O. had made a proximate cause for disallowance of Rs. 13,58,751/- under section 14A of the I.T. Act.
2. On the facts and in the circumstances of the case and in law, whether the ld. CIT(A) was justified in relying on his own order of the earlier year 2 ITA 7239/M/12 thereby ignoring the fact that the A.O. had differentiated the facts of the present case from that of the earlier year.
3. The appellant prays that the order of CIT (Appeals) on the above ground be set aside and that of the Assessing Officer restored."
3. Rival contentions have been heard and perused the records. Facts in brief are that the assessee is a film artist by profession. Assessee was in receipt of tax free income. During the course of assessment, the A.O. asked the assessee to explain as to why section 14-A read with Rule 8-D of the Income Tax Rules, 1962 is not applicable to him, in reply it was submitted that exempt income comprised of PPF, interest, equity dividend, interest on R.B.I. Relief Bonds which were either credited through ECS or recovered by passing a journal entry. As such, there was no expenditure referable to such exempt income within the meaning of section 14A of the Act and hence no disallowance is called for. However, the A.O. did not agree with the assessee's contention and disallowed an amount of Rs. 13,58,751/- by observing that the assessee has incurred various expenses namely office in-charge, motor car expenses, computer maintenance, office maintenance etc. The ld. CIT(A) vide his impugned order, deleted the addition after having recorded the following observation:-
"1.3 I have considered the facts and perused the material on record. The provisions of section 14A (1) read with section 14A (2) provides that for the purpose of total income computed under this chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income under this Chapter and the AO will determine the amount of expenditure incurred in relation to exempt income if he is not satisfied with the correctness of the claim of the assessee. The perusal of Profit and Loss Account of the appellant shows that the appellant has not made any claim of expenditure incurred in relation to exempt income, therefore, the provisions of section 14 A (1) r.w.s. 14A(2) of the Act are not attracted. The AO has also not given any findings on whether the assessee has made a claim of expenditure in relation to exempt income and the claim is not correct. It is seen that the assessee has earned dividend of Rs.10,245/- which has been directly credited to bank through ECS. The interest of Rs.69,90l/- received on PPF, for which a 3 ITA 7239/M/12 journal entry is passed on 31-3-09 and similarly, interest of Rs.66,02,652/- on tax free Bonds is credited by journal entries passed on 3 1-3-09. Thus, no expenditure has been earned for earning exempt income. Therefore, there is no proximate cause for disallowance in relationship with exempt income as held in CIT v Walfort Shares & Stock Brokers Pvt. Ltd. 326 ITRJ (SC) and Godrej & Boyce Manufacturing Co. Ltd v DCIT (2010) 328 ITR 81 (Bom)for attracting the provisions of section 14A. The Honble TAT has confirmed the last year's order in ITA No.61 10/Mum/201 1 (AY.2008-09) dated 8.8.2012. In view of these facts and following the decision of jurisdictional ITAT in assessee's own case, the disallowance of Rs.13,58,751/- is deleted. The Ground Nos. 1 to 3 are allowed."
4. We have considered the rival contentions and found that exempt income of assessee comprised of interest on tax paid, relief bonds accrued and PPF interest for which journal entries were passed at the end of the year and dividend income was credited in the bank through ECS, hence, no expenditure incurred were referable and relatable to the exempt income. The ld. CIT(A) further observed that the A.O. has also not given any finding as to whether the assessee has made a claim of expenditure in relation to exempt income and the claim is not correct. The categorical finding has been recorded by the ld. CIT(A) to the effect that the assessee has earned dividend income of Rs. 10,245/- which has been directly credited to the bank through ECS. The interest of Rs. 69,901/- received on PPF, for which a journal entry was passed on 31-3-09 and similarly interest of Rs. 66,02,652/- on tax free bonds is credited by journal entries passed on 31-3-09. Thus, no expenditure has been incurred for earning exempt income. From the records, we also find that the expenditure mentioned by the A.O. was in relation to the professional income earned by the assessee which is taxable under the Income Tax Act, there is no reason to disallow the expenses incurred for earning he taxable income. The findings so recorded by the ld. CIT(A) at para 1.3 of his order has not been controverted by the Department by bringing any positive material on record. Accordingly, we do not find any reason or infirmity with the order of the ld. CIT(A) in deleting the disallowance of Rs. 13,58,751/-
4 ITA 7239/M/12 made by the A.O. u/s 14-A of the Act. Deletion of similar disallowance was also confirmed by Tribunal in the immediately preceding A.Y. 2008-09 vide its order dated 8-8-2012.
5. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15th September, 2014.
आदे श क घोषणा खल
ु े यायालय म दनांकः 15-09-2014 को क गई ।
sd/- sd/-
(SANJAY GARG) (R.C. SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated 15-09-2014
[
व. न.स./ RK , Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A) -3,, Mumbai
4. आयकर आयु त / CIT -II, Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai H Bench
6. गाड फाईल / Guard file.
ु ार/ BY ORDER,
आदे शानस
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंब
ु ई / ITAT, Mumbai