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TMI Blog2018 (5) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas in the instant case, it is merely reimbursement by the members to the society and, therefore, the payment in question is not liable for TDS.- Decided in favour of assessee Disallowance under section 14A - CIT-A restricted addition - Held that:- As in the instant case, the decision of the learned CIT(A) that dissatisfaction of the learned AO is not discernible, need a re-look and thus the issue needs to be reexamined by the learned CIT(A) and accordingly, we restore the issue to the file of the CIT(A) for deciding afresh in view of the decision in the case of India Bulls Financial Services Pvt. Ltd. (2016 (11) TMI 1369 - DELHI HIGH COURT). CIT(A) first may adjudicate the issue of requirement of satisfaction as to incorrectness of the claim of the assessee of having incurred no expenses towards exempt income. If he finds that the prerequisite of satisfaction is cleared, then he may decide qualification of disallowance under three parts of Rule 8D(2) in accordance with law. - ITA No.1952/Del/2014 - - - Dated:- 15-5-2018 - SH. BHAVNESH SAINI, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Appellant : Sh. S.R. Senapati, Sr. DR For The Respondent : Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, travelling, foreign travelling, telephone and electricity etc. 3.1 Before us, the Ld. DR relied on the order of the Assessing Officer and submitted that in view of the excessive claim of the expenses, the Ld. Assessing Officer was justified in disallowing expenses. 3.2 On the contrary, the Ld. counsel of the assessee relying on the finding of the Ld. CIT(A), submitted that the expenses have been disallowed on ad-hoc basis without pointing out any defects in the books of account or vouchers of those expenses, which is not permitted in law. He further referred to the order of Tribunal in the case of the assessee for assessment year 2008-09, which is placed on page 82 -105 of the paper book filed by the assessee and submitted that identical expenses disallowed in assessment year 2008-09, have been deleted by the Tribunal . 3.3 We have heard the rival submissions and perused the relevant material on record. The Assessing Officer has computed the disallowance on percentile basis. For ready reference, the chart of disallowance of expenses reproduced by the Assessing Officer in the assessment order is extracted as under: Head Claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act or there is a personal expenditure. Making of estimation for disallowance under such circumstances and facts of the case is not permissible. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) who has relied upon the following decisions: a) CIT Vs. Malayalam Plantations Ltd 53 ITR 140 (SC) b) CIT V Birla Cotton Spinning Weaving Mills Ltd 82 ITR 166 [SC] c) Madhav Prasad Jatia Vs. CIT 118 ITR 200 [SC] 8. Reliance was also placed by the Id. counsel for the assessee on the decision of the Hon'ble Supreme Court in the case of J.J. Enterprises Vs. CIT reported at 254 ITR 216 [SC] where, as per the Head Notes , it has been held as under: In its principal order, the Tribunal had concluded that the addition was unsustainable because it had been made on the basis of pure guess work . The Revenue moved the High Court under Section 256(2) of the Income-tax Act, 1961, and the High Court called for a reference on the basis that the question was a question of law. We are unable to agree with the High Court. In the first place, the Tribunal has held that the addition had been made on the basis of pure guess work and this is a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which attracts liability of deduction of tax at source (TDS) under section 194C or section 194I of the Act, and non-deduction of tax on such payment, made the assessee liable for disallowance of those expenses under section 40(a)(ia) of the Act. Accordingly, he disallowed the relevant expenditure of ₹ 7,02,261/-. The Ld. CIT(A) deleted the disallowance holding that there was no relation of contract existed between the assessee and the society in respect of maintenance charges and it was merely reimbursement to the society for expenses incurred on behalf of its members. 4.2 Before us, the Ld. DR relied on the order of the Ld. Assessing Officer and submitted that the Tax Auditor of the assessee has also advised to deduct tax at source on payments to the housing societies for maintenance of flats. 4.3 On the other hand, the Ld. counsel relied on the order of the Ld. CIT(A) and submitted that monthly maintenance charges have been paid in respect of the flats owned by the assessee in the cooperative housing societies, which are not in the nature of payment made to contractor and, therefore, not liable for TDS and consequent disallowance under section 40(a)(ia) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de cannot be treated in the nature of payment by the member to the larger body which (that is the Co-operative Society) as it would in effect mean to be paying to oneself. In view of the above discussion in its totality, the ingredients of section 194C of the Act being is not fulfilled, Section 194C of the Act is not applicable. Similarly, section 194-1 of the Act requires deduction of tax at source if the payment made constitutes income in the hands of the recipient. In the present case, payment made by the appellant to the Society (ies) does not bear the character of income since the Society (ies) works on the principle of mutuality and there exist no profit motive. In this regard, I draw support from the decision of Mitsur Shipping Agency Pvt. Ltd.(supra), wherein the Tribunal held as under: 9. We have considered the rival submissions. The payment of maintenance charses by the owner of the premises to the society can by no stretch of imagination be said to be a payment to contractor for carrvine out work on behalf of the owner of the premises. These payments were made to defray common cause. There is no contract for maintenance between the society and the owner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 14A of the Act to ₹ 90,103/-as against disallowance of ₹ 3, 00, 11, 791/-made by the Assessing Officer. 5.1 The Assessing Officer observed income of ₹ 11,01,207/- from dividend claimed as exempt under section 10(34) of the Act, ₹ 64,921/- as interest from Unit Trust of India claimed as exempt under section 10(33) of the Act and ₹ 7,45,73,635/- from long-term capital gain on sale of shares claimed as exempt under section 10(38) of the Act. No disallowance was made by the assessee in the return of income for expenses related to the income, which does not form part of the total income mentioned above. During assessment proceedings also the assessee repeated the same stand that there was no nexus between the expenses incurred and the income earned which does not form part of the total income. However, without prejudice and in the alternative an amount of ₹ 82,000/- was offered for taxation. The Assessing Officer invoking Rule 8D of Income-tax Rules, 1962 (in short the Rules ) made disallowance of ₹ 3,00,11,791/- as under: a) Direct Expense-Demat Charges [Rule-8D(i)] Rs. 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt which has been reported in (2018) 91 taxman.com 154 (SC). 5.4 On the contrary, the Ld. counsel of the assessee relied on the order of the Ld. CIT(A) and submitted that in the immediately preceding assessment year also the Tribunal has restricted the disallowance under section 14A of the Act to the extent of demat charges paid by the assessee. 5.5 We have heard the rival submissions and perused the relevant material on record. There is no dispute on the facts related to quantum of exempted income earned by the assessee. There is no dispute on the fact that in the return of income filed, the assessee has not made any disallowance out of the expenses claimed in profit and loss account, against the said exempted income. The first issue in the case is of the requirement of recording satisfaction about the incorrectness of the claim of the assessee. We do not agree with the contention of the Ld. counsel that this issue is covered by the order of the Tribunal in preceding year, because in our opinion, recording of satisfaction about incorrectness of the claim is year specific and we have to examine said satisfaction in the year under consideration also. The Ld. CIT(A) has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the decision of the learned CIT(A) that dissatisfaction of the learned AO is not discernible, need a re-look and thus the issue needs to be reexamined by the learned CIT(A) and accordingly, we restore the issue to the file of the Ld. CIT(A) for deciding afresh in view of the decision of the Hon ble High Court in the case of India Bulls Financial Services Pvt. Ltd. (supra). The Ld. CIT(A), first may adjudicate the issue of requirement of satisfaction as to incorrectness of the claim of the assessee of having incurred no expenses towards exempt income. If he finds that the prerequisite of satisfaction is cleared, then he may decide qualification of disallowance under three parts of Rule 8D(2) in accordance with law. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The ground of appeal of the Revenue is accordingly allowed for statistical purposes. 6. The ground Nos. 4 to 6, being general in nature, are not required to adjudicate upon. 7. In the result, the appeal of the Revenue is allowed partly for statistical purposes. The decision is pronounced in the open court on 15th May, 2018. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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