INTERNATIONAL SYNTHFABS P.LTD, MUMBAI V. ACIT 6(3) PALGHAR, PALGHAR

ITA 1140/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9855 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH RAI
• Assessee Lawyers: MITESH N SHAH
• Keywords: Opportunity of being heard; Earning of tax free income; Speculation loss
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, J UDICIAL M EMBER, A ND SH RI N.K. PRADHAN , A CCOUNTANT M EMBER ITA NO . 1140 /MUM/20 16 ASSESSMENT YEAR: 20 1 0 - 11 M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 45C, MANDHANA MANOR MOGUL LANE, MATUNGA (W) MUMBAI 400 016 PAN AAACI1686B / VS. ACIT, CIRCLE - 6 (3) PALGHAR CIRCLE PALGHAR ( /ASSESSEE) ( / REVENUE) P.A. NO. AAACI1686B / ASSESSEE BY SHRI MITESH N. SHAH / REVENUE BY SHRI SAURABH RAI / DATE OF HEARING : 19 /0 3 /2018 / DATE OF ORDER: 19 / 0 3 /2018 / O R D E R PER JOGINDER SINGH ( JUDICIAL MEMBER ) T HE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 14.12.2015, OF THE FIRST APPELLATE AUTHORITY. THE M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 2 FIRST GROUND RAISED PERTAINS TO TREATING THE BUSINESS LOSS OF RS. 73,19,832, CLAIME D TO BE INCURRED BY THE ASSESSEE IN TRADING OF EQUITY DERIVATIVE INSTRUMENTS AS SPECULATION LOSS AND FURTHER ERRED IN ALLOWING CARRIED FORWARD OF SUCH BUSINESS LOSS AS SPECULATION LOSS INSTEAD OF BUSINESS LOSS. 2. DURING THE HEARING, T HE LD. COUNSEL FOR THE ASSESSEE SHRI MITESH N. SHAH, ADVANCED ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED. IT WAS PLEADED THAT THE ASSESSING OFFICER NEVER ASKED THE ASSESSEE TO PRODUCE THE MEMORANDUM OF ASSOCIATION AND, THUS, THE TREATMENT GIVEN TO THE LOSS WAS WRONG LY MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. D.R. SHRI SAURABH RAI, STRONGLY DEFENDED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER AS WELL AS IN THE IMPUGNED ORDER BY INVITING OUR ATTENTION CONTAINED IN THE IMPUGNED ORDER. 3. WE HAVE CONS IDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT THE ASSESSEE A PRIVATE LIMITED COMPANY DECLARED NIL INCOME IN ITS RETURN OF INCOME FILED ON M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 3 08.10.2010, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICE U/S 143(2) OF THE ACT WAS SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SHOWED LOSS OF RS. 1,01,53,753, ON DERIVATIVE TRANS ACTIONS OF M/S. WELSPUN GUJARAT SRL. AS PER THE REVENUE, THE ASSESSEE CLAIMED LOSS OF RS. 73,19,832 , ON SETTLEMENT DATE ON 25.03.2010, ON FUTURE SALE OF 10,49,600 SHARES OF M/S. WELSPUN GUJARAT SRL. THE CASE OF THE REVENUE IS THAT THE ASSESSEE INCORRECTLY DEBITED THE LOSS PERTAINING TO OPEN FUTURE CONTRACTS ON THE CLOSING DATE IN THE PROFIT & LOSS A/C AND, THUS, THE LOSS WAS DISALLOWED. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CLAIMED THAT THE MOA WAS NEVER ASKED BY THE ASSESSING OFFICER TO BE PRODUCED. IT WAS CONTENDED THAT THE FACTS WERE NOT PROPERLY APPRECIATED AND IF THE MOA WOULD HAVE BEEN CONSIDERED THE OUTCOME WOULD HAVE BEEN DIFFERENT. CONSIDERING THE TOTALITY OF FACT, WE DIRECT THE ASSESSEE TO PRODUCE THE NECESSARY EVIDENCE INCLUDING THE MOA BEFO RE THE ASSESSING OFFICER WHO WILL EXAMINE THE FACTUAL MATRIX AND IS DIRECTED TO DECIDE M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 4 AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD. THUS, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE NEXT GROU ND PERTAINS TO CONFIRMATION OF ADDITION OF RS. 39,28,581, DISALLOWING CERTAIN ADMINISTRATIVE EXPENSES AND CONSEQUENT INVOCATION OF THE PROVISIONS OF SECTION 14A OF THE ACT R/W RULE 8D OF THE RULES. THE CRUX OF THE ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE ONLY RECEIVED DIVIDEND INCOME OF RS. 4 LAKH AND SUO - MOTU DECLARED EXPENSES OF RS. 24,948. OUR ATTENTION WAS INVITED TO PAGE - 16 OF THE PAPER BOOK. ON THE OTHER HAND, THE LD. D.R. STRONGLY DEFENDED THE INVOCATION OF THE PROVISIONS OF SECTION 14 A OF THE ACT R/W RULE 8D OF THE RULES. IT WAS PLEADED THAT NOW THE ISSUE HAS BEEN SETTLED BY THE HON'BLE APEX COURT IN MAXOPP INVESTMENT LTD. VS CIT, CIVIL APPEALS NO.104 - 109 IF 2015, ORDER DATED 12.02.2018, THEREFORE, THE ASSESSING OFFICER MAY BE DIRECTED TO EXAMINE THE FACTS OF THE CASE OF THE ASSESSEE IN THE LIGHT OF THE AFORESAID LATEST DECISION OF THE TRIBUNAL. M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER MADE ADDITION / D ISALLOWANCE OF RS. 39,28,581, U/S 14A OF THE ACT R/W RULE 8D OF THE RULES. THE STAND OF THE REVENUE IS THAT, THE WORDS IN RELATION TO IN SECTION 14A NOT ONLY ENCOMPASSES DIRECT EXPENSES BUT ALSO INDIRECT EXPENSES WHICH HAS RELATION TO EXEMPT INCOME. IN R EPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER FOR INCURRING OF EXPENDITURE IN RELATION TO EXEMPT INCOME AND CONSEQUENCE DISALLOWANCE U/S 14A THOUGH THE ASSESSEE FURNISHED THE WORKING OF DISALLOWANCE BUT STILL THE ASSESSING OFFICER WAS NOT SATISFIED BY THE EXPLANATION OF THE ASSESSEE. THERE IS NO DISPUTE, ALL THE TRANSACTION WERE DONE THROUGH BANKING CHANNEL AND EVEN THE INVESTMENT ON WHICH DIVIDEND WAS EARNED WAS ALSO ROUTED THROUGH BANK. CONSIDERING THE TOTALITY OF FACTS WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE FACTS OF THE CASE OF THE ASSESSEE IN THE LIGHT OF THE LATEST DECISION FROM HON'BLE APEX COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA). THE ASSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBERTY TO FURNISH NECESSARY EVIDENCE , IF ANY, IN SUPPORT OF ITS CLAIM. THE ASSESSING OFFICER IS ALSO DIRECTED TO EXAMINE THE INVESTMENT, SOURCE THEREOF, AND THE EXPENSES INCURRED FOR EARNING THE DIVIDEND INCOME AND ALSO WHETHER THE INVESTMENT WAS MADE OUT OF M/S. INTERNATIONAL SYNTHFABS PVT. LTD. 6 OWN FUNDS OR INTEREST BEARING FUN DS, IN THE LIGHT OF THE AFORESAID DECISION FROM HON'BLE APEX COURT. THE ASSESSEE BEING GIVEN OPPORTUNITY TO SUBSTANTIATE ITS CLAIM. THUS, THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. T HIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19 TH MARCH , 2018. SD/ - ( N.K. PRADHAN ) SD/ - (JOGINDER SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 19/ 03 /2018 PRADEEP J. CHOWDHURY , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE ASSESSEE 2. / THE R EVENUE 3. , ( ) / THE CIT, MUMBAI. 4. / CIT(A) - , MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI