M/s. Nasha Trading & Commerce Pvt Ltd. v. DCIT-5(2), Mumbai
[Citation -2016-LL-0920-49]

Citation 2016-LL-0920-49
Appellant Name M/s. Nasha Trading & Commerce Pvt Ltd.
Respondent Name DCIT-5(2), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 20/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags disallowance of depreciation • actual expenditure • source of income • share of profit
Bot Summary: Regarding the audit fees and administrative and other expenses, Ld Counsel for the assessee submitted that the above sums, which is identical to that of the claim made in the AY 2013-14, were allowed in favour of the assessee. Regarding the depreciation, Ld Counsel for the assessee submitted that the said claim is not actual expenditure incurred by the assessee as the claim of depreciation on notional expenditure is allowed under the Statute vide section 32 of the Act. In support of her argument that the claim of depreciation is outside the scope of section 14A of the Act, Ld Counsel for the assessee filed orders of the Tribunal in the case of Hoshang D Nanavati vs. ACIT in ITA No. 3567/M/2007, dated 18.3.2011 and the Special Bench decision in the case of Vishnu Anant Mahajan vs. ACIT vide ITA No.3002/Ahd/2009, dated 25.5.2012. Elaborating the submissions on the claim of Audit Fees and Administrative Other Expenses, Ld Counsel for the assessee submitted that similar claims were not disallowed by the AO in the AY 2013-14. Regarding the disallowance of depreciation on car amounting to Rs. 1,36,016/-, it is the claim of the assessee that the claim of depreciation is the notional expenditure and not the real expenditure. As per the Ld Counsel for the assessee, such claims are outside the scope of the provisions of Rule 8D(2)(i) of the IT Rules, 1962. Referring to the expression expenditure incurred used in the provisions of section 14A and also Rule 8D(2)(i), we find merit in the submissions of the Ld AR. We also perused the order of the Tribunal in the case of Hoshang D Nanavati and also the Special Bench decision in the case of Vishnu Anant Mahajan and find they are in favour of the assessee.


IN INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER I.T.A. No.3837/M/2012 (Assessment Year: 2009-2010) M/s. Nasha Trading & Commerce DCIT-5(2), Pvt Ltd, 5 th Floor, M.K. Marg, Vs. C/o. ZAL BALSARA, Aayakar Bhavan, M.K. Road, 15, Gulistan 13, Carmichael Mumbai 400 020. Road, Mumbai. PAN : AAACN2291H (Appellant) .. (Respondent) Appellant by : Ms. Aarti Sathe Respondent by : Smt. Madhavi, DR Date of Hearing : 20 .09.2016 Date of Pronouncement : 20 .09.2016 ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by assessee on 30.5.2012 is against order of CIT (A)-9, Mumbai dated 10.4.2012 for assessment year 2009-2010. 2. In this appeal, assessee filed revised grounds before us. Bringing our attention to same, Ld Counsel for assessee submitted that Ground no.1 is most relevant and other Grounds no.2 and 3 support ground no.1. Considering above, Ground no.1 is taken up for adjudication which reads as under:- Ld CIT (A)-9, has erred in confirming addition of Rs. 11,75,280/- of taxable income, made by Ld DCIT. Assessee s income during relevant assessment year is totally comprised of share of profit from partnership firm which is exempted u/s 10(2A) of Act and dividend income which is exempted u/s 10(34) of Act. 3. Briefly stated relevant facts of case are that assessee, whose source of income is share of profit from partnership firm and dividend income filed return of income declaring total loss of Rs. 46,36,384/-. Assessment was completed u/s 143(3) of Act and assessed income was determined at Rs. 11,75,280/- which includes certain disallowances. In assessment proceedings, Assessing Officer examined applicability of provisions of section 14A read with Rule 8D(2) of 2 IT Rules and noticed that assessee is engaged in earning of exempt income only. Consequently, all expenditure claimed in P & L Account were considered as disallowable amount u/s 14A of Act. total addition on this account works out to Rs. 61,82,420/-. subject matter of litigation raised by assessee today is restricted to disallowance of Rs. 58,11,660/-. This sum is composite amount of expenditure incurred on accounts of audit fees, rent, depreciation, administrative and other expenses. 4. Before us, Ld Counsel for assessee submitted that ground relating to rent of Rs. 45,77,885/- is not pressed. Regarding audit fees and administrative and other expenses (Rs. 10,71,287/-), Ld Counsel for assessee submitted that above sums, which is identical to that of claim made in AY 2013-14, were allowed in favour of assessee. To support same, assessee filed copy of assessment order for AY 2013-14, dated 9.12.2015. To support analogy of such expenses, Ld Counsel for assessee brought our attention to page 16, schedule-9 and schedule-12 of paper book, relevant for AY 2013-14. Regarding depreciation, Ld Counsel for assessee submitted that said claim is not actual expenditure incurred by assessee as claim of depreciation on notional expenditure is allowed under Statute vide section 32 of Act. In support of her argument that claim of depreciation is outside scope of section 14A of Act, Ld Counsel for assessee filed orders of Tribunal in case of Hoshang D Nanavati vs. ACIT in ITA No. 3567/M/2007 (AY 2003-2004), dated 18.3.2011 and Special Bench decision in case of Vishnu Anant Mahajan vs. ACIT vide ITA No.3002/Ahd/2009, dated 25.5.2012. 5. On other hand, Ld DR for Revenue relied on orders of Revenue Authorities. 6. After hearing both parties and on perusal of orders of Revenue Authorities as well as relevant material placed before Tribunal, we find, disallowance u/s 14A r.w. Rule 8D(2)(i) of IT Rules amounting to Rs. 58,11,660/- is issue contested by assessee in grounds filed before us. back of said amount is as follows:- 3 Audit Fees - Rs. 26,472/- Rent - Rs. 45,77,885/- Depreciation - Rs. 1,36,016/- Administrative and other expenses: - Rs. 10,71,287/- Rs. 58,11,660/- 7. Before us, Ld Counsel for assessee fairly conceded that issue to extent of rent of Rs. 45,77,885/-. Considering said concession, we proceed to dismiss that part of ground. We order accordingly. 8. However, it is submission of Ld Counsel for assessee that other expenses (ie Depreciation and Administrative & Other Expenses) should not be disallowed under Rule 8D(2)(i) of IT Rules, 1962. Elaborating submissions on claim of Audit Fees and Administrative & Other Expenses, Ld Counsel for assessee submitted that similar claims were not disallowed by AO in AY 2013-14. We have examined break-up for Administrative & Other Expenses and find those expenses are comparable to that of expenses of AY 2013-14. Therefore, we are of opinion, Audit Fees and Administrative & Other Expenses of Rs. 26,472/- and Rs. 10,71,287/- respectively should not be disallowed u/s 14A read with Rule 8D(2)(i) of IT Rules, 1962. Accordingly, that part of ground is allowed in favour of assessee. 9. Regarding disallowance of depreciation on car amounting to Rs. 1,36,016/-, it is claim of assessee that claim of depreciation is notional expenditure and not real expenditure . As per Ld Counsel for assessee, such claims are outside scope of provisions of Rule 8D(2)(i) of IT Rules, 1962. Referring to expression expenditure incurred used in provisions of section 14A and also Rule 8D(2)(i), we find merit in submissions of Ld AR. We also perused order of Tribunal in case of Hoshang D Nanavati (supra) and also Special Bench decision in case of Vishnu Anant Mahajan (supra) and find they are in favour of assessee. For sake of completeness of this order, relevant lines from para 7 of Tribunal s order in case of Vishnu Anant Mahajan (supra) are extracted as under:- 7..........coming to question regarding depreciation being expenditure or not, it has been held in case of Hoshan D. Nanavati (supra) that section 14A deals only with expenditure and not any Statutory allowance admissible to assessee. decision has been arrived at after considering decision in case of Nectar 4 Beverages Pvt Ltd vs. DCIT (2009) 314 ITR 314. Ld CIT (DR) has not been able to displace ratio of these cases. Thus, on consideration, we find that section 14A uses words expenditure incurred by assessee in relation to income . Statutory allowable under section 32 is not expenditure. Therefore, we are in agreement with decision of Division Bench in case of Hoshan D. Nanavati (supra). Question referred to us is answered accordingly. division Bench shall dispose of appeal in conformity with this decision. 10. From above, it is clear that claim of depreciation is not expenditure actually incurred by assessee . said decision is taken relying on decision in case of Nectar Beverages Pvt Ltd (supra). Therefore, decision of Tribunal in case of Hoshang D. Nanavati (supra) is upheld and claim of depreciation is eventually outside scope of provisions of section 14A of Act. Therefore, allow this part of ground in favour of assessee. Thus, Ground no.1 is partly allowed. 11. In result, appeal of assessee is partly allowed. Order pronounced in open court on 20th September, 2016. Sd/- Sd/- (RAVISH SOOD) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; 20.09.2016 .OKK , Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Dy./Asstt. Registrar) , ITAT, Mumbai M/s. Nasha Trading & Commerce Pvt Ltd. v. DCIT-5(2), Mumbai
Report Error