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Income Tax Appellate Tribunal, “A” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :- This appeal by the assessee is directed against the order of learned CIT(A) dated 23.9.2019 pertains to A.Y. 2012-13.
Grounds of appeal read as under :
The learned Commissioner of Income Tax (Appeals)['CIT(A)'] has erred in confirming the disallowance of Rs. 4,66,355/- made by the Id. AO u/s 14A of the Act r.w.r.SD of the Income Tax Rules, 1962. On the facts and in the circumstances of the case and in law, the disallowance made ought to be deleted.
Brief facts the appellant is a practicing doctor (Cardiologist) and is affiliated with many hospitals. During the year under consideration the assessee has earned gross receipts of Rs.4,20,49,822/- and after claiming expenses of Rs.39,20,906/-. He offered net professional income at Rs.3,81,28,9l6/-. Apart from professional income, the assessee has also offered Income of Rs. 27,046/- from House Properly and interest income of Rs. 1,68,36,905/-. Apart from above income, the assessee has earned exempt Income of Rs.20,91,427/-. The details of the said income earned are as follows:
2 Dr.Ashwin B. Mehta
Particulars Amount (Rs.) PPF Interest (A) 4,64,096/- Dividend income from : • 1,56,198/- Shares • 14,71,133/- Mutual fund units Tax free dividend (B) 16,27,331/- Total exempt income (A+B) 20,91,427/- On enquiry by the AO for disallowance u/s 14A, the assesee submitted that during the year under consideration, the assessee has incurred advisory service charges of Rs.57,331/- and securities transaction fax & other charges of Rs.40,889/- towards earning exempt income. However, the said expenses were debited to capital account of the assessee and the appellant did not claim it in his Income & Expenditure account out of the total expenses of Rs.39,20,906/- an amount of Rs.8,77,586/- is depreciation allowance. That Depreciation being an allowance is out of the purview of disallowance u/s I4A of the Act, In this regard, the appellant further placed reliance on the decision of Special Bench of Ahmedabad Tribunal in the case of Vishnu Anant Mahajan vs. ACIT (ITA No.3002/Ahd/2009) dated 25.04.2012 and decision of Mumbai tribunal in the case of Hoshang D. Nanavati v ACIT (ITA No. 3567/Mum/2007) dated 18.03.2011. It was further pleaded that whereas balance expenses are incurred wholly and exclusively towards the performance of professional services. If was further submitted that disallowance u/s 14A of the Act can be only made if there is a direct nexus between expenditure incurred and exempt income. It was submitted that in the given case, appellant has not incurred any expenses to earn dividend income. Therefore, no disallowance u/s 14A r.w. rule 3D of the Rules, is required in the instant case. However, on a without prejudice basis, as required by the learned AO, 'the appellant filed a working of 14A disallowance as per Rule 8D of Rules) amounting to Rs.4,66,355/- vide letter dated 30.01,2015 However, the AO without providing any specific findings as to which expenses are incurred to earn exempt income and without recording any reasoning tor his dissatisfaction to the working of the assessee simply mentioned in the order that "use of infrastructure and staff of profession for earning the exempt income cannot be denied".
3 Dr.Ashwin B. Mehta Thereafter, the AO computed disallowance u/s. 14A r.w.r 60 of the Rules at Rs. 4,66,353/-.
Before the learned CIT(Appeals) the inter alia submission of the assessee noted were as under :- “At the outset, we would like to bring to Your Honour's notice that the Mumbai Tribunal in appellant's own case In AYs 2008-09 & 2009-10, has restricted the disallowance under section J4A of the Act to the extent of suo moto disallowance made by the assessee (i.e. advisor charges and STT which was already debited to capital account] plus bank charges and accounting charges debited in the Income & Expenditure Account. Thus, relying upon the ITAT decision in appellant's own case, tor the year under consideration the disallowance under section 14A of the Act ought to be restricted to Rs. 133,909/- (i.e. Rs. 3.909/- towards bank charges and Rs.1,30,000/- accounting charges). Since, Advisory charges of Rs.57,331/- & STT of Rs. 40,889/- is debited to capital account adding the same would result to double disallowance. In view of the above stated facts and in law the disallowance u/s I4A read with rule 8D ought to be restricted to Rs. 1,33,909/-.”
However learned CIT(Appeals) was not convinced. He referred to the decision of honourable Supreme Court in the case of Maxopp Investment Ltd vs. CIT reported in 402 ITR 640 and observed that it has put rest to many controversies under sec I4A of the Act. That the Hon'ble Supreme Court held that if expenditure is incurred on earning the dividend income that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business income. Thereafter Learned CIT(Appeals) chose not to follow ITAT decision in assessee's own case and referred to several other ITAT decision and proceeded to confirm the order of the assessing officer.
Against this order assessee is in appeal before us.
We have heard the learned departmental representative and perused the records. On the facts as narrated above it is clear that ITAT in assessee's own case for earlier years has restricted the disallowance to the suo moto disallowance made by the assessee. There is no change in the facts and 4 Dr.Ashwin B. Mehta circumstances of the case. No reason whatsoever has been attributed by the assessing officer or CIT(A) as to why the suomoto disallowance by the assessee is not appropriate. The learned CIT(Appeals) has referred to the decision of Supreme Court in Maxopp for the proposition referred above. From the reference to the honourable Supreme Court by the learned CIT(Appeals), we fail to understand how the same supports the case of the revenue here that without assigning any reason whatsoever as to why the suomoto disallowance proposed by the assessee on the facts of this case is to be rejected. Furthermore by choosing not to follow the ITAT decision in assessee's own case learned CIT(Appeals) has displayed scant regard to the principle of judicial discipline. For these reasons narrated above the order of learned CIT(Appeals) cannot be sustained.
Hence we set aside the order of authorities below and direct that the suomoto disallowance proposed by the assessee in the submissions above that is Rs. 1,33,909/- should be accepted in accordance with ITAT decision in assessee’s own case for earlier year. Accordingly we direct that the disallowance under section 14A should be restricted to 1,33,909/-.
In the result appeal by the assessee stands partly allowed.
Pronounced in the open court on 12.07.2021