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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI A.K. GARODIA ,AM
आदेश / O R D E R PER AK GARODIA, A. M: This appeal by the assessee is directed against the order dated 30/07/2014 of Commissioner of Income Tax (Appeals)-2, Mumbai (Hereinafter called as the CIT(A) for assessment year 2003-04.The assessee has raised following grounds of appeal:
1. Against partial disallowance amounting to Rs.601456/- against claim u/s 80M : a) For that on the facts and in the circumstances of the case and in law, the ld. Commissioner of Income tax (Appeals) erred in confirming ld. Assessing Officer's action of restricting the deduction u/s 80M of the Income tax Act,
(A.Y: 2003-04) Satyanarayan Investments Co. Vs Deputy Commissioner of Income Tax, 1961 to a sum of Rs. 9515057/- only as against the assessee's claim of said deduction in the sum of Rs.10116513/-. b) For that on the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in confirming ld. A/O’s action of taking Rs.l6628501- as the expenditure allegedly incurred for earning dividend income. c) For that on the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) and ld. A/O both erred in ignoring the clear directions of the Hon'ble Income tax Appellate Tribunal in this regard. d) ,For that on the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in observing that appellant had carried on the investment activities as the predominant business activities.
2. Against charging of interest of Rs.34269/- u/s 234D :
a) For that on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the ld. A/O’s wrong action of charging interest amounting to Rs.34269/- u/s 234D of the Income tax Act, 1961. b) For that on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in observing that there was no refund that had arisen on completion of regular assessment.
Against granting of lower interest u/s 244A :
a) For that on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the ld. A/O’s action of granting only Rs.l73286/- as interest u/s 244A of the Income tax Act, 1961 as against interest allowable in the sum of Rs.39450 1/- even without considering the reliefs expected at appellate stage. b) For that on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in observing that the appellant had no details and working in support of ground against grant of lower interest u/s 244A and also that the said ground was a frivolous ground .
(A.Y: 2003-04) Satyanarayan Investments Co. Vs Deputy Commissioner of Income Tax,
Regarding the ground number 1&2, it was submitted by the ld. AR assessee that as per the judgment of Hon’ble Bombay High Court referred in the case of CIT vs. Central Bank of India as 264 ITR 522, only actual expenses can be reduced from the income before allowing deduction under section 80M of the IT Act and in the present case, no actual expenditure has been reduced by the AO and he has reduced the proportionate expenditure. At this juncture, it was pointed out to him that this is the second round of appeal and as per earlier terminal order in his own case in ITA 3457/Mum/09 dated 18/03/2011; matter was restored to the file of the AO for fresh decision in the light of earlier tribunal order for AY 2001-02 dated 18.01.2007.
3. In reply it was submitted by ld. AR assessee that even while deciding the issue in the light of earlier tribunal order for AY 2001-02 which is available in the paper book on page number 22-26 in dated 18.01.2007, the binding judgment of Hon’ble High Court should be followed in preference to earlier tribunal order. He also placed reliance on judgments of Hon’ble Bombay High Court as reported in 254 ITR 204(Bom) and 284 ITR 586 (Bom). Regarding ground number 3&4 in respect of levy of interest u/s 234D and allowing of interest to the assesseee u/s 244A, it was submitted by the ld. A.R. of the assessee that these are consequential.
I have considered rival submissions regarding ground number 1&2 in respect of restricting the deduction under section 80 M of the Income-Tax Act,1961 to a sum of Rs.9515057/- only as against the assessee’s claim of Rs.10116513/-. In the earlier order for the same year, it was held by the tribunal that the AO should decide the issue afresh as per parameters laid down in AY 2001-02 and 2002-03. In the earlier order for the AY 2001-02 which is available on page number 22&26 of the paper book, it was held by the Tribunal that the AO is required to analyse the facts so as to arrive at the quantum of expenditure that can be apportioned amongst various receipts. It was (A.Y: 2003-04) Satyanarayan Investments Co. Vs Deputy Commissioner of Income Tax, held that expenditure incurred by the assessee for these two years is required to be allocated amongst different sources of income first. Even if an accurate calculation of actual expenditure cannot be made, an attempt should be made to make an estimate of expenditure attributable to various sources of income as near actual basis as possible on the basis of facts that may be brought on record by the assessee. As per the submission made before CIT (A) available on page number 30-35 of the paper book, it was submitted by the asessee that only an amount of Rs.208690/- was incurred as common indirect expenses and all other expenses of Rs.13,17,611/- out of total expenses of Rs.15,26,301/- are specifically allocable to taxable income or infrastructural expenses and no claim for Rs. 22,357/- was made being loss on sale of fixed assests and the expenses which were in the form of Salaries, Bonus, Gratuity, Leave Encashment, Staff Welfare are not to be considered as per the judgment of Hon’ble Bombay High Court referred in the case of CIT Vs General Insurance Corporation of India 240 ITR 203 (Bom.). Assessee has proposed in the such written submissions that 2% of dividend income i.e. Rs.2,23,560/- may be reduced from dividend income for the purpose of computing deduction u/s 80M of the IT Act.
At this juncture, I consider it proper to refer to the judgment of Hon’ble Bombay High Court rendered in the case of CIT Vs General Insurance Corporation of India (supra). In this case, it was held by the Hon’ble Bombay High Court that expenses incurred on account of salary paid to staff is not directly related to earning of dividend for computing deduction u/s 80M of the IT Act. By respectfully following this judgment of the Hon’ble Bombay High Court. I hold that the amount of expenses in the form of Salaries, Bonus, Gratuity, Leave Encashment, Staff Welfare of Rs.11,09,927/- cannot be considered for reducing dividend income for computing deduction u/s 80M of I T Act.
(A.Y: 2003-04) Satyanarayan Investments Co. Vs Deputy Commissioner of Income Tax, 6. I also find that that on page number 3 of the Assessment Order, the AO has stated that the assessee has debited expenses of Rs. 18,05,483/- but I find that as per the Profit & Loss Account and Schedule 10 available in the Paper Book, total expenses claimed is only Rs. 15,26,301/- excluding Depreciation Rs. 39,182/- and Interest on Loan Rs. 240,000/-. Interest on loan cannot be considered because the same is relatable to interest income of Rs. 913,590/- as noted in the assessment order and depreciation of fixed assets is infrastructural expenses.
After considering these facts that the amount of expenses in the form of Salaries, Bonus, Gratuity, Leave Encashment, Staff Welfare of Rs.11,09,927/- cannot be considered for reducing dividend income for computing deduction u/s 80M of I T Act as per the judgment of Hon’ble Bombay High Court rendered in the case of CIT Vs General Insurance Corporation of India (supra) and also non consideration of is infrastructural expenses, I find force in the submissions of the learned AR of the assessee before CIT (A) as available on pages 33 & 34 of the paper book that only 2% of dividend income i.e. Rs. 223,560/- be reduced from dividend income for the purpose of computation of deduction u/s 80M. I direct the A.O. accordingly. The A.O. should compute the deduction u/s 80 M after reducing Rs. 223,560/- from dividend income. The matter is restored back to the file of the A.O. for re-computing the deduction allowed to the assessee u/s 80 M of the IT Act as per above direction. Ground number 1&2 are allowed for statistical purposes.
Ground No. 3&4 are consequential and therefore, the A.O. should re compute the interest chargeable from the assessee u/s 234D and payable to assessee u/s 244A after giving relief to the assessee as per above Para.
(A.Y: 2003-04) Satyanarayan Investments Co. Vs Deputy Commissioner of Income Tax, In the result, the assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 23rd December, 2015