TMI Blog2015 (3) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... urned income of ₹ 8.90 crores, we are of the opinion that this could be an inadvertent mistake for which the assessee should not be held liable for concealment penalty. We, therefore, delete the penalty. - Decided in favour of assessee. Disallowance under section 14A r.w.r. 8D - Held that:- In the year under consideration the assessee has made substantial investment and for making such investment decision have to be taken and it cannot be said that assessee did not incurred any expenditure to earn dividend income which is substantial. Therefore, there is no force in the claim of Ld. AR that assessee did not incur expenditure for earning the dividend income. It is a case where expenses incurred by the assessee to earn exempted income are incurred from joint expenditure and for such situation formula has been prescribed in Rule 8D. In the present case, since assessee did not make any disallowance and even could not substantiate its explanation that no expenditure was incurred for earning exempted income, therefore, we don’t see any force in the claim of the assessee that disallowance on account of expenditure cannot be made as per Rule 8D. However, so far as it relates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case. 3. On the facts and in the circumstances of the case and in law, the learned CIT. (A) erred in partly confirming the penalty levied u/s 271(1)(c) of the I.T. Act although there has been neither any concealment of income nor furnishing of inaccurate particulars of income. 3. In the details furnished at page 1 2 of the paper book the additions which have been made in the assessment order and the position of the quantum are described in the following chart. For the relevant A.Y 2006-07 the date of hearing for quantum addition made was 06/02/2014 and the order was pronounced on 28/02/2014. Following is the summary of ITAT orders passed relevant for penalty levied by the learned CIT(A): S.No. Pariculars of penalty levied Amount ITAT order on quantum Reference No. Remarks 1. Deferred Revenue disallowance 9,13,635 In favour of appellant ITAT order pg. No.4- 6 Para 17 to para 28 Penalty N.A 2. Depreciation on Goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as per directions given by ITAT. 3.2 Ld. DR did not raise any objection on this submission of Ld. AR. Therefore, keeping in view the aforementioned submissions,, so far as it relates to levy of concealment penalty on the addition relating to depreciation on goodwill amounting to ₹ 1,26,563/- and addition relating to franchisee transaction expenses amounting to ₹ 18,50,000/-, the matter is restored back to the file of AO with a direction to re-adjudicate the levy or otherwise of concealment penalty after finalization of the quantum proceedings as per directions given in aforementioned order of the Tribunal. So to this extent the appeal filed by the assessee relating to these additions are considered to be allowed for statistical purposes. 3.3 Keeping in view the aforementioned chart, so far as it relates to levy of concealment , on the following addition penalty is deleted in view of deletion in the quantum proceedings by the aforementioned order of the Tribunal. (i) Deferred Revenue disallowance - ₹ 9,13,635/- (ii) Gratuity - ₹ 13,08,005/- (iii)Renovation/Civil expenses - ₹ 38,56,361/- 3.4 So far as it relates to the levy of concealme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.7 On the other hand, it was submitted by Ld. DR that the assessee has claimed wrong rate on depreciation and it cannot be said to an inadvertent mistake as assessee is assisted by a team of professionals who cannot make such mistake. 3.8 We have heard both the parties and their contentions have carefully been considered. This claim is disallowed by the AO as per following observations: 11. Excess depreciation: 11.1 From the perusal of depreciation chart, it is observed that assessee company had claimed depreciation on air conditioner and office equipment 25%. The correct rate of depreciation is 15%. On being confronted, the assessee company submitted revised chart stating that there is a excess claim of depreciation of ₹ 3,45,661/-. The chart is reproduced as below: Particulars Total Dep. 25% claimed Dep. 15% correct Diff. Excess Air Conditioner 34,68,002 6,42,488 3,85,493 2,56,995 Office equipment 11,05,765 2,21,665 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT, Mumbai is pending for decision, hence, penalty proceedings might be kept in abeyance till the disposal of appeal. This reason for seeking adjournment was not found acceptable and reasonable, therefore, appellant was asked to represent the case so that appeal could be decided on merit. Mr. Nitil D. Chotalia, Executive-Taxation, has appeal and on 09.01.2013 and has requested to give one more date for representation, accordingly, case was finally fixed for hearing on 22.01.2013 at 11.30 AM but on this day again a letter was submitted by Mr. Nitin D. Chotalia for adjournment which was rejected because on 09.01.2013, he was communicated that case was finally fixed on 22.01.2013, hence, there was no propriety to seek further adjournment merely on the basis of appointment of counsel. Thereafter, nothing was hear from the appellant side nor was any communication for reconsideration of rejection of adjournment application. Thus, it is very clear that appellant is not interested in prosecuting its appeal, therefore, case is decided on merit. 4.2 As it can be seen from the above observations of Ld. CIT(A) that despite filing of adjournment application he has proceeded to decide the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not directly attributable to any particular income or receipt an amount computed in accordance with the following formula, namely. A X B/C 49627 X 254145342/1331466734/- 9403/- A= The amount of expenditure by way of interest other than amount of interst included in clause (i) incurred during the previous year. B= the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee on the first day and the last day of the previous year. C= the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year - Rule 8D(2)(ii) 1331466734 1331466734 3 i)Average value of investments - Opening balance of investments + closing balance of investments /2 207036460 + 301254224 = ₹ 254145342 -8D (2)(iii) (ii) Disallowance An amount equal to one half per cent of the average of the value of investment income from which does not or shall not form part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance in the case of Priya Exhibitors Pvt. Ltd. vs. ACIT,27 taxamann 88 (Del) to contend that disallowance under section 14A without pointing out any direct expenses being incurred for earning exempt income was unjustified. Ld. AR also relied upon the decision in the case of Raj Shipping Agencies Ltd. vs. Addl. CIT, 38 Taxman 345 to contend that it is imperative for the AO to examine the accounts of the assessee first and if he is not satisfied with correctness of the claim, then only he can invoke Rule 8D. Ld. AR also relied upon the decision in the case of Justice Sam p. Barrocha vs. Addl. CIT, 25 taxman 381, to contend that principle of apportionment embedded in section 14A has no application when no expenditure was incurred to earn exempted income, particularly when entire expenditure was incurred only to earn professional income. 5.4 On the other hand, Ld. DR relied upon the order passed by AO and Ld. CIT(A). He submitted that as per decision of Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Company Ltd, 328 ITR 81(Bom)Rule 8D is applicable and disallowance has correctly been upheld by Ld. CIT(A). 5.5 We have heard both the parties and their contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reason that assessee s own funds are much more the funds deployed by the assessee in investment out of which the assessee has earned tax free income. Such claim would be supported by the decision of Hon ble Jurisdictional High Court in the case of HDFC Bank (supra), wherein it has been held that in a case where the own funds of the assessee are sufficient to make investment in tax free securities and shares, then the presumption would be that investment made by the assessee in tax free shares and securities would be out of the own funds of the assessee. Therefore, disallowance to the extent of ₹ 9403/- is deleted. 5.7 In view of above discussion, disallowance of ₹ 12,70,726/- is upheld. Ground No.2 is partly allowed. 5.8 Apropos Ground No.3, disallowance of depreciation of goodwill is covered by the earlier decision of Tribunal rendered in respect of A.Y 2006-07, the matter has been restored back by the ITAT vide its order dated 28/2/2014 in ITA No.3200/Mum/2010 with the following observations: 4. Ground No.4 pertains to depreciation claimed on goodwill. The AR submitted that the issue is covered by the decision of Hon ble Supreme Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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