Income Tax Appellate Tribunal - Mumbai
Kamvan Construction P. Ltd, Mumbai vs Ito 3(2)(1), Mumbai on 26 April, 2017
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ "ऐ" मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM आमकय अऩीर सं./ I.T.A. No.3084/Mum/2013 (निर्धारण वषा / Assessment Year : 2008-09) M/s Kamvan Construction P.Ltd., Income Tax Officer 3(2)(1), 403, Maker Bhavan No.3, फनाभ/ Aaykar Bhavan, 21, New Marine Lines, Vs. M K Road, Mumbai-400020 Mumbai-400020 Appellant Respondent PAN: AAACK1994L अऩीराथी की ओय से / Appellant by : Shri Anuj Kisnadwala प्रत्मथी की ओय से/Respondent by : Shri Rajesh Kumar Yadav सुनवाई की तायीख /Date of Hearing : 3.4.2017 घोषणा की तायीख /Date of : 26.4.2017 Pronouncement आदे श / O R D E R PER RAJESH KUMAR, A. M:
This is an appeal filed by the assessee challenging the order of ld.
CIT(A)-Mumbai, dated 1.6.2012, pertaining to the assessment year 2008-09.
2. The only issue raised in the grounds of appeal is against the confirmation of the disallowance by the ld. CIT(A) Rs.29,54,392/- as made by the AO under section 14A of the Income Tax Act, 1961 r.w.s.8D of the 2 I.T.A. No.3084/Mum/2013 Income tax Rules, 1962 towards expenses attributable to earning the exempt income.
3. Brief facts of the case are that the assessee filed return of income on 28.9.2008 declaring a total loss of Rs.14,74,150/-. The return was processed under section 143(1) of the Income Tax Act. Thereafter the case of the assessee was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. We find from the record that the assessee has received dividend income of Rs.6,05,693/- which was claimed as exempt under the provisions of section 10(23)/(34) of the Act while not disallowing any expenditure attributable to earning of this exempt income. The assessee has total investment in shares and mutual funds Rs.1,60,17,613/-. The AO during the course of assessment proceedings came to the conclusion that the assessee has received exempt income whereas failed to disallow expenses attributable to earning of exempt income. Accordingly, the AO, vide ordersheet entry dated 23.11.2010 called upon the assessee to show cause as to why the disallowance u/s 14A r.w.r 8D of the rules should not be made, which was replied by the assessee by submitting that no expenditures were incurred on earning of exempt income. Ultimately, the AO framed the assessment under section 143(3) of the Act by assessing the total income of the assessee at an income of Rs.14,82,731/- by making disallowance of Rs.29,54,392/- by applying 0.5% of the average 3 I.T.A. No.3084/Mum/2013 investment under section 14A r.w.r.8D of the Rules which worked out to Rs.80,023/- and interest disallowance of Rs.28,74,369/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority who after considering the submissions and documents as submitted by the assessee also dismissed the appeal of the assessee by observing and holding as under :
"4. I have considered the facts of the case and submissions of the assessee. Undisputedly the investment has been made in trading of shares and F&O and dividend income from all such investments is exempt from Income-tax and, therefore, it cannot be said that the borrowed funds have no nexus with the dividend income. It is immaterial whether dividend from a particular share is received or not, as long as the investment is in such securities from which if any dividend is received and the same is exempt then the interest is to be disallowed along with any other related expenditure and, therefore, A.O. has correctly disallowed the expenditure relating to interest paid. On account of other expenses the A.O. has correctly applied Rule 8D as the same is applicable from A.Y. 08-09 as has been held by Hon'ble jurisdictional Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. CIT 328 ITR 81. Therefore, the ground of appeal of the assessee is rejected."
4. The ld. AR vehemently submitted before us that the disallowance of Rs.29,54,392/- confirmed under section 14A r.w.r.8D of the rules is against the settled proposition of law as enunciated by various forums of law. The ld.AR submitted that the exempt income earned by the assessee during the year was Rs.6,05,693/- and disallowance of expenses u/s 14A r.w.r.8D could not be more than the exempt income whereas the ld.CIT(A) confirmed the disallowance of Rs.29,54,392/- which should be restricted to Rs.6,05,893/-. 4
I.T.A. No.3084/Mum/2013 .In defence of his arguments, the ld.AR relied upon the following case laws:
"1) Indus Valley Investments v. DCIT being ITA NO: 3763/De1/2013 for AY. 2009-10 dated 29.04.2015 (copy enclosed)
2) M/s Slyvex Cable Co.Pvt.Ltd. v/s Dy.CIT being ITA No:8581/Mum/2011 for AY-2008-09 dated 24.02.2016 (copy enclosed)
3) Mls Daga Global Chemicals v. Asst. CIT being ITA No:5592/Mum/2012 dated 01.01.2015
4) M/s Global Capital Ltd v ACIT being ITA No: 6586/Del/2013 for AY. 2009-10 dated 27.11.2015
5) DCIT v. DCM Ltd being ITA No: 4467/De1/2012 for AY. 2009-10 dated 01.09.2015
7) Essar Properties Ltd v. DCIT (ITA No: 423/Mum/2015) for AY. 2009-
10 dated 19.07.2016
8) Joint Investments V/s CIT (372 ITR 694) (del)
5. The ld. DR, on the other hand, objected to the arguments advanced by the ld.AR by submitting that the assessee has made huge investments in the mutual funds and shares. Therefore, the disallowance made by the AO and upheld by the ld. CIT(A) deserved to be upheld by heavily relying on the orders of authorities below.
6. We have carefully considered the rival contentions and material placed before us including the impugned orders of lower authorities and case law relied upon by the assessee. We find that the ratio laid down in the aforesaid decisions, disallowance u/s 14A r.w.rule. 8D cannot exceed the amount of exempt income. In the present case the income received is Rs.6,05,693/- by 5 I.T.A. No.3084/Mum/2013 way of dividend which has been claimed as exempt u/s 10 of the Act and therefore the disallowance on the same at the most could be Rs.6,05,593/-. We, therefore, respectfully following the ratio laid down in the above decisions and also our observations hereinabove, set aside the order of the ld.CIT(A) and direct the AO to restrict the disallowance to Rs.6,05,693/- u/s 14A r.w.r 8D of the rules.
7. Resultantly, the appeal of the assessee stands partly allowed. Order pronounced in the open court on 26th April, 2017 Sd sd (SAKTIJIT DEY) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER भंफ ु ई Mumbai; ददनांक Dated : 26.4.2017 SRL,Sr.PS आदे श की प्रततलरपऩ अग्रेपषत/Copy of the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent
3. आमकय आमक् ु त(अऩीर) / The CIT(A)
4. आमकय आमक् ु त / CIT - concerned
5. पवबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भफ ुं ई / DR, ITAT, Mumbai
6. गार्ड पाईर / Guard File आदे शानस ु ाय/ BY ORDER, True copy उऩ/सहामक ऩंजीकाय (Dy./Asstt. Registrar) आमकय अऩीरीम अधधकयण, भफ ुं ई / ITAT, Mumbai