Spin Investment (India) Ltd., New Delhi V. ITO, New Delhi

ITA 2379/DEL/2010

• Counselvise Citation: 237920114 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: GAURAV JAIN
• Keywords: Business income; Opportunity of being heard; Earning of tax free income; Source of fund
• Section: 244A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER ITA NO: 2379/DEL/2010 A.Y. : 2006-2007 SPIN INVESTMENT (INDIA)LTD. VS. ITO, WARD 9(2) 4 7C, DDA SHOPPING CENTRE NEW DELHI NEW FRIENDS COLONY NEW DELHI 110 025 PAN: AAACS 2428 M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. GAURAV JAIN, ADV. RESPONDENT BY : SH. S. MOHANTY, D.R. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18.1.2010 OF CIT(A)-XII, NEW DELHI PERTAINING TO A.Y. 2006-07 ON THE FOLLOWING GROUNDS. 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE ASSESSMENT COMPLETED AT AN INCOME OF RS. 5,42,000/- AS AGAINST THE LOSS OF RS. 6,61,705/- RETURNED BY THE APPELLANT. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIR MING THE DISALLOWANCE OF TOTAL EXPENSES AMOUNTING TO RS. 13, 06,940/- UNDER S.14A OF THE ACT ALLEGED TO HAVE BEEN INCURRED FOR EARNING TAX FREE DIVIDEND INCOME. 2.1.THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NO T APPRECIATING THAT THE TOTAL EXPENSES INCURRED DURING THE YEAR AGGREGA TING TO RS. 12,62,355/- UNDER THE HEAD ADMINISTRATIVE AND FINAN CIAL EXPENSES WERE NOT DISALLOWABLE U/S 14A OF THE ACT SINCE (I) THE SAME HAD NO NEXUS NOR WERE INCURRED IN RELATION TO EARNING EXEM PT INCOME AND (II) IN ANY CASE, THE ACTUAL EXPENDITURE CLAIMED UNDER THE ACT AMOUNTED TO RS. 12,62,355/- ONLY. ITA 2379/DEL/2010 PAGE 2 OF 4 A.Y. 2006-07 M/S SPIN INVESTMENT (INDIA)LTD. 2.2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT APPORTIONMENT OF THE EXPENSES IS NOT ALLOWED U/S 14 A OF THE ACT AND ONLY EXPENSES DIRECTLY INCURRED FOR EARNING OF DIVI DEND INCOME COULD BE DISALLOWED. 2.3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE PROVISIONS OF SUB SECTION (2) OF SECTION 14A READ W ITH RULE 8D OF THE RULES, ARE APPLICABLE RETROSPECTIVELY TO THE YEAR U NDER CONSIDERATION AS WELL. 3. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN TRE ATING INTEREST INCOME ON FDS WITH BANKS AMOUNTING TO RS. 5,42,000/- AS I NCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME, AS DECLARED BY THE APPELLANT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE INTEREST CHARGED U/S 234B/234D AND INTEREST CHARGED U/S 244A OF THE ACT IN RESPECT OF INTEREST WITHDRAWN EARLIER IS LIABLE TO BE DELETED. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AME ND OR VARY FROM THE AFORESAID GROUNDS OF APPEAL AT OR BEFORE THE TIME O F HEARING. 2. AT THE TIME OF HEARING THE COMMON STAND OF THE P ARTIES BEFORE THE BENCH WAS THAT THE ISSUE HAS TO GO BACK TO THE A.O . IN VIEW OF THE FACT THAT THE A.O. AND THE CIT(A) HAVE TAKEN INTO CONSID ERATION THE ORDER OF THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAG EMENT SERVICES, 117 ITD 169. IT IS SEEN THAT THE SAID ORDER HAS NOT B EEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CE LTD. VS. DCIT, 328 ITR 81 (BOM) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE AMENDMENT TO RULE 8D IS RETROSPECTIVE, HOWEVER, IN THE YEAR UNDER CONSIDERATION THE A.O. ON FACTS CAN MAKE A REASONAB LE DISALLOWANCE. AS SUCH FOR THIS EXERCISE THE ISSUE HAS TO GO BACK T O THE A.O. THE LD.A.R. FURTHER PLACED RELIANCE UPON CIT VS. WALFORT SHARE AND STOCK BROKERS P.LTD. 326 ITR 1 (S.C.) AND CIT VS. HERO CYCLES LTD . 323 ITR 518 (P&H) FOR THE PROPOSITION THAT ONLY DIRECT EXPENSES CAN B E DISALLOWED AND DISALLOWANCE IS NOT PERMISSIBLE WHERE NO NEXUS BETW EEN EXPENDITURE INCURRED AND INCOME GENERATED IS FOUND. AS SUCH IT WAS ARGUED THAT ONLY DIRECT EXPENSES HAVE TO BE DISALLOWED. IN THE FACTS OF THE PRESENT CASE, IT WAS ARGUED THAT IGNORING THE FACT THAT THE RE ARE OTHER SOURCES OF INCOME APART FROM THE EXEMPT INCOME THE A.O. HAS DI SALLOWED THE ENTIRE EXPENSES. THE APPORTIONMENT IS REQUIRED TO BE DONE AND THE LD.D.R. ITA 2379/DEL/2010 PAGE 3 OF 4 A.Y. 2006-07 M/S SPIN INVESTMENT (INDIA)LTD. STATED THAT APPORTIONMENT HAS TO BE DONE BY THE A. O. IN THE LIGHT OF THE ABOVE FACTS GROUND NO.2 IS RESTORED BACK TO THE FIL E OF THE A.O. WITH THE DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDER AFTER GIVING THE ASSESSEE A REASONABLE OPPORT UNITY OF BEING HEARD. 3. SIMULTANEOUSLY THE A.O. WILL CONSIDER THE FACTS QUA GROUND NO.3 AGITATED BY THE ASSESSEE AS APART FROM DIVIDEND INC OME THE ASSESSEE ALSO HAS SHOWN INTEREST INCOME FROM LOANS AND ADVANCES. AS SUCH THE FACTS QUA THE SAID GROUND SHALL BE ASCERTAINED AND A SPEA KING ORDER BE PASSED IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 4. GROUND NO.4 IS CONSEQUENTIAL IN NATURE AS SUCH REQUIRES NO ADJUDICATION. GROUND NO.1 IS GENERAL IN NATURE AND HAS BEEN SPECIFICALLY ADDRESSED BY GROUND NO.2 AND 3 AS SUCH IT REQUIRES NO SEPARATE ADJUDICATION. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE ISSUE IS RESTORED BACK TO THE FILE OF A.O. IN THE LIGHT OF ABOVE DISCUSSION. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER,2011. SD/- SD/- (B.C.MEENA ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH OCTOBER, 2011 *MANGA ITA 2379/DEL/2010 PAGE 4 OF 4 A.Y. 2006-07 M/S SPIN INVESTMENT (INDIA)LTD. COPY OF THE ABOVE ORDER IN ITA 2379/DEL/2010 FORWA RDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CI T(A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //