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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 05.06.2014 passed by the Commissioner of Income Tax (Appeals) 25, A.Y. 2010-11 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2011-12. 3. The assessee has raised the following grounds:-
A. Disallowance of Rs.26,26,247/- u/s.14A r.w.Rule 8D
1. The Ld. CIT(A) erred in confirming the disallowance of Rs.26,26,247/- u/s. 14A r.w. Rule 8D without appreciating that no expenditure was incurred for the purpose of earning exempt dividend income and that all expenditure debited to P&L account including interest pertained to Appellant’s taxable business of trading in paper and even if some expenses are notionally held to be incurred for earning dividend income, the same should first be adjusted from expenses debited to capital account and not claimed as deduction in P&L account.
2. Without prejudice, the Ld. CIT(A) failed to appreciate that the AO had not recorded satisfaction and mechanically invoked the provisions of sec. 14A r.w. Rule 8D and that the Appellant had sufficient interest- free funds which were used for the purpose of making investments. Hence, disallowance of interest u/s.14A r.w. Rule 8D(2)(ii) is not justified.
3. Without prejudice, the Ld. CIT(A) failed to appreciate that the Appellant had earned dividend of only Rs.93,968/- and disallowing Rs.26,26,247/- as incurred for earning such dividend is unreasonable and unjustified especially when dividend is received through ECS. B. Disallowance of commission of Rs.74,800/- A.Y. 2010-11
4. The Ld. CIT(A) erred in confirming the disallowance of Rs.74,800/- paid as commission for the purpose of earning rental income.
5. Without prejudice to the above, the Ld. CIT(A) failed to appreciate that the commission of Rs.74,800/- is a charge against the rental income of Rs.5,83,163/- earned by the Appellant. Hence, only the net figure of Rs.5,08,363/- (i.e. 5,83,163 – 74,800) should be considered as Income from House Property before allowing deduction u/s.24 of the Act.
2. The brief facts of the case are that the assessee filed his return of income for the A.Y.2011-12 on 30.09.2011, declaring total income to the tune of Rs.8,47,00,540/-. The return was processed u/s.143(1) of the Income Tax Act, 1961( in short “the Act”). The case was selected for scrutiny and notice u/s.143(2) of the Act dated 12.09.2012 was issued and served upon. Thereafter, the notice u/s.142(1) of the Act was issued and served upon the assessee. Detailed questionnaire was also issued on 04.12.2013. The assessee was an individual and the proprietor of M/s. Saraf Sales Corporation, which was engaged in the business of trading in paper. Thereafter, the income of the assessee was assessed to the tune of Rs.8,74,95,410/-. The assessee was not satisfied, therefore filed an appeal before the CIT(A) and the CIT(A) confirmed the order of Assessing officer, hence the assessee has filed the present appeal before us. ISSUE NO.1 TO 3:-
ITA No.5248/M/14 A.Y. 2010-11 3. We have heard the arguments advanced by the learned representative of the parties and perused the record. The learned representative of the assessee has argued that no expenditure was incurred to earn the exempt income and the assessee was having the sufficient amount with him i.e. Rs.100,229,715/- and the assessee purchased the shares to the tune of Rs.57,481,741/- and in this regard the details has been mentioned at page 15 and 16 of the paper book, therefore in the said circumstances, the assessee was having sufficient own funds to purchase the shares and no expenditure of any kind was claimed to earn the exempt income, therefore, section 14A r.w.Rule 8D of the Act is not applicable to the case of the assessee and in this regard the assessee has also placed reliance upon his own case for the A.Y.2010-11, in decided on 29.05.2015 by the ITAT Mumbai hence disallowance u/s 14A to the tune of Rs 26,26,247 is ordered to be set aside. The assessee has also placed reliance upon the law settled in the judgment of Hon’ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Limited, 313 ITR 340 (Bom) and on the other hand the learned representative of the department has refuted the said contentions.
In view of the argument advanced by the learned representative of the parties and perusing the record, it came into the notice that the assessee was having his own funds to the tune of Rs.100,229,715/- whereas he purchased the shares to the tune of Rs.57,481,741/-. In ITA No.5248/M/14 A.Y. 2010-11 this regard the details have been mentioned at page 15 and 16 of the paper book. The facts and circumstances of the present case is quite similar to the assessee own case in ITA No.4891/Mum/2013 for the A.Y.2010-11 decided on 29.05.2015 by the ITAT ‘E’ Bench, Mumbai. In view of the said facts and circumstances of the case and in view of the order passed by the ITAT in the assessee’s own case (Supra), it is quite clear that the provision u/s.14A r.w. Rule 8D is not applicable to the case of the assessee in the present year also. Moreover, the revenue has also accepted this contention while finalizing the assessment for the year of 2012-13, in view of the order passed by the CIT(A)-29 lies at page 4 to 7 of the paper book and this order has also given effect at by the Assessing Officer at page 8 to 14 of the paper book. The ratio has properly been applied as held in judgment of Hon’ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Limited, 313 ITR 340 (Bom). In view of the above said facts and circumstances, we delete the addition to the tune of Rs.26,26,247/-. ISSUE NO.4:- 5. Under this issue, the assessee has challenged the disallowance of Rs.74,800/- paid as commission for the purpose of earned rental income. Before Assessing Officer, the assessee did not produce any evidence to justified this claim, therefore, the Assessing Officer ITA No.5248/M/14 A.Y. 2010-11 declined the said claim. However, in appeal the CIT(A) has also rejected the claim of the assessee. By giving the following finding:- “4.3 I have perused the facts of the case carefully. Admittedly the commission income is claimed against rental income assessable under Income from House Property. I find the case of the appellant to be squarely covered by the decision of Hon’ble Pubjab – Haryana High Court in the case of M/s.Piccadily Hotels Private Limited Vs. CIT (ITA No.348 of 2005). In the said case also, the assessee had rented out a commercial site and showed the income under Income from House Property, and claimed commission / brokerage expenses which according to the assessee were instrumental in letting the commercial building on rent. The assessee therein claimed that only because of intervention of those property agents, it got the best rent of its property and the commission paid to said agents was normal expenditure in the nature of this trade. The Hon’ble High Court, however, did not accept the submissions of assessee and held that Rent admittedly was payable to the assessee and brokerage was an independent transaction envisaging payment to the broker. Where ever deductions out of income from property are permissible, the same have been specified in A.Y. 2010-11 Section 24. De-hors the said provision, deduction from income is not permissible. This view has also been taken by Delhi High Court in Commissioner of Income-Tax, Delhi-I Vs. H.G.Gupta & Sons [1984] CTR (Del.) 178: (1984) 149 ITR 253 (Del). I have also perused the case of H.G.Gupta & Sons (supra) referred by Hon’ble Punjab-Haryana High Court, and find that in similar case, the expenditure incurred towards stamp duty and registration charges were not allowed as a deduction in assessing annual value of property. Relying upon the aforesaid case laws, I confirm the disallowance made of Rs.74,800/-. Therefore, the ground no.1 of appeal is dismissed.”
Before us nothing was produced to which it can be assumed the claim of the assessee is reasonable and justifiable. No distinguishable material has been produced before us which leads to the circumstances in connection with allowance of the claim raised by the assessee. No evidence of any kind has been produced before us to raise the justifiable claim if any. The law mentioned above has adjudicated by matter of controversy. In view of the said circumstances, we are of the view that the CIT(A) has passed the order on this ground judiciously and correctly which does not require