Income Tax Appellate Tribunal - Mumbai
Mad Entertainment Ltd, Mumbai vs Assessee on 28 October, 2014
आयकर अपील य अ धकरण "बी" यायपीठ मुंबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
ी जो ग दर संह, या यक सद य एवं ी एन. के. बलै या, लेखा सद य के सम ।
BEFORE SHRI JOGINDER SINGH, JM AND SHRI N. K. BILLAIYA, AM
आयकर अपील सं./I.T.A. No. 5993/Mum/2011
( नधारण वष / Assessment Year: 2008-09)
Mad Entertainment Ltd. Asst. CIT, Circle 11(1),
C/o. Mangaldas D. Shah & Co., बनाम/ Aayakar Bhavan, 6th Floor,
506, Lotus House, 5th Floor, 33-A, Vs. R. No. 667, M. K. Road,
New Marine Lines, Mumbai-400 020 Mumbai-400 020
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AABCM 2869 H
(अपीलाथ /Appellant) : ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Dhirendra M. Shah
यथ क ओर से/Respondent by : Shri Vijay Kumar Bora
ु वाई क तार ख /
सन
: 28.10.2014
Date of Hearing
घोषणा क तार ख /
: 28.10.2014
Date of Pronouncement
आदे श / O R D E R
Per N. K. Billaiya, AM:
This appeal by the assessee is preferred against the order of the CIT(A)-3, Mumbai dated 23.06.2011, pertaining to Assessment Year (A.Y.) 2008-09.
2. The sum and substance of the grievance of the assessee is twofold. Firstly, the ld. CIT(A) erred in confirming the addition of Rs.5,03,361/- made u/s.14A of the Act and secondly, the ld. CIT(A) erred in confirming the addition of Rs.47,94,682/- made out of cash expenses.
3. During the course of scrutiny assessment proceedings, the Assessing Officer (A.O.) noticed that the assessee has earned exempt income amounting to Rs.72,02,178/-
2 ITA No. 5993/Mum/2011 (A.Y. 2008-09)MAD Entertainment Ltd. vs. Asst. CIT and dividend of Rs.21,373/-. The assessee was asked to explain why the provisions of section 14A r/w Rule 8D should not be made applicable. The assessee explained that there are no new investments. The investments were made in earlier years and further no cost has been incurred for earning dividend income, as the same is credited to the bank account through electronic clearing system. This explanation of the assessee was not accepted by the A.O. who was of the firm belief that the assessee is maintaining office premises and staff and, therefore, certain expenditure have to be attributed towards exempt income. The A.O. went on to compute the disallowance by applying the formula given in Rule 8D and worked out the disallowance being 0.5% of the average investment at Rs.5,03,361/-. Proceeding further, the A.O. noticed that the assessee has incurred various expenses in cash. The assessee was asked to submit the details of cash expenses. The assessee filed the details of cash expenses amounting to Rs.2,39,73,409/- and also provided cash vouchers which were examined on a random basis. The A.O. examined the details with the vouchers and found that most of the cash expenses have been kept below Rs.20,000/- so as to escape from the provisions of section 40A(3). The A.O. further observed that out of the total expenditure claimed during the year amounting to Rs.34 crores, cash expenses are about Rs.2.40 crores, which works out to 7% of the expenditure. Considering the facts in totality, the A.O. treated 20% of the total expenditure disallowable for lack of verifiability. The disallowance was worked out at Rs.47,94,682/-. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) but without any success.
4. Before us, the ld. Counsel for the assessee stated that no expenditure was incurred for earning the exempt income. Therefore, the disallowance made u/s.14A r/w Rule 8D is unwarranted. The Departmental Representative (DR) supported the findings of the lower authorities. We have gone though the order of the authorities below. It is the settled proposition of law that the application of Rule 8D is mandatory on and from A.Y. 2008-
09. We find that the disallowance has been computed as per the formula given under Rule 3 ITA No. 5993/Mum/2011 (A.Y. 2008-09) MAD Entertainment Ltd. vs. Asst. CIT 8D. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Ground no. 1 with its sub-ground is dismissed.
5. Insofar as the claim of expenditure is concerned, the ld. Counsel for the assessee stated that the disallowance has been made on ad hoc basis without pointing out any specific item of expenditure not verifiable or not incurred for the purposes of the business. Per contra, the ld. DR supported the orders of the authorities below.
6. We have carefully perused the orders of the authorities below. It is not in dispute that the assessee has incurred expenditure amounting to Rs.2,39,73,409/- in cash. It is also an undisputed fact that the auditors have qualified in their report that amount of Rs.9.18 lacs have been paid in cash in violation of the provisions of section 40A(3) of the Act. Although the same was claimed to be allowable as per Rule 6DD, however, no details have been furnished, neither before the Revenue authorities nor before us. Therefore, the expenditure of Rs.9.18 lacs are clearly disallowable, as per the qualification of the Auditors. That leaves us with a balance disallowance of Rs.38.76 lacs. In our considered opinion, 50% out of this should meet the ends of justice, therefore, in addition to the disallowance of Rs.9.18 lacs, we direct the A.O. to restrict the disallowance out of the balance expenditure at Rs.19.38 lacs meaning thereby that the total disallowance should be restricted to Rs.28.56 lacs. Ground no. 2 with its sub ground is partly allowed.
7. In the result, the appeal filed by the assessee is partly allowed.
प रणामतः नधा रती क अपील आं शक वीकृत क जाती है ।
Order pronounced in the open court on October 28th, 2014 Sd/- Sd/-
(Joginder Singh) (N. K. Billaiya)
या यक सद य / Judicial Member लेखा सद य / Accountant Member
मुंबई Mumbai; दनांक Dated : 28.10.2014
4
ITA No. 5993/Mum/2011 (A.Y. 2008-09)
MAD Entertainment Ltd. vs. Asst. CIT
व. न.स./Roshani, 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)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File
आदे शानस
ु ार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंब
ु ई / ITAT, Mumbai