ITO (I.T) 2(1), MUMBAI v. Sri. BHALCHANDRA R. SULE, MUMBAI

ITA 3684/MUM/2005 | 2001-2002
Pronouncement Date: 29-10-2010 | Result: Dismissed

Appeal Details

RSA Number 368419914 RSA 2005
Bench Mumbai
Appeal Number ITA 3684/MUM/2005
Duration Of Justice 5 year(s) 5 month(s) 13 day(s)
Appellant ITO (I.T) 2(1), MUMBAI
Respondent Sri. BHALCHANDRA R. SULE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted L
Tribunal Order Date 29-10-2010
Date Of Final Hearing 19-10-2010
Next Hearing Date 19-10-2010
Assessment Year 2001-2002
Appeal Filed On 16-05-2005
Judgment Text
ITA NO.3684/M/05 ASSESSMENT YEAR 2001-02 1 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH MUMBAI. BEFORE SHRI N.V.VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) I.T.A NO. 3684/ MUM/2005 ASSESSMENT YEAR: 2001-02 INCOME TAX OFFICER (IT) 2(1) APPELLANT SCINDIA HOUSE BALLARD ESTATE MUMBAI-400 038 VS. SHRI BHALCHANDRA R SULE RESPONDENT A-3 MAYFAIR GARDEN LITTLE GIBBS ROAD MALABAR HILL MUMBAI-400 006. PA NO.AAIPS 5455 M APPELLANT BY: SHRI KESHAVA SAXENA RESPONDENT BY : SHRI NITISH S. JOSHI O R D E R PER PRAMOD KUMAR: BY WAY OF THIS APPEAL THE REVENUE HAS CALLED INTO QU ESTION CORRECTNESS OF CIT(A)S ORDER DATED 11 TH MARCH 2005 IN THE MATTER OF ASSESSMENT UNDER SECTIO N 143(3) FOR ASSESSMENT YEAR 2001-02 ON THE FOLLOWING GRO UND:- ON THE FACTS OF THE CASE AND IN LAW THE CIT (A) HAS ERRED IN DISAPPROVING THE ACTION OF THE AO IN DISALLOWING EXPE NSES RELATABLE TO EARN EXEMPT INCOME UNDER SECTION 14A OF THE I.T.ACT WITHOUT APPRECIATING THAT THE EXPENSES ARE INDIVISIBLE. 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS CLAIMED DIVIDEND ITA NO.3684/M/05 ASSESSMENT YEAR 2001-02 2 INCOME OF RS 57 78 309/- AS TAX FREE INCOME BUT DID NOT OFFER ANY AMOUNT FOR DISALLOWANCE U/S.14A. THE ASSESSING OFFICER WAS OF THE OP INION THAT THE EXPENDITURE OF RS 6 96 002/- CLAIMED BY THE ASSESSEE AS NET EXPENSES ARE RELATED TO EARNING OF TAX FREE DIVIDEND AND COMPUTED THE PROPORTIONATE AM OUNT DISALLOWABLE AT RS.6 74 003/- U/S 14A. 3. IN APPEAL THE CIT (A) ACCEPTED THE CONTENTION O F THE ASSESSEE THAT 97% OF THE DIVIDEND AMOUNT IS RECEIVED FROM A SINGLE COMPAN Y AND THERE CANNOT BE ANY SIGNIFICANT EXPENDITURE ASCRIBED TO THE ACTIVITY OF H OLDING SHARES FOR THE PURPOSE OF EARNING DIVIDEND INCOME. HOWEVER HE PARTLY AGREED WITH THE STAND TAKEN BY THE ASSESSING OFFICER FOR DISALLOWANCE OF EXPENDITURE INCURR ED IN RELATION TO EXEMPTED INCOME UNDER SECTION 14A AND RESTRICTED THE DISALLOWAN CE TO ` ` . 25 000/- ON A REASONABLE BASIS. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4. IN VIEW OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ& BOYCE LIMITED VS. ACIT 234 CTR (BOM) 1 THE DISALLOWANCE OF REASONABLE EXPENDITURE WHICH CAN BE SAID TO HAVE BEEN INCURRED IN THE EXEMPT INCOME CAN INDEED BE DISALLOWED. IN THE CASE BEFORE US 97% OF DIVIDENDS HAVE COME FROM ONE SING LE COMPANY AND THROUGH ECS CLEARANCE. WHILE THE ASSESSING OFFICER HAD HIMSELF DISALLOWED A PROPORTIONATE DISALLOWANCE OF RS 6 74 003/- AS A REASONABLE ALLOCAT ION EXPENSES TO EARN THE INTEREST FREE INCOME THE CIT(A) HAS RESTRICTED ALSO A REASONABLE DISALLOWANCE OF RS 25 000/- AS AGAINST RS 6 74 003/- DISALLOWED BY THE AO AFTER TAKING INTO CONSIDERATION THE FACTS OF THIS CASE. THE DISALLOWANCE O F EXPENSES ON THE BASIS OF PROPORTIONATE BASIS ON INCOME PARAMETER CERTAINLY CAN NOT BE SAID TO BE REASONABLE ON THE FACTS OF THIS CASE. THE DIVIDENDS BEING PASSIVE IN COME ALL THE EXPENSES INCURRED CANNOT BE FAIRLY ALLOCATED TO DIVIDEND INC OME. THE CIT(A) HAS REASONABLY RESTRICTED THE DISALLOWANCE TO RS 25 000 PARTICULARLY IN VIEW OF THE FACT THAT ALMOST ENTIRE DIVIDEND COMES FROM ONE COMPANY AND THROUGH E CS CLEARANCE. THERE ARE HARDLY ANY EXPENSES INCURRED TO EARN THIS DIVIDEND IN COME. IN VIEW OF THESE DISCUSSIONS WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) HAS MADE A REASONABLE DISALLOWANCE OF RS 25 000/- AND ACCORDINGLY WE UPH OLD THE SAME. ITA NO.3684/M/05 ASSESSMENT YEAR 2001-02 3 5. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISM ISSED. PRONOUNCED ON 29 TH OCTOBER 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 29 TH OCTOBER 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XXXI MUMBAI 4. DIT (INTERNATIONAL TAXATION) RANGE- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH L MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI