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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-16, Chennai in dated 21.03.2017.
:-2-: I.T.A. N0. 1179/Mds/2017
Ms. Visalakshi Kannan, the assessee, a non-resident settled in USA, earned income from interest receipts from loans and advances, banks and investment dividend income, share of profit, profit on sale of investments etc. In the assessment made for assessment year 2013-14, the Assessing Officer held that the assessee earned a total income of Rs. 1,16,81,976/- out of which, Rs. 69,79,139/- is related to dividend income earned from shares and units of mutual funds which the assessee claimed as an exempt income.
Applying section 14A, r.w.r. 8D2(iii), the AO held that Rs. 5,21,480/- should be the expenditure incurred in relation to income not includible in total income and hence added to the income of the assessee. Aggrieved, the assessee filed an appeal before the CIT(A) and CIT(A) dismissed the appeal.
Against that order, the assessee filed this appeal, inter alia, with the following grounds:
“2. The Commissioner of Income Tax (Appeals) erred in dismissing the Appeal without there being any material to sustain the addition made by the Assessing Officer.
3. The Commissioner of Income Tax (Appeals) failed to note that the Assessing Officer has not recorded any satisfaction as to how the claim of the Appellant that no expenditure has been incurred against dividend income is not acceptable and consequently the addition is not sustainable.
4. The Commissioner of Income Tax (Appeals) failed to note that it is obviously clear from the accounts that no expenditure has been incurred or claimed even against the :-3-: I.T.A. N0. 1179/Mds/2017
taxation Income admitted and the gross income has been offered for taxation and so question of any disallowance or application of section 14A is not attracted in this case. 5. The Commissioner of Income Tax (Appeals) erred in relying on the cases mentioned in page 3 of his order as the facts and issues in those cases are totally different from the facts and issue in this case.”
The AR submitted the assessee’s receipts and the head in which the income was admitted as under:
Sl.No Nature of Income Amount Rs Head of Income 1. Interest Receipts from Loans and 7,53,721 Business Income advances 2. Interest receipts from banks and 1,56,411 Other sources investments 3. Dividend Income 69,79,139 Exempted u/s. 10 4. Profit on sale of Investments 53,82,309 Considered under capital gain 5. Share of profit from partnership 28,10,395 Exempted u/s. 10 firm
4.1 Against these receipts, the expenditure incurred and claimed by the assessee in the P&L account are as under:
Bank Charges 1,224 Service Tax on Sale of investment 2,814 STT on shares 6,861 General expenses 200
:-4-: I.T.A. N0. 1179/Mds/2017
However, the above expenditures were added by the assessee in the computation of business income and arrived the assessable business income.
Thus, the assessee has not claimed any expenditure at all.
4.2 From the above, the AR submitted that it is clear that the assessee has not claimed any expenditure, whether taxable or exempted.
Further, the assessee had huge reserves and surplus of Rs. 1145.40 lakhs at the beginning of the year and Rs. 1275.39 lakhs at the end of the year, she has not borrowed any money for any investment and all the investments have been made out of own resources only. Facts being so, the Assessing Officer has notionally added Rs. 5,21,480/- to the income, invoking section 14A r.w.r.
8D. Relying on the jurisdictional High Court decision in the case of Patco 272 ITR 195 (Mad), the AR submitted that the assessee received dividend of mutual fund units and claimed that said dividend is exempt u/s. 10(33), in absence of a proximate cause between expenditure incurred by assessee and tax exempt income, section 14A could not be invoked. Per contra, the DR supported the order of the AO & the order of the CIT(A).
We heard the rival submissions and gone through the relevant orders. It is clear from the above that the assessee has not claimed any expenditure or deduction at all. When no expenditure or deduction is incurred by the assessee in relation to any income which includes the income which :-5-: I.T.A. N0. 1179/Mds/2017 does not form part of the total income, the addition made by the Assessing Officer u/s. 14A r.w.s. 8D and sustained by the CIT(A) is held as unwarranted and accordingly deleted.
In the result, the assessee’s appeal is allowed.
Order pronounced on Monday, the 14th day of August, 2017 at Chennai.