ASHOK KUMAR DAMANI, MUMBAI V. ACIT 4(1), MUMBAI

ITA 1244/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2897 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI ABENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PARTHASARATHY CHOUDHURY,JUDICIAL MEMBER /.ITA NO.1244/MUM/2012, /ASSESSMENT YEAR-2008-09 SHRI ASHOK KUMAR DAMANI 1 ST FLOOR, SURYA MAHAL BLDG. 5, BURJORJI BHARUCHA MARG FORT MUMBAI-400 023. PAN: AABPD 1845 K VS ACIT RANGE-4(1) AAYAKAR BHAVAN MUMBAI-400 020. ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY : SHRI HIRO RAI / REVENUE BY : SHRI S.P. WALIMBE / DATE OF HEARING : 01-09 -2015 / DATE OF PRONOUNCEMENT : 21 -10-2015 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS DT.07.12.2011OF CIT(A)-9,MUM BAI,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LD. CIT(A) ERRED IN PARTLY CONFIRMING THE AC TION OF LD. ACIT OF DISALLOWING A PART OF EXPENSE BY ATTRIBUTING THE SAME TOWARDS EARNING OF EXEMPT I NCOME. 2. WITHOUT PREJUDICE TO THE ABOVE CLAIM, THE LD. CO MMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING THE ACTION OF LD. ACIT OF TREATING THE F IGURE OF STOCK IN TRADE AS INVESTMENTS FOR THE PURPOSE OF CALCULATION OF DISALLOWANCE U/S.14A. 3. THE APPELLANT RESERVES THE RIGHT TO ADD, TO ALTE R AND TO AMPLIFY THE GROUNDS OF APPEAL. THE ASSESSEE-AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF SHARE BROKING ACTIVITIES,FILED HIS RETURN OF INCOME ON 27.09.2008,DISCLOSING TOTAL INCOME AT RS. 18,66,39,440/-/.THE ASSESSING OFFICE(AO) COMPLETED THE ASSESSMENT ON 13/12/2010,U/S.143(3)OF THE ACT,DETERMINING HIS INCOME AT RS. 18.92 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE MA DE U/S.14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD EARNED DIVIDEND INCOME OF RS.84.97 LAKHS,THAT SAME WAS CLAIMED EXEMPT U/S.10 OF THE AC T,THAT THE ASSESSEE HAD INCURRED ANY EXPENDITURE TO EARN SUCH INCOME.REFERRING TO THE PR OVISIONS OF SECTION 14A R.W.RULE 8D OF THE INCOME TAX RULES,1962 (RULES)THE AO DISALLOWED RS.7 ,58,435/- AND RS.16,26,402/-UNDER THE HEADS INTEREST EXPENDITURE AND ONE HALF % OF THE TO TAL INVESTMENT OF THE AVERAGE OF THE VALUE OF INVESTMENT RESPECTIVELY. THUS,TOTAL DISALLOWANCE OF RS.23.84 LAKHS WAS MADE BY THE AO. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,IT WAS ARGUED THAT THE I NVESTMENT WERE MADE IN AY.2000-01OUT OF OWN FUND, THAT NO LOANS WERE OUTSTANDING AS ON 31.0 3.2000,THAT BORROWED FUNDS WERE NOT USED ITA/1244/M/12-ASHOK KUMAR 2 FOR INVESTMENT,THAT BORROWED FUNDS WERE USED FOR MA RGIN MONEY FOR BUSINESS AS SHARE BROKER,THAT INTEREST WAS NOT DIRECTLY ATTRIBUTABLE TO INVESTMEN T.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE ENTIRE CAPITAL BEING INVESTED IN SECURI TIES, THAT IT WAS IMPOSSIBLE TO BELIEVE THAT OUT OF THE COMMON HOTCH POTCH OF FUNDS THE ENTIRE CAPIT AL WOULD HAVE GONE TO INVESTMENT IN SHARES WITHOUT A PART OF SHARES GOING TO THE BUSINESS, THA T IT WAS NOT CATEGORICAL AS TO HOW MUCH OF THE SUM WAS INVESTED IN BUSINESS.HE REFERRED TO CASE OF DHAPA & SONS (54 DTR 345) AND SMT. LEENA RAMACHANDRAN (45 DTR 372) AND OBSERVED THAT T HE ASSESSEE HAD NOT GIVEN ANY DETAILS TO WORK OUT THE DIRECT NEXUS OF INTEREST EXPENDITURE R ELATED TO EXEMPT INCOME, THAT THE CASE OF THE ASSESSEE WAS COVERED BY SUB SECTION 3 OF SECTION 1 4A AS WELL AS SUB SECTION 2. RELYING UPON THE DECISION OF DAGA CAPITAL MANAGEMENT (26 SOT 603) HE HELD THAT EVEN IF SHARES WERE HELD IN STOCK- IN- TRADE SAME WERE TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE.FINALLY, HE UPHELD THE DISALLOWANCE OF RS.23,84,837/- AS WORKED OUT BY THE AO. 4. BEFORE US THE AUTHORISED REPRESENTATIVE (AR) STATED THAT THE AO HAD MADE THE DISALLOWANCE WITHOUT RECORDING ANY SATISFACTION, THAT MAJORITY O F THE SHARES FORMED PART OF THE STOCK, THAT THE AVERAGE INVESTMENT OF THE ASSESSEE WAS RS.32.52 CR ORES, THAT THE DISALLOWANCE CALCULATED ON THE PART OF THE INVESTMENT WOULD NOT BE MORE THAN RS.15 ,320/-.HE RELIED UPON THE CASE OF CCI LTD. (206 TAXMANN 563) AND SMT. LEENA RAMACHANDRA (SUPRA ). DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FIND THAT THE AO HAD COMPUTED THE DISALLOWANCE CONSIDERING THE PR OVISIONS OF SECTION 14A R.W. RULE 8D, THAT THE ASSESSEE HAD SUBMITTED THAT SHARES HELD BY IT W ERE PART OF STOCK-IN-TRADE, THAT THE ASSESSEE HAD NOT PROVIDED THE DETAILED WORKING BEFORE THE AO OR THE FAA WITH REGARD TO SHARES HELD AS STOCK- IN- TRADE/INVESTMENT. WE ARE OF THE OPINION THAT DISALLOWANCE U/S. 14A CAN BE MADE ONLY WHEN THE SHARES ARE HELD AS INVESTMENT AND NOT AS S TOCK-IN TRADE. AS THE ISSUE HAS NOT BEEN DELIBERATED UPON BY THE AO IN ABSENCE OF AVAILABILI TY OF DETAILS OF SHARES HELD UNDER BOTH THE CATEGORIES, THEREFORE, IN THE INTEREST OF JUSTICE W E ARE REMITTING THE MATTER TO HIS FILE. HE IS DIRECTED TO EXCLUDE THE STOCK-IN-TRADE WHILE CALCUL ATING THE DISALLOWANCE. THE ASSESSEE IS DIRECTED TO FILE THE DETAILED WORKING OF THE STOCK IN TRADE BEFORE THE AO. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE EFFECTIVE GROUN D OF APPEAL IS ALLOWED IN FAVOUR OF ASSESSEE. AS A RESULT,APPEAL FI LED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER,2015. 21 ,2015 SD/- SD/- ( / PARTHASARATHY CHOUDHURY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 21.10.2015 . . . JV.SR.PS. ITA/1244/M/12-ASHOK KUMAR 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.