AMIT P. PANDYA, MUMBAI V. ASST CIT CIR 25(3), MUMBAI

ITA 1069/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75920 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRADEEP SAGAR
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA, AM ./I.T.A. NO. 1069/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) AMIT P. PANDYA, B/101, 1 ST FLOOR, SHYMAKUNJ, MAHAVIR NAGAR, KANDIVALI(WEST), MUMBAI-400 067 / VS. ASST. CIT, CIRCLE-25(3), INCOME TAX OFFICES, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI ./PAN : AFVPP 0474 K ( /APPELLANT ) .. ( / RESPONDENT ) ! / APPELLANT BY : SHRI PRADEEP SAGAR ! / RESPONDENT BY : SHRI M. L. PERUMAL ' # $ % & /DATE OF HEARING : 19/02/2014 '() % & / DATE OF PRONOUNCEMENT : 27/03/2014 * / O R D E R PER SANJAY ARORA, AM. THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-35, MUMBAI (C IT(A) FOR SHORT) DATED 07/12/2011, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DA TED 03/12/2010 FOR AY 2008-09. THE APPEAL RAISES AS MANY AS FOUR ISSUES PER AN EQU AL NUMBER OF GROUNDS, AND WHICH INCLUDE SUB-GROUNDS AS WELL. WE SHALL PROCEED IN S ERIATIM. 2. THE FIRST GROUND ASSAILS THE IMPUGNED ORDER FOR TREATING THE INCOME ARISING ON THE PURCHASE AND SALE OF SHARES AS BUSINESS INCOME IN-AS-MUCH AS THE SHARES ARE STATED TO BE HELD AS INVESTMENTS, SO THAT THE INCOME THERE FROM IS LIABLE TO BE ASSESSED AS 2 ITA NO.1069/MUM/2012 (A.Y. 2008-09) AMIT P. PANDYA VS. ASST. CIT CAPITAL GAINS. IT IS FURTHER ALLEGED THAT THE LD. C IT(A) HAS DECIDED THE MATTER PER A NON- SPEAKING ORDER. 3. DURING HEARING, IT WAS AT THE OUTSET INFORMED BY THE LD. AUTHORIZED REPRESENTATIVE (AR IN SHORT), THE ASSESSEES COUN SEL, ON AN ENQUIRY BY THE BENCH, THAT THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN HIS OWN CASE FOR THE PRECEDING YEAR, I.E., AY 2007-08 (IN ITA NO.391 6/MUM/2011 DATED 05/09/2012), PLACING A COPY OF THE SAID ORDER ON RECORD. WE OBSE RVE PARITY OF FACTS, WITH THE ASSESSEE DEALING IN SHARES ON F & O BASIS AS WELL A S BY WAY OF SHARE TRADING. THE MATTER HAS BEEN DISCUSSED AT LENGTH BY BOTH THE AUT HORITIES BELOW FOR THE CURRENT YEAR, AS ALSO STANDS DULY CONSIDERED BY THE TRIBUNAL IN H IS OWN CASE FOR THE PRECEDING YEAR, REFERRING TO THE DECISIONS BY THE HIGHER COURTS, AS BY THE APEX COURT IN CIT VS. MADAN GOPAL RADHEY LAL [1969] 73 ITR 652 (SC) AS WELL AS THE CIRCULAR NO. 4/2007 DATED 15/06/2007 BY THE CBDT. UNDER THE CIRCUMSTANCES, WE FIND NO REASON NOT TO ADOPT THE FINDINGS BY THE TRIBUNAL, AS WELL AS INFERENCES BY THE AUTHORITIES BELOW IN THE MATTER. WE DECIDE ACCORDINGLY, CONFIRMING THE IMPUGNED ORDE R ON THIS GROUND. 4. THE SECOND ISSUE, RAISED PER GROUND NO.2 BY THE ASSESSEE, IS IN RESPECT OF DISALLOWANCE IN THE SUM OF RS.2,22,478/- U/S. 14A R EAD WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (THE RULES HEREINAFTER). THE DISALLOW ANCE, AS ALSO CONFIRMED BY THE LD. AR, IS ONLY IN RESPECT OF ADMINISTRATIVE EXPENSES, I.E., TOWARD INDIRECT EXPENSES OTHER THAN INTEREST, ESTIMATED AT 0.5% OF THE AVERAGE INV ESTMENT, IN TERMS OF RULE 8D(2)(III). THE ASSESSEE FIRSTLY CONTENDED THAT IT HAD NOT INCU RRED ANY ADMINISTRATIVE EXPENSES FOR THE PURPOSE OF EARNING DIVIDEND INCOME, WHICH IS AT RS.4.51 LAKHS FOR THE CURRENT YEAR (REFER PB PAGE 77). AS AN ALTERNATE CLAIM, THE ASSE SSEES CASE IS THAT THE SHARES BEING HELD AS STOCK-IN-TRADE, THE PRESCRIPTION OF RULE 8D WILL NOT APPLY. THE SAID RULE, IN-AS- MUCH AS SHARES ARE HELD AS STOCK-IN-TRADE OF ITS BU SINESS AND, THUS, CONSTITUTE A BUSINESS ASSET, BECOMES INAPPLICABLE. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 WE FIRSTLY OBSERVE THAT THE ONUS TO SHOW THAT N O EXPENDITURE STANDS INCURRED IN RELATION TO INCOME NOT FORMING PART OF TOTAL INCOME LIES SQUARELY ON THE ASSESSEE. IN FACT, THE SAID EXPENDITURE MAY HAVE NO CORRELATION, MUCH LESS DIRECT OR LINEAR, WITH THE 3 ITA NO.1069/MUM/2012 (A.Y. 2008-09) AMIT P. PANDYA VS. ASST. CIT QUANTUM OF SUCH INCOME, AS EXPLAINED BY THE APEX CO URT IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 (SC) AND, FURTHER, BY THE TRIBU NAL IN THE CONTEXT OF SECTION14A IN CHEMINVEST LTD. VS. ITO [2009] 121 ITD 318 (DEL) (SB). REFERENCE IN THIS REGARD BE ALSO MADE TO THE DECISI ON IN THE CASE OF ASST. CIT VS. CITICORP FINANCE (INDIA) LTD. [2007] 108 ITD 457 (MUM). 5.2 COMING TO THE FACTS OF THE CASE, THE APPLICATIO N OF SECTION 14A READ WITH RULE 8D, WHERE THE ASSETS YIELDING TAX-EXEMPT INCOME FOR M PART OF THE ASSESSEES TRADE ASSETS, HAS BEEN A SUBJECT MATTER OF CONSIDERATION BY THE TRIBUNAL IN MANY CASES, WITH CONFLICTING DECISIONS. THE MATTER HAS ATTAINED STA BILITY, I.E., AT END OF THE TRIBUNAL, BY THE THIRD MEMBER DECISION IN THE CASE OF D. H. SECURITIES PVT. LTD. (IN ITA NOS. 5163 & 5724/M/2011 DATED 06.12.2013). REFERENCE IN THIS CONTEXT BE ALSO MADE TO THE DECISION OF DY. CIT VS. DAMANI ESTATES AND FINANCE P. LTD. [2013] 25 ITR 683 (MUM.) (TRIB.) AS SUCH, IN PRINCIPLE A DISALLOWANCE U/S. 14A READ WITH RULE 8D WOULD ARISE, OF COURSE HAVING REGARD TO THE FACTS OF THE CASE, AND TOWARD WHICH THE PROVISIONS OF SECTION 14A(2) AND 14A(3), THOUGH PROCEDURAL IN NATURE, WOULD HAVE TO BE OBSERVED, AND TOWARD WHICH WE MAY ADVERT TO THE DEC ISION IN THE CASE OF AFL (P.) LTD. VS. ASST. CIT [2013] 28 ITR (TRIB) 263 (MUM). 5.3 IN THE GIVEN FACTS AND CIRCUMSTANCES, WE ONLY C ONSIDER IF FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER (A.O.) TO ALLOW OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE BEFORE HIM. THE A.O. SHALL DECIDE THE SAME IN ACCORDANCE WITH LAW, KEEPING IN VIEW THE AFORE-REFE RRED DECISIONS, PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 6. THE THIRD ISSUE, RAISED PER GROUND NO. 3, IS IN RESPECT OF NON-CONSIDERATION OF CLAIM FOR DEPRECIATION U/S. 32(1)(II), I.E., IN RES PECT OF TENANCY RIGHTS OF A RENTED BUSINESS PREMISES. THE ASSESSEES CLAIM OF THE SAME BEING AN INTANGIBLE ASSET AND, ACCORDINGLY, ELIGIBLE FOR DEPRECIATION U/S. 32(1)(I I), STANDS DISALLOWED BY THE AUTHORITIES BELOW ON THE GROUND OF NO SUCH CLAIM HA VING BEEN RAISED BY THE ASSESSEE PER ITS RETURN/S OF INCOME, FOLLOWING THE DECISION BY THE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT [2006] 284 ITR 323 (SC). THE ASSESSEE HAS BEFORE U S PLACED RELIANCE ON THE DECISION BY THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. 4 ITA NO.1069/MUM/2012 (A.Y. 2008-09) AMIT P. PANDYA VS. ASST. CIT PRUTHVI BROKERS AND SHAREHOLDERS [2012] 23 TAXMANN.COM 23 (BOM) (COPY ON RECORD) HOLDING, AFTER CONSIDERING THE SAID DECISION BY THE APEX COURT AS WELL AS THE EARLIER DECISIONS BY IT IN THE MATTER, THAT THE SAME SHALL NOT PRECLUDE THE TRIBUNAL IN LAW TO ENTERTAIN A CLAIM FOR DEDUCTION FOR THE FIRST TIME. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE HONBLE HIGH COURT HAS CLARIFIED ON THE POWERS OF THE TRIBU NAL, SO THAT THE NON-RAISING OF A CLAIM BY THE ASSESSEE PER ITS RETURN OF INCOME DOES NOT C ONSTRAIN AN APPELLATE AUTHORITY FROM ADMITTING THE SAME WHERE THE CIRCUMSTANCES JUSTIFY IT, IN THE SENSE THAT THERE IS NOTHING MALA FIDE IN THE SAID RAISING OF THE CLAIM BEFORE IT. NO SUC H CASE HAVING BEEN MADE OUT BY THE REVENUE IN THE INSTANT CASE, WE, ACCORDINGLY , ADMITTING THE ASSESSEES CLAIM, RESTORE THE MATTER BACK TO THE FILE OF AO FOR HIS A DJUDICATION IN ACCORDANCE WITH LAW AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNIT Y OF BEING HEARD. WE MAY FURTHER CLARIFY THAT WE ARE IN DOING SO NOT IN ANY MANNER A DVERTING TO THE MERITS OF THE SAID CLAIM, BUT ONLY ENABLING A DECISION THEREON. WE DEC IDE ACCORDINGLY. 8. THE FOURTH AND THE LAST GROUND BY THE ASSESSEE I S IN RESPECT OF CLAIM FOR NON GRANT OF REBATE U/S. 88E FOR RS.19,67,634/- (I.E., RS.12,78,991/- ON F & O TRANSACTIONS AND RS.6,88,643/- ON SHARE TRANSACTIONS) ON ACCOUNT OF SECURITY TRANSACTION TAX (STT) PAID. A BROWSE OF THE ASSESSMENT ORDER (PARA 4/PAGE 17), HOWEVER, REVEALS THAT THE AO HAS IN FACT ALLOWED REBATE U/S. 88E, THE SAME STATI NG IN CLEAR TERMS WHICH BE REPRODUCED AS UNDER:- 4.1.6 .. REBATE U/S. 88E ON STT PAID OF RS.19,6 7,634/- ON THESE TRANSACTIONS IS ALLOWED.. THE BENCH, ON SEEKING CLARIFICATION IN THE MATTER, WAS INFORMED BY THE LD. AR THAT, EVEN SO NO REBATE UNDER 88E HAS BEEN ACTUALLY ALLOWED BY THE AO EITHER WHILE THE PASSING ASSESSMENT ORDER OR WHILE GIVING EFFECT TO THE ORDER OF THE FIRST APPELLATE AUTHORITY, WHOSE ORDER IS ALSO SILENT IN THE MATTER , EVEN AS A SPECIFIC GROUND (GROUND NO.4) IN ITS RESPECT STOOD RAISED BEFORE HIM. 9. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LANGUAGE OF THE SECTION 88E IS CLEAR AND UNAMBIGUOUS. HOWEVER, WE DO NOT OBSERVE ANY DISPUTE IN 5 ITA NO.1069/MUM/2012 (A.Y. 2008-09) AMIT P. PANDYA VS. ASST. CIT THE MATTER IN-AS-MUCH AS AO HAS ALLOWED THE ASSESSE ES CLAIM IN PRINCIPLE, WHICH BECOMES ALL THE MORE MAINTAINABLE IN VIEW OF THE RE VENUES STAND OF THE ASSESSEES INCOME BEING ASSESSABLE AS BUSINESS INCOME HAVING B EEN CONFIRMED BY US (REFER PARA 3 OF THIS ORDER). THE ASSESSEES GRIEVANCE, WHICH T HOUGH CANNOT BE DISCOUNTED, IS SANS ANY MATERIAL ON RECORD. THE SAME HAVING ALSO BEEN R AISED BEFORE THE FIRST APPELLATE AUTHORITY, WHICH HAS NOT DISPOSED OF THE SAME, WE O NLY CONSIDER IT FIT AND PROPER TO RESTORE THE MATTER BACK TO HIS FILE TO DECIDE THE I SSUE OF NON-GRANT OF THE REBATE U/S. 88- E, WHERE SO, CONSISTENT WITH THE LAW AND THE FACTS OF THE CASE AFTER HEARING BOTH THE SIDES. WE DECIDE ACCORDINGLY. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 27, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER ' $ /MUMBAI; +# /DATED: 27/03/2014 SHEKHAR, P.S./ # . . !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ,% ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. ' ,% / CIT CONCERNED, MUMBAI 5. -. / % #01 , & 01 ) , ' $ / DR, ITAT, MUMBAI BENCH 6. / 23 4 $ / GUARD FILE. & / BY ORDER, ' / &( ) (DY./ASSTT. REGISTRAR) , ' $ / ITAT, MUMBAI