INDIA ADVANTAGE SECURITES P.LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 1424/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8795 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Earning of tax free income; Bad and doubtful debts
• Section: 143(3); 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI RAJENDRA, AM AND SHRI C.N. PRASAD, JM ./ I.T.A. NO. 1424 /MUM/201 5 ( / ASSESSMENT YEAR: 20 1 0 - 1 1 ) INDIA ADVANTAGE SECURITIES LTD. (NOW INDIA ADVANTAGE SECURITIES PVT. LTD.) 4 TH FLOOR, OM PLAZA, VASANJI LALJI ROAD, KANDIVALI (W), MUMBAI 400 067. / VS. D CIT 4 ( 1 ), MUMBAI ./ ./ PAN/GIR NO. AA DCP5317M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DHAVAL SHAH / RESPONDENT BY : SHRI K. MOHANDAS / DATE OF HEARING : 2 5 /10/2016 / DATE OF PRONOUNCEMENT : 20 /01/2017 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 9, MUMBAI DATED 2.1.2015 FOR THE ASSESSMENT YEAR 2010 - 11 ARISING OUT OF 2 INDIA ADVANTAGE SECURITIES LTD. ITA NO. 1424/MUM/2015 ASSESSMENT ORDER DATED 30.11.2012 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE FIRST ISSUE IN THE APPEAL OF ASSESSEE IS THAT CIT(A) ERRED IN LAW AND IN FACT IN CONFIRMING THE DISALLOWANCE MADE U/S 14A OF THE ACT AMOUNTING TO RS.7,21,725/ - . BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT N OTICED THAT ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS.26,66,404/ - AND CLAIMED THIS AS EXEMPT INCOME. HE REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY PROPORTIONATE EXPENSES RELATING TO SUCH EXEMPT INCOME SHOULD NOT BE DISALLOWED. ASSESSEE SUBMITTED THAT THE DIVIDEND INCOME IS INCIDENTAL TO CARRYING ON BUSINESS OF TRADING IN SHARES & SECURITIES AND HENCE THERE SHOULD NOT BE ANY DISALLOWANCE U/S 14A OF THE ACT. NOT CONVINCED WITH THE SUBMISSIONS OF ASSESSEE, THE ASSESSING OFFICER APPLYING RULE 8D OF THE INCOME TAX RULES ARRIVED AT THE DISALLOWANCE OF RS.7, 21,725/ - . THIS CONSISTS OF DISALLOWANCE UNDER RULE 8D(2)(I) OF RS.11,466/ - AND DISALLOWANCE UNDER RULE 8D(2)(III) AT RS.7,10,258/ - . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) UPHELD TH E ACTION OF ASSESSING OFFICER OBSERVING THAT IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT, 234 DTR 1 , EVEN IN CASE OF COMPOSITE AND IND IVIS IBLE BUSINESS IT WOULD BE NECESSARY TO APPORTION THE EXP ENDITURE INCURRED BY ASSESSEE. 3. THE LEARNED COUNSEL FOR ASSESSEE SUBMITS THAT THERE IS NO JUSTIFICATION FOR SUSTAINING THE DISALLOWANCE OF RS.7,21,725/ - . THE LEARNED COUNSEL SUBMITS THAT THE AMOUNT OF RS.11,466/ - WHICH WAS DISALLOWED UNDER RULE 8D(2) (I) IS ON ACCOUNT OF 10% OF BANK CHARGES AND 3 INDIA ADVANTAGE SECURITIES LTD. ITA NO. 1424/MUM/2015 THE REMAINING AMOUNT OF RS.7,10,258/ - IS ON ACCOUNT OF 0.5% OF AVERAGE INVESTMENTS. THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITS THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO. 6711/MUM/2 011 DATED 14.9.2012 THE COORDINATE BENCH HELD THAT THE INVESTMENTS HELD AS STOCK - IN - TRADE SHOULD BE EXCLUDED FROM THE PURVIEW OF DISALLOWANCE U/S 14A OF THE ACT. 4. THE LD. DR VEHEMENTLY SUPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD TH E RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RELIED ON. ADMITTEDLY, THE PROVISIONS OF RULE 8D APPLIES TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE, THE ASSESSING OFFICER IS JUSTIFIED IN COMPUTING THE DISALLOW ANCE BY APPLYING THE PROVISIONS OF SEC. 14A R.W.R 8D. HOWEVER, COMING TO THE CALCULATION OF 0.5% OF AVERAGE INVESTMENTS FOR THE PURPOSE OF DISALLOWANCE, THE STOCK - IN - TRADE OF ASSESSEE, WHO IS A STOCK BROKER, SHOULD BE EXCLUDED AS WAS HELD IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO. 6711/MUM/2011 DATED 14.9.2012 SUPRA. THUS, RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE STOCK - IN - TRADE FOR THE PURPOSE OF COMPUTING THE DISALLOWANCE UNDER RULE 8D(2) (III), I.E., 0.5% OF AVERAGE INVESTMENTS. THUS, THE FIRST ISSUE IN APPEAL OF ASSESSEE IS PARTLY ALLOWED. 6. THE NEXT ISSUE IN THE APPEAL OF ASSESSEE IS THAT CIT(A) ERRED IN LAW AND IN FACT IN CONFIRMING THE DISALLOWANCE OF RS.1,04,426/ - ON ACCOUNT 4 INDIA ADVANTAGE SECURITIES LTD. ITA NO. 1424/MUM/2015 OF BAD DEBTS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE DEBITED RS.1,04,426/ - UNDER THE HEAD BAD DEBTS IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM BY TH E ASSESSING OFFICER. ASSESSEE SUBMITTED THAT ADVANCE OF RS.1,04,426/ - WAS PAID TO CANTEEN CONTRACTOR (MUSKAN SWEETS AND FARSHAN) AND SINCE THIS AMOUNT WAS NOT RECEIVABLE/RECOVERABLE, SAME WAS TRANSFERRED TO BAD DEBTS. THE EXPLANATION OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER HOLDING THAT NO PROOF IS GIVEN TO SUGGEST THAT THIS ADVANCE WAS GIVEN TO CANTEEN CONTRACTOR NOR ANY DETAILS REGARDING THE EFFORTS TO RECOVER THE SAME WAS SUBMITTED. THEREFORE, THE ASSESSING OFFICER, IN THE ABSENCE OF ANY DOCU MENTARY PROOF AND SINCE HE WAS OF THE VIEW THAT THE CONDITIONS AS CONTAINED IN SEC. 36(1)(VII) R.W.S 36(2) ARE NOT SATISFIED, REJECTED THE CLAIM OF BAD DEBTS. ON APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANCE OBSERVING THAT THE AMOUNT CLAIMED TOWARDS BAD D EBTS HAS NOT BEEN CONSIDERED AS INCOME BY THE ASSESSEE EITHER IN THE PRESENT YEAR OR ANY OF THE PREVIOUS YEARS. THEREFORE, HE CONCLUDED THAT SINCE THE BAD DEBTS OR PART THEREOF WAS NOT OFFERED AS INCOME IN ANY OF THE YEARS, SAME CANNOT BE ALLOWED. 7. T HE LD. COUNSEL FOR ASSESSEE SUBMITS THAT THE CONTENTIONS OF CIT(A) THAT SINCE THE BAD DEBTS WERE NOT OFFERED AS INCOME, THEY SHOULD NOT BE ALLOWED AS DEDUCTION IS NOT JUSTIFIED. THE LEARNED COUNSEL SUBMITS THAT IF THE BAD DEBTS ARE NOT ALLOWED U/S 36(1)( I II), THE LOWER AUTHORITIES SHOULD HAVE CONSIDERED THE CLAIM OF ASSESSEE U/S 28 OF THE ACT AND SHOULD HAVE ALLOWED IT AS A BUSINESS LOSS. HE PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF FORSTAR 5 INDIA ADVANTAGE SECURITIES LTD. ITA NO. 1424/MUM/2015 FROZEN FOODS PVT. LTD. V S. ACIT (ITA NO. 2035/MUM/2012 DATED 17.4.2013). 8. THE LD. DR SUPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RELIED ON. WE FIND FROM THE ASSESSMENT O RDER THAT THE ASSESSING OFFICER REJECTED THE CLAIM OF BAD DEBTS IN THE ABSENCE OF DETAILS FURNISHED BY THE ASSESSEE. ASSESSEES SUBMISSION IS THAT THE CLAIM , IF NOT ALLOWED U/S 36(1)(III) OF THE ACT, SHOULD BE ALLOWED U/S 28 OF THE ACT AS A BUSINESS LOSS. THE CONTENTIONS OF ASSESSEE SINCE NOT EXAMINED BY THE LOWER AUTHORITIES, AND ALSO SINCE ASSESSEE HAS NOT FURNISHED THE COMPLETE DETAILS BEFORE THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED VIEW THAT THIS MATTER SHOULD GO BACK TO THE ASSESSING OFFICER F OR AFRESH ADJUDICATION. THUS, WE RESTORE THIS MATTER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 T H JANUARY, 2017. S D / - S D / - (RAJENDRA) ACCOUNTANT MEMBER ( C.N. PRASAD ) JUDICIAL MEMBER MUMBAI, DATE : 2 0 T H JANUARY, 2017 * SSL* 6 INDIA ADVANTAGE SECURITIES LTD. ITA NO. 1424/MUM/2015 COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, I BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI