Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI RAJENDRA & SHRI AMIT SHUKLA
ITA No. : 1426/Mum/2014 (Assessment year: 2010-11) �ाआइम वोवेएंस �ल�मटेड Vs DCIT- 3(2), Aayakar Bhavan, M/s Prime Wovens Limited, M K Road, 11-B, Mittal Tower, Mumbai -400 020 Nariman Point, Mumbai -400 021 �थयी लेखा सं.:PAN: AACCP 9493 M अपीलाथ� (Appellant) ��यथ� (Respondent) Appellant by �ी अनुज �कसनादवाला : Shri Anuj Kisandwala Respondent by : �ी संद�प गोयल Shri Sandeep Goel सुनवाई क� तार�ख /Date of Hearing : 10-03-2016 घोषणा क� तार�ख /Date of Pronouncement : 21-03-2016 . आदेश ORDER अिमत शु�ला : �या. स.: PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the assessee against impugned order dated 18.12.2013, passed by Commissioner of Income Tax (Appeals)-4 [CIT(A)] Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2010-11.
The only issue raised in the grounds of appeal is disallowance of Rs.1,69,744/- made by the AO under section 14A r.w. Rule 8D.
Brief facts are that, the assessee has received dividend income of Rs.14,50,836/- on total investment of Rs. 3,21,36,613/-.
�ाआइम वोवेएंस �ल�मटेड 2 M/s Prime Wovens Limited ITA 1426/M/2014 In the computation of income, the assessee has disallowed Rs.25,000/- on account indirect expenses and Rs.5,355/- on account of Securities Transaction Tax charges (STT). In response to the show cause notice, as to why such a disallowance should not be worked out in accordance with Rule 8D(2), the assessee submitted that, the expenditure incurred under head ‘administration charges’ was in the course of carrying out the business and nothing has been incurred or can be said to be attributable for the earning of the exempt income. However, the Ld. AO rejected the assessee’s contentions and worked out the disallowance of indirect expenses as per Rule 8D, that is, by taking 0.5% of the average value of investment and accordingly, disallowance was worked out at Rs.1,69,744/-.
The Ld. CIT(A) too has confirmed the said disallowance.
Before us, the Ld. Counsel for the assessee submitted that, the assessee had shown income from F&O at more than Rs. 2 crores, whereas, administrative expenditure debited is only at Rs.34,27,247/-. The administrative expenses mostly pertained to this business only and cannot be held to be attributable for earning of exempt income. He further submitted that, in the group case of the assessee, the Tribunal has considered this aspect, wherein, it is held that amount which is directly attributable to business cannot be disallowed. In support, he filed the order of the ITAT in the case of DCIT vs Jubliant Enterprises Pvt Ltd, in order dated 12.03.2014. He also gave the working of disallowance on the basis of proportionate of exempt income to the total income as per the direction of the Tribunal in the said case, which works out to Rs.16,640/- whereas, the assessee itself has disallowed Rs.25,000/-.
On the other hand, Ld. DR strongly relied upon the order of the CIT(A).
�ाआइम वोवेएंस �ल�मटेड 3 M/s Prime Wovens Limited ITA 1426/M/2014 7. After considering the relevant finding given in the impugned order and submissions made by the parties, we find that, the total expenditure debited to the profit and loss account is Rs.34,24,237/- out of which security transaction tax on F&O transaction which is not related to the exempt income was shown at Rs.7,86,716/- and STT charges relating to earning of exempt income was Rs.5,355/- which has been disallowed by the assessee itself. The balance expenditure, which can be said to be incurred for earning of both the exempt and taxable income works out to Rs.26,31,266/-. If proportionate expenditure incurred vis-à-vis the earning of total income and the exempt income, then following proportion will be worked out:- Particulars Amount Total income earned during the year 22,94,22,128 Expenditure incurred for earning both exempt and taxable income 26,31,266 Exempt income earned during the year 14,50,836 Disallowance u/s 14A 16,640 Whereas, the assessee itself has disallowed Rs.25,000/-. Section 14A(2) contemplates that AO has to determine the amount of expenditure incurred in relation to the earning of the exempt income only when having regard to the accounts of the assessee, the AO is satisfied with the correctness of the claim of the assessee in respect of such an expenditure. Having regard to the accounts of the assessee assumes a great significance, because the AO has to examine all the streams and nature of income and the corresponding expenditure debited. If the assessee’s major income was from other activities, which are taxable, then most likely the proportionate expenditure would also relate to the earning of such income unless it is found from the accounts or the records that, assessee has incurred more expenditure on which can be said to be attributable to the earning of the exempt income. The AO can resort to Rule 8D(2) to work out the disallowance only when from the examination of accounts of the assessee he founds that it is difficult to work out the expenditure which can be said to be