Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA, & SHRI MAHAVIR PRASAD
The captioned appeal has been filed by the assessee against the order of the CIT(A)-2, Vadodara (‘CIT(A)’ in short), dated 24.11.2017 arising in the assessment order dated 30.12.2015 passed by the Assessing Officer under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2013-14.
K. Patel (HUF) vs. DC IT] A.Y. 2013-14 - 2 -
The captioned appeal has filed by the assessee seeking to impugn the disallowance sustained by the CIT(A) amounting to 1,83,184/- under s. 14A r.w.r. 8D (2)(iii) of the I. T. Rules. The assessee is a partner in M/s. Kamlesh Gandhi Infrastructure. His share of holding is of 40% during the year under consideration. The assessee has not received any interest on capital from the firm.
However, the assessee has earned Rs. 38,66,171/- as its share of profit in the partnership firm. The share of profit is exempt in the hands of the partner under s. 10(2A) of the Act. The AO inter alia invoked under s. 14A of the Act and disallowed Rs. 1,83,184/- being 0.5% of the average value of investment in the partnership firm which action of the AO was affirmed by the CIT(A) in first appeal.
The assessee filed before the Tribunal against the aforesaid disallowance.
None appeared for the assessee before the Tribunal.
Accordingly, the matter was proceeded ex-parte.
Ld. DR for the Revenue relied upon the order of the AO and the CIT(A).
We have perused the order of the lower authorities. We find that the assessee has earned dividend income of Rs. 32,155/- on K. Patel (HUF) vs. DC IT] A.Y. 2013-14 - 3 - investment in mutual funds. The assessee has also claimed exempt income of Rs. 38,66,171/- from the partnership firm in which the assessee is a partner. The investment in mutual fund does not per se call for any separate administrative expenditure having regard to the fact that the mutual funds are run by professional who separately charges administrative expenses from the assessee for management of the funds. Likewise, investments in partnership firm would not attract disallowance under s. 14A unless it is shown by the AO that certain expenses howsoever small have been incurred for the purposes of partnership firm and claimed in the assessee’s accounts.
No such observation is found in the order of the AO. Needless to say application of sec. 14A is not automatic and it inheres in it the concept of reasonableness. The AO in the instant case is not found to have satisfied himself about incurring of any administrative expenses. The partnership firm is an independent entity and requires to run its affairs separately. The partners are holding the mutual agency in the partnership firm and unless the partners are shown to be drawing remuneration from the assessee concern and at the same time investing its attention in the partnership firm, there is no perceptible reason to disbelieve the assessee for not incurring in expenditure. We, thus, find no reason to thrust mechanical application of Rule 8D(2)(iii) of the Act in the given facts. The K. Patel (HUF) vs. DC IT] A.Y. 2013-14 - 4 - order of the CIT(A) is consequently set aside and the AO is directed to reverse the disallowance made in Rule 8D(2)(iii) r.w.s 14A of the Act.
In the result, appeal of the assessee is accordingly allowed ex- parte.
This Order pronounced in Open Court on 23/07/2019
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 23/07/2019 TANMAY TRUE COPY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद । 1.Date of dictation on 15.07.2019 2.Date on which the typed draft is placed before the Dictating Member 16.07.2019 3.Date on which the approved draft comes to the Sr. P.S./P.S. 16.07.2019 4.Date on which the fair order is placed before the Dictating Member for pronouncement 16.07.2019 5.Date on which the fair order comes back to the Sr. P.S./P.S 23.07.2019 6.Date on which the file goes to the Bench Clerk 23.07.2019 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Despatch of the Order………