PRANAV MUKUND SHAH, MUMBAI V. DCIT 4(2)(1), MUMBAI

ITA 1122/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0069 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Assessee Lawyers: DEEPAK N KAN ABAR
• Keywords: Transactions in derivatives
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 1 122 /MUM/ 2016 (ASSESSMENT YEAR 20 12 - 13 ) MR. PRANAV MUKUND SHAH 17, B1/2 RAJA BAHADUR MANSION , 8 AMBALAL DOSHI MARG, FORT MUMBAI - 400 0 01. PAN : AACPS1208C V S . DCIT 4(2)(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI DEEPAK N. KANABAR DEPARTMENT BY SHRI ABI RAMA KARTIKIYEN DATE OF HEARING 4 .9 . 201 8 DATE OF PRONOUNCEMENT 19 . 9 . 201 8 O R D E R PER B.R. BASKARAN (AM) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14.12.2015 PASSED BY THE LEARNED CIT(A) - 9, MUMBAI AND IT RELATES TO A.Y. 2012 - 13. GROUNDS AS WELL AS ADDITIONAL GROUND S URGED BY THE ASSESSEE RELA TE TO FOLLOWING TWO ISSUES : - (A) DISALLOWANCE OF ENTIRE EXPENSES INCURRED UNDER THE HEAD TELEPHONE, MOTOR CAR , TRAVELLING AND LEGAL FEES. (B) DISALLOWANCE U/S. 14A OF THE I.T. ACT. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A TRADER IN SHARES AND SECURITIES AND IS ALSO CARRYING ON INVESTMENT ACTIVITIES. 3. FIRST ISSUE RELATES TO DISALLOWANCE OF TELEPHONE, MOTOR CAR, TRAVELLING AND LEGAL FEES. THE ASSESSEE DISALLOWED A SUM OF ` 3,37,198/ - OUT OF TELEPHONE AND MOTOR CAR EXPENSES TOWAR DS PERSONAL NATURE. AGGREGATE AMOUNT INCURRED BY THE ASSES SEE ON TELEPHONE AND MOTOR CAR WA S ` 17,78,797/ - . HOWEVER, WHILE FURNISH ING DETAILS RELATING TO THESE EXPENSES , THAT WERE CALLED FOR BY THE MR. PRANAV MUKUND SHAH 2 ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE MENTIONED THE ENTIRE FIGURE OF ` 17,78,797/ - AS PERSONAL IN NATURE. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED ENTIRE AMOUNT OF EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD TELEPHONE AND MOTOR CAR EXPENSES , TREATING THE SAME AS PE RSONAL IN NATURE . SIMILAR LY, EXPENSES INCURRED UNDER THE HEAD TRAVELLING AND PROFESSIONAL CHARGES WERE SHOWN AS PERSONAL IN NATURE WHILE FURNISHING DETAILS BEFORE THE ASSESSING OFFICER. HENCE, THE ASSESSING OFFICER DISALLOWED TRAVELLING AND PROFESSIONAL CHARGES AGGREGATING TO ` 5,36,762/ - TREATING THE SAME AS PERSONAL IN NATURE. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. 4. IT IS THE CONTENTION OF LEARNED AR THAT THE ASSESSEE HAS BEEN INCURRING SIMILAR TYPE OF EXPENSES IN OTHER YEARS ALSO AND THE SAME H AS BEEN ALLOWED BY THE ASSESSING OFFICER. WITH REGARD TO TELEPHONE AND MOTOR CAR EXPENSES, THE LD A.R SUBMITTED THAT THE ASSESSEE H I M SELF HAS VOLUNTARILY DISALLOWED A PORTION OF EXPENSES TREATING TOWARDS PERSONAL ELEMENT. HE SUBMITTED THAT , WHILE FURNISHI NG DETAILS OF EXPENSES BEFORE THE ASSESSING OFFICER, THE ACCOUNTANT OF THE ASSESSEE HAS INADVERTENTLY CLASSIFIED ALL EXPENSES UNDER THE HEAD PERSONAL EXPENSES . HE SUBMITTED TH A T IT IS A MISTAKE COMMITTED BY THE ACCOUNTANT OF THE ASSESSEE AND HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PLACING RELIANCE ON THE STATEMENT BY DISREGARDING THE PURPOSE OF EXPENSES. 5. THE LEARNED DR, ON THE CONTRARY, SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT THERE IS MERIT IN THE CONTENTION S OF THE ASSESSEE. THE ASSESSING OFFICER, IN OUR VIEW, IS REQUIRED TO EXAMINE THE CLAIM OF EXPENSES IN ACCORDANCE WITH THE CONDITION S PRESCRIBED UNDER VARIOUS PROVISIONS OF THE ACT. IT IS THE CONTENTION OF THE A SSESSEE THAT SIMILAR EXPENSES HAVE BEEN CLAIMED IN OTHER YEARS AND THEY HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAS VOLUNTARILY DISALLOWED A PORTION OF EXPENSES TOWARDS PERSONAL ELEMENT MR. PRANAV MUKUND SHAH 3 AND THE REMAINING EXP ENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS ONLY. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN PLACING RELIANCE ON THE DESCRIPTION GIVEN TO THE DETAILS OF EXPENSES , WHICH HAS BEEN CLAIMED TO BE AN INADVERTENT ERROR. WE NOTICED THAT THE LEARNED CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE WITHOUT ADDRESSING VARIOUS CONTENTIONS RAISED BY THE ASSESSEE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATI ON 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 ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW BY DULY TAKING INTO CONSIDERATION THE DECISION TAKEN BY THE ASSESSING OFFICER IN OTHER YEARS. 7 . NEXT ISSUE RELATES TO DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S. 14A OF THE ACT. THE ASSESSEE DECLARED DIVIDEND INCOME OF ` 90.18 LAKHS AND CLAIMED THE SAME AS EXEMPT. HOWEVER, THE ASSESSEE DID NOT DISALLOW THE EXPENDITURE AS PER REQUIREMENT OF SECTION 14A OF THE ACT. HENCE, THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE U/S. 14A OF THE ACT AS PER PROVISIONS OF RULE 8D AND DISALLOWED A SUM OF ` 5,77,064/ - OUT OF INTEREST EXPENSES UNDER RULE 8D(2)(II) OF THE I.T. RULES AND FURTHER DISALLOWED A SUM OF ` 4,29,982/ - OUT OF ADMINISTRATIVE EXPENSES U/R.8D(2)(III) OF THE I.T. RULES. THUS THE ASSESSING OFFICER DISALLOWED A SUM OF ` 10.06 LAKHS U/S. 14A OF THE ACT . THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. 8 . LEARNED AR SUBMITTED THAT INTEREST EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE ` 23.84 LAKHS AND ENTIRE INTEREST EXPENSES HAVE BEEN INCURRED ON THE MARGIN MONEY PAID BY IT FOR F&O TRANSACTIONS. HE SUBMITTED THAT F&O TRANSACTION DOES NOT YIELD ANY DIVIDEND INCOME AND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING INTEREST EXPENDITURE FOR THE PURPOSE OF COMPUTING DISALLOWANCE. LEARNED AR SUBMITTED THAT DISALLOWANCE OF INTEREST EXPENDITURE U/R. 8D(2)(II) OF THE I.T. RULES SHALL BE MADE ONLY OUT OF INDIRECT INTEREST EXPENDITURE WHICH ARE NOT MR. PRANAV MUKUND SHAH 4 DIRECTLY RELATED TO ANY SPECIFIC ACTIVITIES. ACCORDINGLY, LEARNED AR CONTENDED THAT THE I MPUGNED INTEREST EXPENDITURE PAID FOR F& O ACTIVITIES , BEING EXPENDITURE DIRECTLY RELATED TO TAXABLE ACTIVITY, WILL NOT FALL IN THE CATEGORY OF INDIRECT INTEREST EXPENDITURE TO BE CONSIDER FOR DISALLOWANCE U/R. 8D(2)(II) OF THE I.T. RULES. THE LEARNED AR PLACED RELIANCE ON THE DECISION RENDERED B Y COCHIN BENCH OF THE ITAT IN THE CASE OF GEOJIT INVESTMENT SERVICES P. LTD. (2014) 50 TAXMNN.COM 150, WHEREIN IT WAS HELD THAT INTEREST EXPENDITURE DIRECTLY ATTRIBUTABLE TO TAXABLE INCOME WHICH REQUIRES TO BE EXCLUDED FOR THE PURPOSE OF RULE 8D(2)(II). 9 . IN THE ALTERNATIVE, LEARNED AR SUBMITTED THAT THE ASSESSEE HAS ALSO EARNED INTEREST INCOME OUT OF BANK FDS, BONDS, DEBENTURES ETC. AND THE SAME HAS TO BE NETTED OFF FOR THE PURPOSE OF TAKING INTEREST EXPENDITURE U/R. 8D(2)(II). IN THIS REGARD, LEARNED A R TOOK SUPPORT OF THE DECISION RENDERED IN THE CASE OF NIRMA CREDIT & CAPITAL P. LTD. VS. ACIT (2017) 85 T AXMAN N .COM 72. 10 . THE LEARNED DR ON THE CONTRARY SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 11 . WE NOTICED THAT THE ASSESSEE HAS CLAIMED BE FORE US THAT INTEREST EXPENDITURE INCURRED BY HIM FOR F&O ACTIVITY. INCOME FROM F&O ACTIVITY IS TAXABLE AND ALSO IT IS IN THE KNOWLEDGE OF EVERYONE THAT F&O ACTIVITY DOES NOT YIELD ANY DIVIDEND INCOME. IN THAT CASE , INTEREST EXPENDITURE IS NOT REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/R. 8D(2)(II) AS PER DECISION RENDERED BY COCHIN BENCH OF THE ITAT IN THE CASE OF GEOJIT INVESTMENT SERVICES P. LTD. (SUPRA) . HOWEVER, WE NOTICED THAT THIS PARTICULAR CLAIM OF THE ASSESSEE HAS NOT B EEN EXAMINED BY THE ASSESSING OFFICER. IN OUR VIEW THAT SAME REQUIRES EXAMINATION AND IF THE CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT, THEN ENTIRE INTEREST EXPENDITURE SHOULD NOT BE CONSIDERED FOR COMPUTING DISALLOWANCE U/R. 8D(2)(II) OF THE I.T. RULES . SINCE THIS MATTER REQUIRES EXAMINATION, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE MR. PRANAV MUKUND SHAH 5 DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE DECISION REFER RED SUPRA AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. BEFORE THE ASSESSING OFFICER THE ASSESSEE IS FREE TO RAISE HIS ALTERNATIVE CONTENTION WITH REGARD TO NETTING OFF INTEREST. 12. SINCE WE HAVE RESTORED THE ISSUE RELATING TO INTEREST EXP ENSES, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE OUT OF ADMINISTRATIVE EXPENSES U/S 8D(2)(III) ALSO REQUIRES FRESH EXAMINATION. ACCORDINGLY WE RESTORE THE SAID ADDITION ALSO TO THE FILE OF THE AO. 1 3 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSE S . ORDER HAS BE EN PRONOUNCED IN THE COURT ON 19 . 9 . 201 8 . SD/ - SD/ - (RAMLAL NEGI) (B.R.BASKARAN) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DAT ED : 19 / 9 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI