WELSPUN FINTRADE LTD. (WELSPUN FINTRADE PVT. LTD.),MUMBAI vs. DCIT - 8(3)(2), MUMBAI

आयकर अपीलीय अपीलीय अिधकरण अिधकरण मुंबई मुंबई “आई आई” खंडपीठ खंडपीठ आयकर आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण मुंबई मुंबई आई आई खंडपीठ खंडपीठ IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI सव�ी राजे�� राजे��, लेखा लेखा सद�य सद�य एवं एवं रिवश सूद रिवश सूद, �याियक �याियक सद�य सद�य सव�ी सव�ी सव�ी राजे�� राजे�� लेखा लेखा सद�य सद�य एवं एवं रिवश सूद रिवश सूद �याियक �याियक सद�य सद�य Before S/Sh. Rajendra,Accountant Member & Ravish Sood, Judicial Member आयकर अपील अपील संसंसंसं/. Assessment Year: 2012-13 आयकर आयकर आयकर अपील अपील िनधा�रण िनधा�रण वष� वष� M/s.Welspun Fintrade Limited, Dy. Commissioner of Income Tax, (Now Welspun Fintrade Pvt. Ltd), 8(3)(2), Room No.615, Trade World, B-Wing, 9th Floor, Aaykar Bhavan, M.K.Road, Vs. Kamala Mill Compound, Senapati Bapat Mumbai – 400 020. Marg, Lower Parel,Mumbai-400 013. PAN: AAACW2877J (अपीलाथ� /Appellant) (��यथ� / Respondent) Revenue by : Shri Saurabh Deshpande-DR Assessee by : Shri Mitesh N. Shah सुनवाई क� तारीख / Date of Hearing: 08/11/2017 घोषणा क� तारीख / Date of Pronouncement: 03/01/2018 आयकर अिधिनयम अिधिनयम, 1961 क� धारा ( 1 ) 254 केकेकेके अ�तग�त अ�तग�त आदेश आदेश आयकर क� धारा आयकर आयकर अिधिनयम अिधिनयम क� क� धारा धारा अ�तग�त अ�तग�त आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य,राजे�� राजे�� केकेकेके अनुसार अनुसार -Per Rajendra,AM: लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dtd. 19/08/2016 of the CIT(A)-14A,Mumbai the Assessee has filed the present appeal.Assessee-company,engaged in the business of trading and investment filed its return of income on,13/09/2012,declaring Loss of Rs.5.72 crores.The Assessing Officer(AO) completed the assessment on,13/03/2015,u/s.143(3)of the Act,determining its income at Rs.(-) 5, 40,77,445/- 2.Effective ground of appeal First ground of appeal is about confirming the addition of Rs.31.57 lakhs made by the AO u/s. 14A r.w.r. 8D of the Income Tax Rules,1962 (Rules).During the assessment proceedings the AO found that the assessee had earned dividend income of Rs. 3.23 crores,that same had been claimed exempt u/s.10(34) of the Act.He directed the assessee to show cause as to why the disallowance u/s. 14A r.w.r.8D of the Rules should not be made.After considering the submission of the assessee, the AO refer to the case of Citicorp Finance India Ltd.(12 SOT 248) and held that all the expenses connected exempt income had to be disallowed u/s.14A regardless of whether they were direct or indirect, fixed or variable,managerial or financial.Invoking the provisions of Rule 8D(2)(iii) of the rules,he made a disallowance of Rs. 31.58 lakhs (Rs.1,132-direct expenses (STT)+ Rs.31.57 lakhs-0.5% of average investments).As the assessee had already disallowed Rs.1,132 in the competition of income,so,he restricted the disallowance to Rs.31.57 lakhs u/s. 14A r.w.r. 8D. of 2016 for M/sWelspun Fintrade Pvt. Ltd.

3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA) and made detailed submissions.After considering the available material,he held that the AO had duly discuss the reasons for disallowance,that he had applied his mind before invoking the provisions of section 14A,that in the earlier years the then FAA.s had dealt with the issue of making investment in that subsidiary companies,that it had claimed expenditure of Rs. 56.10 lakhs in the P&L account,that the AO had made disallowance of Rs. 31.58 lakhs only, that the assessee had included only the remuneration of the auditors, printing and stationary charges and miscellaneous expenses (Rs.41,559/-)under the head administrative expenses,that it could not be substantiated that all expenses under the head other expenses were not wholly or partly related to earning of exempt income,that there was no evidence that expenditure incurred under the heads legal and professional fees were not linked to earning of exempt income,that the disallowance made by the AO was less than the expenses claimed under the head. Finally,the FAA upheld the order of the AO.

4.During the course of hearing before us the Authorised Representative (AR) stated that as per Schedule 19 the assessee had incurred total expenses of Rs.56.10 lakhs,that expenses incurred under the heads rates,taxes,legal and professional charges amounted to Rs.more than 55 lakhs, that the balance expenses were about 41,000/-(approximately).The Departmental Representative (DR)supported the order of the FAA.

5.We have heard the rival submissions and perused the material before us.We find that while invoking the provisions of Rule 8D(2)(iii)the AO had not considered the details of the expenses, that he had not established nexus between the exempt income and the expenditure incurred for earning the said income.After considering the details of Schedule 19,we are of the opinion that the expenditure incurred by the assessee during the year was not related to earning of tax free income.Provisions of section 14A can be invoked only when some expenditure is claimed against the exempt income.As in the case under consideration the AO /FAA had not specified the items of expensed incurred for earning exempt income,so,we are able to persuade ourselves to endorse the views of the FAA.Reversing his order,we decide the effective ground of appeal in favour of the assessee. of 2016 for M/sWelspun Fintrade Pvt. Ltd.