M/s.Inditrade Capital Ltd, Cochin V. The ACIT, Cochin

ITA 222/COCH/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7699 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 30-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2015
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: BALAKRISHNAN K
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income
• Section: 14A

Judgement Text

ITA NO.222/COCH/2015 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.222/COCH/2015 ( #$ % /ASSESSMENT YEAR : 2010-11) M/S. INDITRADE CAPITAL LTD., (FORMERLY KNOWN AS JRG SECURITIES LIMITED) XXXVI-202, JJ COMPLEX, DAIRY METHANAM ROAD, EDAPPALLY, KOCHI-682 024. VS THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), KOCHI. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . ' ./PAN NO. AAACJ 7327G &' * + /ASSESSEE BY SHRI BALAKRISHNAN K., CA ( ) &' * + /REVENUE BY SHRI SHANTAM BOSE, CIT(DR) ,- * ./ / DATE OF HEARING 30/08/2016 0 % * ./ /DATE OF PRONOUNCEMENT 01/09/2016 1 1 1 1 /ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE O RDER OF THE LD. CIT(A)-I, KOCHI VIDE ORDER DATED 09-01-2015 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.222/COCH/2015 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN MAKING A DISALLOWAN CE OF RS.393,266 BY INCORRECTLY APPLYING THE PROVISIONS O F SECTION 14A OF THE ACT READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT PROVIDING THE A PPELLANT RELIEF WITH RESPECT TO THE ADDITIONAL CLAIM FOR ALLOWANCE ON ACCOUNT OF EXPENDITURE INCURRED ON EMPLOYEES STOCK OPTION PLAN (ESOP) AMOUNTING TO RS.2,836,241. 3. THE ASSESSEE HAS NOT PRESSED GROUND NO. 2 AND ACC ORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 4. AS REGARDS GROUND NO.1, THE BRIEF FACTS OF THE CASE ARE THAT DISALLOWANCE IN THE PRESENT CASE WAS WORKED OUT AS PER RULE 8D R.W.S.14A OF THE ACT AMOUNTING TO RS.20,90,677/- AS PER DETAILS WHICH AR E ENCLOSED AS ANNEXURE-1 TO THE ORDER OF THE LD. CIT(A). SINCE THE ASSESSEE HA S OFFERED RS.16,97,411/- AS INCOME WHICH IS EXEMPT, THE SAME WAS REDUCED FROM T AXABLE INCOME AND ACCORDINGLY, THE DISALLOWANCE WAS WORKED OUT AT RS. 3,93,266/-. 5. THE LD. CIT(A) OBSERVED THAT THE EXPENSES FOR PROVI SION OF SUB-SECTION (2) IS APPLICABLE IN A CASE WHERE EVEN NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR EARNING AN EXEMPT INCOME. IT WAS HELD THAT THE ASSESSING OFFICER ITA NO.222/COCH/2015 3 HAS CORRECTLY MADE THE DISALLOWANCE, AND, WORKED OU T THE PROPORTIONATE EXPENSE, WHICH RELATES TO EXEMPT INCOME BY FOLLOWIN G THE PROVISIONS OF RULE 8D. NOT FINDING ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER, THE SAME WAS UPHELD AND THE APPEAL OF THE ASSESSEE ON THIS GROUN D WAS DISMISSED BY THE LD. CIT(A). 6. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT WHILE MAKING COMPUTATION OF THE DISALLOWANCE U/S. 14A READ WITH RULE 8D, NO OPPORTUNITY HAS BEEN PROVIDED TO THE ASSESSEE BY THE LD. CIT(A) . 7. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS A FACT ON RECORD THAT WHILE WORKING OUT THE DISA LLOWANCE AS PER RULE 8D R.W.S. 14A OF THE ACT, THE ASSESSING OFFICER AND THE LD. C IT(A) DID NOT ALLOW ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE MA KING THE COMPUTATION OF THE DISALLOWANCE. THIS IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, IN THE INTEREST OF JUSTICE, THE MATTER REQUIRES RE- CONSIDERATION AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND SENT B ACK TO THE LD. CIT(A) TO DECIDE THE ISSUE DE NOVO BY AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO. 1 IS ALLOWED FOR STATIST ICAL PURPOSES. ITA NO.222/COCH/2015 4 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COUR T ON 01-09-2016 SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 2 /DATED: 1ST SEPTEMBER, 2016 GJ/ 1 * (.3 43%. /COPY TO: 1. &' /M/S. INDITRADE CAPITAL LTD., (FORMERLY KNOWN AS JR G SECURITIES LIMITED) XXXVI-202, JJ COMPLEX, DAIRY METHANAM ROAD, EDAPPALLY, KOCHI-682 024. 2. () &' /THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1 (2), KOCHI. 3. ,5 . ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS), I, KOCHI 4. ,5 . /THE COMMISSIONER OF INCOME-TAX, KOCHI 5. 367 (. , /THE DR/ITAT, COCHIN BENCH. 6. 79 :- /GUARD FILE. 1, /BY ORDER ; /ASSISTANT REGISTRAR - .