SHREYAS R. MEHTA,MUMBAI vs. ACIT- 10(3)(1), MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that since the assessee maintained separate audited accounts for business and share trading, and expenses like demat charges were debited to the capital account, the disallowance under Section 14A was not justified. Similar additions in earlier years were deleted by the Tribunal.
What were the facts?
The assessee had investments in shares and earned exempt dividend income. The Assessing Officer disallowed expenses under Section 14A read with Rule 8D, considering salary, bank charges, rent, etc. The assessee argued that expenses like demat and STT charges were debited to the capital account and not the Profit & Loss account.
What were the issues?
Whether disallowance of expenses under Section 14A is justified when expenses related to earning exempt income are debited to the capital account and not the Profit & Loss account.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: HON’BLE SHRI C.N. PRASAD, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI माननीय "ी सी. एन. "साद,"ाियक सद" एवं माननीय "ी मनोज कुमार अ"वाल ,लेखा सद" के सम"। BEFORE HON’BLE SHRI C.N. PRASAD, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ (िनधा"रण वष" / Assessment Year: 2015-16) Shreyas R. Mehta ACIT-10(3)(1) C/o. Rasiklal Hiralal & Co. Room No.212, 2nd Floor बनाम/ EC 4051-52, Bharat Diamond Bourse Aaykar Bhavan, M.K.Marg Vs. Bandra Kurla Complex Mumbai-400 020. Mumbai-400 051. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AACPM-8602-L (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Ajay C. Gosalia-Ld. AR Revenue by : Chaudhary Arun Kumar Singh - Ld.Sr.DR सुनवाई की तारीख/ : 20/08/2019 Date of Hearing घोषणा की तारीख / : 20/08/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2015-16 contest the order of Ld. Commissioner of Income-Tax (Appeals)-17, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-17/IT-330/10306/17-18 dated 27/03/2018 qua confirmation of certain disallowance u/s 14A. The Ld. Authorized 2 Shreyas R. Mehta. Assessment Year :2015-16 Representative for Assessee, at the outset, submitted that the issue stood covered in assessee’s own case by the order of this Tribunal for AY 2010-11 order dated 07/07/2016 and also for AY 2011-12, ITA No. 3308/Mum/2018 dated 21/05/2019. The copies of the orders have been placed on record. 2.1 Facts on record would reveal that the assessee being resident individual running a proprietorship concern in the name of Rasiklal Hiralal & Co., was assessed for impugned AY u/s 143(3) on 23/12/2017 wherein the assessee was saddled with disallowance u/s 14A read with Rule 8D for Rs.9.06 Lacs, being expense disallowance @0.5% u/r 8D(2)(iii) in view of the fact that the assessee had made investments in shares. The Ld. AO proceeded to make the said disallowance since the assessee had claimed certain expenditure such as salary, bank charges, clearing charges, rent, telephone expenses etc. The assessee had earned exempt dividend income of Rs.33.94 Lacs. 2.2 Before Ld. first appellate authority, the assessee, inter-alia, pleaded that demat charges, STT charges and other expenses were debited to the capital account and not charged to Profit & Loss account and no expenses were claimed towards earning of dividend income. However, the submissions could not find favor with learned first appellate authority, who confirmed the disallowance. Aggrieved, the assessee is in further appeal before us.
Upon careful consideration of cited decisions of Tribunal in assessee’s own case for earlier years as well as upon perusal of assessee’s financial statements as placed on record, it is found that the assessee’s is maintaining separate accounts for business activities and 3 Shreyas R. Mehta. Assessment Year :2015-16 share trading activities. The accounts have been duly audited u/s 44AB of the Income Tax Act, 1961. It is observed that no significant expenses have been debited by the assessee against share trading activities. The demat charges, STT & other charges have directly been debited to the Capital Account of the assessee. This being so, disallowance u/s 14A would not be justified since the assessee, in the first place, should have claimed the expenditure while computing the Profit / Loss for the year under consideration. Under similar circumstances, the additions in earlier years have been deleted by the co-ordinate bench of this Tribunal. Keeping in view the same, we delete the impugned disallowance and allow the appeal 4. The appeal stands allowed. Order pronounced in the open court on 20th August, 2019. (C.N. Prasad) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांक Dated : 20/08/2019 Sr.PS, Jaisy Varghese आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : अपीलाथ"/ The Appellant 1. ""थ"/ The Respondent 2. आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड"फाईल / Guard File 6. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.
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