RASAYANI TRADERS P. LTD,MUMBAI vs. ITO 5(3)(1), MUMBAI

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ITA 6220/MUM/2013Status: DisposedITAT Mumbai26 November 2015AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the expenses disallowed by the AO were not directly relatable to the earning of exempt income. Therefore, the disallowance made by the AO was not justified.

What were the facts?

The assessee suo-moto disallowed certain administrative and managerial expenses related to exempt income. The Assessing Officer (AO) made further disallowances under Section 14A, including managerial remuneration, administrative expenses, depreciation, and interest on fixed deposits.

What were the issues?

Whether the expenses disallowed by the AO under Section 14A were directly related to earning exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI SANJAY GARG & SHRI ASHWANI TANEJA

For Appellant: Shri Nitesh Joshi, A.R
For Respondent: Shri Vishwas Jadhav, D.R
Hearing: 26.11.2015Pronounced: 26.11.2015

Per Sanjay Garg, Judicial Member:

1.

The present appeal has been preferred by the assessee against the order dated 14.08.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11.

2.

The only issue taken by the assessee is relating to the confirmation of disallowance under section 14A of the Income Tax Act read with rule 8D2(i) of the Income Tax Rules in relation to the direct expenses incurred by the assessee for earning of exempt income. At the outset, the Ld. A.R. of the assessee has pointed out that so far as the administrative and managerial expenses are concerned, the assessee had suo-moto disallowed a sum of Rs.2,79,089/- under rule 8D2(iii) as per the formula prescribed therein. It is the case of the assessee that no direct expenditure has been incurred by the assessee for earning of tax exempt income. He has invited our attention to the working of disallowance made by the Assessing Officer (hereinafter referred to as the AO) in the assessment order in question. We find that the AO had disallowed the managerial remuneration at Rs.4,25,000/-, administrative and other expenses at Rs.8,63,567/- depreciation claim of Rs.73,741/- and interest expenditure of Rs.3,792/- incurred by the assessee for pre-mature withdrawal of fixed deposits. None of the above expenses are directly relatable to the earning of exempt income. The part of the above expenses have already been suo-moto disallowed by the assessee as administrative and managerial expenses under rule 8D2(iii) of the Income Tax Rules. The Ld. D.R. could not point out before us as to how the above stated expenses can be said to be directly relatable to the earning of exempt income. The disallowance made by the AO under such circumstances cannot be held to be justified and the same is therefore set aside.

3.

In the result, the appeal of the assessee is hereby allowed.

Order pronounced in the open court on 26.11.2015.

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