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Asha Lalit Kanodia Datamatics Staffing Services Versus Addl. CIT, Range – 12 (2) , Mumbai

2016 (3) TMI 50 - ITAT MUMBAI

Disallowance u/s. 14A toward indirect administrative expenditure - Held that:- A meeting of the ‘assessee’ with his investment consultant or broker in relation to a IPO or any other emerging investment option is to be conducted (say). This would require visit by the consultant to the assessee’s premises or vice versa. This explains the appropriation of the expenditure claimed on telephone, electricity, conveyance, etc. The job may itself be assigned - wholly or partly, to some staff, even as a p .....

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income, and investments – yielding both taxable and tax-free incomes. The manner or the account from which common expenditure, i.e., which could be ascribed to both sets of activities, is incurred or routed, is immaterial, being borne by and claimed by the assessee.

Suo motu disallowance by the assessee or its’ claim of no expenditure having been incurred to earn tax exempt income is to be found non-satisfactory by the A.O. before resort to computation (of disallowance) under rule 8D .....

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the assessee’s claim is to be made.Under the circumstances and, in view of the foregoing, we find little merit in the assessee’s case and, accordingly, uphold that of the Revenue - Decided against assessee - I.T.A. No. 27/Mum/2012 - Dated:- 17-2-2016 - Shri Joginder Singh, JM And Shri Sanjay Arora, AM For the Appellant : Shri J. P. Bairagrd For the Respondent : Shri Mohhamed Rizwan ORDER Per Sanjay Arora, A. M. This is an Appeal by the Assessee directed against the Order by the Commissioner of .....

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ing dividend on units, shares and securities (Rs.56.25 lacs) and long-term capital gain (LTCG), at ₹ 5.92 lacs. The assessee has also earned another ₹ 2,62,431/- as dividend income in a proprietary concern, M/s. Datamatics Financial Software Services Ltd., claimed exempt u/s. 10(34) of the Act and, two, the figure of ₹ 56.25 lac includes ₹ 77,994/- by way of interest (tax free) on securities (computation of income at PB pgs. 15-21). 3. The disallowance effected by the Ass .....

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where, as claimed in the instant case, no expenditure has been incurred by the assessee in the first place. The assessee had maintained two sets of accounts, i.e., for personal transactions and her business of recruitment agency. No expenditure has been claimed in the personal accounts, reflecting an investment in tax-free securities, i.e., securities yielding or liable to yield income which is tax-exempt, at ₹ 867.61 lacs; the direct expenditure in the form of depository charges (Rs.2,66 .....

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cause the assessee had earned such income. The A.O. could not proceed mechanically to apply rule 8D, but has to record his dissatisfaction with the correctness of the assessee s claim, giving cogent reason for not accepting the same. This sums up the assessee s case. 4. We have heard the parties, and perused the material on record. 4.1 Section 14A reads as under: Expenditure incurred in relation to income not includible in total income. 14A. (1) For the purposes of computing the total income und .....

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ectness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. Provided …….. Clearly, it is only where the expenditure has been incurred in the first place, that there .....

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re not satisfied, with reference to the assessee s accounts. This is as only its accounts could reveal the existence of expenditure - direct or indirect, that could be said to be incurred by the assessee toward or in pursuing such activity. The assessee s claim, however, cannot be a bald claim, made in the face of expenditure being incurred and claimed. How could, one may ask, the correctness of a bald claim be examined? Such a claim has no sanction in law, and no cognizance could be given there .....

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s having been incurred cannot, therefore, be lightly made, much less without any substance, as in the present case. It is toward this that the assessee s accounts are relevant and gain primacy. The disallowance u/s. 14A, it needs to be appreciated, is a statutory disallowance. The issue also has been examined, in the fact situation of the given case by the tribunal in different decisions, and toward which we may advert to its order in AFL P. Ltd. vs. Asst. CIT [2013] 28 ITR (Trib) 263 (Mum), rep .....

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accordance with the prescribed method. Further, therefore, though there is no specific requirement of recording dissatisfaction, it is incumbent on A.O. to do so, as in its absence it cannot be ascertained if he had actually examined the assessee s claim or proceeded mechanically. Two, his order being appealable, it is only where it bears his reasons, could the validity thereof and, thus, of his action of disallowance u/r. 8D, be subject to judicial review. It is in this context that it has bee .....

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accounts. How could the A.O. possibly verify the correctness of the assessee s claim in such a case? In another, the assessee does not state the basis of its claim or makes the same de hors the expenses incurred and claimed. The A.O. could not possibly verify the correctness of such an incoherent or infirm claim. True, ………. True, no disallowance would ensue in the absence of any nexus or proximity between the expenditure and the related activity. The law does not presume a .....

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IT vs. Walfort Shares & Stock Brokers (P.) Ltd. [2010] 326 ITR 1 (SC). Reliance toward this is also placed on the decisions by the tribunal, as in the case of Dy. CIT vs. Damani Estates and Finance P. Ltd. [2013] 25 ITR (Trib) 683 (Mum) and Kunal Corporation vs. Asst. CIT [2013] 28 ITR (Trib) 277 (Mum). 4.3 Coming to the facts of the present case, the disallowance u/s. 14A is only toward indirect administrative expenditure. The assessee, per the accounts of its proprietary concern, claims ex .....

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performance as well as of the investment environment/scenario. Could this be without any associated cost? Even as much as maintaining and keeping the records, including safe-keeping of the securities (where not dematerialized), entails cost. A meeting of the assessee with his investment consultant or broker in relation to a IPO or any other emerging investment option is to be conducted (say). This would require visit by the consultant to the assessee s premises or vice versa. This explains the .....

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140.59 lacs) including tax-free investments, in its business. Two, and more importantly, the assessee is one entity, undertaking both, business - yielding taxable income, and investments - yielding both taxable and tax-free incomes. The manner or the account from which common expenditure, i.e., which could be ascribed to both sets of activities, is incurred or routed, is immaterial, being borne by and claimed by the assessee. Further, the personal balance-sheet includes investment in business (M .....

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