Income Tax Appellate Tribunal - Mumbai
Crescent Finstock Ltd, Mumbai vs Assessee on 22 August, 2014
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ 'सी' मुंबई
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, MUMBAI
श्री डी. करुणाकर राव, ऱेखा सदस्य, एवुं श्री अममत शक्ऱा, न्याययक सदस्य के समक्ष
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
आमकय अऩीर सं. / ITA no. 5175/Mum./2012
(ननधधायण वषा / Assessment Year : 2009-10)
Crescent Finstock Limited
................. अऩीरधथी /
1st Floor, Kanta Terrace
533, Kalbadevi Road, Mumbai 400 002 Appellant
फनधभ v/s
Asstt. Commissioner of Income Tax
................... प्रत्मथी /
Circle-4(1), Aayakar Bhavan
101, M.K. Road, Mumbai 400 020 Respondent
स्थधमी रेखध सं./ Permanent Account Number - AAACC6420F
ननधधारयती की ओय से / Assessee by : Shri Dharmesh Shah
यधजस्व की ओय से / Revenue by : Shri R.A. Pant
सन
ु वधई की तधयीख / आदे श घोषणध की तधयीख /
Date of Hearing - 07.08.2014 Date of Order - 14.08.2014
आदे श / ORDER
अममत शक्ऱा, न्याययक सदस्य के द्वारा /
PER AMIT SHUKLA, J.M.
The present appeal is preferred by the assessee, challenging the impugned order dated 28th May 2012, passed by the learned Commissioner (Appeals)-VIII, Mumbai, for the quantum of assessment Crescent Finstock Limited 2 passed under section 143(3) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2009-10.
2. This appeal is time barred by two days. Along with the appeal, the assessee has filed petition for condonation of delay which is duly supported by an affidavit of the director. In view of the reasons stated therein, we condone the delay of two days.
3. The main issue involved here in this appeal is disallowance of ` 15,89,295, made under section 14A.
4. The assessee has shown exempt income of ` 26,310, being dividend income. Before the Assessing Officer, it was submitted that the assessee had invested in share, mostly in the subsidiary companies which was devolved on demerger and a paltry sum was invested in the equity shares of Bombay Stock Exchange. The rest investments are in mutual funds. The assessee has only disallowed sum of ` 1,200 on account of demat charges and submitted that the other expenses debited in the Profit & Loss account are entirely for the business purpose. The Assessing Officer rejected the assessee's contention and held that rule 8D is to be applied and accordingly he disallowed 0.5% by taking the average value of the investment, which worked out to ` 15,89,295.
Crescent Finstock Limited 3
5. Before the learned Commissioner (Appeals), it was submitted that before invoking the provisions of rule 8D, the Assessing Officer has not given any particular reason or identified any expenditure which could have been incurred for the purpose of earning of tax free dividend income or making the investment. The administrative expenses which have been incurred are purely for business purpose and whatever was attributable for the dividend income, which too was received through ECS, the assessee has disallowed the same. However, the learned Commissioner (Appeals) rejected the assessee's contention and held that rule 8D is mandatory in such a situation and disallowance has to be made under rule 8D.
6. Before us, the learned counsel for the assessee submitted that the shares which have been invested in the subsidiary companies were devolved through demerger of the said company and the assessee has not made any effort for acquiring the shares. The mutual funds too were invested in the earlier years. Thus, without attributing any expenses for the purpose of dividend income of ` 26,310, no disallowance can be made on account of administrative expenses by applying rule 8D. The condition precedent under sub-section (2) of section 14, has not been fulfilled in by the Assessing Officer. Thus, the Crescent Finstock Limited 4 disallowance worked out by the assessee at ` 1,200, alone should be disallowed for the purpose of section 14A.
7. The learned Departmental Representative, on the other hand, strongly relied upon the order of the Assessing Officer as well as the learned Commissioner (Appeals).
8. We have heard the rival submission and also perused the relevant record. Before us, the only dispute with regard to disallowance under section 14A, is administrative expenses which has been made after taking 0.5% of the average investment value, as envisaged in rule 8D. The learned counsel has pointed out that the major investment is on account of equity shares in subsidiary company which too was devolved on demerger of the said company in the earlier years. Insofar as the mutual fund are concerned, as on 31st March 2009, the mutual funds were not appearing in the Balance Sheet. Thus, no effort was made or any time was consumed for making any analysis of the investment which has resulted into exempt income of ` 26,310, by way of dividend. The assessee has already disallowed the sum of ` 1,200 on account of demat charges which is sufficient and directly attributable to the exempt income. Under these facts and circumstances, we are of the opinion that simply relying on rule 8D, for the purpose of disallowance, cannot be held to be applicable, because the Assessing Officer having Crescent Finstock Limited 5 regard to the accounts of the assessee as well as the nature of expenses incurred which can be said to be attributable for the earning of exempt income, has not pointed out what are the expenses which could be said to be have been incurred or attributable on the administrative expenses. Only when the Assessing Officer is not satisfied with the correctness of the claim of the assessee, he can proceed to apply rule 8D. In this case, such a requirement has not been fulfilled by the Assessing Officer. Accordingly, we do not find any merit in the disallowance made by the Assessing Officer under rule 8D and accordingly, the disallowance made by the Assessing Officer under rule 8D and confirmed by the learned Commissioner (Appeals) stands deleted. This ground raised by the assessee is thus allowed.
9. ऩरयणधभत् ननधधारयती की अऩीर स्वीकृत की जधती है ।
9. In the result, assessee's appeal is allowed.
आदे श की घोषणा खुरे न्मधमधरम भें ददनधंक् 14th August 2014 की गई । Order pronounced in the open Court on 14th August 2014 Sd/- Sd/-
डी. करुणाकर राव अममत शक्ऱा
ऱेखा सदस्य न्याययक सदस्य
D. KARUNAKARA RAO AMIT SHUKLA
ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई MUMBAI, ददनाुंक DATED: 14th August 2014 Crescent Finstock Limited 6 आदे श की प्रनतलरपऩ अग्रेपषत / Copy of the order forwarded to:
(1) ननधधारयती / The Assessee;
(2) यधजस्व / The Revenue;
(3) आमकय आमुक्त(अऩीर) / The CIT(A); (4) आमकय आमुक्त / The CIT, Mumbai City concerned; (5) पवबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / The DR, ITAT, Mumbai; (6) गधर्ा पधईर / Guard file.
सत्मधपऩत प्रनत / True Copy आदे शधनुसधय / By Order प्रदीऩ जे. चौधयी / Pradeep J. Chowdhury वरयष्ठ ननजी सधचव / Sr. Private Secretary उऩ / सहधमक ऩंजीकधय / (Dy./Asstt. Registrar) आमकय अऩीरीम अधधकयण, भंफ ु ई / ITAT, Mumbai