Case Law Details
Shilpa Shetty Kundra Vs DCIT (ITAT Mumbai)
It is observed that the assessee has already offered suo-moto disallowance of Rs.2.34 Lacs u/s 14A in her computation of income, which has been overlooked by the lower authorities. Another undisputed fact that emerges is that disallowance against average investments which have actually yielded exempt income during the impugned AY works out to Rs.0.84 Lacs which is less than suo-moto disallowance as offered by the assessee. It is further noted that the assessee has debited various expenditure aggregating to Rs.59.53 Lacs in the profit & loss account. The expenditure under the head commission & depreciation aggregate to Rs.54.24 Lacs whereas the balance expenditure under other heads aggregate to Rs.5.29 Lacs. The commission and depreciation have no nexus with earning of exempt income whereas out of balance expenditure of Rs.5.29 Lacs, the assessee has already offered suo-moto expenditure of Rs.2.34 Lacs. The same, in our opinion, was more than sufficient to cover up the requisite disallowance. Therefore, on the facts and circumstances of the case, the additional disallowance of Rs.8.95 Lacs as made by Ld. AO could not be sustained. By deleting the same, we allow the appeal.
FULL TEXT OF THE ITAT JUDGMENT
1. Aforesaid appeal by assessee for Assessment Year [AY] 2013-14 contest the order of Ld. Commissioner of Income-Tax (Appeals)-48, Mumbai, [CIT(A)], Appeal No. CIT(A) -48/I. T- 12/DCCC-2(3)/20 16-17 dated 29/08/2017 qua confirmation of disallowance u/s 1 4A.
2.1 Facts in brief are that the assessee being resident individual and a Film Actress by profession was assessed for impugned AY in scrutiny assessment u/s 143(3) on 29/03/2016 by Ld. Deputy Commissioner of Income Tax-Central Circle-2(3), Mumbai [AO] wherein the income of the assessee was determined at Rs.420.20 Lacs after sole disallowance u/s 14A for Rs.8.95 Lacs as against returned income of Rs. 411.25 Lacs e-filed by the assessee on 25/09/2013. The disallowance u/s 14A is the sole subject matter of present appeal before us.
2.2 During assessment proceedings, it transpired that the assessee earned exempt dividend income of Rs.9,08,198/- against investment of Rs.16.87 Crores. The Ld. AO, noticing that no disallowance against the same was offered by the assessee, computed expense disallowance as per Rule 8D(2)(iii) for Rs.8.95 Lacs computed as 0.5% of average investments of Rs.17.90 Crores. Accordingly, the same was added to the income of the assessee.
3. Aggrieved, the assessee agitated the same without any success before Ld. CIT(A) vide impugned order dated 29/08/2017 wherein the assessee drew attention to the erroneous calculations made by Ld. AO in view of the fact that certain loans / deposits were considered as investments by Ld. AO. However, this plea got rejected for want of documentary evidences. The Ld. CIT(A), noticing that there was churning of funds during impugned AY, concluded that the provisions of Section 14A were rightly invoked and the disallowance was justified. Aggrieved, the assessee is in further appeal before us.
4. The Ld. Authorized Representative for Assessee [AR], Shri Narayan Atal, drawing our attention to the documents including assessee’s financial statements as placed in the paper-book, submitted that the assessee had already offered suo-moto disallowance of Rs.2,34,357/- u/s 14A in her computation of income which was more than enough to cover the disallowance against expenses debited in the Profit & Loss Account. Our attention is further drawn to the fact that expense disallowance against those investments which have actually yielded exempt income during impugned AY work out to Rs.0.85 Lacs which was far less than suo-moto disallowance offered by the assessee. Per Contra, Ld. DR, Ch. Arun Kumar Singh, supported the stand of first appellate authority.
5. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper-book. It is observed that the assessee has already offered suo-moto disallowance of Rs.2.34 Lacs u/s 14A in her computation of income, which has been overlooked by the lower authorities. Another undisputed fact that emerges is that disallowance against average investments which have actually yielded exempt income during the impugned AY works out to Rs.0.84 Lacs which is less than suo-moto disallowance as offered by the assessee. It is further noted that the assessee has debited various expenditure aggregating to Rs.59.53 Lacs in the profit & loss account. The expenditure under the head commission & depreciation aggregate to Rs.54.24 Lacs whereas the balance expenditure under other heads aggregate to Rs.5.29 Lacs. The commission and depreciation have no nexus with earning of exempt income whereas out of balance expenditure of Rs.5.29 Lacs, the assessee has already offered suo-moto expenditure of Rs.2.34 Lacs. The same, in our opinion, was more than sufficient to cover up the requisite disallowance. Therefore, on the facts and circumstances of the case, the additional disallowance of Rs.8.95 Lacs as made by Ld. AO could not be sustained. By deleting the same, we allow the appeal.
6. The appeal stands allowed in terms of our above order.
