SHAILESH SHAH SECURITIES P.LTD, MUMBAI V. ASST CIT CIR 4(2), MUMBAI

ITA 1027/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1220 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Court: TRIBUNAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 1027 /MUM/20 15 (ASSESSMENT YEAR 20 10 - 11 ) M/S. SHAILESH SHAH SECURITIES PVT. LTD. 301 - 308, VEER DESAI ROAD ANDHERI WEST MUMBAI - 400 058. VS . ACIT CIRCLE 4(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAECS3607E ASSESSEE BY SHRI NEELKANTH KHANDELWAL DEPARTMENT BY S HRI AARSI PRASAD DATE OF HEARING 1 1 .4 . 201 7 DATE OF PRONOUNCEMENT 11 . 4 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.12.2014 PASSED BY THE LEARNED CIT(A) - 9, MUMBAI AND IT RELATES TO A.Y. 2010 - 11. THE SOLITARY ISSUE URGED BY THE ASSESSEE RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A SHARE BROKER. DURING THE YEAR, THE ASSESSEE EARNED TAX FREE INCOME OF ` 5,90,893/ - AND CLAIMED THE SAME AS EXEMPT. THE ASSESSEE DISALLOWED A SUM OF ` 1,77,051/ - U/S. 14A OF THE ACT WHILE FILING RETURN OF INCOME. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS COMPUTED THE DISALLOWANCE WITHOUT ANY BASIS. ACCORDINGLY, HE COMPUTED THE DISALLOWANCE U/S. 14A OF THE ACT AS PER PROVISIONS OF RULE 8D(2) OF THE INCOME TAX RULES. THE ASSESSEE CHALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER BEFORE THE LEARNED CIT(A), BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. M/S. SHAILESH SHAH SECURITIES PVT. LTD. 2 3. LEARNED AR SUBMITTED THAT THE ASSESSEE IS HOLDING PART OF SHARES AS I TS STOCK IN TRADE AND HAS ALSO MADE INVESTMENT IN GROUP COMPANIES AS STRATEGIC INVESTMENT . LEARNED AR SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS HELD IN THE CASE OF GARWARE WALL ROPES LTD. VS. ADD.CIT (46 TAXMANN.COM 18) HAS HELD THAT STRATEGI C INVESTMENT HAVE TO BE EXCLUDED FROM THE VALUE OF INVESTMENT FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/R. 8D(2) OF THE I.T. RULES . HE FURTHER SUBMITTED THAT THE COORDINATE BENCH HAS HELD IN THE CASE OF DCIT VS. INDIA ADVANTAGE SECURITIES LTD. (ITA NO. 6 711/MUM/2011 DATED 14.9.2012) THAT SECURITIES HELD AS STOCK IN TRADE CANNOT BE CONSIDERED FOR COMPUTING DISALLOWANCE U/R. 8D. HE SUBMITTED THAT THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA) HAS SINCE BEEN APP ROVED BY HON'BLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 13.4.2013 PASSED IN ITA NO. 1131 OF 2013. LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAS MADE SUO MOTO DISALLOWANCE OF ` 1.77 LAKHS WITHOUT PROPERLY UNDERSTANDING LEGAL POSITION OF THE PROVISION S OF SECTION 14A AND RULE 8D. ACCORDINGLY, HE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR COMPUTING THE DISALLOWANCE AFRESH. HE FURTHER SUBMITTED THAT HON'BLE COORDINATE BENCH HAS HELD IN THE CASE OF NIRSHILP SECURITI ES LTD. (ITA NO. 4297/MUM/2014 DATED 25.8.2016) THAT IF THE DISALL OWANCE COMPUTED U/R. 8D(III) GOES B E LOW THE DISALLOWANCE OFFERED BY THE ASSESSEE IN THE SET ASIDE PROCEEDINGS , THE ASSESSING OFFICER SHOULD COMPUTE THE DISALLOWANCE AS PER LAW AND FACTS BECA USE IT IS A TRITE LAW THAT INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE STATUTORY PROVISIONS AND NOT MERELY BY THE ACQUIESCENCE OF THE ASSESSEE. 4. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS PASSED BY THE TAX A UTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE. ACCORDING TO THE LEARNED AR, INVESTMENT HELD BY THE ASSESSEE CONSISTS OF STOCK IN TRADE, STRATEGIC INVESTMENT AND OTHER INVESTME NT. WITH REGARD TO THE STOCK IN TRADE AS WELL AS M/S. SHAILESH SHAH SECURITIES PVT. LTD. 3 STRATEGIC INVESTMENT THE ASSESSEE IS PLACING RELIANCE ON CERTAIN CASE LAWS WHICH HAVE EXPRESSED THE VIEW THAT THEY HAVE TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/R. 8D(2) OF THE I.T. RULES. HON'BLE COORDINATE BENCH HAS ALSO EXPRESSED THE VIEW IN THE CASE OF NIRSHILP SECURITIES LTD. (SUPRA) THAT THE DISALLOWANCE U/S. 14A READ WITH RULE 8D HAVE TO BE COMPUTED IN ACCORDANCE WITH THE STATUTORY PROVISIONS AND NOT MERELY BY ACQUIESCENCE OF THE ASSE SSEE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESS ING OFFICER WITH THE DIRECTION TO COMPUTE THE DISALLOWANCE AFRESH BY DULY CONSIDERING VARIOUS DECISIONS THAT MAY BE RELIED UPON BY THE ASSESSEE IN THE SET ASIDE PROCEEDINGS. IN CASE, THE DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER GOES BELOW THE DISALLO WANCE MADE BY THE ASSESSEE, THEN THE ASSESSING OFFICER SHOULD DISALLOW THE AMOUNT SO COMPUTED BY HIM ONLY AS PER THE DECISION RENDERED BY THE COORDINATE BENCH IN THE CASE OF NIRSHILP SECURITIES LTD. (SUPRA). 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 11 .4 .201 7. SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 11 / 4 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI M/S. SHAILESH SHAH SECURITIES PVT. LTD. 4 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT , MUMBAI