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Income Tax Appellate Tribunal, MUMBAI ‘K’ BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, HON’BLE & SHRI PAWAN SINGH, HON’BLE]
PER SHRI SHAMIM YAHYA, AM
This appeal by the assessee is directed against the order of Ld. CIT(A) – 29, Mumbai dated 01.08.2016 and pertains to A.Y. 2012-13.
The grounds of appeal
read as under: “i. On the facts and circumstances of the appellant’s case and in law the Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Ld. AO amounting to Rs. 16,76,123/- as expenditure incurred for the purpose of earning exempt income by invoking the provision of section 14A r.w.r. 8D of the Income Tax Act, 1961. ii. On the facts and circumstances of the appellant’s case and in law the Ld. Commissioner of Income Tax (Appeals) erred in confirming the adhoc addition made by the Ld. AO amounting to Rs. 46,290/- treating 10% of the total expenditure debited to P/L account as personal in nature.” Assessment Year: 2012
13. Hira T. Jhamtani
At the outset it is noted that there is a delay of 17 days in filing the appeal. The reasonable cause has been attributed to the misplacement of the file. Upon careful consideration we condone the delay.
Apropos ground no. 1, the facts of the case are as under: The appellant engaged in the business of manufacturing and selling of readymade garments, towels etc. filed his return of income for A.Y. 2012-13 declaring a total income of Rs. 94,71,185/- on 28.09.2012. During the relevant assessment year, the appellant received exempt income in the form of dividend of Rs. 1,64,821/- and PPF interest of Rs. 3,740/-. The appellant has not made any disallowance u/s 14A towards expenditure incurred for earning income which does not form part of total income. The AO issued a show cause to the appellant seeking why disallowance u/s 14A should not be made to which the appellant replied that major parts of the investment are forced investments which are mandatory for the assessee to operate the business with the Future Group and others. Further, he claims to have his own capital and interest free funds which are more than the amount of investments. According to him, the provisions of section 14A are not attracted to his case. However, the AO was not satisfied with the reply and had proceeded to work out the disallowance u/s 14A r.w.r. 8D and made a disallowance of Rs. 14,87,620/-.
Against the above order, assessee appealed before the Ld. CIT(A). In support of its proposition that the assessee has sufficient interest free funds of its own and no disallowance is required the assessee placed reliance upon Hon'ble Bombay High Court decision in the case of CIT vs. Reliance Utilities & Power Ltd. 313 ITR 340 and Hon'ble Bombay High Court decision in the case of HDFC Bank Ltd. 366 ITR 505. However the Ld. CIT(A) went on to distinguish these directly applicable Jurisdictional High Court decision by noting that in these Assessment Year: 2012-13 Hira T. Jhamtani decisions Hon'ble High Court was not informed about the decision of Godrej & Boyce.
Against the above assessee is in appeal before us. Upon careful consideration, in our considered opinion, this approach of Ld. CIT(A) is totally uncalled for. In the decision referred by the assessee as above, Hon'ble Jurisdictional High Court has held that if assessee has sufficient interest free funds to make investment in instruments earning exempt income, no disallowance on account of interest ìs to be made. It was also held that assessee was not required to establish one to one nexus. In these circumstances, in our considered opinion the interest of justice demands for this issue be remitted to the file of Assessing Officer. The Assessing Officer is directed to consider the issue afresh keeping in mind, the decision of Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd. and Reliance Utilities & Power Ltd. (supra).
The second issue is disallowance u/s 37. The AO has disallowed 10% of telephone expenses, motor car expenses, depreciation on motor car and motor expenses totalling to Rs. 46,290/- on the ground of personal use. The AO so held by noting that log book or itineraries were not furnished or maintained regarding these expenses. Upon assessee’s appeal Ld. CIT(A) upheld the above disallowance of 10%. Against this order, assessee is in appeal before us. We have heard Ld. DR. None appeared on behalf of the assessee. We note that Assessing Officer has made this disallowance on adhoc basis on surmises and conjectures. The Assessing Officer has not pointed out any specific Assessment Year: 2012-13 Hira T. Jhamtani personal use. It is only this conjectures of possibility of personal use. In our considered opinion, this cannot sustained. Hence we direct for deletion of disallowance on this issue.
Appeal filed by the assessee stand partly allowed. Order Pronounced in the Open Court on 15th January, 2020. Sd/- Sd/- (PAWAN SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/01/2020 Biswajit, Sr. PS Copy of the order forwarded to:
1. 1. Hira T. Jhamtani, 19, Tulips Union Park, 4th Floor, Pali Hill Khar (W), Mumbai – 400 052.
2. ACIT – 18(1), Mumbai.
3. CIT(A)- 4. CIT- , 5. CIT(DR), Mumbai Benches, Mumbai.