RAKSHA SUDHIR SHETH, MUMBAI V. ITO WD 22(2)(4), NAVI MUMBAI

ITA 1159/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2629 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MATHURIA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SM C BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J UDICIAL MEMBER ITA NO .1159/MUM/2015 (A.Y.:2008 - 09 ) SMT. RAKSHA SUDHIR SHETH, 104, RAMESHWAR, 7 TH RAJAWADI ROAD, NEELKANTH VALLEY, GHATKOPAR (EAST), MUMBAI 400 077 VS. T HE INCOME TAX OFFICER, WA RD - 22 ( 2 ) ( 4 ), TOWER - 6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI 400 703 PAN:AWPPS 9103 B APPELLANT .. RESPONDENT APPELLANT BY .. MS. MATHURIA, AR RESPONDENT BY .. SHRI JITENDRA KUMAR YADAV, DR DATE OF HEARING .. 14 - 0 7 - 2016 DATE OF PRONOUNCEMENT .. 14 - 07 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OU T OF THE ORDER OF THE CIT (A) , MUMBAI - 25 PASSED IN APPEA L NO. CIT (A) - 33 / IT/364/10 - 11 DATED 01 - 12 - 2014 . ASSESSMENT WAS FRAMED BY THE I T O , WARD - 22 ( 2 )( 4 ) , MUMBAI FOR ASSESSMENT YEAR 20 08 - 09 VIDE HIS ORDER DATED 20 - 12 - 2010 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT (A) CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF EXPENSES QUA EXEMPTED INCOME BY INVOKING THE PROVISIONS OF SECTION 14 OF THE ACT READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962 (HEREINAFTER THE RULES) 3. BRIEFLY STATED FACTS ARE THAT THE AO NOTED FROM THE ACCOUNTS OF THE ASSESSEE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.87 , 626/ - AND LONG TERM CAPITAL GAINS OF RS.4,80,827/ - . THE SAME WAS CLAIMED AS EXEMPT. ACCORDING TO THE AO , NO EXPENDITURE WAS ALLOCATED FOR EARNING OF THIS EXEMPT INCOME. AND A CCORDINGLY, HE INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8 D OF THE RULES. ACCORDINGLY, HE ITA NO . 1159 /MUM/20 1 5 2 COMPUTED THE DISALLOWANCE UNDER RULE 8 D (II) I.E. INDIRECT INTEREST ATTRIBUTABLE TO INTEREST INCOME AT RS.8,94,023/ - AND UNDER RULE 8 D (III ) I.E. 0.5% OF AVERAGE INVESTMENT AT RS.40,223/ - . THEREBY, HE DISALLOWED A SUM OF RS.9,34,245/ - . AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A), WHO SIMPLY CONFIRMED THE DISALLOWANCE. AGGRIEVED, NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE FIRST OF ALL DREW MY ATTENTION TO THE ASSESSEES CAPITAL ACCOUNT WHEREIN THE ASSESSEES TOTAL CAPIT AL IS AT RS.67,74,371/ - AS AGAINST INVESTMENT IN SHARES TO THE TUNE OF RS.31,31,195/ - . ACCORDING TO THE LEARNED COUNSEL ONCE THE ASSESSEE HAS OWN FUNDS TO THE TUNE OF RS.67,74,371/ - , WHICH IS MORE THAN THE INVESTMENT IN SHARES/SHARE APPLICATION MONEY, THE DISALLOWANCE CANNOT BE ATTRIBUTED, PARTICULARLY WHEN THE AO IS UNABLE TO PROVE THE NEXUS. I FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEES ISSUE IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC LTD. VS CIT (2016) 383 ITR 529 AND CIT VS. RELIANCE UTILITIES (2009) 313 ITR 340. IN VIEW OF THE ABOVE FACTS, I AM OF THE VIEW THAT THE ASSESSEE WAS HAVING OWN FUNDS , WHICH ARE MORE THAN THE FUNDS INVESTED IN SHARES YIELDING EXEMPTED INCOME. ACCORDINGLY, THE ISSUE BEING COVERED, I ALLOW THE CLAIM OF THE ASSESSEE. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT (A) IN GIVING DIRECTION TO THE AO TO ALLOW CONDITIONAL RELIEF IN RESPECT OF DISALLOWANCE OF ADDITION OF RS.1,78,680/ - BEING DIFFERENCE IN TH E COMMISSION EARNED FROM KOTAK SECURITIES. 6. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE DREW MY ATTENTION TO THE WRITTEN SUBMISSIONS BEFORE THE CIT (A) AND THE SAME IS REPRODUCED IN PARA 3.1 OF THE APPELLATE ORDER WHICH READS AS UNDER: - ITA NO . 1159 /MUM/20 1 5 3 3.1 . D URING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS MADE A WRITTEN SUBMISSION WHICH IS REPRODUCED HERE UNDER: .. IT IS RESPECTFULLY SUBMITTED THAT THERE IS NO SUCH ALLEGED DIFFERENCE IN PROFIT DISCLOSED BY THE APPELLANT. IN FACT, THE SAID MESSRS. KOTAK SECURITIES LTD. HAD ISSUED A STATEMENT SHOWING PROFIT EARNED BY THE APPELLANT BY TAKING GROSS VALUE OF SALES/ PURCHASES OF SHARES THROUGH THEM WITHOUT MAKING/ADDING BROKERAGE, SERVICE TAX, SURCHARGE ON SERVICE TAX, TRANSACTION CHARGES ETC. (COPY OF IMPUG NED STATEMENT IS ATTACHED HEREWITH AND MARKED AS EXHIBIT E). YOUR KIND ATTENTION IS DRAWN TO MY SUBMISSION IN PARA (3), (3.1) AND (3.2) READ WITH EXHIBIT B AND EXHIBIT C. FULL DETAILS OF NET SHARE TRADING PROFIT AS PER SCHEDULE H OF INCOME AND EXPE NDITURE ACCOUNT WAS RS.21,61,483/ - AFTER MAKING APPROPRIATE ENTRIES FOR BROKERAGE, SERVICE TAX, SURCHARGE ON SERVICE TAX, TRANSACTION CHARGES, DELIVERY CHARGES ETC. AS PER THE LAW. HE ALSO STATED THAT THE CIT (A) HAS GIVEN DIRECTION FOR VERIFICATION OF D IFFERENCE IN STATEMENT GIVEN BY KOTAK SECURITIES LTD. AND THE ACCOUNTS OF THE ASSESSEE. HE FAIRLY AGREED THAT HE HAS NO OBJECTION IF IT IS VERIFIED BY THE AO. IN TERMS OF THE ABOVE, I AM OF THE VIEW THAT CIT (A) HAS RIGHTLY DIRECTED THE AO TO VERIFY THE RE CONCILIATION AND ACCORDINGLY ALLOW THE CLAIM OF THE ASSESSEE. I FIND NO INFIRMITY IN THE DIRECTIONS OF CIT(A). 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 14 /07 / 201 6 . SD/ - ( MAHAVIR SINGH ) JUDICIAL MEMBER MUMBAI , DATED 14 /7 / 201 6 LAKSHMIKANTA DEKA/SR.PS ITA NO . 1159 /MUM/20 1 5 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI DATE INITIAL DICTATION PAD ATTACHED WITH THE DRAFT ORDER YES 1. DRAFT DICTATED ON 15 - 07 - 16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 15 - 07 - 16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT ( A), MUM BAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//