Neelama Portfolio (P) Ltd., New Delhi V. ITO, New Delhi

ITA 2194/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7023 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 17-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA SENIOR
• Assessee Lawyers: ASHOK SIN GHAL
• Keywords: Retrospective amendment
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 2194/DEL/2010 ASSESSMENT YEAR: 2007-08 NEELEAMA PORTFOLIO (P) LTD., VS. INCOME-TAX OFFICE R, 4852/24, FIRST FLOOR, ANSARI ROAD, WARD 13(2), DARYA GANJ, NEW DELHI-1100 02 NEW DELHI. (PAN: AACCN0715A) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHOK SIN GHAL, CA & SH.ASHOK GUPTA, AR RESPONDENT BY: SHRI AK MONGA, SE NIOR DR DATE OF HEARING : 17.11.2011 DATE OF PRONOUNCEMENT : 25.11.2011 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 18.03.2010 PASSED FOR ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTIVE AND ARGUM ENTATIVE IN NATURE. IN BRIEF, THE GRIEVANCE OF ASSESSEE IS THAT LEARNED CI T(APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,08,168.50 UNDER SEC. 14A OF THE INCOME-TAX ACT, 1961. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 24.10.2007 DECLARING LOSS OF RS.2,41,969. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT TRANSPIRES TO THE ASSESSING OFFICER TH AT ASSESSEE HAS A DIVIDEND INCOME OF RS.10,735.74 WHICH WAS CLAIMED EXEMPT FOR TAX UNDER SEC. 10(34) OF THE ACT. IT HAS NOT MADE ANY DISALLOWANCE OF THE EXPENDITURE ATTRIBUTABLE TO EARNING OF THIS DIVIDEND INCOME. ASSESSING OFFIC ER MADE A DISALLOWANCE UNDER SEC. 14A READ WITH RULE 8D. HE WORKED OUT THE DISALLOWANCE AT RS.1,08,165.50. 3. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT DISALLOWANCE FOR THE PURPOSE OF SEC. 14A HAS BEEN M ADE WITH THE HELP OF RULE 8D. RULE 8D WAS BROUGHT ON THE STATUTE BOOK W. E.F. 24.3.2008. ASSESSING OFFICER HAS RELIED UPON THE ORDER OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT (P) LTD . REPORTED IN 117 ITD 167. THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF G ODREJ BOYCE REPORTED 3 IN 328 ITR 81 HAS CONSIDERED THIS RULE AND OBSERVED THAT IT IS NOT APPLICABLE FROM RETROSPECTIVE EFFECT. THE HON'BLE COURT HAS OB SERVED THAT THIS RULE CAME INTO EXISTENCE ON 24.3.2008 AND IT WILL BE APP LICABLE FROM ASSESSMENT YEAR 2008-09. THUS, THE DISALLOWANCE DESERVES NOT T O BE MADE WITH THE HELP OF THIS RULE IN THIS ASSESSMENT YEAR. WHEN WE CONFR ONTED THE LEARNED COUNSEL FOR THE ASSESSEE AS TO WHY THE ISSUE BE NOT SET ASI DE TO THE ASSESSING OFFICER FOR EXAMINING THE SURROUNDING FACTS AND CIRCUMSTANC ES FOR QUANTIFYING THE DISALLOWANCE REQUIRED TO BE MADE UNDER SEC. 14A OF THE ACT. IN RESPONSE TO OUR QUERY, IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT ASSESSEE COMPANY IS THE MEMBER OF DELHI STOCK EXCH ANGE. IT BUYS AND SELLS SHARE FOR AND ON BEHALF OF ITS CLIENTS. BEING A MEM BER OF DSE, IT WAS REQUIRED TO GIVE SECURITY. IT HAS PLEDGED SHARES OF ONE OF ITS CLIENTS ARIVIND WITH DSE 5 YEARS BACK. THESE SHARES HAVING VALUE OF RS. 3 LACS HAVE BEEN SHOWN IN THE ACCOUNTS. THE SHARES WERE ULTIMATELY R ELEASED AND GIVEN BACK TO THE CLIENT. THE ASSESSEE HAD RECEIVED A DIVIDEND OF RS.10,000 ON THESE SHARES, OTHERWISE IT HAS NOT MADE ANY INVESTMENT IN THESE YEARS UTILIZING BORROWED FUNDS ETC. THE ASSESSEE HAS NOT MADE INVES TMENT IN SHARES EITHER AS A INVESTOR OR AS A STOCK. THE LEARNED COUNSEL FO R THE ASSESSEE IN THIS CONNECTION MADE REFERENCE TO THE BALANCE SHEET AVAI LABLE ON PAGE NOS. 1, 2 AND 3, STATEMENT OF HOLDING OF SHARES ISSUED BY ALA NKIT ASSIGNMENT LTD., 4 DETAILS OF SHARES TRANSFERRED TO CLIENTS ON 26.5.20 07 AFTER CLOSURE OF PLEDGE BY DSE ALONGWITH THE BANK STATEMENT OF HDFC EXHIBIT ING THE TRANSFERS. THESE DETAILS ARE PLACED ON PAGES 4 TO 10 OF THE PA PER BOOK. ON THE STRENGTH OF THESE DETAILS, HE SUBMITTED THAT NO DISALLOWANCE DESERVES TO BE MADE IN THE CASE OF ASSESSEE. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. ON PERUSAL OF THE DETAILS, WE FIN D THAT THE ASSESSEE NEVER PURCHASED SHARES ON HIS OWN ACCOUNT NOR HAS ANY SUC H SALES. AS PER THE SEBI GUIDELINES, IT WAS REQUIRED TO PLEDGE MARGIN M ONEY WITH THE DSE. IT PLEDGED THE SHARES OF ONE OF ITS CLIENTS HAVING VAL UE OF RS. 3 LCAS, ON THESE SHARES, A DIVIDEND OF RS.10,000 WAS RECEIVED BY IT. ASSESSING OFFICER HAS MADE A DISALLOWANCE OF RS.1,08,165.50 BEING EXPENDI TURE FOR EARNING A DIVIDEND OF RS.10,735.74. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING OF DIVIDEND INCOME OF RS.10,73 5. FOR THE SAKE OF ARGUMENTS, WE MAY PRESUME THAT SOME ENERGY OF MANAG ERIAL STAFF MIGHT BE DEVOTED FOR KEEPING A TRACK OF THE SHARES PLEDGED W ITH THE DSE. IT HAS NOT TRANSMITTED THE DIVIDEND INCOME TO THE CLIENTS BUT KEPT BY IT ITSELF. A NOMINAL AMOUNT MAY BE ALLOCATED TOWARDS THE CONTRIBUTION MA DE BY THE MANAGERIAL 5 STAFF FOR KEEPING THE TRACK BUT CONSIDERING THE MEA GER AMOUNT OF DIVIDEND I.E. RS.10,000 ONLY, WE DO NOT SEE ANY REASON TO ES TIMATE SOME EXPENSES WHICH MAY BE ONLY RS.500 AT THE MOST TO MAKE SOME A DDITION IN THE INCOME OF THE ASSESSEE. THEREFORE, WE DELETE THE DISALLOWA NCE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/11/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR