Ashok Liladhar Shah v. Assistant Commissioner of Income-tax-18(2), Mumbai
[Citation -2016-LL-0923-195]

Citation 2016-LL-0923-195
Appellant Name Ashok Liladhar Shah
Respondent Name Assistant Commissioner of Income-tax-18(2), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 23/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags levy of interest • share of profit • capital asset • capital gain
Bot Summary: 09.2016 ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 04.01.2013 passed by the Commissioner of Income Tax 29, Mumbai hereinafter referred to as the CIT(A) relevant to the A.Y.2009-10. The Ld. Commissioner of Income Tax-29, Mumbai hereinafter referred to as Ld. CIT(A) erred in passing the order dated 04.01.2013 under section 250 of the Income Tax Act, 1961 hereinafter referred to as of the Act confirming the action of the A.O. in making following additions and disallowances without appreciating the facts and circumstances of the case: Sr. Particulars Amount No. A Disallowance of under section 14A 1,32,944/- B Addition of Income from other sources 49,71,900/- A. Disallowance of under section 14A - 1,32,944/- 2. The brief facts of the case are the at the assessee filed his return of income for the A.Y.2009-10 on 16.09.2009 declaring total income to the tune of Rs.49,37,912/-. The Assessing Officer assessed the expenditure to earn the exempt income to the tune of Rs.3,98,012/- whereas the assessee disallowed the expenditure to the tune of Rs 2,65,068 and added the difference to the tune of Rs 1,32,944 to the income of assessee and also assessed the income from other sources on account of sale of piece of land by the assessee but the assessee was not satisfied, therefore an appeal was filed before CIT(A) who confirmed 3 ITA No.2985/M/2013 A.Y. 2009-10 the order of the Assessing Officer, therefore the assessee filed the present appeal before us. The contention of the assessee is that the Rule 8D of the Act is not applicable to the facts of the case because the assessee himself has disallowed the expenditure to the tune of Rs.2,65,068/- to earn the exempt income. As no income has been offered in case of firm M/s.Ashok L.Shah, this income is rightly taxed by the Assessing Officer in the hands of the appellant as income from other sources. Accordingly the income of assessee is required to be assessed.


IN INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM I.T.A. No. 2985/Mum/2013 (Assessment Year: 2009-10) Shri Ashok Liladhar Shah Assistant Commissioner of 29, Ideal Industrial Estate, Income Tax 18(2) Vs. Lower Parel, Room No.115, 1 s t Floor, Mumbai - 400013 Piramal Chambers, Lalbaug, Mumbai - 400012 PAN/GIR No. : AMNPS2327M. (Appellant) .. (Respondent) Assessee by: Shri K. Gopal and Ms. Neha Paranjpe Department by: Shri R.P.Rastogi Date of Hearing: 11.05.2016 /Date of Pronouncement:23.09.2016 ORDER PER AMARJIT SINGH, JM: assessee has filed present appeal against order dated 04.01.2013 passed by Commissioner of Income Tax (Appeals) 29, Mumbai [hereinafter referred to as CIT(A) ] relevant to A.Y.2009-10. ITA No.2985/M/2013 A.Y. 2009-10 2. assessee has raised following grounds:- 1. Ld. Commissioner of Income Tax (Appeals)-29, Mumbai [hereinafter referred to as Ld. CIT(A) ] erred in passing order dated 04.01.2013 under section 250 of Income Tax Act, 1961 [hereinafter referred to as of Act ] confirming action of A.O. in making following additions and disallowances without appreciating facts and circumstances of case: Sr. Particulars Amount ( ) No. Disallowance of under section 14A 1,32,944/- B Addition of Income from other sources 49,71,900/- A. Disallowance of under section 14A - 1,32,944/- 2. Ld. CIT(A) erred in confirming action of Ld. A.O. in making disallowance of 1,32,944/- under section 14A of Act by invoking provisions of Rule 8D of Income Tax Rules, 1962. Appellant, therefore, prays that disallowance of 1,32,944/- under section 14A r.w.Rule 8D is not justified and hence, same may be deleted. 3. Ld. CIT(A) failed to appreciate that Ld. A.O. has not given any reasons why he considers that Appellant has incurred expenditure to earn exempt income over and above 2,65,068/-. Thus, provision of Rules 8D are not applicable. Hence, disallowance of Rs.1,32,944/- is not justified. 4. Ld. CIT(A) further failed to appreciate that Appellant has incurred 2,65,068 as expenditure with respect to exempt income and disallowed same in his returns. Therefore, disallowance of 1,32,944/- is not at all justified and same may be deleted. B. Addition of Income from other sources - 49,71,900/- 5. Ld. CIT(A) erred in confirming action of A.O. in addition of 49,71,900/-. Appellant, therefore, prays that 2 ITA No.2985/M/2013 A.Y. 2009-10 addition of 49,71,900/- is not at all justified and hence, same may be deleted. 6. Ld. CIT(A) failed to appreciate that short term capital gains on account of transfer of Depreciable asset are not tenable as block of asset continues to exist in books of appellant. Thus, addition of 49,71,900/- is not justified. C. Levy of interest under section 234A, 234B and 234C of Act not justified 7. appellant denies any liability to pay interest under section 234A, 234B and 234C of Act. Hence, same are not leviable. 3. brief facts of case are at assessee filed his return of income for A.Y.2009-10 on 16.09.2009 declaring total income to tune of Rs.49,37,912/-. return was processed u/s.143(1) of Income Tax Act, 1961 ( in short Act ). Thereafter, case was selected for scrutiny through CASS and notice u/s.143(2) dated 18.08.2010 was issued and served upon assessee. Further, notice u/s.142(1) of Act along with questionnaire was issued and served upon assessee. Assessing Officer assessed expenditure to earn exempt income to tune of Rs.3,98,012/- whereas assessee disallowed expenditure to tune of Rs 2,65,068 and added difference to tune of Rs 1,32,944 to income of assessee and also assessed income from other sources on account of sale of piece of land by assessee but assessee was not satisfied, therefore appeal was filed before CIT(A) who confirmed 3 ITA No.2985/M/2013 A.Y. 2009-10 order of Assessing Officer, therefore assessee filed present appeal before us. ISSUE NO.1 TO 4:- 4. Under this issue assessee has challenged disallowance of expenditure to tune of R.1,32,944/-. It is necessary to advert finding of Assessing Officer in this regard on record:- 6. Disallowance u/s.14A : On perusal of records, it is seen that assessee has earned following exempt income from investments:- (1) Share of profit 10(2) Ashok L. Shah : 8,931/- (2) -do- - First Fashion : 6,91,969/- (3) Long Term Capital Gain : 3,33,594/- (4) Dividend on shares : 5,489/- (5) Dividend on mutual fund : 11,24,415/- (6) PPF Interest : 6,20,544/- TOTAL : 27,85,042/- CIT(A) has confirmed said order. contention of assessee is that Rule 8D of Act is not applicable to facts of case because assessee himself has disallowed expenditure to tune of Rs.2,65,068/- to earn exempt income. No bifurcation of expenses is on record. If bifurcation of expenses to earn exempt income is not on record therefore it is quite clear that expenses would be allowed in view of other 4 ITA No.2985/M/2013 A.Y. 2009-10 provisions of section 14A read with Rule 8D of act. On appraisal of order passed by Assessing Officer we found nothing ambiguity for application of Rule 8D of Act for calculation of expenses to earn exempt income. Assessing Officer has assessed expenditure in view of facts and circumstances of case wherein no specific expenditure has been shown to be explained to earn exempt income. Therefore, in said circumstances CIT(A) has rightly confirmed order of Assessing Officer on this issue which does not require to be interfere with at this appellate stage. ISSUE NO.5 & 6:- 5. assessee has challenged addition of income from other sources to tune of Rs.49,71,900/-. Before going further it is necessary to advert finding of CIT(A) on this issue on record:- 6. I have considered facts of case, findings in assessment order and submission made during appellate proceedings. contention of appellant cannot be accepted for following reasons:- (i) Appellant s claim that as per partnership deed dated 01.12.1996, right and ownership of industrial gala belong to appellant cannot be accepted for simple reason that this asset has 5 ITA No.2985/M/2013 A.Y. 2009-10 been constantly shown by firm, M/s. Ashok L. Shah in Balance Sheet filed from A.Y.1996-97. (ii) There was no transfer of this asset in books of firm. (iii) firm has been showing this asset regularly in its Balance Sheet and has also been claiming depreciation thereon. (iv) Even registration of property has been done in name of firm, M/s.Ashok L. Shah and not in name of individual i.e., Ashok L. Shah. (v) ownership of immovable properties cannot be transferred by any internal agreement between partners. There has to be registered legal agreement for transfer of asset. (vi) Nobody can claim ownership by inserting clause to that effect in partnership deed. sanctity of legal document cannot be challenged by any internal family arrangement. (vii) capital gain can arise only when capital asset owned by assessee is transferred. When asset itself is not owned by appellant, 6 ITA No.2985/M/2013 A.Y. 2009-10 question of capital gains in hand of appellant does not arise. above facts clearly prove that asset belong to firm and not to appellant. Therefore, capital gain cannot be assessed in hand of appellant. However, since amount has been credited in books of appellant, this is undoubtedly income in his hands. It is not case where capital gain is offered in hands of firm by filing revised return. Thus, it is not case of double taxation. gain/income has to be taxed at some place either in case of firm or in case of appellant. As no income has been offered in case of firm M/s.Ashok L .Shah, this income is rightly taxed by Assessing Officer in hands of appellant as income from other sources . Thus, action of Assessing Officer is upheld. This ground is dismissed. 6. contention of assessee is that assessee is owner of property and said property never become property of firm M/s.Ashok L. Shah and according to agreement of partnership, it is also apparent on record that said property would never became part of partnership firm of M/s. Ashok L. Shah. Therefore, in said circumstances ownership of property lies with assessee and sale of said property is liable to be 7 ITA No.2985/M/2013 A.Y. 2009-10 assessed as Long Term Capital Gain. Therefore, in said circumstances order passed by CIT(A) is wrong against law and facts and is liable to be set aside. However Ld Representative of department refuted said contention. order passed by CIT(A) speaks about this facts that said land was belonging to firm M/s. Ashok L. Shah which cannot be treated as property of assessee, therefore on account of sale, proceed was assessed as income from other sources on part of assessee i.e. Rs.49,71,900/-. No doubt CIT(A) has given some reasons which has been reproduced above but it is required to be seen that property sold by assessee is belonging to partnership firm M/s. Ashok L. Shah or not. agreement on record speaks about this facts that property was given for purpose of firm but other partners have no right of any kind on this property. CIT(A) has raised issue with regard to ownership of property and held that property was owned by firm therefore, on account of sale of said property CIT(A) has treated sale proceed as income from other sources. Anyhow, this issue has not been properly adjudicated on basis of ownership of property. Utilization of land and sale of land is quite different. Accordingly income of assessee is required to be assessed. It is not case of double taxation when income of assessee was assessed on basis of utilization and sale of land. Since matter of controversy has not been adjudicated by CIT(A) on basis title, therefore, we set 8 ITA No.2985/M/2013 A.Y. 2009-10 aside finding of CIT(A) in this regard and direct Assessing Officer to decide this issue afresh in view of said observations after giving opportunity of being heard to assessee in accordance with law. Accordingly, these issues are decided in favour of assessee . ISSUE NO.7:- 7. This issue is consequential therefore there is no need not be decide same. 8. In result, appeal filed by assessee is hereby partly allowed. Order pronounced in open court on 23rd September, 2016. Sd/- Sd/- (R.C.SHARMA) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated : 23rd September, 2016 MP Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5.DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ,ITAT, Mumbai 9 Ashok Liladhar Shah v. Assistant Commissioner of Income-tax-18(2), Mumbai
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