HINCON FINANCE LTD, MUMBAI V. ASST CIT CEN CIR 22, MUMBAI

ITA 2157/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8102 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 07-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: BHAKTI SHAH
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BE NCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 2157/MUM/2013 ( / ASSESSMENT YEAR : 2009-10 M/S. HINCON FINANCE LTD., HINCON HOUSE, 11 TH FLOOR, 247 PARK, L.B.S. MARG, VIKHROLI (W), MUMBAI-400 083 / VS. THE ACIT, CENTRAL CIRCLE-22, MUMBAI ./ ! ./ PAN/GIR NO. : AAACH 2665M ( ' / APPELLANT ) .. ( #$' / RESPONDENT ) ' % / APPELLANT BY: MS. BHAKTI SHAH #$' & % / RESPONDENT BY: SHRI VIJAY KUMAR BORA & '( / DATE OF HEARING :09.10.2014 )* & '( / DATE OF PRONOUNCEMENT :17.10.2014 +, / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-39, MUMBAI DT.11.01.2013 PERTAINING TO A.Y.2 009-10. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE BY THE AO U/S. 14A OF THE I.T. ACT, 1961. ITA NO. 2157/M/13 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EAR NED EXEMPT INCOME. ON EXAMINATION OF THE RETURN OF INCOME, THE AO NOTI CED THAT THE ASSESSEE HAS WORKED OUT AN AMOUNT OF RS. 87,673/- U/S. 14A O F THE ACT AND DISALLOWED THE SAME BEING INADMISSIBLE PORTFOLIO MA NAGEMENT FEES. THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE IS MA INTAINING CONSOLIDATED ACCOUNT, IT IS NOT POSSIBLE TO ESTABLISH ONE-TO-ONE NEXUS BETWEEN EXPENSES AND EXEMPT INCOME YIELDING INVESTMENTS. THE AO OBS ERVED THAT THE ASSESSEE IS UNABLE TO ESTABLISH THE CORRECTNESS OF ITS CLAIM, THE AO PROCEEDED BY APPLYING PROVISIONS OF SEC. 14A OF THE ACT R.W. RULE 8D AND WORKED OUT THE DISALLOWANCE AT RS. 6,40,312/-. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BEFORE THE LD. C IT(A) THAT NO DISALLOWANCE IS CALLED FOR ON THE GROUND THAT NO SP ECIFIC EXPENSES HAD BEEN INCURRED. THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTION STATING THAT RULE 8D IS MANDATORY AND THE AO HAS CORRECTLY COMPU TED THE DISALLOWANCE AS PER THE PROVISIONS OF SEC. 14A R.W. RULE 8D. HOWEVER, THE LD. CIT(A) DIRECTED THE AO TO REDUCE THE DISALL OWANCE OF RS. 87,000/- WHICH WAS ALREADY OFFERED BY THE ASSESSEE. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT MAJ OR INVESTMENT IN SHARES IS IN HINDUSTAN CONSTRUCTION COMPANY WHICH I S LONG TERM INVESTMENT AND STRATEGIC IN NATURE, EVEN THE ADDITI ONAL INVESTMENT MADE DURING THE YEAR IN SHARES OF HINDUSTAN CONSTRUCTION COMPANY, IS STRATEGIC IN NATURE. IT IS THE SAY OF THE LD. COUNSEL THAT W HERE THE INVESTMENT IS NOT MADE WITH THE OBJECT OF EARNING DIVIDEND, SECTION 1 4A R.W. RULE 8D CANNOT BE APPLIED. THE LD. COUNSEL RELIED UPON THE DECISION OF THE ITA NO. 2157/M/13 3 TRIBUNAL MUMBAI BENCH IN THE CASE OF M/S. J.M. FINA NCIAL LTD IN ITA NO. 4521/M/2012 AND GAREWARE WALL ROPES LTD IN ITA NO. 5408/M/2012. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT EVIDENCES BROUGHT ON RECORD BEFORE US. THE ASSESSEE HAS TAKEN PLEA OF STRATEGIC INVESTMENT FOR THE FIRST TI ME BEFORE US THOUGH IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2008 -09, THE TRIBUNAL HAS CONFIRMED THE FINDINGS OF THE REVENUE AUTHORITIES O N APPLICATION OF RULE 8D. HOWEVER, WE FIND THAT THE TRIBUNAL HAD NO OCCAS ION TO CONSIDER THE PLEA OF STRATEGIC INVESTMENT. THEREFORE, IN THE IN TEREST OF JUSTICE AND FAIR PLAY, WE SET ASIDE THE MATTER TO THE FILE OF THE AO . THE AO IS DIRECTED TO DECIDE THE ISSUE DENOVO AFTER CONSIDERING THE PLEA OF THE ASSESSEE THAT INVESTMENT IN THE SHARES OF HINDUSTAN CONSTRUCTION COMPANY IS A STRATEGIC INVESTMENT IN THE LIGHT OF THE DECISION O F THE TRIBUNAL CITED HEREINABOVE AFTER GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.10.2014 SD/- SD/- ( JOGINDER SINGH ) (N.K. BILLAIYA) + / JUDICIAL MEMBER + / ACCOUNTANT MEMBER MUMBAI; -+ DATED : 17.10.2014 . . ./ RJ , SR. PS ITA NO. 2157/M/13 4 +, +, +, +, & && & #'. #'. #'. #'. /.' /.' /.' /.' / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$' / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. .12 #' , , / DR, ITAT, MUMBAI 6. 23 4 / GUARD FILE. +, +, +, +, / BY ORDER, $.' #' //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI