Prakash Dadasaheb Medshinge,, Kolhapur v. Assistant Commissioner of Income-tax,,

ITA 919/PUN/2016 | 2011-2012
Pronouncement Date: 14-10-2016 | Result: Allowed

Appeal Details

RSA Number 91924514 RSA 2016
Assessee PAN AAWPM3324K
Bench Pune
Appeal Number ITA 919/PUN/2016
Duration Of Justice 5 month(s) 9 day(s)
Appellant Prakash Dadasaheb Medshinge,, Kolhapur
Respondent Assistant Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 14-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 14-10-2016
Assessment Year 2011-2012
Appeal Filed On 05-05-2016
Judgment Text
- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC PUNE BEFORE MS. SUSHMA CHOWLA JM . / ITA NO. 919 /PN/201 6 / ASSESSME NT YEAR : 20 11 - 12 SHRI PRAKASH DADASAHEB MEDSHINGE PROP. SAI BUILDERS & DEVELOPERS 101/E SARASWATI NAGALA PARK KOLHAPUR 416003 . / APPELLANT PAN: A A WPM3324K VS. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE - 1 KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI MAYURESH DOSHI / RESPONDENT BY : SMT. SUMITRA BANERJI / DATE OF HEARING : 0 4 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 14 . 1 0 .201 6 / ORDER PER SUSHMA CHOWLA J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 2 KOLHAPUR DATED 07 . 0 3 .20 1 6 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT 1961 (IN SHORT THE AC T) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING S.14A OF THE ACT R.W. 8D OF THE RULES. ITA NO. 919 /PN/20 1 6 SHRI PRAKASH DADASAHEB MEDSHINGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER WHICH IS WITHOUT ANY POSITIVE SATISFACTION AND WITHOUT ESTABLISHING ANY NEXUS BETWEEN EXPENDITURE INCURRED AND EXEMPT INCOME EARNED ALSO APPELLANT HAS SUFFICIENT NON INTEREST BEARING FUNDS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) FAILED TO APPRECIATE THAT THE BROKERAGE RS.5 00 000/ - DEBITED TO PROFIT AND LOSS A / C OF SAI DEVELOPERS AND BUILDERS A PROPRIETARY CONCERN OF APPELLANT AND INTEREST RS. 6 46 699/ - DEBITED TO PROFIT AND LOSS A / C OF MEDSHINGE PATIL & ASSOCIATES WHERE APPELLANT IS PARTNER ARE NOT AMOUNTS OF EXPENDITURE DIRECTLY RELATING TO INCOM E WHICH DOES NOT FORM PART OF TOTAL INCOME (EXEMPT INCOME) OF THE APPELLANT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) NOT JUSTIFIED IN MAKING OBSERVATION THAT THE APPELLANT HAS FAILED TO PROVE AS TO HOW EXPENDITURE HA VE BEEN INCURRED FOR EARNING EXEMPT INCOME WHEN THE BURDEN IS ON ASSESSING OFFICER TO ESTABLISH THE SAME. 3. THE ISSUE ARISING IN THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE INCOME TAX RULES 1962 (IN SHORT THE RULES) TOTALING RS. 11 46 699/ - . 4. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.36 38 244/ - . THE ASSESSING OFFICER NOTED THAT DECLARING TOTAL INCOME OF RS.36 38 244/ - . THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSI DERATION THE ASSESSEE HAD RECEIVED TAX FREE INCOME OF RS. 17 73 495/ - WHICH CONSTITUTED OF INCOME ON ACCOUNT OF TRANSFER OF EQUITY SHARES I.E. CAPITAL GAINS OF RS. 2 35 771/ - PPF INTEREST OF RS. 33 288/ - DIVIDEND INCOME OF RS. 65 176/ - SHARE OF PROFIT FRO M TWO CONCERNS OF RS. 4 32 416/ - & RS. 9 06 844/ - AND AGRICULTURAL INCOME OF RS.1 LAKH TOTALING RS. 17 73 495/ - . THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES WAS OF THE VIEW THAT THE DISALLOWANCE OF EXPENDITURE INCURRED FOR EARNING THE TAX FREE INCOME HAD TO BE MADE IN THE HANDS OF ASSESSEE. HE THUS COMPUTED THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AT RS. 11 46 699/ - I.E. RS. 5 LAKHS PLUS RS.6 46 699/ - . FURTHER DISALLOWANCE OF INTEREST EXPENDITURE WAS MADE OF RS.10 703/ - AND 0.5% OF AVERAGE OF TAX FREE INVESTMENT WAS ITA NO. 919 /PN/20 1 6 SHRI PRAKASH DADASAHEB MEDSHINGE 3 MADE AT RS.1660/ - . THE ASSESSING OFFICER THUS DISALLOWED SUM OF RS. 11 59 062/ - IN THE HANDS OF ASSESSEE WHICH HAS BEEN UPHELD BY THE CIT(A) . 5. THE ASSESSEE IS IN APPEAL AGAINST THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO TAX FREE INCOME AT RS. 11 46 699/ - . 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO DISPUTE WITH RESPECT TO DISALLOWAN CE OF RS. 10 703/ - PLUS RS.1660/ - IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSEE HAD NOT INCURRED THE ABOVE SAID EXPENDITURE IN RESPECT OF RS. 6 46 699 - . HE POINTED OUT THAT THE SAID INTEREST EXPENDIT URE WAS DEBITED BY THE PARTNERSHIP FIRM AS ITS EXPENDITURE IN WHICH THE ASSESSEE WAS PARTNER. HOWEVER THE SAID EXPENDITURE HAS NOT BEEN DEBITED BY THE ASSESSEE AS ITS EXPENDITURE. OUR ATTENTION WAS DRAWN TO THE FINANCIAL STATEMENTS OF M/S. MEDSHINGE PAT IL & ASSOCIATES IN THIS REGARD. IN RESPECT OF SECOND M/S. MEDSHINGE PAT IL & ASSOCIATES IN THIS REGARD. IN RESPECT OF SECOND EXPENDITURE OF RS.5 LAKHS THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID EXPENDITURE WAS ON ACCOUNT OF BROKERAGE EXPENSES WHICH WAS DEBITED BY THE ASSESSEE UNDER THE HEAD CONSTRUCTION EXPENSES. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID EXPENDITURE WAS CLAIMED AS AN EXPENSE IN THE SOLE PROPRIETOR SHIP OF THE ASSESSEE AND WAS DIRECTLY CONNECTED TO THE BUSINESS UNDERTAKEN BY THE ASSESSEE AND HAD NO CONNECTION WITH TAX FREE INCOME. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. ON PERUSAL OF RECORD AND AFTER GOING THROUGH THE PAPER BOOK FILED BY THE ASSESSEE THE ISSUE WHICH ARISES FOR ADJUDICATION IN THE PRESENT APPEAL IS THE NATURE OF EXPENDITURE WHICH WAS HELD TO BE INCURRED FOR EARNING TAX FREE ITA NO. 919 /PN/20 1 6 SHRI PRAKASH DADASAHEB MEDSHINGE 4 INCOME. THE ASSESSEE HAD EARNED CERTAIN INCOME ON WHICH NO TAX WAS PAYABLE. HOWEVER THE COMPUTATION OF INCOME AT RS. 17 73 495/ - ITSELF IS NOT CORRECT. BUT THE ASSESSEE IS NOT IN APPEAL AGAINST THE SAME AND HENCE THE SAME IS TAKEN TO HAVE BEEN ACCEPTED BY THE ASSESSEE. IN RESPECT OF ASSESSING OFFICERS CONTENTION THAT THE ASSESSEE HAD INCUR RED EXPENDITURE OF RS.5 LAKHS PLUS RS. 6 46 699/ - AS DIRECTLY RELATABLE TO SUCH INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME THE FACTUAL ASPECTS NEED TO BE CONSIDERED. THE ASSESSEE IS A PARTNER IN TWO PARTNERSHIP FIRMS AND IS ALSO SOLE PROPRIETOR OF TH E CONCERN M/S. SAI DEVELOPERS AND BUILDERS. THE SAID SOLE PROPRIETARY CONCERN IS ENGAGED IN THE BUSINESS OF DEVELOPERS AND BUILDERS. THE FINANCIAL STATEMENTS OF THE SAID SOLE PROPRIETOR ALONG WITH AUDITED BALANCE SHEET ARE PLACED ON RECORD. DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED SALES TO THE EXTENT OF RS.69 LAKHS BESIDE OTHER INCOME. THE ASSESSEE HAD DEBITED CONSTRUCTION EXPENSES OF RS. 6 40 430/ - WHICH INCLUDED BROKERAGE OF RS.5 LAKHS. THE SAID CONSTRUCTION EXPENSES RELATED TO T HE BUSINESS CARRIED ON BY THE ASSESSEE AND HAD NO LINK WITH THE TAX FREE INCOME ALLEGED TO HAVE BEEN EARNED BY THE ASSESSING OFFICER. THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN DISALLOWING RS.5 LAKHS AS BEING EXPENDITURE DIRECTLY ATTRIBUTABLE TO EARNING OF TAX FREE INCOME. 9. NOW COMING TO SECOND EXPENDITURE CONSIDERED BY THE ASSESSING OFFICER I.E. RS. 6 46 699/ - . THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT THE SAID EXPENDITURE HAS NOT BEEN CLAIMED AS INTEREST EXPENDITURE BY THE A SSESSEE. HOWEVER THE SAME IS CLAIMED AS INTEREST EXPENDITURE BY THE PARTNERSHIP FIRM M/S. MEDSHINGE PATIL & ASSOCIATES . THE COPIES OF FINANCIAL STATEMENTS AND THE AUDIT REPORT HAVE BEEN PLACED ON RECORD IN WHICH ADMITTEDLY THE ASSESSEE HAD 50% SHARE OF PROFITS. THE PROFIT & LOSS ACCOUNT IS PLACED AT PAGE 44 OF THE PAPER BOOK UNDER WHICH THE SAID PARTNERSHIP FIRM ITA NO. 919 /PN/20 1 6 SHRI PRAKASH DADASAHEB MEDSHINGE 5 HAD DECLARED CONTRACTUAL RECEIPTS OF RS.3.58 CRORES AND HAD CLAIMED BANK INTEREST ON CASH CREDIT ACCOUNT OF RS. 6 46 699/ - . THE EXPENSES THUS WE RE CLAIMED NOT BY THE ASSESSEE BUT BY THE PARTNERSHIP FIRM IN WHICH THE ASSESSEE WAS A PARTNER. H ENCE THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN CONSIDERING THE SAME AS EXPENDITURE DIRECTLY RELATABLE TO EARNING OF EXEMPT INCOME BY THE AS SESSEE. ACCORDINGLY DISALLOWANCE OF EXPENDITURE TOTALING RS. 11 46 699/ - BEING ATTRIBUTABLE TO THE EXEMPT INCOME IS FOUND TO BE INCORRECT AND THE SAME IS THUS DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS ALLOWED. 10 . IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF OCTOB ER 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 14 TH OCTO BER 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 2 KOLHAPUR ; 4. / THE CIT - II KOLHAPUR ; 5. 6. - / DR SMC ITAT PUNE; / GUARD FILE . / BY ORDER // TRUE COPY // / SR. PRIVATE SECRETARY / ITAT PUNE