YARDLEY INVESTMENT & TRADING CO. LTD,MUMBAI vs. CIT(A) -3, MUMBAI

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ITA 5419/MUM/2015Status: DisposedITAT Mumbai29 February 2016AY 2012-136 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee had sufficient own funds for investment, and the Assessing Officer failed to establish a nexus between expenditure and investment. Therefore, the disallowance under Section 14A was to be reconsidered.

What were the facts?

The assessee, a company dealing in shares, earned dividend income and claimed it as exempt. The Assessing Officer disallowed Rs. 1,79,263/- under Section 14A read with Rule 8D, which was upheld by the CIT(A).

What were the issues?

Whether disallowance under Section 14A read with Rule 8D is justified when the assessee has sufficient own funds for investments and no expenditure is claimed.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM

Hearing: 03.02.2016Pronounced: 29.02.2016

PER AMARJIT SINGH, JM:

This is an appeal against the order dated 30.09.2015 passed by the learned Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as the learned “CIT(A)”] relevant to the assessment year 2012-13. ITA No.5419/Mum/15 A.Y. 2012-13

2.

The appellant has taken following grounds of appeal:-

“1. The learned CIT(A) has erred in confirming the disallowance of an amount of Rs.1,79,263/- u/s. 14A of the Income Tax act 1961 and has further erred in applying Rule 8D of Income Tax Rules, 1961 without appreciating the facts of the case in the right perspective.”

3.

The brief facts the case are that the main business of the assessee is of dealing in shares and securities. The assessee earned the dividend income to the tune of Rs.2,97,393/- however, no expenditure to earn the exempt income was mentioned. At the time of assessment the Assessing Officer applied the section 14 A read with rule 8D of the Income Tax Act, 1961 ( in short “the Act”) and disallowed the expenditure to the tune of Rs.1,79,263/-. Assessee was not satisfied therefore, the appeal was filed before the learned CIT(A) who also dismissed the appeal of the assessee therefore, the assessee is before us.

4.

We have heard the arguments advanced by the learned representative of department and perused the records carefully. The sole point which has been raised by the assessee is that the assessee received the dividend income to the tune of Rs.2,97,393/- which was being claimed as exempted from income tax. As the assessee invested the said investment from his own fund and the assessee never claimed any interest expenditure or any other expenditure therefore, in A.Y. 2012-13 4448/Del/2013)(order dated 19.01.2015), Delhi Income Tax Appellate ITD 267), CIT Vs. Hero Cycles (Panjab & Haryana High Court) (323 No. 47/Kol/2012. 4.1 On the other hand learned representative of the Department has refuted the said contention. A.Y. 2012-13

4.

2 Keeping in view of the arguments advanced by the representative of department and perusing the record, it is observed that it is necessary to mentioned the details of Share Capital, Reserve & Surplus, Investments, Dividends and Interest for last three years of the assessee on record:-

A.Y. 2010-11 2011-12 2012-13 Share Capital 70,30,200 70,30,200 70,30,200 Reserve & Surplus 2,41,83,371 2,47,26,720 2,52,05,047 Quasi Equity 3,51,00,000 3,51,00,000 3,51,00,000 TOTAL 6,63,13,571 6,68,56,920 6,73,35,247 Investments 3,62,41,475 3,62,66,475 3,62,66,475 Dividend Income 4,585 3,51,455 2,97,393 Interest Expense Nil Nil Nil

The above said chart speaks that the investments are less than the available total funds in the nature of Capital, Reserves and Surplus and Quasi Equity. In the year under consideration, the total share capital available to the appellant was to the tune of Rs.6.73 crores whereas the assessee made investments in shares only to the tune of Rs.3.63 crores. In view of the law settled in Reliance Utilities and Power Ltd. (313 ITR 340), Bombay High Court, it is required to be presumed that the assessee has invested into the shares and derived dividend from its own fund. Moreover nothing came into the notice A.Y. 2012-13

that the Assessing Officer prove the nexus between the expenditure claimed and invested amount in the shares. In view of the said circumstances we are of the view that the matter is liable to be considered again by the Assessing Officer in the light of observations made above and to reassess the disallowance u/s. 14A in view of the law settled in Reliance Utilities and Power Ltd. (313 ITR 340), Bombay High Court.

6.

Accordingly the appeal filed by the assessee is hereby allowed for statistical purpose.

Order pronounced in the open court on 29th February, 2016. (R.C.SHARMA) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 29th February, 2016 MP MP MP MP A.Y. 2012-13

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

2.

""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT

5.

"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार /(Dy./Asstt.

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