ADDL CIT RG 1(2), MUMBAI V. MONEY MATTERS ADVISORY SERVICES LTD, MUMBAI

ITA 135/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7816 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDE
• Keywords: Unexplained cash credit; Business income; Earning of tax free income; Additional evidence
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 135 /MUM/20 1 3 ASSESSMENT YEAR: 2008 - 2009 THE ACIT, CIRCLE 1(1)(1), ROOM NO. 579, AAYKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 VS. M/S CAPRI GLOBAL AD VISORY SERVICES PRIVATE LIMITED (FORMERLY KNOWN AS MONEY MATTERS ADVISORY SERVICES LTD.), 1 - B, 1 ST FLOOR, COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI - 400020 PAN: AACCP2478C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K. MADHUSUDAN (CIT DR) ASSESSEE BY : SHRI ARVIND SONDE ( A R) DATE OF HEARING: 29/11 /201 7 DATE OF PRONOUNCEMENT: 22 / 12 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE RE VENUE AGAINST ORDER DATED 25/10/2012 PASSED BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) - 2 , MUMBAI FOR THE A S S ESSMENT YEAR 20 08 - 2009 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN F INANCIAL A DVISORY S ERVICES AND DEALING IN SHARES AND SECURITIES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 DECLARIN G THE TOTAL INCOME OF RS. 59,35,03,416/ - . THE AO AFTER MAKING DISALLOWANCES/ADDITIONS DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,80,58,61,650/ - . THE ASSESSMENT ORDER 2 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 WAS CHALLENGED BEFORE THE LD. CIT (A) IN THE FIRST APPEAL . T HE LD. CIT (A) PARTL Y ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION OF RS. 14,00,00,000/ - MADE BY THE AO AS UNEXPLAINED CREDIT ON ACCOUNT OF PREFERENCE SHARE CAPITAL ISSUED BY THE ASSESSEE COMPANY , DELETED THE ADDITION OF RS. 1,37,40,20,114/ - MADE AS UNEXPLAINED CASH CREDIT ON ACCOUNT OF UNSECURED LOAN OBTAINED FROM VARIOUS CREDITORS, DELETED THE ADDITION OF RS. 2,35,63,568/ - MADE ON ACCOUNT OF INTEREST EXPENDITURE, DELETED THE ADDITION OF RS. 7,00,000/ - MADE ON ACCOUNT OF BROKERAGE EXPENSES FOR ARRANGING PREFERENCE SHARES . THE LD. CIT(A) FURTHER DIRECTED THE AO TO TREAT THE INCOME OF RS. 33,96,96,628/ - AS SHORT TERM CAPITAL GAIN AND NOT THE INCOME UNDER THE HEAD BUSINESS OR PROFESSION AS HAD BEEN HELD BY THE AO. REGARDING ADDITION U/S 14A, THE LD. CIT(A) HELD THAT N O DISALLOWANCE U/S 14A NEEDS TO BE MADE WITH REGARD TO THE TAX FREE INVESTMENTS FROM WHICH NO TAX FREE INCOME IS EARNED IN THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND DIRECTED THE AO TO EXCLUDE TAX FREE INVESTMENTS FROM WHIC H NO TAX FREE INCOME WAS EARNED . THE LD. CIT(A) FURTHER DIRECTED TO PRODUCE THE NECESSARY DETAILS REQUIRED FOR THE WORKING. 3. A GGRIEVED BY THE ORDER OF LD. CIT (A) , THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROU NDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 14,00,00,000/ - AS UNEXPLAINED CASH CREDIT U/S 68 ON ACCOUNT OF PREFERENCE SHARE CAPITAL ISSUED WITHOUT GIVING THE FACTS ON MERITS OF THE CASE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 1,37,40,20,114/ - AS UNEXPLAINED CASH CREDIT U/S 68 ON ACCOUNT OF UNSECURED LOAN WITHOUT GIVING THE FACTS ON MERITS OF THE CASE 3 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 2,35,63,568 / - AS UNEXPLAI NED CASH CREDIT U/ S 68 ON ACCOUNT OF INTEREST PAID TO THE PARTIES IN WHICH THE UNSECURED LOANS IS ASSESSED AS ASSESSEES INCOME U/S 68 WITHOUT GIVING THE FACTS ON MERITS OF THE CASE? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT (A) ERRED IN HOLDING THAT SECTION 14A OF THE I.T. ACT CANNOT BE APPLIED TO EXPENDITURE I NCURRED IN RELATION TO TAX FREE DIVIDEND INCOME AS THERE WAS NO TAX FREE DIVIDEND INCOME EARNED OR RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATI ON WHICH IS CONTRARY TO THE JUDGMENT OF SPECIAL BENCH OF HONBLE ITAT, NEW DELHI IN THE CASE OF CHEMINVEST LTD., AS REPORTED IN (2009) 121 ITD 318 (DELHI) (SB) IN WHICH THE SPECIAL BENCH OF THE TRIBUNAL HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY REPORTED IN 115 ITR 522 (SUPREME COURT)? 4.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT CONSIDERING THE DECISION IN THE CASE OF M/S GODREJ & BOYCE MFG. C O. LTD. )2010) (328 ITR 80 (BOM), WHERE IN ITS HAS HELD THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, BY VIRTUE OF THE PROVISIONS OF SECTION 14A(A) OF THE I.T. ACT?. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 7,00,000/ - BEING BROKERAGE PAID FOR ARRANGING THE PREFERENCE SHA RE CAPITAL IN THE LIGHT OF PREFERENCE SHARE CAPITAL AMOUNTING TO RS. 14,00,00,000/ - HAS BEEN TREATED AS UNEXPLAINED CASH CREDIT AND THEREFORE THE BROKERAGE EXPENDITURE IS NOT RELATED TO ASSESSEES BUSINESS? 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING INCOME ASSESSED BY THE ASSESSING OFFICER AS BUSINESS INCOME OF RS. 33,96,98,628 AS 4 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 AGAINST CLAIM OF ASSESSEE AS SHORT TERM CAPITAL GAIN IN THE LIGHT OF THE FACTS THAT THE INVESTMENTS MADE BY THE ASSE SSEE OUT OF COMMON FACTS AND IN THE BACKDROP OF SUBSTANTIAL TRADING TRANSACTION OF SHARES MADE BY THE ASSESSEE ARE UNASCERTAINABLE TO WHICH PURCHASES ARE BEING MADE FOR INVESTMENTS AND TO WHICH ARE MADE BY INVESTMENT? 4. BEFORE US, THE LD. DEPARTMENTAL R EPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT THE LD. CIT (A) WRONGLY DELETED T HE ADDITION OF RS. 14,00,00,000/ - MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON ACCOUNT OF PREFERENCE SHARE CAPITAL ISSUE AND RS. 1,37,40,20 ,114/ - AS UNEXPLAINED CASH CREDIT U/S 68 ON ACCOUNT OF UNSECURED LOAN . THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,35,63,568/ - MADE BY THE AO AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON ACCOUNT OF INTE REST PAID TO THE PARTIES. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT (A) ERRED IN HOLDING THAT SECTION 14A OF THE ACT CANNOT BE APPLIED TO EXPENDITURE INCURRED IN RELATING TO TAX FREE DIVIDEND INCOME WHERE NO DIVIDEND INCOME WAS EARNED OR RECEIVED BY TH E ASSESSEE DURING THE YEAR UNDER CONSIDERATION, WHICH IS CONTRARY TO THE JUDGMENT OF SPECIAL BENCH OF ITAT, NEW DELHI IN THE CASE OF CHEMIVEST LTD. THE LD. DR FURTHER ARGUED THAT THE LD. CIT (A) HAS ERRED IN NOT CONSIDERING THE DECISION IN THE CASE OF M/S GODREJ & BOYCE MFG. CO. LTD. 328 ITR 80 (BOM). THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS. 7,00,00 0 / - BEING BROKERAGE PAID FOR ARRANGING THE PREFERENCE SHARES IN THE LIGHT OF THE PREFERENCE SHARE CAPITAL AMOUNTING TO RS. 14,00,00,0 00/ - . THE LD. DR FURTHER CONTENDED THAT THE LD. CIT (A) HAS ERRED IN DELETING THE INCOME ASSESSED BY THE AO AS BUSINESS INCOME OF RS. 33,96,98,628/ - AS AGAINST THE CLAIM OF THE ASSESSEE AS SHORT TERM CAPITAL GAIN IN THE LIGHT OF THE FACT THAT THE INVESTMEN T MADE BY THE ASSESSEE OUT OF COMMON FUNDS AND IN THE BACKDROP OF SUBSTANTIAL TRADING TRANSACTION OF SHARES MADE BY THE ASSESSEE AS UNSUSTAINABLE. 5 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES APPEAL IS COVERED B Y THE ORDER DATED 18.05.2017 PASSED BY THE ITAT MUMBAI IN ASSESSEES OWN CASE S ITA NO 1019/MUM/2013 AND ITA NO 1020/MUM/2013 FOR THE A.Y. 2008 - 09 AND 2009 - 10 RESPECTIVELY . THE LD. COUNSEL FURTHER SUBMITTED THAT THE TRIBUNAL HAS DEALT WITH ALL THE GROUNDS T AKEN BY THE ASSESSEE IN THE PRESENT APPEAL AND HAS DECIDED THE SAID GROUNDS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SINCE, THE FINDINGS OF THE LD. CIT(A) ON ALL THE ISSUES ARE IN ACCORDANCE WITH THE FINDINGS OF THE ITAT, THE PRESENT APPEAL FILED BY THE REVENUE DESERVES DISMISSAL BEING DEVOID OF MERIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RESPECTIVE CONTENTIONS OF THE PARTIES. WE NOTICE THAT THE CO - ORDINATE BENCH HAS DECIDED THE APPE AL S FILED BY THE REVENUE IN ASSESSEES OWN CASES FOR THE ASSESSMENT YEARS 2 008 - 09 AND 2009 - 10 IN WHICH THE DEPARTMENT HAD RAISED THE IDENTICAL ISSUE S. WE FURTHER NOTICE THAT THE CO - ORDINATE BENCH HAS DECIDE D THE IDENTICAL ISSUES IN FAVOUR OF THE ASSESSEE A ND AGAINST THE REVENUE. 7. GROUND NO I OF THE PRESENT APPEAL PERTAINS TO THE ADDITION OF RS. 14,00,00,000/ - MADE AS UNEXPLAINED CREDIT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ISSUED 2,80,000 PREFERENCE SHARES OF RS.100/ - EACH AT A PREMIUM O F RS.400/ - PER SHARE TO A COMPANY NAMED M/S APEX TRADE EXIM P P VT. LTD, KOLKATT A AND THUS COLLECTED A SUM OF RS.14.00 CRORES. THE AO MADE ENQUIRIES THROUGH ADIT (INV.) SITTING IN KOLKATTA. THE ADIT REPORTED THAT HE HAD DEPUTED HIS INSPECTOR TO MAKE ENQU IRIES AND THE INSPECTOR HAS REPORTED THAT NO SUCH COMPANY EXISTED AT THE ADDRESS GIVEN. EVEN THOUGH THE ASSESSEE PLEADED THAT THE SAID COMPANY IS EXISTING AND IS REGULARLY FILING ITS ANNUAL RETURNS, YET THE AO ASSESSED THE SUM OF RS.14.00 CRORES AS UNEXPL AINED CASH CREDIT U/S 68 OF THE ACT. BEFORE LD CIT(A), THE ASSESSEE 6 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 FURNISHED ALL THE DETAILS RELATING TO M/S APEX TRADE EXIM P LTD, FROM WHOM IT HAD RECEIVED THE MONEY FOR ISSUING PREFERENCE SHARE CAPITAL. THE LD CIT(A) CONFRONTED THE SAME WITH THE AO A ND THE ASSESSING OFFICER, AFTER ANALYZING THE EVIDENCES GAVE A FINDING THAT IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE SUBSCRIBER OF THE PREFERENCE SHARE CAPITAL HAS BEEN PROVED. HENCE THE LD CIT(A) DELETED THE ADDITION OF RS.14.00 CRORES. THE REV ENUE IS AGGRIEVED BY THIS DECISION TAKEN BY LD CIT(A). 8. THIS GROUND IS IDENTICAL TO THE GROUND NO 1 OF THE REVENU E S APPEAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09. THE FACTS RELATING TO THE SAME ARE ALSO IDENTICAL. THE CO - ORDINATE BEN CH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN HIS REMAND REPORT, THE AO HAD HELD THAT THERE WAS NO DOUBT OF THE TRANSACTION, IDENTI TY OF THE CREDITOR OR THE CREDIT WORTHINESS OF THE LENDERS, THAT THE FAA HAD DELETED THE ADDITION ON THE BASIS OF REMAND REPORT OF AO, THAT HE HAD FORWARDED THE ADDITIONAL EVIDENCES TO THE AO. IF THE AO HIMSELF HAD ADMITTED THAT THE ASSESSEE HAD PROVED THE GENUINENESS OF THE TRANSACTIONS AND OTHER INGREDIENTS FOR NOT ATTRACTING THE PROVISIONS OF SECTION 68 OF THE ACT, THEN WHERE WAS THE JUSTIFICATION FOR FILING THE APPEAL BEFORE THE TRIBUNAL. WE DO NOT SEE ANY FACTUAL OR LEGAL INFIRMITY IN THE ORDER OF THE FAA AND THEREFORE, DISMISS THE FIRST GROUND, RAISED BY THE AO. 9 . IN THE PRESENT CASE ALSO THE LD. CIT (A) SOUGHT REMAND REPORT FROM THE AO AND ON THE BASIS OF THE REPORT, THE LD. CIT (A) HAS DECIDED THE GROUND IN FAVOUR OF THE ASSESSEE. FACTS OF THE C ASE BEING IDENTICAL, THE LD. CIT(A) HAS RIGHTLY DECIDE D THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN VIEW OF THE FACT THAT THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDANCE WITH THE DECISION OF THE CO - ORDINATE BENCH RENDERED IN THE ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, WE DO NOT FIND ANY R EASON TO DEVIATE FROM THE 7 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 DECISION RENDERED BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE . HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL THE CASE AF ORESAID, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 10 . THE SECOND GROUND PE RTAINS TO DISALLOWANCE OF RS. 1 37,40,20,114/ - AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON ACCOUNT OF UNSECURED LOAN S . THE AS SESSEE HAD TAKEN UNSECURED LOANS FROM VARIOUS PERSONS AGGREGATING TO RS.137.40 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE ENQUIRIES BY DEPUTING HIS INSPECTOR AND ALSO BY ISSUING SUMMONS. THE RESULTS OF THOSE ENQUIRIES WERE NOT SATIS FACTORY AND HENCE THE AO ASSESSED THE ABOVE SAID AMOUNT OF RS.137.40 CRORES AS UNEXPLAINED CASH CREDIT. BEFORE LD CIT(A), THE ASSESSEE FURNISHED ALL THE DETAILS AND ALSO FURNISHED EXPLANATIONS WITH REGARD TO THE VARIOUS OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER. HENCE THE LD CIT(A) CONFRONTED THOSE EVIDENCES WITH THE AO. THE ASSESSING OFFICER EXAMINED THE EVIDENCES DURING THE COURSE OF REMAND PROCEEDIN GS AND REPORTED THAT THE IDENTIFY & CREDIT WORTHINESS OF THE CREDITORS ARE PROVED AND THE GENU INENESS OF TRANSACTIONS WERE ALSO ESTABLISHED. ACCORDINGLY THE LD CIT(A) DELETED THE ABOVE SAID ADDITION. THE REVENUE IS AGGRIEVED WITH THIS DECISION OF LD CIT(A). 11. THIS GROUND OF APPEAL IS IDENTICAL TO THE SECOND GROUND OF APPEAL OF THE REVENUE FIL ED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09(SUPRA). THE FACTS RELATING TO THE ISSUE ARE ALSO IDENTICAL. THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE HOLDING AS UNDER: - 3. SE COND GROUND OF APPEAL DEALS WITH DELETING THE ADDITION OF RS. 14.89 CRORES AS UNEXPLAINED CASH CREDIT MADE U/S 68 ON ACCOUNT OF UNSECURED LOANS. DURING THE ASSESSMENT PROCEEDINGS THE AO ADDED RS. 14,89,08,059/ - TO THE TOTAL INCOME OF THE ASSESSEE HOLDING T HE SAME AS 8 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 UNEXPLAINED CASH CREDITS. HE MADE ENQUIRIES WITH VARIOUS CREDITORS AND ARRIVED AT THE CONCLUSION THAT THE DISPUTED AMOUNT, WAS HIT BY THE PROVISIONS OF SECTION 68 OF THE ACT. ACCORDINGLY, HE MADE THE ADDITION AS STATED EARLIER. 3.1 DURING THE A PPELLATE PROCEEDINGS THE ASSESSEE FILED DETAILS ABOUT THE CREDITORS AND CALLED FOR A REMAND REPORT. AFTER CONSIDERING THE SAME HE HELD THAT ALL THE CREDITORS WERE HAVING PAN, THAT THE AO HAD LISTED THE SOURCES, ALL SOURCES FOR GIVING LOAN TO THE ASSESSEE, THAT HE HAD GIVEN A CATEGORICAL FINDING THAT ALL THE CREDITORS EXCEPT ONE WERE HAVING SUFFICIENT FUNDS TO ADVANCE LOANS, THAT IN CASE OF REMAINING ONE CREDITOR THE ASSESSEE HAD FILED BANK STATEMENT INDICATING THAT THE MONEY WAS RECEIVED THROUGH BANKING CHA NNEL, THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS COULD NOT CARRYOUT PROPER VERIFICATION, THAT DURING REMAND PROCEEDINGS HE HAD GIVEN A CATEGORICAL FINDINGS THAT THE TRANSACTION IN QUESTION WERE GENUINE. THE FAA DELETED THE ADDITION MADE BY TH E AO. 12 . IN THE PRESENT CASE ALSO, THE LD. CIT (A) SOUGHT REMAND REPORT FROM THE AO AND ON THE BASIS OF THE REPORT, THIS GROUND WAS DECIDED IN FAVOUR OF THE ASSESSEE. FACTS OF THE CASE BEING IDENTICAL, THE LD. CIT(A) HAS RIGHTLY DECIDE D THIS ISSUE IN FA VOUR OF THE ASSESSEE AND DELETED THE ADDITION . IN VIEW OF THE FACT THAT THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDANCE WITH THE DECISION OF THE CO - ORDINATE BENCH RENDERED IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, WE DO NOT FIND ANY REAS ON TO DEVIATE FROM THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL AFORESAID, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APP EAL OF THE REVENUE. 13 . THIRD GROUND OF APPEAL PERTAINS TO ADDITION OF RS. 2,35,63,568/ - MADE BY THE AO RELATING TO INTEREST EXPENSES ON UNEXPLAINED CASH CREDIT S. THIS GROUND OF APPEAL IS IDENTICAL TO GROUND NO 3 OF THE REVENUES APPEAL IN THE ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YEAR 2008 - 09(SUPRA). THE CO - 9 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER: - 4. THIRD GROUND IS ABOUT DELETING THE ADDITION OF RS. 33.43 LAKHS ON ACCOUNT OF INTEREST P AID TO VARIOUS PARTIES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD INCURRED NET INTEREST EXPENSES OF RS. 2.65 CRORES THAT SAME HAD BEEN DEBITED IN THE P & L ACCOUNT UNDER THE HEAD FINANCIAL CHARGES. THE AO DISALLOWED INTEREST EXPENSES OF RS. 33,8 4,562/ - ON THE GROUND THAT THE SAID INTEREST PAYMENT WERE MADE TO PAPER COMPANIES. 4.1 IN THE APPELLATE PROCEEDINGS IT WAS ARGUED THAT INTEREST WAS PAID TO CREDITORS WHO HAD ADVANCED LOANS TO ASSESSEE AND THAT THE TRANSACTIONS WERE NOT IN DOUBT. AFTER CON SIDERING THE AVAILABLE MATERIAL THE FAA HELD THAT THERE WAS NO JUSTIFICATION TO DISALLOW INTEREST EXPENDITURE THAT THE INTEREST WAS PAID TO CREDITORS WHOS GENUINENESS WAS ACCEPTED BY THE AO. HE DIRECTED THE AO TO DELETE THE IN TEREST EXPENDITURE OF 33.84 L AK H. 4.2. IN THE EARLIER PARAGRAPH WHILE ENDORSING THE ORDER OF THE FAA, WE HAVE HELD THAT THE LOAN TRANSACTIONS WERE GENUINE. THEREFORE, IN OUR OPINION, THERE WAS NO JUSTIFICATION IN MAKING DISALLOWANCE UNDER THE HEAD INTEREST EXPENDITURE FOR THE SAID CR EDITORS. THIRD GROUND STANDS DISMISSED. 14. IN THE EARLIER PARAGRAPHS WE HAVE NOTICED THAT THE LD CIT(A) HAS DELETED THE ADDITION OF LOAN AMOUNTS AND CONSEQUENTLY THE INTEREST PAYABLE ON THOSE LOANS WAS HELD TO BE ALLOWABLE AS DEDUCTION. SINCE , WE HAVE UPHELD THE VIEW TAKEN BY THE LD CIT(A) WITH REGARD TO THE ADDITION OF LOAN AMOUNTS, WE ALSO UPHOLD THE ORDER PASSED BY LD CIT(A) IN DELETING THE DISALLOWANCE OF INTEREST EXPENDITURE. 1 5 . GROUND NO. 4 AND 4.1 PERTAIN TO DISALLOWANCE U/S 14A OF THE ACT RE AD WITH RULE 8D OF THE INCOME TAX RULES 1962 (RULES). THIS GROUND IS IDENTICAL TO GROUND 4 OF THE REVENUES APPEAL IN THE ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YEAR 2008 - 09(SUPRA). AS IN THE EARLIER YEAR, THE AO COMPUTED THE DISALLOWANCE U/S 14 A OF THE ACT AS PER RULE 8D OF IT RULES. THE LD CIT(A) HELD 10 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 THAT THE DISALLOWANCE OUT OF INTEREST EXPENDITURE AND ADMINISTRATIVE EXPENSES IS CALLED FOR. HOWEVER, BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DELITE ENTERPRISES (IT A NO.110 OF 2009 DATED 26 - 02 - 2009), THE LD CIT(A) HELD THAT NO DISALLOWANCE IS REQUIRED TO BE MADE IN RESPECT OF TAX FREE INVESTMENTS FROM WHO NO TAX FREE INCOME WAS EARNED. ACCORDINGLY HE DIRECTED THE AO TO EXCLUDE THE INVESTMENTS FROM WHICH NO EXEMPT IN COME WAS EARNED. IDENTICAL VIEW HAD BEEN TAKEN BY LD CIT(A) IN AY 2008 - 09 ALSO. THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER 5 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE FAA AND MADE DETAILED SUBMISSIONS. HE DIRECTED THE ASSESSEE TO ESTABLISH THE DIRECT NEXUS BETWEEN THE NON - INTEREST BEARING FUNDS AND THE INVESTMENT IN TAX EXEMPT INCOME. THAT THE ASSESSEE COULD NOT FILE DETAILS IN THAT REGARD, SO, HE HELD TH AT TAX FREE INVESTMENTS WERE MADE OUT OF THE COMMON FUNDS, THAT INTEREST EXPENDITURE HAD TO BE WORKED OUT AS PER RULE 8D (2)(II) OF THE RULES. REFERRING TO THE MATTER OF DELIGHT ENTERPRISES (ITA NO. 110 OF 2009, DT. 26/12/2009) OF HONBLE BOMBAY HIGH COURT HE HELD THAT NO DISALLOWANCE U/S 14A WAS TO BE MADE WITH REGARD TO TAX FREE INVESTMENT FROM WHICH NO EXEMPT INCOME WAS EARNED DURING THE YEAR UNDER APPEAL. ACCORDINGLY, HE DIRECTED THE AO TO EXCLUDE THE TAX FREE INVESTMENT FROM WHICH NO EXEMPT INCOME WAS EARNED FROM NUMERATORS IN THE CALCULATION U/S 8D (2)(II) AND 8D(2)(III) OF THE RULES. HE FURTHER DIRECTED THE ASSESSEE TO PRODUCE NECESSARY DETAILS/DOCUMENTS TO CALCULATE THE DISALLOWANCE. 5.2 BEFORE US, THE DR STATED THAT MATTER COULD BE DECIDED ON MER ITS. THE AR STATED THAT ASSESSEE HAD NOT CHALLENGED THE ORDER OF THE FAA. WE FIND THAT THE FAA HAD NOT DELETED THE ENTIRE ADDITION, THAT HE HAD FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT AND HAD DIRECTED THE AO TO RECALCULATE THE DISALLOWA NCE, THAT HE HAD INSTRUCTED ASSESSEE TO FILE NECESSARY DETAILS. IN OUR OPINION THERE IS NO NEED TO DISTURB HIS FINDINGS, THEREFORE, CONFIRMING HIS ORDER WE DECIDE GROUND NO. 4 AGAINST THE AO. 11 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 CONSISTENT WITH THE VIEW TAKEN BY THE CO - ORDINATE BENCH IN THE EARLIER YEAR, WE UPHOLD THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 16 . GROUND NO. 5 OF THIS APPEAL PERTAINS TO THE ADDITION OF RS. 7,00,000/ - MADE BY THE AO AS BROKERAGE PAID FOR ARRANGING SH ARE CAPITAL AMOUNTING TO RS. 14, 00,00,000/ - SINCE, WE HAVE DI SMIS SED GROUND NO. 1 OF THE REVENUES APPEAL AND HELD THE TRANSACTION GENUINE, NO QUESTION RELATING TO PAYMENT OF BROKERAGE FOR ARRANGIN G THE PREFERENCE SHARE CAPITAL IS REQUIRED TO BE DECIDED IN FAVOUR OF THE ASSESSEE . HENCE, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 1 7 . VIDE G ROUND NO. 6 THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN HOLDING RS. 33,96,98,628/ - AS SHORT TERM CAPITAL GAIN INSTEAD OF TREATING THE SAID AMOUNT AS INCOME FROM BUSINES S OR PROFESSION AS HELD BY THE AO. THIS GROUND OF APPEAL IS IDENTICAL TO THE LAST GROUND OF THE REVENUES APPEAL IN THE ASSESSEES OWN CASE PERTAINING TO THE ASSESSMENT YEAR 2008 - 09(SUPRA). THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN FA VOUR OF THE ASSESSEE HOLDING AS UNDER: - 6 LAST GROUND OF APPEAL IS RELATED TO TREATMENT OF RS. 18.87 CRORE I.E. AS TO WHETHER THE PROFIT ARISING ON SALE OF SECURITIES SHOU L D BE ASSESSED UNDER THE HEAD BUSINESS INCOME OR INCOME FROM SHORT TERM CAPITAL G AIN (STCG). 6.1 THE AO FOUND THAT THE ASSESSEE HAD SHOWN STCG OF RS. 18,49,132/ - , THAT IT HAD SHOWN SPECULATION PROFIT OF RS. 10.13 CRORES ON INTRA - DAY TRADING, THAT IT HAD BORROWED FUNDS TO THE TUNE OF RS. 9.25 CRORES, THAT THE ASSESSEE WAS ACTIVELY IN VOLVED IN TRADING OF SHARES. VIDE HIS SHOW CAUSE NOTICE DATED 20.12.2010 HE ASKED THE ASSESSE E AS TO WHY THE STCG SHOULD NOT BE TREATED AS BUSINESS INCOME. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE HELD THAT IT HAD SHOWN SALES OF SHARES WORTH RS . 154.91 CRORES, THAT IT HAD PURCHASED SHARES AMOUNTING TO RS. 180.58 CRORES, THAT IT WAS NOT POSSIBLE TO ASCERTAIN AS TO WHETHER THE 12 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 PURCHASES WERE FOR INVESTMENT OR FOR TRADING, THAT THE CLAIM BY THE ASSESSEE TO TREAT THE INCOME UNDER STCG WAS ONLY A PLO Y TO PAY LESS TAX AS AGAINST NORMAL RATE OF TAX. ACCORDINGLY, HE DISALLOWED THE STCG OF RS. 18.87 CRORES AND TREATED THE SAME AS BUSINESS INCOME FROM TRADING IN SHARES. 1 8 . THE FACTS PERTAINING TO THIS ISSUE IS IDENTICAL TO THE FACTS OF THE REVENUES AP PEAL IN ASSESSEES OWN CASE AFORESAID. IN VIEW OF THE FACT THAT THE FINDINGS OF THE LD. CIT(A) ARE IN ACCORDANCE WITH THE DECISION OF THE CO - ORDINATE BENCH RENDERED IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09, WE DO NOT FIND ANY REASON TO DE VIATE FROM THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL AFORESAID, WE UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF T HE REVENUE. 1 9 . IN THE RESULT, APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 20 08 - 09 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND , D EC EMBER , 2017 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 22 / 12 / 2017 ALINDRA P S / 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 . 13 ITA NO. 135 / MUM/201 3 ASSESSMENT YEAR: 200 8 - 20 09 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI