SHILPA STOCK BROKER P. LTD, MUMBAI V. ITO WD 4(2)(2), MUMBAI

ITA 2362/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3402 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND SHRI AMIT SHUKLA , JM ./I.T.A. NO. 2362/MUM/2012 ( / ASSESSMENT YEAR :2006-07) SHILPA STOCK BROKER PVT. LTD. 5 NATWAR CHAMBER, NAGINDAS MASTER ROAD FORT, MUMBAI-400 001 / VS. ITO WD 4(2)(2) AAYAKAR BHAVAN, MUMBAI-400 020 ./PAN : AAECS9799R ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SMT. PARMINDER /DATE OF HEARING : 22.04.2013 / DATE OF PRONOUNCEMENT : 17.05.2013 ! / O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A) 8-MUMBAI DATED 10.01.2012 WHEREBY HE SUSTAINED THE PENALTY IMPOSED BY THE AO UNDER SECTION 271(1)(C) IN RESPECT OF ADDITION OF R S.3,53,950/- MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE U NDER SECTION 14A OF THE ACT READ WITH RULE 8D OF INCOME TAX RULES. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 24.11.20 06 DECLARING TOTAL INCOME OF ITA NO.2362/MUM/ 2012 SHILPA STOCK BROKER PVT. LTD . 2 RS.4,59,45,770/- IN THE SAID RETURN, DIVIDEND INCOM E RECEIVED ON SHARES WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. HOWEVER, NO D ISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE EARNING OF EXE MPT INCOME WAS MADE BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SECTION 1 4A OF THE ACT ON THE GROUND THAT NO SUCH EXPENDITURE WAS INCURRED FOR EARNING THE EX EMPT INCOME. THE AO DID NOT ACCEPT THE STAND OF THE ASSESSEE AND MADE DISALLOWA NCE UNDER SECTION 14A ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE TOWARD S EARNING OF EXEMPT INCOME AT RS.3,53,950/- AS WORKED OUT BY APPLYING RULE 8D OF INCOME TAX RULES. HE ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) INTER ALIA IN RESPECT OF THE SAID DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID PENALTY IMPOSED BY THE AO HOLDING THAT THE ASSESSEE BY NOT OFFERING DISALLOWANCE UNDER SECTION 14A, HAS REDUCED ITS INCOME BY AN AMOUNT OF RS.3,53,950/- WHICH CLEARLY AMOUNTED TO F URNISHING OF INACCURATE PARTICULAR OF INCOME. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US, NONE HAS APPEA RED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE ASSESSEE IS THEREFORE BEING DISPOSED OF EXPARTE AFTER PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD AND CONSIDERING THE SUBMISSIONS MADE BY THE LD. DR WHO HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE. IT IS OBSERVED THAT NO DISALLOWANCE UNDER SECTION 14A WAS MADE BY THE ASSESSEE SUO MOTO ON THE GROUND THAT NO EXPENDITURE HAD BEEN ACTUALLY INCURRED TOWARDS EARNING OF THE EXEMP T INCOME. THE ASSESSING OFFICER, HOWEVER WORKED OUT THE QUANTUM OF SAID EXP ENDITURE BY APPLYING RULE 8D OF INCOME TAX RULES, 1961. AS HELD BY THE HONBLE B OMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LIMITE D VS. DCIT (2010) 328 ITR 81(BOM), THE SAID RULE 8D IS APPLICABLE PROSPEC TIVELY I.E. FROM AY 2008-09 ITA NO.2362/MUM/ 2012 SHILPA STOCK BROKER PVT. LTD . 3 AND THE SAME THUS IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE INVOLVING AY 2006- 07. AS FURTHER HELD BY THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA) THE DISALLOWANCE UNDER SECTION 14A FOR THE YEARS PRIOR TO AY 2008-09 IS TO BE MADE ON SOME REA SONABLE BASIS AND WHAT IS THAT REASONABLE BASIS GENERALLY DEPENDS ON THE FACTS OF EACH CASE. THE DISALLOWANCE OF EXPENSES UNDER SECTION 14A FOR THE YEARS PRIOR TO A Y 2008-09 THUS IS REQUIRED TO BE MADE ON ESTIMATED BASIS DEPENDING ON THE FACTS O F EACH CASE. THE ISSUE RELATING TO DISALLOWANCE TO BE MADE UNDER SECTION 14A THUS I S A HIGHLY DEBATABLE ISSUE AND IT ALSO INVOLVES ESTIMATION OF THE QUANTUM OF EXPEN SES TO BE DISALLOWED DEPENDING ON THE FACTS OF EACH CASE. KEEPING IN VIEW THIS POS ITION, WE ARE OF THE VIEW THAT ALTHOUGH THE DISALLOWANCE MADE BY THE AO UNDER SECT ION 14A WAS ACCEPTED BY THE ASSESSEE, IT IS NOT A FIT CASE TO IMPOSE PENALTY UN DER SECTION 271(1)(C) IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A ESPECIALLY WHEN THERE IS NO ALLEGATION LEVELED AGAINST THE ASSESSEE THAT HE HAS FURNISHED ANY INACCURATE PARTICULARS. IN THAT VIEW OF THE MATTER, WE CANCEL THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IN RESPECT O F ADDITION MADE BY WAY OF DISALLOWANCE UNDER SECTION 14A AND ALLOW THIS APPEA L OF THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 17 TH . MAY.2013 ! ' # $ % & 17.MAY. 2013 ' ( SD/- SD/- ( AMIT SHUKLA) ( P.M.JAGTAP) ') / JUDICIAL MEMBER / ACCOUNTANT MEMBER # * MUMBAI; % DATED 17 TH / MAY/2013 . ) . . / ASHISH PS ITA NO.2362/MUM/ 2012 SHILPA STOCK BROKER PVT. LTD . 4 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. + ( ) / THE CIT(A)-II, MUMBAI 4. + / CIT MUMBAI 5. ,-' ))./ , ./ , # * / DR, ITAT, MUMBAI H 6. '01 2 / GUARD FILE. % / BY ORDER, , ) //TRUE COPY// & / %' ( (DY./ASSTT. REGISTRAR) , # * / ITAT, MUMBAI