GILL & COMPANY P. LTD, MUMBAI V. ASST CIT RG 2(1)(OSD), MUMBAI

ITA 1802/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83517 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , ! '#$% , & '( BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NOS. 1802 & 1803/MUM/2013 ( ) ) ) ) / ASSESSMENT YEARS : 2005-06 & 2009-10 M/S. GILL & COMPANY PVT.LTD., NTC HOUSE, NARROTTAM MORARJI MARG, BALLARD ESTATE, MUMBAI-400 038 THE ACIT, RANGE 2(1)(OSD), AAYAKAR BHAVAN, MUMBAI-400 020 (* & ./ + ./PAN/GIR NO. : AAACG 3743M ( *, /APPELLANT ) .. ( -.*, / RESPONDENT ) *, / / APPELLANT BY : ` SHRI NITESH JOSHI -.*, 0 / /RESPONDENT BY : SHRI A.K. NAYAK 0 12& / DATE OF HEARING : 21.08.2014 34) 0 12& / DATE OF PRONOUNCEMENT : 21.08.2014 ' 5 / O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS BY THE ASSESSEE ARE PREFERR ED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-4,MUMBAI PERTAINING TO AS SESSMENT YEARS 2005- 06 AND 2009-10 DT. 26.12.2012 AND 14.12.2012 RESPEC TIVELY. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 1802/MUM/2013 A.Y. 2005-06 ITA NOS.1802 & 1803/M/13 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 9,30,211/- U/S. 14A OF ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 31.12.2007. THE MATTER TRAVELLED UPTO THE TRIBUNAL. THE TRIBUNAL VIDE ORD ER IN ITA NO. 3544/M/2009 DT. 31.12.2010 HAS SET ASIDE THE ISSUE PERTAINING TO DISALLOWANCE U/S. 14A OF THE ACT. WHILE RESTORING THE ISSUE TO THE FILES OF THE AO, THE TRIBUNAL DIRECTED THE AO TO DECIDE THE ISSUE IN LINE WITH THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 234 CTR (BOM) 01. WHI LE FRAMING THE ASSESSMENT U/S. 143(3) R.W. SEC. 254 OF THE ACT, TH E AO COMPUTED THE DISALLOWANCE U/S. 14A AT RS. 9,30,211/- ON ACCOUNT OF INTEREST EXPENDITURE TO WHICH HE ADDED RS. 5,339/- BEING DEMAT CHARGES. THE TOTAL DISALLOWANCE U/S. 14A WAS MADE AT RS. 9,35,550/-. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STRO NGLY SUBMITTED THAT THE AO HAS COMPLETELY DISREGARDED THE FACTUAL POSIT ION WHILE COMPUTING THE DISALLOWANCE U/S. 14A OF THE ACT WHILE CONSIDER ING THE INTEREST EXPENSES. THE LD. COUNSEL FURTHER STATED THAT THE AO HAS NOT FOLLOWED THE FINDINGS OF THE TRIBUNAL NOR THE AO HAS CONSIDE RED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GO DREJ & BOYCE MANUFACTURING CO. (SUPRA). 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. ITA NOS.1802 & 1803/M/13 3 6. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT MATERIAL EVIDENCE BROUGHT BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ORIGINAL ASSESSMENT WAS SET ASIDE TO THE F ILES OF THE AO FOR CONSIDERING THE DISALLOWANCE U/S. 14A AFRESH. IT I S ALSO AN UNDISPUTED FACT THAT WHILE FRAMING THE ASSESSMENT U/S. 143(3) R.W. SEC. 254 OF THE ACT, THE AO HAS NOT CONSIDERED THE FACTUAL ASPECT OF THE CAS E. A PERUSAL OF THE BALANCE SHEET FIGURES SHOWS THAT THE ASSESSEE WAS H AVING OWN FUNDS AT RS. 12.70 CRORES WHEREAS THE TOTAL INVESTMENT AS ON 31.3.2005 IS AT RS. 9.34 CRORES WHICH CLEARLY SHOWS THAT THE ASSESSEE W AS HAVING SUFFICIENT OWN FUNDS FOR MAKING THE INVESTMENT. WE FURTHER FI ND THAT THE TOTAL LOANS OUTSTANDING AS ON 31.3.2004 WAS AT RS. 41.34 CRORES THE SAME IS BROUGHT DOWN TO RS. 32.04 CRORES AS ON 31.3.2005 WHICH CLEA RLY SHOW THAT THERE ARE NO FRESH BORROWINGS. THE INCREASE IN INVESTMEN T FROM FINANCIAL YEAR 2003-04 TO FINANCIAL YEAR 2004-05 IS BY RS. 49.24 L AKHS. CONSIDERING ALL THESE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON OR JUSTIFICATION IN COMPUTING THE DISALLOWANCE OUT OF INTEREST EXPENSES . IF THE INTEREST EXPENSES ARE IGNORED FOR THE COMPUTATION OF DISALLO WANCE U/S. 14A, THE DISALLOWANCE WORKS OUT TO RS. 45,330/-. WE, ACCORD INGLY, DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S. 14A TO RS. 45,330 /- ONLY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1803/M/2013 A.Y. 2009-10 8. THE GRIEVANCE OF THE ASSESSEE IS TWO FOLD. FIRS T GRIEVANCE RELATES TO THE DISALLOWANCE U/S. 14A R.W. RULE 8D AMOUNTING TO RS. 23,70,969/- AND SECOND GRIEVANCE RELATES TO THE TREATMENT OF INCOME FROM SHORT TERM CAPITAL GAIN AS INCOME FROM BUSINESS. ITA NOS.1802 & 1803/M/13 4 9. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INC OME OF RS. 34,19,021/-. THE ASSESSEE COMPUTED THE DISALLOWANCE U/S. 14A 23, 70,969/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSES SEE FILED AN APPLICATION FOR REDUCING THE DISALLOWANCE TO RS. 7, 74,536/-. THE ASSESSEE ALSO FILED THE COMPUTATION OF REVISED DISALLOWANCE U/S. 14A OF THE ACT. THE AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESS EE. DRAWING SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF GOETZE (INDIA) LTD VS CIT 284 ITR 323, THE AO COMPLETED TH E ASSESSMENT BY TAKING THE DISALLOWANCE ORIGINALLY COMPUTED BY THE ASSESSEE AT RS. 23,70,969/-. 10. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STR ONGLY SUBMITTED THAT THE AO OUGHT TO HAVE CONSIDERED THE REVISED COMPUTA TION OF DISALLOWANCE U/S. 14A OF THE ACT. 12. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE FILED A REVISE D COMPUTATION OF DISALLOWANCE U/S. 14A OF THE ACT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF, THOUGH THE SAME WAS NOT ACCEPTE D BECAUSE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F OF GOETZE (INDIA) LTD VS CIT 284 ITR 323 (SUPRA). IN OUR CONSIDERED OPINION, THE REVISED COMPUTATION OF DISALLOWANCE NEEDS TO BE EXAMINED BY THE AO. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO . THE AO IS DIRECTED TO EXAMINE THE COMPUTATION OF DISALLOWANCE MADE BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH AS PER THE PROVISIONS OF LA W AND ALSO IN THE LIGHT OF ITA NOS.1802 & 1803/M/13 5 THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. 313 ITR 340. THIS GRIEVANCE OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 13. THE SECOND GRIEVANCE RELATES TO THE TREATMENT O F SHORT TERM CAPITAL GAINS (STCG) AS BUSINESS INCOME. AT THE VE RY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT ON IDENTICAL F ACTS, THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOR A. Y. 2007-08 IN ITA NO. 6666/M/2010. 14. THE LD. DR FAIRLY CONCEDED TO THIS. 15. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CAS E FOR A.Y. 2007-08 IN ITA NO. 6666/M/2010. WE FIND THAT THE TRIBUNAL HAS CONSIDERED THIS ISSUE AT PARA-10 ON PAGE-4 OF ITS ORDER AND AT PAGE - 16.1 AT PAGE-7, THE TRIBUNAL HELD AS UNDER: CONSIDERING ALL THE FACTS IN TOTALITY AND THE NATU RE OF BUSINESS OF THE ASSESSEE AND THE NUMBER OF SCRIPS T RANSACTED IN THE LIGHT OF THE OWN FUNDS OF THE ASSESSEE, IN O UR HUMBLE OPINION, THE REVENUE AUTHORITIES HAVE ERRED IN TREA TING THE SHORT TERM CAPITAL GAINS AS BUSINESS INCOME. THE A O IS DIRECTED TO TREAT THE STCG AS DECLARED BY THE ASSES SEE. GROUND NO. 6 & 7 ARE ACCORDINGLY ALLOWED. AS NO DISTINGUISHING FACTS HAVE BEEN BROUGHT ON RE CORD BEFORE US, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT THE AO TO TREAT THE STCG AS DECLARE D BY THE ASSESSEE. THIS GRIEVANCE OF THE ASSESSEE IS ALLOWED. ITA NOS.1802 & 1803/M/13 6 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1802/M/13 IS PARTLY ALLOWED AND ITA NO. 1803/M/13 I S PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2014 ' 5 0 4) & 6 7'8 21.8.2014 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT & '( / ACCOUNTANT MEMBER MUMBAI; 7' DATED 21 ST AUGUST,2014 . . ./ RJ , SR. PS ' 5 ' 5 ' 5 ' 5 0 00 0 -1' -1' -1' -1' : ')1 : ')1 : ')1 : ')1 / COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. '<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. ' 5 ' 5 ' 5 ' 5 / BY ORDER, .'1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI