Prashant J Andharia, Mumbai vs Assessee
- CitationITA NO.5710/Mum/2013
Ratio decidendi
The rule this decision rests on
Where the assessee's expenditure is not shown to have any nexus with income from investments, a disallowance under section 14A read with Rule 8D cannot be sustained on the basis of an assumed investment-related expenditure; the Revenue must establish that the expenses debited to the profit and loss account relate to earning exempt income, and where the assessee demonstrates that borrowed funds were applied to trading, import or collateral purposes rather than to investments, no disallowance under section 14A is warranted. Where separate books of account are maintained but the Revenue establishes that administrative and selling expenses were supported by kachha or self-made documents and paid to family members of the assessee, the disallowance of such expenses is justified, and the assessee's claim to deduction fails for want of reliable evidence of their genuineness.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Shri Prashant J. Andharia, DCIT-8(2), Ghaswala Building, 2nd Floor, बनाम Room No.216(A), बनाम/ Sir M.V. Road, Andheri(East), Aaykar Bhavan, M.K.Marg, Mumbai-400069 Vs. Mumbai-400020 (िनधा'(रती /Assessee) (राजःव /Revenue) P.A. No.AACPA8400A
िनधा'(रती क+ ओर से / Assessee by): Shri Sanjay R. Parikh राजःव क+ ओर से / Revenue by Shri. R.N. D'souza-DR
सुनवाई क+ तार-ख / 27/01/2015 Date of Hearing :
घोषणा क+ तार-ख / 27/01/2015 Date of Pronouncement : आदे श क+ तार-ख / Date of Order: 28/01/2015
आदे श / O R D E R
PER JOGINDER SINGH (Judicial Member):
The assessee is aggrieved by the impugned order dated 30/07/2013 of the ld. First Appellate Authority, Mumbai. The assessee has raised the following grounds:-
A). Disallwoance u/s 14A_ Rs.1,65,830/-
i. The ld. Commissioner of Income tax (Appeals)-17, Mumbai erred on fact and in law in upholding the order of the Deputy Commissioner of 2 Shri Prashant J. Andharia
Income Tax-8(2), Mumbai (Assessing Officer) whereby the Assessing Officer had made a disallowance of Rs.1,65,830/- u/s 14A. ii. The ld. Commissioner of Income tax (Appeals) erred on facts and in law in holding that the appellant had agreed to the disallowance u/s 14A read with Rule 8D as made by the Assessing Officer. iii. The appellant prays that the disallowance of Rs.1,65,830/- made by the Assessing Officer u/s 14A and as confirmed by the CIT(A) may be deleted.
B. Disallowance out of administrative and selling expenses - Rs.29,875/-
iv The ld. Commissioner of Income tax (Appeals) erred on facts and in upholding the order of the Assessing Officer making a disallowance of Rs.29,875/- out of administrative and selling expenses. v. The appellant prays that the disallowance of Rs.29,875/- out of administrative and selling expenses as made by the Assessing Officer and as confirmed by the CIT(A) may be deleted.
2. So far as, disallowance of Rs.1,65,830/- u/s 14A of the Act read with Rule 8D of the Rules is concerned, we find that as per letter dated 15/11/2012, of the assessee, addressed to the DCIT, the assessee, during the relevant period earned Rs.89,981/- (dividend from shares), Rs.2,92,557 (dividend from mutual fund) and Rs.6,12,061/- (PPF interest). This income was generated from the shares, mutual fund and PPF, which was treated as investment in the balance sheet. The expenses debited to the profit and loss accounts, relates to the business, carried out by the assessee and thus, there is no nexus of the expenses debited to the profit & loss account and the income generated out of investment. The claim of the assessee is that unsecured loans were utilized for payment of imports of chemical for trade or for paying import duties or for establishing the fixed deposit with the bank which was required as collateral security by the bank 3 Shri Prashant J. Andharia
for letter of credit for import of chemicals. It was empathetically asserted that none of the loan, taken on which interest was paid, was utilized for investment purposes. In view of these facts, we find merit in the explanation of the assessee, consequently, this ground of the assessee is allowed.
2.1. So far as, disallowance of Rs.29,875/- out of administrative and selling expenses is concerned, separate books of accounts were maintained. The stand of the Revenue is that such expenses were made on Kachha copy/self made documents and such expenses were paid to family members of the assessee. In view of this finding, the stand of the ld. Commissioner of Income tax (Appeals) is affirmed. This ground of the assessee is dismissed.
Finally, appeal of the assessee is partly allowed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 28/01/2015.
आदे श क+ घोषणा 2दनांकः 28/01/2015 को क+ गई ।
Sd/- Sd/- (N.K.Billaiya) (Joginder Singh) लेखा सदःय / ACCOUNTANT MEMBER याियक सदःय / JUDICIAL MEMBER
मुंबई Mumbai; 2दनांक Dated : 28/01/2015 f{x~{tÜ? P.S/.िन.स.
आदे श क+ ूितिल प अमे षत/Copy षत of the Order forwarded to :
1. अपीलाथ= / The Appellant
2. ू>यथ= / The Respondent.
3. आयकर आयु?(अपील) / The CIT, Mumbai.
4. आयकर आयु? / CIT(A)- , Mumbai
5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 4 Shri Prashant J. Andharia
6. गाड' फाईल / Guard file.
आदे शानुसार/ ार BY ORDER, स>या पत ूित //True Copy//
उप/ उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई / ITAT, Mumbai
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