HINDUSTAN DIAMOND CO. P.LTD,MUMBAI vs. ASST CIT 14(2)(1), MUMBAI

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ITA 3844/MUM/2016Status: DisposedITAT Mumbai29 March 2017AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the employee's salary was for various company works, not solely for earning exempt income. Therefore, disallowing the entire salary was not justified.

What were the facts?

The assessee claimed disallowance of Rs. 5,29,605/- under Rule 8D(2)(ii) r.w.s. 14A of the IT Act. The AO disallowed 100% of the salary of an employee, attributing it to earning exempt income, which was confirmed by the CIT(A).

What were the issues?

Whether the entire salary of an employee can be disallowed as expenditure attributable to earning exempt income when the employee performs multiple duties.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM

For Appellant: Shri Mitesh N Shah
For Respondent: Shri Saurabh Deshpande
Hearing: 29/03/2017Pronounced: 29/03/2017

आदेश / O R D E R PER R.C.SHARMA (A.M): This appeal is filed by the assessee against the order of CIT(A)-22, Mumbai dated 23/03/2016 for the Assessment Year 2012-13 in the matter of order passed u/s.143(3) of the IT Act. 2. In this appeal, assessee is aggrieved for disallowance of Rs.5,29,605/- under Rule 8D(2)(ii) r.w.s.14A of the Act. 3. Rival contentions have been heard and record perused. From the record we found that assessee has made investment in Mutual Fund for which it has offered disallowance of 25% of salary of Shri Rajesh Vohra whose salary was to the tune of Rs.7,06,140/- being incurred for earning exempt income. By observing that in the preceding year assessee has M/s. Hindustan Diamond Co. Pvt. Ltd., incurred expenditure on PMS for maintaining those of investment portfolio and now all this work is done by the Accountant, the AO disallowed 100% of the salary of Shri Rajesh Vohra. By the impugned order, the CIT(A) confirmed the action of the AO.

4.

It was contended by learned AR that from the details of the expenditure, it was clear that the expenditure incurred and claimed by the assessee had direct nexus with the business income of the assessee. That it was not the case of the AO that the assessee has used its official machinery and Establishment for earning the exempt income. That the AO has not given any finding that any of the expenditure incurred and claimed by the assessee was attributable for earning the exempt income. In other words when the AO has not pointed out that certain expenditure was not incurred for earning the business income; but were incurred in relation to dividend income or such expenditure was incurred for inseparable and indivisible activities comprising professional as well as the activities on which exempt income has been earned by the assessee, then in the absence of any such instance of expenditure, finding of AO or any material to show that the expenditure incurred and claimed by the assessee against the taxable income had any relation for earning the exempt income, the provisions of Section 14A could not be applied.

5.

On the other hand, learned DR relied on the order of the lower authorities.

6.

We have considered rival contentions and gone through the orders of authorities below. From the record we found that the Accountant of the

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