Raj Shipping Agencies Ltd. v. Addl. CIT

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The Tax Publishers2013 TaxPub(DT) 1816 (Mum-Trib) : (2014) 055 (II) ITCL 0454 : (2014) 146 ITD 0277 : (2013) 024 ITR (Trib) 0249 Income Tax Act, 1961 --Disallowance under section 14A--Expenditure against exempt income No expenditure incurred against exempt income --Assessee disclosed dividend income and claimed exemption under section 10(34). As assessee had not offered any disallowance under section 14A, assessing officer directed assessee to submit the working for disallowance under section 14A. Assessee furnished the working as directed by the assessing officer but assessing officer, however, disallowed certain amount under section 14A. Before Commissioner (Appeals), assessee submitted that it was deriving income from shipping operations and had opted for tonnage tax scheme as per the provisions of section 115VA. It also derives non-tonnage income for which direct expenditure was relatable. Since assessee had not spent any amount in earning exempt income, it was submitted that the disallowance under section 14A was not required. Income Tax Act 1961, Section 14A In the ITAT, Mumbai D Bench B. Ramakotaiah, A.M. & Sanjay Garg, J.M. Raj Shipping Agencies Ltd. v. Addl. CIT ITA No. 4868/Mum/2011 A.Y. 2008-09 15 March, 2013 Appellant by : M.M. Golvala & Sandeep Chetiwal Respondent by : D.P. Sharma, Departmental Representative ORDER *B. Ramakotaiah, A.M.* This is an appeal by the assessee against the orders of the Commissioner (Appeals)-9, Mumbai, dated 24-3-2011. The issue in this appeal is with reference to the disallowance amounting to Rs. 4,40,138 under section 14A. 2. Briefly stated, the assessee has disclosed dividend income of Rs. 1,12,84,713 and claimed exemption under section 10(34). This amount comprises of mutual fund dividend stated to be out of own sources on which no interest liability has been incurred by the assessee. As the assessee has not offered any disallowance under section 14A, the assessing officer directed the assessee to submit the working for disallowance under section 14A. While submitting that the company neither incurred any direct expenditure in relation to exempt income nor has any debit for the interest paid during the year, the assessee furnished the working as directed by the assessing officer at Rs. 4,40,138. The assessing officer while noting that the assessee does not have any secured or unsecured loans during the year and only Rs. 17,621 was claimed towards interest/finance charges however, disallowed 1/2 per cent, of Rs. 8.80 crores of average investment and disallowed the above amount under section 14A. 3. Before the Commissioner (Appeals), it was submitted that the assessee is engaged in the business of hiring and operation of vessel and is deriving income from shipping operations and has opted for tonnage tax scheme as per the provisions of section 115VA of the Income Tax Act, 1961. It also derives non-tonnage income for which direct expenditure was relatable. Since the assessee has not spent any amount in earning exempt income, it was submitted that the disallowance under section 14A is not required. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1816 (Mum-Trib) : (2014) 055 (II) ITCL 0454 : (2014) 146 ITD 0277 : (2013) 024 ITR (Trib) 0249

Income Tax Act, 1961

--Disallowance under section 14A--Expenditure against exempt income No expenditure incurred against exempt income --Assessee disclosed dividend income and claimed exemption under section 10(34). As assessee had not offered any disallowance under section 14A, assessing officer directed assessee to submit the working for disallowance under section 14A. Assessee furnished the working as directed by the assessing officer but assessing officer, however, disallowed certain amount under section 14A. Before Commissioner (Appeals), assessee submitted that it was deriving income from shipping operations and had opted for tonnage tax scheme as per the provisions of section 115VA. It also derives non-tonnage income for which direct expenditure was relatable. Since assessee had not spent any amount in earning exempt income, it was submitted that the disallowance under section 14A was not required.

Income Tax Act 1961, Section 14A

In the ITAT, Mumbai D Bench

B. Ramakotaiah, A.M. & Sanjay Garg, J.M.

Raj Shipping Agencies Ltd. v. Addl. CIT

ITA No. 4868/Mum/2011

A.Y. 2008-09

15 March, 2013

Appellant by : M.M. Golvala & Sandeep Chetiwal

Respondent by : D.P. Sharma, Departmental Representative

ORDER

B. Ramakotaiah, A.M.

This is an appeal by the assessee against the orders of the Commissioner (Appeals)-9, Mumbai, dated 24-3-2011. The issue in this appeal is with reference to the disallowance amounting to Rs. 4,40,138 under section 14A.

2. Briefly stated, the assessee has disclosed dividend income of Rs. 1,12,84,713 and claimed exemption under section 10(34). This amount comprises of mutual fund dividend stated to be out of own sources on which no interest liability has been incurred by the assessee. As the assessee has not offered any disallowance under section 14A, the assessing officer directed the assessee to submit the working for disallowance under section 14A. While submitting that the company neither incurred any direct expenditure in relation to exempt income nor has any debit for the interest paid during the year, the assessee furnished the working as directed by the assessing officer at Rs. 4,40,138. The assessing officer while noting that the assessee does not have any secured or unsecured loans during the year and only Rs. 17,621 was claimed towards interest/finance charges however, disallowed 1/2 per cent, of Rs. 8.80 crores of average investment and disallowed the above amount under section 14A.

3. Before the Commissioner (Appeals), it was submitted that the assessee is engaged in the business of hiring and operation of vessel and is deriving income from shipping operations and has opted for tonnage tax scheme as per the provisions of section 115VA of the Income Tax Act, 1961. It also derives non-tonnage income for which direct expenditure was relatable. Since the assessee has not spent any amount in earning exempt income, it was submitted that the disallowance under section 14A is not required.