SHAKTI FILMS, MUMBAI V. ITO 11(1)(4), MUMBAI

ITA 1474/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9191 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Earning of tax free income
• Section: 142(1); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO S . 1474/M/2015 & 600 /M/201 3 ASSESSMENT YEAR S : 2008 - 09 & 2008 - 09 SHAKTI FILMS ARVIND CHAMBERS, NATRAJ STUDIOS, 194, M.V. ROAD, ANDHERI (W) , MUMBAI PIN: 400069 VS. CIT - 11 ./ ./ PAN/GIR NO. : AAAFS 6403 M ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 06 .0 7 .2017 DATE OF PRONOUNCEMENT : 04.10 .2017 O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE ABOVE MENTIONED APPEA LS AGAINST THE DIFFERENT ORDER PASSED BY THE COMMIS SIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 28.01.2013 AND ORDER DATED 14.08.2012 PASSED U/S 263 OF THE I.T. ACT, 1961 RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 . ITA NO.1474 /M/201 5 : - 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ASSESSEE BY: SHRI VIRENDRA SINGH KHURANA DEPARTMENT BY: SHRI RAM TIWARI (SR. AR) ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 2 1 . THE HONBLE COMMISSIONER OF INCOME TAX HAS ERRED IN VIEW OF THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE IN UPHOL D IN G THE DISALLOWANCE OF RS2, 1D129/ - ALL HA AND IN PRESUMING THAT THERE IS A NEXUS BETWEEN THE EXPENSES INCURRED AND THE EARNING OF EXEMPT INCOMES, ESP ECIALLY AS THE ASSESSEE HAS MAINTAINED SEPARATE SETS OF ACCOUNTS FOR THE DIFFERENT AC6VLTLES OF THE FIRM. IN ANY CASE AND WITHOUT PREJUDICE, THE ADDITION MADE IS FAR TOO EXCESSIVE AND OUGHT TO HE DELETED IN TO IF NOT REDUCED SUBSTANTIALLY. THE REMA RKS MADE I N THIS CONNECTION ARE AGAINST [ACTS AND THE LAW. THE HONORABLE COMMISSIONER OF INCOME TAX HAS ERRED IN UPHOLDING THE DISALLOWANCE OF A SUM OF RS .434081 /BEING LONG TERM CAPITAL GAINS ON THE GROUND THATNO S TT WAS PAID ON THE SALE OF THE SAID MUTUAL FUNDS I N ACT IT A MATTER 01 RECORD THAT STT WAS NOT LIABLE AT ALL IN RESPECT TO THE SAID MUTUAL FUNDS UND SUCH A CONSIDERATION W AS IRRELEVANT [OR ARRIVING AT THE DISALLOWANCE. ON FACTS ALONE NO DISALLOWANCE OUGHT TO HAVE BEEN MADE . THE APPELLANT CRAVES LEAVE TO ALTER, ADD TO OR AMEND THE AFORESAID GROUNDS OF APPEAL . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE CIT - 11, MUMBAI VIDE HIS ORDER DATED 14.08.2012 PASSED THE ORDER U/S 263 OF THE I.T. ACT, 1961 AND DIRECTED THE AO TO REFRAME THE ASSESSMENT BY COMPUTING THE DISALLOWANCE U/S 14A AND ALSO TO BRING TO TAX ON THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS.4,34,081/ - WHICH HAS BEEN ESCAPED ASSESSMENT FOR THE A.Y. 2008 - 09. A NOTICE U/S 142(1) OF THE I.T. ACT, 1961 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAF TER, THE ASSESSEE FILED THE REPLY AND CONSIDERING THE REPLY THE AO APPLIED THE PROVISION U/S 14A R.W. RULE 8D OF THE ACT AND DISALLOWED THE EXPENDITURE TO EARN THE EXEMPT INCOME TO THE TUNE OF RS. 2,16,129/ - U/S 14A . T HE ASSESSEE ALSO RECEIVED THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS.4,34,081/ - BUT HE DID NOT PAID STT, THEREFORE, THE SAID LONG TERM CAPITAL GAIN TO THE TUNE OF RS. 4,34,081/ - WAS DISALLOWED ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 3 AND ADDED TO THE INCOME OF THE ASSESSEE . THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO T HE TUNE OF RS.6,50,210/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX APPEAL - 11 , MUMBAI WHO DISMISSED THE APPEAL OF THE ASSESSEE , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 4 . UNDER THIS ISSUE THE A SSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.2,16,129/ - U/S 14A OF THE ACT. UNDER THE YEAR OF ASSESSMENT THE ASSESSEE EARNED THE DIVIDEND INCOME TO THE TUNE OF RS.52,36,106/ - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED T HAT THE ASSESSEE DID NOT INCURR ANY EXPENSES TO EARN THE EXEMPT INCOME NOR EXPENSES WERE CLAIME D, T HEREFORE, IN THE SAID CIRCUMSTANCES THE DISALLOWANCE U/S 14A OF THE ACT TO THE TUNE OF RS.2,16,129/ - IS WRONG AGAINST THE LAW AND FACTS AND IS NOT LIABLE TO BE SUSTAINABLE IN THE EY E S OF LAW. IT IS ALSO ARGUED THAT THE ASSESSING OFFICER NOWHERE PROVE NEXUS BETWEEN TH E BORROWED FUNDS AND INVESTMENT, T HEREFORE, IN THE SAID CIRCUMSTANCES , THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME TO THE TUNE OF RS. 2,16,129/ - IS NOT LIABLE TO BE SUSTAINABLE IN VIEW OF THE LAW SETTLED IN THE CASE OF WINSOME TEXTILE 319 ITR, 204 (P&H) & HERO CYCLES 323 ITR 518 .H OWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTIONS. ON APPRAISAL OF THE RECORD , WE NOTICED TH AT THE ASSESSEE DID NOT CLAIM ANY EXPENSES AGAINST EXEMPT INCOME. THE ASSESSING OFFICER NOWHERE ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 4 PROVE NEXUS WITH THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME WITH THE EXPENSES CLAIMED . THE ASSESSEE NOWHERE CLAIMED ANY EXPENSES WHEN NO E XPENSES WE RE CLAIMED AGAINST THE EARNING OF EXEMPT INCOME THEN NOTHING IS REQUIRED TO BE DISALLOWED T HEREFORE, NO DOUBT IN VIEW OF THE LAW SETTLED IN WINSOME TEXTILE 319 ITR, 204 (P&H) & HERO CYCLES 323 ITR 518. WE ARE OF THE VIEW THAT THE DISALLOWANCE IS UNJUSTIFIABLE HENCE, WE DELETE THE SAID DISALLOWANCE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.2 : - 5 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF A SUM OF RS.4,34,081/ - BEING LONG TER M CAPITAL GAIN O N ACCOUNT OF THIS FACT THAT NO STT WAS PAID. THE ASSESSEE CLAIMED THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS. 4,34,081/ - WHICH DISALLOWED BY THE AO AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF THIS FACT THAT THE STT WAS NOT PAID . THE LD. REPRESENTATIVE OF T HE ASSESSEE HAS ARGUED THAT THE UPON THE INCOME OF LONG TERM CAPITAL GAIN NO STT WAS PAYABLE , THEREFORE, THE ASSESSING OFFICER HAS WRONGLY DECLINED THE CLAIM OF THE ASSESSEE , HENCE, THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE IN THE INTEREST OF JUSTICE. ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE ASSESSEE EARNED LONG TERM CAPITAL GAIN TO THE TUNE OF RS. 4,34,081/ - . N O STT WAS P AYABLE ON THE SALE OF THE MUTUAL FUND IN VIEW OF THE PROVISION 10(38) ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 5 OF THE ACT. SINCE NO STT WAS PAYABLE ON THE CAPITAL GAIN ARISED DUE TO SALE OF MUTUAL FUNDS, THEREFORE, DISALLOWANCE OF LONG TERM CAPITAL GAIN TO THE TUNE OF RS.434081/ - IS NOT JUSTIFIAB LE. THEREFORE, FINDING OF THE CIT(A) ON THIS ISSUE IS WRONG HENCE ORDERED TO BE SET ASIDE. ACCORDINGLY, WE ALLOWED THE CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAIN TO THE TUNE OF RS.4,34,081/ - . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSE E AGAINST THE REVENUE. 6 . IN RESULT , APPEAL FILED BY THE ASSESSEE I S HEREBY ORDERED TO BE ALLOWED . I TA NO.600 /M/201 3 : - 7 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1 . THE HONORABLE CIT HAS ERRED IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN COMMENCING PROCEEDINGS U/S 263, AND IN ORDERING THAT THE ASSESSMENT ORIGINALLY MADE BE SET ASIDE. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE REOPENING IS BAD IN LAW. 2 . THE HONORABLE CIT HAS ERRED IN TREATING THAT THERE IS A NEXUS BETWEEN T HE EXPENSES INCURRED AND THE EARNING OF THE EXEMPT INCOMES, ESPECIALLY AS THE ASSESSEE HAS MAINTAINED SEPARATE SETS OF ACCOUNTS FOR THE DIFFERENT ACTIVITIES OF THE FIRM ON FACTS THIS IS, WITH RESPECT, AN ERRONEOUS INTERPRETATION AND APPLICATION OF THE LAW RESULTING IN THE DISALLOWANCE. THE REMARKS MADE IN THIS CONNECTION ARE AGAINST FACTS. THE APPELLANTS CRAVES LEAVE TO ALTER, ADD TO OR AMEND THE AFORESAID GROUNDS OF APPEAL. 8 . THE FACTS OF THE PRESEN T CASE ARE THAT THE COMMISSIONER OF INCOME TAX (APPEAL S) INVOKE D THE PROVISION U/S 263 OF THE ACT, 1961 ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 6 ON THE BASIS OF THE EXAMINATION OF CLAIM U/S 14A AND CLAIM OF LONG TERM CAPITAL GAIN . A FTER PASSING THE ORDER , T HE ASSESSING OFFICER PASSED THE ORDER IN VIEW OF THE PROVISION U/S 263 OF THE ACT, 1961 BY VIRTUE OF ORDER DATED 26.11.2010 . SUBSEQUENTLY, THIS ORDER WAS CHALLENGED BEFORE THE CIT(A) WHO DECIDED THE CONTROVERSY BY VIRTUE OF ORDER DATED 06.01.2015 . T HE ASS ESSEE FILED AN APPEAL BEFORE THE I TAT IN VIEW OF THE ITA. NO. 1474 /M/2015. THE CLAIM OF THE ASSESSEE WAS ALLOWED WHILE DECIDING THE ABOVE MENTIONED APPEAL. IN THE SAID CIRCUMSTANCES, THE APPEAL BEARING NO. 600/M/2013 AGAINST THE ORDER PASSED U/S 263 OF THE ACT, 1961 HAS BECOME INFRUCTUOUS , THEREFORE, THERE IS NO NEED TO DECIDE IN THE SAME BE ING ACADEMIC IN NATURE. 9 . IN THE RESULT , ALL THE APPEALS FILED BY THE ASSESSEE ARE HEREBY ALLOWED . ORDER P RONOUNCED IN THE OPEN COURT ON 04.10. 2017 SD/ - SD/ - ( R.C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : . 04.10. 2017 V.P. SINGH ITA. NO. 1474/M/2015 & 600/M/2013 A.Y. 2008 - 09 7 / 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. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI