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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Nitin R Shah Income Tax Officer, 404-B, Shirin Sohrab Palace, Aayakar Bhavan, Churchgate Vs. Nariman RD, Ville Parle (E) Mumbai-20 Mumbai-400057 .. Appellant Respondent PAN No. AAIPS2745J .. Shri Ajay R Singh, AR Assessee by Revenue by .. Dr. Suman Ratnam, DR .. Date of hearing 09-02-2017 Date of pronouncement .. 26-04-2017 O R D E R PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the common order of CIT(A)-9, Mumbai, in appeal No. CIT(A)-9/ITO 5(2)(3)/282/2012-13 dated 12-08-2013. The Assessments were framed by ITO ward 5(2)(3), Mumbai for the A.Ys. 2005-06 & 2006-07 vide order dated 31-12-2012 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first common issue in these two appeals of assessee is as regards to the orders of CIT(A) confirming the addition made by AO treating the repayment of car loan re-installments paid by Lynx Energy & Solutions Pvt. Ltd. as deemed income under section 2(24)(iv) of the Act. For this assessee has raised identical worded grounds and are arising out the same facts and circumstances, hence, we take up the issue from AY 2006-06 and will decide the matter. The grounds raised in AY 2005-06 reads as under: -
“1. Addition under section 2(24)(iv) of Rs. 1,62,164/-
The ld. CIT(A) erred in confirming the order of AO treating the repayment of car loan & 6587 /Mum/2013 Nitin R Shah; A.Y:05-06, 06-07
installments by the company Lynx Synergy & Solutions Pvt. Ltd. to M/s Ford Credit Mahindra Ltd. as deemed income under section 2(24)(iv) in the hands of assessee.
The ld. CIT(A) failed to appreciate that the car was purchased by the company for the business purposes and has been reflected in the fixed asset schedule in the balance sheet of the company, therefore the provision of section 2(24)(iv) is not applicable to the facts of the case.”
We have heard the rival contentions and gone through the facts and circumstances of the case. Briefly stated facts are that the assessee is an individual and director of Lynx Energy & Solutions Pvt. Ltd. The AO noticed during the course of assessment proceedings that the assessee has purchased a car in April 2003 and register the same in his own name at the residential address Flat No. 315 3rd Floor, Shakti Varsha, Evershine City Complex Vasai E, Thane. The AO further noted that this car was booked in the books of account of Lynx Energy & Solutions Pvt. Ltd., the company where assessee is director and as its asset and company claimed depreciation and interest on installments of the same. According to AO, the amount of repayment of loan to acquire the car in the name of director of the company of Rs. 1,62,164/- was treated as income in the hands of the assessee under section 2(24)(iv) of the Act because the car is standing in the name of the assessee in his individual capacity. Aggrieved assessee preferred the appeal before CIT(A), who also confirmed the action of the AO.
Now, we find that the car is in the name of the assessee but this car was purchased as director of the Company Lynx Energy & Solutions Pvt. Ltd. There was a board resolution dated 05-04-2003 which implied that the car was on companies account and board resolution is valid evidence of the intention of the company. It is a fact that the funds have flown from the company Lynx Energy & Solutions Pvt. Ltd. and it has repaid the installation out of the company fund and claimed interest and depreciation which was consequently allowed by the Page 2 of 4 & 6587 /Mum/2013 Nitin R Shah; A.Y:05-06, 06-07 AO. We find that in no way this repayment of installment can be treated as deemed income in the hands of the assessee under section 2(24)(iv) in the given facts and circumstances of the case. Similar, are the facts in the AY 2006-07and hence, this issue of both the appeals of assessee is allowed.
The next issue in CIT(A) confirming the disallowance of expense relatable to exempted income at Rs. 5,542/-. For this assessee has raised following ground No.2: - “II. Disallowance of Rs. 5542/- u/s 14(A)
3. The ld. CIT(A) erred in holding the disallowance u/s 14A of the Act of Rs. 5,542/-, without appreciating that no expenses were incurred to earn exempt income during the year therefore disallowance u/s 14A not justified..”
6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the AO as well as CIT(A) both are of the view that only demat charges and bank charges which are primarily related to exempted income of dividend are disallowed. Admittedly, the assessee has exempted income of dividend of Rs. 37,957/- RBI Bond accrued interest of Rs. 41,286/- and PPF accrued interest of Rs. 35,842/-. We find that the AO has disallowed and CIT(A) has confirmed the expenses relatable to exempted income which are directly relatable to exempted income i.e. demat charges and bank charges amounting to Rs. 5,542/-. We find no infirmity in the order of the CIT(A) and hence the same is confirmed.
In the result, the appeal in is allowed. Order pronounced in the open court on 26-04-2017.