ACIT 11(I), Room No. 439, Aayakar Bhavan, M.K. Marg, Mumbai 400 020. Vs. Shri Hrithik Rakesh Nagrath, B-27, Commerce Centre, Ist Floor, Off. New Link Road, Andheri (W), Mumbai 400 053.
October, 08th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER &
SHRI SANJAY GARG, JUDICIAL MEMBER
./I.T.A. No.7239 /Mum/2012
( / Assessment Year : 2009-2010
ACIT 11(I), / Shri Hrithik Rakesh
Room No. 439, Nagrath,
Aayakar Bhavan, B-27, Commerce Centre,
M.K. Marg, Ist Floor,
Mumbai 400 020. Off. New Link Road,
Mumbai 400 053.
. / PAN : AABPN2790F
( /Appellant) .. ( / Respondent)
Appellant by Shri Vivek Peram Purna
Respondent by : Shri R. Prasad Rao
/ Date of Hearing : 15-09-2014
/Date of Pronouncement : 15-9-2014
/ O R D E R
PER R.C. SHARMA, A.M. :
This appeal filed by the Revenue is directed against the order of ld.
CIT(A) -3, Mumbai dated 25-09-2012 for the A.Y. 2009-10 in the matter of
order passed u/s 143(3) of the Income Tax Act, 1961.
2. The following grounds have been taken by the Revenue:-
"1. On the facts and in the circumstances of the case and in law, whether
the ld. CIT(A) was justified in deleting the addition u/s 14A r.w. Rule 8D even
when the A.O. had made a proximate cause for disallowance of Rs.
13,58,751/- under section 14A of the I.T. Act.
2. On the facts and in the circumstances of the case and in law, whether
the ld. CIT(A) was justified in relying on his own order of the earlier year
2 ITA 7239/M/12
thereby ignoring the fact that the A.O. had differentiated the facts of the
present case from that of the earlier year.
3. The appellant prays that the order of CIT (Appeals) on the above ground
be set aside and that of the Assessing Officer restored."
3. Rival contentions have been heard and perused the records. Facts in
brief are that the assessee is a film artist by profession. Assessee was in
receipt of tax free income. During the course of assessment, the A.O. asked
the assessee to explain as to why section 14-A read with Rule 8-D of the
Income Tax Rules, 1962 is not applicable to him, in reply it was submitted
that exempt income comprised of PPF, interest, equity dividend, interest on
R.B.I. Relief Bonds which were either credited through ECS or recovered by
passing a journal entry. As such, there was no expenditure referable to such
exempt income within the meaning of section 14A of the Act and hence no
disallowance is called for. However, the A.O. did not agree with the assessee's
contention and disallowed an amount of Rs. 13,58,751/- by observing that
the assessee has incurred various expenses namely office in-charge, motor
car expenses, computer maintenance, office maintenance etc. The ld. CIT(A)
vide his impugned order, deleted the addition after having recorded the
"1.3 I have considered the facts and perused the material on record.
The provisions of section 14A (1) read with section 14A (2) provides that
for the purpose of total income computed under this chapter, no
deduction shall be allowed in respect of expenditure incurred by the
assessee in relation to income which does not form part of total income
under this Chapter and the AO will determine the amount of
expenditure incurred in relation to exempt income if he is not satisfied
with the correctness of the claim of the assessee. The perusal of Profit
and Loss Account of the appellant shows that the appellant has not
made any claim of expenditure incurred in relation to exempt income,
therefore, the provisions of section 14 A (1) r.w.s. 14A(2) of the Act are
not attracted. The AO has also not given any findings on whether the
assessee has made a claim of expenditure in relation to exempt income
and the claim is not correct. It is seen that the assessee has earned
dividend of Rs.10,245/- which has been directly credited to bank
through ECS. The interest of Rs.69,90l/- received on PPF, for which a
3 ITA 7239/M/12
journal entry is passed on 31-3-09 and similarly, interest of
Rs.66,02,652/- on tax free Bonds is credited by journal entries passed
on 3 1-3-09. Thus, no expenditure has been earned for earning exempt
income. Therefore, there is no proximate cause for disallowance in
relationship with exempt income as held in CIT v Walfort Shares &
Stock Brokers Pvt. Ltd. 326 ITRJ (SC) and Godrej & Boyce
Manufacturing Co. Ltd v DCIT (2010) 328 ITR 81 (Bom)for attracting
the provisions of section 14A. The Honble TAT has confirmed the last
year's order in ITA No.61 10/Mum/201 1 (AY.2008-09) dated 8.8.2012.
In view of these facts and following the decision of jurisdictional ITAT in
assessee's own case, the disallowance of Rs.13,58,751/- is deleted. The
Ground Nos. 1 to 3 are allowed."
4. We have considered the rival contentions and found that exempt
income of assessee comprised of interest on tax paid, relief bonds accrued
and PPF interest for which journal entries were passed at the end of the year
and dividend income was credited in the bank through ECS, hence, no
expenditure incurred were referable and relatable to the exempt income. The
ld. CIT(A) further observed that the A.O. has also not given any finding as to
whether the assessee has made a claim of expenditure in relation to exempt
income and the claim is not correct. The categorical finding has been recorded
by the ld. CIT(A) to the effect that the assessee has earned dividend income of
Rs. 10,245/- which has been directly credited to the bank through ECS. The
interest of Rs. 69,901/- received on PPF, for which a journal entry was passed
on 31-3-09 and similarly interest of Rs. 66,02,652/- on tax free bonds is
credited by journal entries passed on 31-3-09. Thus, no expenditure has
been incurred for earning exempt income. From the records, we also find that
the expenditure mentioned by the A.O. was in relation to the professional
income earned by the assessee which is taxable under the Income Tax Act,
there is no reason to disallow the expenses incurred for earning he taxable
income. The findings so recorded by the ld. CIT(A) at para 1.3 of his order
has not been controverted by the Department by bringing any positive
material on record. Accordingly, we do not find any reason or infirmity with
the order of the ld. CIT(A) in deleting the disallowance of Rs. 13,58,751/-
4 ITA 7239/M/12
made by the A.O. u/s 14-A of the Act. Deletion of similar disallowance was
also confirmed by Tribunal in the immediately preceding A.Y. 2008-09 vide its
order dated 8-8-2012.
5. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 15th September, 2014.
(SANJAY GARG) (R.C. SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 15-09-2014
. ../ RK , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A) 3,, Mumbai
4. / CIT II, Mumbai
5. , , / DR, ITAT, Mumbai H Bench
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai