NINCRO ETERNAL RESOURCES P., LTD,MUMBAI vs. ITO WD 5(2)1, MUMBAI

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ITA 5887/MUM/2013Status: DisposedITAT Mumbai25 January 2017AY 2010-116 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that only Demat charges and STT charges could be considered as expenditure to earn exempt income, limiting the disallowance to Rs. 12,535/- and Rs. 1,20,910/- respectively. Other expenses were deleted.

What were the facts?

The assessee earned dividend income and claimed it as exempt. The Assessing Officer disallowed expenses under Section 14A read with Rule 8D, which was confirmed by the CIT(A). The assessee argued that minimal expenses were incurred to earn this income.

What were the issues?

Whether expenses incurred to earn exempt income were correctly disallowed under Section 14A read with Rule 8D, and what constitutes a justifiable nexus for such disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM

Hearing: 20.10.2016Pronounced: 25.01.2017

Assessee by: Mrs. Mamta Parmar Department by: Shri Pradeep Kumar Singh सुनवाईकीतारीख / Date of Hearing:20.10.2016 घोषणाकीतारीख /Date of Pronouncement: 25.01.2017 आदेश / O R D E R

PER AMARJIT SINGH, JM:

1.

The assessee has filed the present appeal against the order dated 23.08.2013 passed by the Commissioner of Income Tax A.Y. 2010-11 (Appeals)-9, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2010-11.

2.

The assessee has raised the following grounds:-

“1. The learned CIT(A) erred in law and on facts in confirming the addition made by the assessing officer amounting to Rs.7,49,869/- u/s. 14A.

2. The learned CIT(A) erred in law and on facts in not giving due credit to the ratios laid down by the several High Court and Apex Court decisions for method of calculation of reasonable disallowance u/s.14A.

3.

The learned CIT(A) erred in not accepting the assessee’s plea that there are hardly any expenses incurred to dividend income as the shares are held for more than several years and only demat charges are incurred on the same.

4.

The learned CIT(A) erred in confirming the addition made by the assessing officer amounting to Rs.2,25,000/-, which was reduced less out of the booking amount advance to a builder some ten years ago. The said amount has been written off as Bad debts.

5.

The appellant craves to insert new grounds, to add, amend, alter, insert, delete, edit any of the above grounds of appeal

either in full or in part on or before the final hearing of the appeal.

2. The brief facts of the case are that the assessee filed its return of income on 25.09.2010 declaring a loss to the tune of Rs.41,53,441/-. The return was processed u/s.143(1) of the Income Tax Act, 1961( in short “the Act”) dated 29.08.2011. Thereafter, the case was selected for scrutiny and notice u/s.143(2) and 142(1) of the Act were issued A.Y. 2010-11 and served upon the assessee. During the year under consideration, the assessee carried out the business of investment and share trading. The assessee also carried out trading activity in shares in which it suffered a loss to the tune of Rs.38,51,075/- in addition to earning long term and short term gains on sale of shares, interest and dividend. The assessee earned the dividend income to the tune of Rs.20,74,535/- and Long Term Capital Gain to the tune of Rs.42,39,908/- which were claimed as exempt u/s.10(34) of the Act in the computation of income. The assessee did not disallow any expenditure to earn the exempt income, therefore the Assessing Officer applied the provision of section 14A read with Rule 8D of the Act and worked out expenditure to incurred the exempt income to the tune of Rs.7,47,869/-. Feeling aggrieved the assessee filed an appeal before the CIT(A) who confirmed the order, therefore the assessee has filed the present appeal before us. ISSUE NO.1 TO 3:-

3. Issue no.1 to 3 are interconnected therefore are being taken up together for adjudication. Infact all the issues leads only one controversy in which the assessee has raised the contention that section 14A read with Rule 8D is not applicable to the case of the assessee being the assessee did not claim any expenditure to earn the exempt income. However, the learned representative of the assessee has argued that nexus of expenditure to earn the exempt income is A.Y. 2010-11

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