DCIT 4(1), MUMBAI V. DARASHAW & CO. P.LTD, MUMBAI

ITA 1470/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3066 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 18-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NOS.311 & 312/MUM/2014 ASSESSMENT YEARS: 2009-10 & 2010-11 M/S DARASHAW & CO. PVT. LTD. FLAT NO.3, RAJESH MANSION, D. VACHHA ROAD, CHURCHGATE, MUMBAI-400020 / VS. DCIT-4(1), R.NO.640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO.AAACB2360F ITA NOS.1470 & 1471/MUM/2014 ASSESSMENT YEARS: 2009-10 & 2010-11 DCIT-4(1), R.NO.640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S DARASHAW & CO. PVT. LTD. FLAT NO.3, RAJESH MANSION, D. VACHHA ROAD, CHURCHGATE, MUMBAI-400020 ( ' / REVENUE) ( ! /ASSESSEE) PAN. NO . AAACB2360F ITA NO. 311, 312, 1470 & 1471/MUM/2014 M/S DARASHAW & CO. PVT. LTD 2 ' / REVENUE BY SHRI B.S. BIST- SR.DR ! / ASSESSEE BY DR. K.SHIVARAM & NEELAM C. JADHAV # '$ % ! & / DATE OF HEARING : 14/06/2016 % ! & / DATE OF ORDER: 14/06/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS REVENUE IS IN CROSS APPEALS AGAINST THE IMPUGNED ORDERS ALL DATED 06/12/2013 FO R THE ASSESSMENT YEAR 2009-10 AND 2010-11, OF THE LD. FIR ST APPELLATE AUTHORITY, MUMBAI. 2. FIRST, WE SHALL TAKE UP THE APPEALS FOR ASSESSM ENT YEAR 2009-10. IN THE APPEAL OF THE ASSESSEE (ITA NO.311/MUM/2014), THE ONLY GROUND IS WITH RESPECT T O DISALLOWANCE MADE U/S 14A OF THE INCOME TAX ACT, 19 61 (HEREINAFTER THE ACT). THE ARGUMENT ON BEHALF OF TH E ASSESSEE IS THAT THE DISALLOWANCE WAS CONFIRMED WITH RESPECT TO INTEREST PAID ON BORROWED FUNDS IS WITHOUT APPRECIA TING THE FACT THAT THE ENTIRE INVESTMENT WAS MADE OUT OF OWN FUNDS AND NO BORROWED FUNDS WERE UTILIZED WHILE MAKING TH E INVESTMENT IN THE SHARES. ON THE OTHER HAND, THE LD . DR, DEFENDED THE DISALLOWANCE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE CO MING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RE LEVANT ITA NO. 311, 312, 1470 & 1471/MUM/2014 M/S DARASHAW & CO. PVT. LTD 3 PORTION FROM THE ORDER OF THE TRIBUNAL (PARA 22) (I TA NO.225/MUM/2011, 458/MUM/2012, 229/MUM/2011 AND 660/MUM/2012) (ASSESSMENT YEAR 2007-08 AND 2008-09) FOR READY REFERENCE:- 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EV IDENCES BROUGHT ON RECORD. A PERUSAL OF THE BALANCE SHEET OF THE AS SESSEE AS EXHIBITED AT PAGE-1 OF THE PAPER BOOK SUPPORTS THE CONTENTION OF THE COUNSEL THAT ASSESSEE HAS SUFFICIENT OWN FUNDS TO COVER UP THE INVESTMENTS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD., 313 ITR 340 HAS HELD THAT WHERE BOTH OWN FUNDS AND LOAN FUNDS ARE AVAILABLE W ITH THE ASSESSEE, THE PRESUMPTION IS THAT THE INVESTMENT IS MADE OUT OF OWN FUNDS. RESPECTFULLY FOLLOWING THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT, IN OUR CONSIDERATE VIEW, THE DISALLOWANCE AS COMPUTED BY THE ASSESSEE UNDER RULE 8D AT RS. 39,19,175/- SHOULD MEET THE ENDS OF JUSTICE. WE, AC CORDINGLY DIRECT THE AO TO RECOMPUTED THE DISALLOWANCE AS DONE BY TH E ASSESSEE AFTER GIVING A REBATE OF RS. 1,75,883/- WHICH HAS A LREADY BEEN DISALLOWED BY THE ASSESSEE IN ITS COMPUTATION OF IN COME. WE FIND THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS AS SHARE AND STOCK BROKER AND MAKES INVEST MENT. THE ASSESSEE EARNED EXEMPT INCOME OF RS.38,02,033/- AND DISALLOWED RS.75,340/- U/S 14A OF THE ACT. WITHOUT GOING INTO MUCH DELIBERATION, WE FIND THAT THE LD. COMMIS SIONER OF INCOME TAX (APPEAL) HAS FOLLOWED THE ORDER OF THE T RIBUNAL FOR ASSESSMENT YEAR 2008-09 (PARA 22 OF THE ORDER OF TH E TRIBUNAL) BY HOLDING THAT THE FACTS ARE IDENTICAL A ND THE ASSESSING OFFICER WAS DIRECTED TO RE-COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT, IN THE LIGHT OF TH E OBSERVATION MADE BY THE TRIBUNAL. THUS, WE FIND NO INFIRMITY IN THE DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX ITA NO. 311, 312, 1470 & 1471/MUM/2014 M/S DARASHAW & CO. PVT. LTD 4 (APPEAL), WHICH WAS ON THE BASIS OF THE ORDER OF TH E TRIBUNAL FOR ASSESSMENT YEAR 2008-09. 2.2. SO FAR AS, THE CROSS APPEAL OF THE REVENUE (I TA NO.1470/MUM/2014) IS CONCERNED, THIS IS ALSO WITH R ESPECT TO DISALLOWANCE U/S 14A OF THE ACT. CONSIDERING THE TOTALITY OF FACT, THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE DISMISSED AS THE ORDER OF THE TRIBUNAL BEING ON IDE NTICAL FACT HAS TO BE FOLLOWED. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E FOR ASSESSMENT YEAR 2010-11 (ITA NO.312/MUM/2014), WHEREIN, GROUND NO. 1 & 2 IS IDENTICAL TO ASSESSMEN T YEAR 2008-09, THEREFORE, ON THE SAME REASONING BOTH THES E GROUNDS ARE DISMISSED. 4. SO FAR AS, GROUND NUMBER 3 FOR NOT ALLOWING SET OFF OF SHORT TERM CAPITAL LOSS ON LISTED SECURITIES (ST T PAID) AGAINST SHORT TERM CAPITAL GAIN ON MUTUAL FUNDS WIT H (NON STT PAID) OF RS.17,05,720/- IS CONCERNED, THIS GROU ND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ADIT VS LEGG MASON SIA (EX JAPAN) ANALYST FUND (2014) 61 SOT 277 AND CAPITAL INTERNATIONAL EMERGING MARKETS FUNS VS DIT (2013) 145 ITD 491 (MUM.) (ITAT) (PARA 3.2). THUS, THIS GR OUND OF THE ASSESSEE IS ALLOWED. 5. THE NEXT GROUND I.E. GROUND NO. 4 WAS NOT PRESS ED BY THE ASSESSEE, THEREFORE, IT IS DISMISSED AS NOT PRESSED. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 311, 312, 1470 & 1471/MUM/2014 M/S DARASHAW & CO. PVT. LTD 5 6. IN THE APPEAL OF THE REVENUE (ITA NO.1471/MUM/2014), THE ONLY GROUND RAISED IS WITH R ESPECT TO ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT. WE FIND THAT THE LD. ASSESSING OFFICER DISALLO WED RS.24,90,868/- U/S 14A OF THE ACT. WITH THE INSERTI ON OF RULE-8D, DISALLOWANCE U/S 14A HAS TO BE COMPUTED AS PER THIS RULE AND THE PROCEDURE LAID DOWN FOR DETERMINI NG THE EXPENDITURE, WHICH HAS TO BE DISALLOWED. THE DECISI ON IN GODREJ & BOYCE MFG. CO. LTD. (328 ITR 81) (BOM.) CA N BE QUOTED. SIMILARLY, IN M/S DAGA CAPITAL MANAGEMENT P VT. LTD. (ITA NO.8057/MUM/2003), AN ELABORATE DISCUSSION HAS BEEN MADE BY THE TRIBUNAL. THE ASSESSEE HAS MAINTAINED S EPARATE BOOKS OF ACCOUNT FOR INVESTMENT. THE ASSESSEE INVES TED RS.90,54,68,411/- AS AGAINST THE NET WORTH OF RS.102,74,40,180/- MEANING THEREBY, THE ASSESSEE WA S HAVING SUBSTANTIAL OWN FUNDS TO MAKE INVESTMENT. CONSIDERING THE TOTALITY OF FACTS, WE FIND NO INFIR MITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEAL) AS THE FACTS ARE IDENTICAL TO ASSESSMENT YEAR 2008- 09, WHICH HAS ALREADY BEEN DECIDED BY THE TRIBUNAL. THE APPEA L OF THE REVENUE IS DISMISSED. FINALLY, I. FOR ASSESSMENT YEAR 2009-10 THE APPEAL OF THE ASSES SEE AS WELL AS OF THE REVENUE ARE DISMISSED. ITA NO. 311, 312, 1470 & 1471/MUM/2014 M/S DARASHAW & CO. PVT. LTD 6 II. FOR ASSESSMENT YEAR 20010-11, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, WHEREAS OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 14/06/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGI NDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ( DATED : 14/06/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1! ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1! / CIT(A)- , MUMBAI 5. 3'4 .! , 0 *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6$ / GUARD FILE. / BY ORDER, /3+! .! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI