Case Law Details
Vinay Bhasin Vs ACIT (ITAT Delhi)
Assessee made heavy investments for earning of exempt income and being a busy professional, he requires the management of such a portfolio by incurring expenses, diversion of man-power/staff for indulging in investment activities to various activities like visiting banks, use of vehicle and telephone, use of internet if portfolio management is web-based, cost of computer and its depreciation, computer operator, consequent electricity, use of office premises, fee charged by mutual fund agents/bankers (annual fee), portfolio record maintenance and its tracking to ensure timely sale/purchase of mutual fund units etc. Except making this statement and reading all the possible expenses that involve in investment process, Ld. Assessing Officer is not specific as to what exactly the probable expenditure in this matter the assessee could have incurred. According to the assessee the investment was made in mutual funds and the expenses were already directed by the operators and a certificate to that extent was submitted before the Ld., Assessing Officer. Further, the instructions are that the dividend income will be directly credited to the bank account of the assessee so that no probable expenditure at the end of the assessee for deposit of the me dividend in bank could have occurred. Having regard to this set of facts and circumstances involved in this matter, we are of the considered opinion that instead of making a sweeping enumeration of the probable expenses involved in investment process, Ld. Assessing Officer could have taken legal exercise to verify the correctness or otherwise of the certificate that was issued by the asset management companies or the Citibank in this respect. We, therefore, find that there is no proper record of satisfaction as to the expenses incurred by the assessee for earning the exempt income. By following the decision reported in CIT vs. Taikisha Engineering India Ltd. 275 CTR (Del.) 316 and Joint Investments (P) Ltd. vs. CIT 372 ITR 694 (Dei.), we are of the opinion that the AO at the first instance should have examined the correctness of the statement made by the assessee that no expenses were incurred for earning the exempt income during the year and if and only if the Ld. AO is not satisfied on this account after making reference to the accounts, he is entitled to adopt the method under Rue 8D of the Rules. We. therefore, while allowing the plea of the assessee direct the Ld. Assessing Officer to delete the addition made on this score also.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against order dated 13/10/2017 passed by the Learned CIT(Appeals)-23, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:
1. That the learned Commissioner of Income Tax (Appeals) has erred in sustaining the disallowance of Rs.8,76,091/- failing to appreciate that aforesaid disallowance has been made mechanically applying the provisions of Rule 8D(2)(iii) of the Income Tax Rules, 1962 and without recording a satisfaction vis-a-vis books of the accounts of the assessee as envisaged under the provisions of Sub-sections (2) and (3) of Section 14A of the Act and hence the disallowance made of Rs. 8, 76, 091/- is wholly unsustainable in law and deserves to be deleted.
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