DTC Securities Ltd., Kolkata V. ITO, Ward - 6(1), Kolkata, Kolkata

ITA 1698/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9367 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-08-2010
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: P K AGARWAL
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !' !' !' !' /AND . .. . . .. .! !! ! , # ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] '$ '$ '$ '$ / I.T.A NO. 1698/KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2006-07 DTC SECURITIES LTD. -VS- INCOME-TAX OFFICER, WD -6(1), KOLKATA (PA NO.AABCD 0191 P) ( +, /APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT: SRI P. K. AGARWAL FOR THE RESPONDENT : SRI P. K. MISHRA . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A), KOLKATA DATED 17.05.2010 FOR ASSESSMENT YEA R 2006-07 IN RESPECT OF CONFIRMING THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE U/S. 14A OF THE I. T. ACT OF RS.2,08,990/-. 2. BRIEFLY STATED FACTS OF THE CASE AS OBSERVED BY THE ASSESSING OFFICER ARE THAT THE ASSESEE COMPANY EARNED LTCG OF RS.11,31,210/- FROM REDEMPTION OF MUTUAL FUND AND CLAIMED EXEMPTION WITHOUT CONSIDERING ANY EXPENSES FOR INVESTMENT IN MUTUAL FUND, MAINTAINING MUTUAL FUND ACCOUNT, UTILIZING ITS STAF F AND ESTABLISHMENT. HE ALSO OBSERVED THAT THE ASSESSEE DEBITED ADMINISTRATIVE EXPENSES O F RS.90,34,324/- WHICH INCLUDES THE EXPENSES TOTALING RS.46,92,214/- AS BROKERAGE AND C OMMISSION, STT AND INSURANCE CHARGES. ADMINISTRATIVE EXPENSES AS REDUCED BY THE ABOVE EXPENSES, WHICH ARE NOT GENERAL IN NATURE COMES TO RS.43,42,110/-. THESE E XPENSES WERE INCURRED FOR ITS BUSINESS ACTIVITIES INCLUDING TRANSACTION OF MUTUAL FUND. BUT EXPENSES RELATABLE TO MUTUAL FUND TRANSACTION COULD NOT BE DEDUCED DIRECT LY FROM THE P&L ACCOUNT. NOR ANY ACCOUNT THEREOF WAS FURNISHED BY THE ASSESEE. EXPE NSES RELATABLE TO EXEMPT INCOME ARE NOT ALLOWABLE FOR DEDUCTION AS PROVIDED IN SECTION 14A OF THE I. T. ACT., HE, THEREFORE, FOLLOWING THE DECISION OF ITAT, KOLKATA IN THE CASE OF OBEROI LEASING & FINANCE CO. 2 (P) LTD. VS. ACIT, IN ITA NO. 2363/K/2005, A.Y 2002 -03 COMPUTED THE EXPENSES ATTRIBUTABLE TO LTCG AT RS.2,08,990/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) WHILE CONFIRMI NG THE ACTION OF THE ASSESSING OFFICER HAS HELD AS UNDER : THE APPELLANT RELIED ON ITAT DELHI F BENCH JUDGM ENT IN ITR NO. 3198/D/2004 IN GE CAPITAL SERVICES VS. DCIT. THE A/R ARGUED THAT AS PER A.O. THE COMMON EXPENDITURE WAS DETERMINED AT RS.43,42,110/-. AS A GAINST THE SAME THE LD. A/R FILED A STATEMENT SHOWING EXPENSES ATTRIBUTABLE TO EXCEPT I NCOME AS PER APPELLANT, AT RS.23,72,958/- AS AGAINST RS.43,42,110/- AS PER A.O . THE A/R SUBMITTED THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO RS.1,14,213/- AS AGAINST DETERMINED BY THE A.O. FOR RS.2,08,990/-. THE WORKING OF THE A/R AS FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE A.O. IN HIS REMAND REPORT STATED THA T THE AMOUNT OF RS.42,42,110/- DISALLOWED OUT OF ADMINISTRATIVE EXPENSES IS NOT GE NERAL IN NATURE. THE A.O. DISALLOWED THE ADDITION EXPENSES WHICH ARE RELATED TO MUTUAL F UND TRANSACTIONS. SINCE SECTION 14A CLEARLY STATES THE EXPENSES RELATED TO EXEMPT I NCOME ARE NOT ALLOWABLE AS DEDUCTION. THE A.O. HAS RIGHTLY DISALLOWED THE EXP ENSES ATTRIBUTABLE TO EXEMPT INCOME. THE A.O. FOLLOWING DECISION OF HONBLE ITAT, KOLKAT A IN THE CASE OF OBEROI LEASING & FINANCE CO. (P) LTD. VS. ACIT, CIRCLE-6, KOLKATA IN ITA NO.2363 (KOL) OF 2005 HAS COMPUTED THE DISALLOWANCE. THE DISALLOWANCE MADE B Y THE A.O. IS CONFIRMED. THE ADDITIONAL GROUND OF APPEAL IS DISMISSED. BEING FURTHER AGGRIEVED, THE ASSESSEE IS NOW IN APP EAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER PLACED HEAVY RELIANCE ON A RECENT DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS P. LTD. (2010) 326 IT R 1 (SC) AND PRAYED BEFORE THE BENCH TO DELETE THE ADDITION SO SUSTAINED BY THE LD . CIT(A). 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND PRAYED BEFORE THE BENCH TO CONFIRM THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL PLACED ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL. WE FIND THAT TH E LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US HEAVILY PLACED RELIANCE O N THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKER S P. LTD. (CITED SUPRA), WHEREIN FOLLOWING WAS OBSERVED : FOR ATTRACTING SECTION 14A, THERE HAS TO BE A PRO XIMATE CAUSE FOR DISALLOWANCE, WHICH IS ITS RELATIONSHIP WITH THE TAX EXEMPT INCOME .. THUS, IN THE ABSENCE OF SUCH PROXIMATE CAUSE FOR DISALLOWANCE, SECTION 14A CANN OT BE INVOKED. 3 SINCE THIS DECISION IS A VERY RECENT ONE AND THE F ACTS OF THE CASE HAVE NOT BEEN EXAMINED IN THAT PERSPECTIVE BY THE LOWER AUTHORITI ES, WE ARE OF THE CONSIDERED OPINION THAT IN THE INTEREST OF NATURAL JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH AS PE R LAW IN THE LIGHT OF AFORESAID JUDGMENT OF THE HONBLE APEX COURT AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND OF APPEAL OF THE ASSESSEE IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.1.20 11 SD/- SD/- . . ! , # . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( # # # #) )) ) DATED : 31 ST JANUARY, 2011 !/0 %&12 %3! JD.(SR.P.S.) . 4 -%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT M/S. DTC SECURITIES LTD., 1, N. S. ROAD , 1 ST FLOOR, KOLKATA-1. 2 -+, / RESPONDENT, ITO, WARD-6(1), KOLKATA. 3 . %.& / THE CIT, KOLKATA 4. %.& ( )/ THE CIT(A), KOLKATA. 5 . !=% -%& / DR, KOLKATA BENCHES, KOLKATA 5 -%/ TRUE COPY, .&>/ BY ORDER, ? '2 /DEPUTY REGISTRAR .