SHREE NAMAN SECURITIES & FINANCE PVT LTD., MUMBAI V. DY CIT CIR. 5(4), MUMBAI

ITA 1378/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6198 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 03-03-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT KUMAR
• Assessee Lawyers: MAHESH R AJORA
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , E BENCH MUMBAI BEFORE : SHRI M.BALAGANESH, A CCOUNTANT MEMBER & SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 1378/ MUM/ 2020 ( ASSESSMENT YEAR : 2016 - 17 ) SHREE NAMAN SECURITIES & FINANCE PVT.LTD., 1 04, SHREE NAMAN PLAZA OPP. SHANKAR LANE, 41 S.V. ROAD, KANDIVALI - WEST MUMBAI - 400 067 VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 5(4) AAYKAR BHAVAN MUMBAI PAN/GIR NO. AAACN1917G (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI MAHESH RAJORA REVENUE BY SHRI ROHIT KUMAR DATE OF HEARING 07/09/2021 DATE OF PRONOUNCEMENT 08 / 09 /2021 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 1378/MUM/2020 FOR A.Y. 2016 - 17 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) - 53, MUMBAI IN APPEAL NO. CIT(A) - 53/IT - 560/DCCC - 5(4)/2018 - 19 DATED 16/12/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 28/12/2018 BY THE LD. AS ST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 5(4), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). ITA NO . 1378/MUM/2020 SHREE NAMAN SECURITIES & FINANCE LTD., 2 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE MADE U/S.14A OF THE ACT R.W.R. 8D(2) OF THE RULES UNDER THE NORMAL PROVISIONS OF THE ACT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS A MEMBER OF BOMBAY STOCK EXCHANGE (BSE) AND NATIONAL STOCK EXCHANGE (NSE) AND IS ENGAGED IN THE BUSINESS OF SHARE BROKING, SHARES AND SECUR ITIES TRADING AND OTHER INCIDENTAL ACTIVITIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS.20,85,460/ - ON INVESTMENT AND SHARES AND SECURITIES HELD AS STOCK IN TRADE. NO SUO - MOTO DISALLOWANCE OF EXPENSES WAS MADE U/S. 14A OF THE ACT BY THE ASSESSEE IN ITS RETURN OF INCOME. THE LD. AO BY APPLYING THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES PROCEEDED TO MAKE THE DISALLOWANCE U/S.14A OF THE ACT AS UNDER: - ( I ) UNDER RULE 8D(2)(II) - RS.1,46,29,283/ - ( II ) UNDER R ULE 8D(2)(III) - RS. 9,57,827/ - 3.1. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). WE FIND FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE WHICH ARE ENCLOSED IN THE PAPER BOOK THAT ASSESSEE IS HAVING OWN FUNDS OF RS.7.09 CRORES AS ON 31/03/20 16 AND RS.9.45 CRORES AS ON 31/03/2015. THE INVESTMENTS THAT HAD ACTUALLY YIELDED EXEMPT INCOME WERE ONLY RS.2.67 CRORES AS ON 31/03/2016 AND RS.4.35 CRORES AS ON 31/03/2015. SINCE, THE OWN FUNDS ARE SUFFICIENTLY AVAILABLE AND ARE MORE THAN THE INVESTMENTS THAT HAD ACTUALLY YIELDED EXEMPT INCOME, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HDFC BANK LIMITED ITA NO . 1378/MUM/2020 SHREE NAMAN SECURITIES & FINANCE LTD., 3 REPORTED IN 366 ITR 505, WE HOLD THAT NO DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) OF THE RULES COULD BE M ADE IN THE FACTS OF THE INSTANT CASE. 3.2. WITH REGARD TO DISALLOWANCE OF INDIRECT EXPENSES UNDER RULE 8D(2)(III) OF THE RULES, WE DIRECT THE LD. AO TO CONSIDER ONLY THOSE INVESTMENTS WHICH HAD ACTUALLY YIELDED EXEMPT INCOME TO THE ASSESSEE AND RE - COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES ACCORDINGLY, SUBJECT TO THE CONDITION THAT IN ANY CASE, THE DISALLOWANCE SHALL NOT EXCEED EXEMPT INCOME. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE DISPOSED OF IN THE AFORESAID MANNER. 4. IN TH E RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 08 / 09 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 08 / 09 / 2021 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//