Mr. Rajesh Damani, Kolkata V. ITO, Ward 35(4), Kolkata, Kolkata

ITA 262/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6222 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE CIT LD
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BE NCH, KOLKATA BEFORE : SHRI P.M. JAGTAPSH, ACCOUNTANT ME MBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 262/KOL/2017 A.Y 2013-14 MR. RAJESH DAMANI VS. INCOME-TAX OFFICER PAN: AEAPD3236M WARD 35(4), KOLKATA [APPELLANT ] [RESPONDENT ] APPELLANT/ ASSESSEE BY : SHRI A. K. TIBREWAL, FCA, SHRI AMIT AGARWAL, ADVOCATE, LD. ARS RESPONDENT/ DEPARTMENT BY : SHRI A. BHATTACHAR JEE, ADDL. CIT, LD.DR DATE OF HEARING : 08-05-2018 DATE OF PRONOUNCEMENT : 04-07-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THE ABOVE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DT. 17- 11-2016 OF THE CIT-A, 10, KOLKATA FOR THE A.Y 2013- 14. 2. THE CONTENTION OF THE LD. AR IS THAT ASSESSEE I S ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND ALL THE SHARES AR E HELD AS STOCK-IN- TRADE. IT IS ALSO CONTENDED BY HIM THAT THE THE ASS ESSEE DID NOT RECEIVE ANY EXEMPT INCOME AND AS SUCH DISALLOWANCE MADE BY THE AO ON THIS COUNT BY INVOKING THE PROVISIONS OF RULE 8D (2) OF THE IT RULES, 1962 IS BAD IN LAW. 3. THE CONTENTION OF THE LD. DR IS THAT THE HONBL E SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD VS. CIT [ 2018 ] 91 TAXMANN.COM 154 (SC) HELD THAT THE PROVISIONS OF SECTION 14A OF TH E ACT WOULD BE APPLICABLE EVEN THE SHARES ARE HELD AS STOCK-IN-TRADE AND ACCORDINGLY SOUGHT TO REMAND THE ISSUE TO THE F ILE OF AO FOR HIS FRESH CONSIDERATION. 4. WE FIND THAT THE CO-ORDINATE BENCH, KOLKATA ITAT IN THE CASE OF M/S. MARUITI TRADERS & INVESTORS VIDE ITS ORDER DT . 11-04-2018 ITA NO. 262/KOL/2017 MR. RAJESH DAMANI 2 REMANDED THE ISSUE TO THE FILE OF AO FOR DE NOVO AD JUDICATION TO ASCERTAIN THE AMOUNT OF DISALLOWANCE FROM THE ACCO UNTS RELATING TO SHARES HELD AS STOCK-IN-TRADE FOR THE PURPOSE OF SE CTION 14A OF THE ACT. RELEVANT PORTION OF THE SAID ORDER IS REPRODUC ED HEREIN BELOW FOR BETTER UNDERSTANDING:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE HON'BLE SUPREME COURT IN ITS RECENT DECISION IN THE CASE OF MAXOPP INVESTMENT LT D. VS. CIT REPORTED IN [2018] 91 TAXMANN 154 (S C) DATED 12.02.2018 HAD HELD THAT TH E PROVISION OF SECTION 14A WOULD BE APPLICABLE EVEN WHEN THE SHARES ARE HELD AS STOC K-IN-TRADE IN VIEW OF THE FACT THAT THE RESULTANT DIVIDEND INCOME EARNED WOULD BE EXEMP T IN ANY CASE. HENCE, WE HOLD THAT THE APPLICABILITY OF PROVISION OF SECTION 14A IN RESPECT OF SHARES HELD AS STOCK-IN- TRADE HAS BEEN SETTLED BY THE AFORESAID HON'BLE SUP REME COURTS DECISION. NOW, THE SHORT POINT THAT ARISES FOR OUR CONSIDERATION IS AS TO WHAT AMOUNT COULD BE DISALLOWED BY THE LD. AO. THE LD. AO IN THE INSTANT CASE, HAD APPLIED THE THIRD LIMB OF RULE 8D(2) OF THE RULES AND MADE DISALLOWANCE OF RS. 38,93,332 /-. THE ASSESSEE HAS MADE SUO- MOTO DISALLOWANCE IN ITS RETURN OF INCOME IN THE SU M OF RS. 12,881/- TOWARDS DEMAT CHARGES. THE LD. CITA HAD RESTRICTED THE TOTAL DISA LLOWANCE OF RS. 9,47,339/- BEING 10% OF DIVIDEND INCOME OVER AND ABOVE THE FIGURE OF RS. 12881/- SUO-MOTO DISALLOWED BY THE ASSESSEE. WE FIND THAT THE LD. AO CANNOT DIR ECTLY RESORT TO THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES FOR T HE PURPOSE OF MAKING DISALLOWANCE U/S 14A OF THE ACT. IT IS INCUMBENT ON THE PART OF THE LD AO TO VERIFY THE ACCOUNTS OF THE ASSESSEE AND ASCERTAIN THE AMOUNT OF DISALLOWAN CE FROM THE SAID ACCOUNTS U/S 14A OF THE ACT. ACCORDINGLY, WE DEEM IT FIT AND APPROPR IATE IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO REMAND THIS ISSUE TO THE FILE OF LD. AO FOR DE NOVO ADJUDICATION. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STA TISTICAL PURPOSES. 5. IN VIEW OF ABOVE, WE DEEM IT FIT AND PROPER TO R EMAND THE MATTER TO THE FILE OF AO TO WORK OUT THE DISALLOWAN CE RELATING TO THE SHARES HELD AS STOCK-IN-TRADE FOR THE PURPOSE OF EX PENDITURE TO BE COMPUTED U/SEC 14A OF THE ACT. THUS, THE GROUNDS RA ISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 04-07-2018 SD/- SD/- P. M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04-07-2018 ITA NO. 262/KOL/2017 MR. RAJESH DAMANI 3 **PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE: MR. RAJESH DAMANI, S/O MAN MOHA N (SINCE DECEASED), 8 LYONS RANGE, GROUND FLOOR, KOLK ATA- 700 001. 2 RESPONDENT/DEPARTMENT: INCOME TAX OFFICER, WARD 35( 4), KOLKATA, AAYKAR BHAWAN POORVA, 110 SHANTI PALLY, KOLKATA-700 107. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER SR.P.S,H.O.O, ITAT.K OL