AVDHOOT FINANCE AND INVESTMENT P.LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 2523/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8102 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHADR
• Keywords: Earning of tax free income
• Section: 142(1); 14A

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.2523/MUM/2017 ASSESSMENT YEAR: 2013-14 AVDHOOT FINANCE AND INVESTMENT PVT. LTD. CAMA BUILDING, 1 ST FLOOR, 24/26, DALAL STREET, FORT, MUMBAI-400001 / VS. INCOME TAX OFFICER-2(1)(1), R. NO.543, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / ASSESSEE / REVENUE P.A. NO. AAACA6917D $ % & / ASSESSEE BY SHRI VIJAY MEHTA & SHRI ANUJ KISNADWALA $ % & / REVENUE BY MS. N. HEMALATHA-DR / DATE OF HEARING 18/12/2017 & / DATE OF ORDER: 18/12/2017 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 06/01/2017 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. ITA NO.2523/MUM/2017WE AVDHOOT FINANCE & INVESTMENT P. LTD. 2 THE ONLY GROUND RAISED BY THE ASSESSEE PERTAINS TO UPHOLDING THE DISALLOWANCE OF RS.3,20,185/- MADE BY THE ASSES SING OFFICER U/S 14A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT). ALTERNATIVELY, IT WAS CONTENDED THAT THE DISA LLOWANCE SHOULD HAVE BEEN RESTRICTED TO RS.33,825/-, U/S 14A OF THE ACT, VOLUNTARILY OFFERED BY THE ASSESSEE DURING ASS ESSMENT PROCEEDINGS. BEFORE THIS TRIBUNAL, THE LD. COUNSEL FOR THE ASSESSEE, SHRI VIJAY, MEHTA ALONG WITH SHRI ANUJ KISHNADWALA, INVITED MY ATTENTION TO THE DETAILS OF ADMINISTRATIVE EXPENSES AMOUNTING TO RS.4,69,829/-, DEBITED TO THE PROFIT & LOSS ACCOUNT. IT WAS SUBMITTED THAT DURING THE YEAR, THE ASSESSEE RECEIVED EXEMPT INCOME ONLY FROM ONE COMPANY I.E. SHAKTI FINANCE LTD., WHEREIN, THE INVE STMENT WAS MADE IN THE PRECEDING YEAR AND THE ASSESSEE REC EIVED DIVIDEND THROUGH BANKING CHANNEL BY WAY OF SINGLE TRANSACTION. IT WAS PLEADED THAT NO EFFORTS WERE MA DE BY THE ASSESSEE IN REALIZATION OF DIVIDEND. PLEA WAS ALSO RAISED THAT NO SATISFACTION WAS RECORDED BY THE LD. ASSESSING O FFICER REJECTING THE SUO-MOTO DISALLOWANCE MADE BY THE ASS ESSEE U/S 14A OF THE ACT. THE LD. COUNSELS FURTHER CONTEN DED THAT TO PUT AN END TO THE LITIGATION, THE DISALLOWANCE M AY ITA NO.2523/MUM/2017WE AVDHOOT FINANCE & INVESTMENT P. LTD. 3 RESTRICTED TO RS.50,354/- (RS.3371/- ON ACCOUNT OF D-MAT CHARGES AND 10% OF RS.4,69,829/- I.E. RS.46,983/- O N ACCOUNT OF ADMINISTRATIVE EXPENSES). ON THE OTHER HAND, THE LD. DR, RELIED UPON THE IMPUGNED ORDER. 2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVE STMENT IN SHARES, PROVIDING FINANCIAL SERVICES AND INVESTM ENT BANKING, DECLARED TOTAL INCOME OF RS.3,55,190/- IN ITS RETURN FILED ON 28/10/2013. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE, STATUTORY NOT ICES U/S 143(2) AND 142(1) WERE SERVED UPON THE ASSESSEE. TH E ASSESSEE ATTENDED THE PROCEEDINGS AND FILED THE DET AILS CALLED FOR. THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.6,75,702/- AS AGAINST THE INCOME OF RS.3,55,185/ -, RETURNED BY THE ASSESSEE. WHILE DOING SO, THE LD. A SSESSING OFFICER MADE ADDITION OF RS.3,20,217/- U/S 14A OF T HE ACT READ WITH RULE-8D OF THE INCOME TAX RULES AGAINST RS.33,825/- OFFERED BY THE ASSESSEE DURING ASSESSME NT PROCEEDINGS. THE LD. ASSESSING OFFICER INVOKED THE PROVISIONS ITA NO.2523/MUM/2017WE AVDHOOT FINANCE & INVESTMENT P. LTD. 4 OF SECTION 14A (2) R.W.R 8D OF THE RULES WHILE COMP UTING THE DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSEE COMPA NY SUBSCRIBED 56,24,288 EQUITY SHARES OF SHAKTI FINANC E LTD. AT AN ISSUE PRICE OF RS.11.10 PER SHARE. THE CLAIM OF THE ASSESSEE IS THAT IT WAS INTENDED TO BE LONG TERM IN VESTMENT FOR FUTURE APPRECIATION AND NOT WITH THE INTENTION TO EARN TAX FREE INCOME. THE ASSESSEE RECEIVED DIVIDEND INCOME OF RS.56,24,208/-. THE CLAIM OF THE ASSESSEE IS THAT N O EFFORTS WERE MADE ON THEIR PART TO COLLECT AND REALIZE THE DIVIDEND INCOME. ANOTHER CLAIM OF THE ASSESSEE BEFORE ME IS THAT NO OTHER EXPENDITURE WAS INCURRED FOR REALIZATION OF D IVIDEND INCOME AND THE DE-MAT CHARGES OF RS.3,371/- ARE FOR MING PART OF OTHER EXPENSES DEBITED TO PROFIT & LOSS ACC OUNT FOR DEMATERIALIZATION OF SHARES FROM PHYSICAL TO DE-MAT . ADMITTEDLY, THE ASSESSEE OFFERED RS.33,825/- FOR MA KING DISALLOWANCE U/S 14A OF THE ACT. AT THE SAME TIME, THE ASSESSEE MADE SALARY PAYMENT OF RS.2,40,000/- AND T HERE IS COMMUNICATION CHARGES OF RS.64,546/-. CONSIDERING T HE TOTALITY OF FACTS AVAILABLE ON RECORD, SUBMISSION M ADE BEFORE THIS TRIBUNAL, CONTENTION RAISED BY THE LD. ASSESSI NG OFFICER AS WELL AS OBSERVATION OF THE FIRST APPELLATE AUTHO RITY AND TO ITA NO.2523/MUM/2017WE AVDHOOT FINANCE & INVESTMENT P. LTD. 5 PUT AN END TO THE LITIGATION, THE EXPENSES INCURRED BY THE ASSESSEE ON COMMUNICATION, TRAVELLING AND CONVEYANC E, MOTOR CAR EXPENSE, PRINTING AND STATIONERY, PAYMENT TO THE AUDITORS AND SALARY TO THE EMPLOYEE, THE DISALLOWAN CE U/S 14A OF THE ACT IS RESTRICTED TO RS.60,000/-, WHICH WILL MEET THE ENDS OF JUSTICE. MY ADOPTION/RESTRICTION TO THE ABOVE FIGURES IS DEPENDENT UPON THE FACTUAL MATRIX THAT T HERE ARE NO MANY TRANSACTIONS FOR EARNING THE DIVIDEND INCOM E AS A SINGLE TRANSACTION WAS MADE BY THE ASSESSEE. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESEN CE OF LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLU SION OF THE HEARING ON 18/12/2017 SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 18/12/2017 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT ITA NO.2523/MUM/2017WE AVDHOOT FINANCE & INVESTMENT P. LTD. 6 2. '(%& / THE RESPONDENT. 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,- ' , ) '#$ ' / , / DR, ITAT, MUMBAI 6. -0 1$ / GUARD FILE. & / BY ORDER, (+# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI