AJMERA ASSOCIATES LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 2673/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1155 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 22-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

' IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA , ACCOUNTANT MEMBER ITA NO. 2 6 7 3 /MUM/201 5 , (A.Y : 20 1 0 - 1 1 ) M/S AJMERA ASSOCIATES LTD. 63/67, CARMELLO BUILDING PATHKWADI, OPP.G.T.HOSPITAL L.T.MARG MUMBAI 400 002 PAN : AAD CA7062J VS. DCIT R AN G E 4 (1) AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 020 ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : MS. DINKLE HARIYA / REVENUE BY : SHRI RAJAT MITTAL / DATE OF HEARING : 22 /0 2 /2017 / DATE OF PRONOUNCEMENT : 27/ 04/2017 / O R D E R P ER C.N.PRASAD (JM) TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (APPEALS) - 9, MUMBAI DATED 24.03.2015 FOR THE ASSESSMENT YEAR 2010 - 11 ARISING OUT OF ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT . 2. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS IN RES PECT OF DISALLOWANCE MADE U/S 1 4 A R.W.R. 8D OF THE I.T. RULES . 2 ITA NO. 2673/MUM/2015 (A.Y.2010 - 11) M/S AJMERA ASSOCIATES LTD. 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED RS.8,25,037/ - U/S 14 A R.W.R.8D OF THE ACT. THIS AMOUNT COMPRISES THE DISALLOWANCE U/S 8D2(I) I.E. DIRECT EXPENDITURE B EING THE DEMAT CHARGES AND DISALLOWAN CE UNDER RULE 8D(2)(III) OF RS.5,28,936/ - BEING 0.5% OF THE AVERAGE INVESTMENTS TOWARDS ADMINISTRATIVE EXPENSES . THE ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAS SHOWN DIVIDEND INCOME OF RS.10,09,241/ - AND CLAIMED AS EXEMPTION. HOWEVER, 5% OF SUCH DI VIDEND INCOME WAS DISALLOWED BY THE ASSESSEE AS EXPENDITURE INCURRED IN RELATION TO EARNING SUCH DIVIDEND INCOME. THE ASSESSING OFFICER OBSERVING THAT THE DISALLOWANCE MADE BY THE ASSESSEE IS WITHOUT ANY BASIS AND THE WORKING SUBMITTED BY THE ASSESSEE TO EXCLUDE STOCK - IN - TRADE WHILE COMPUTING THE AVERAGE INVESTMENTS IS REJECTED AND DISALLOWED RS.8,25,037/ - AFTER EXCLUDING 5% ADHOC DISALLOWANCE OF RS.50,462/ - MADE BY THE ASSESSEE. ON APPEAL, THE LD. CIT (APPEALS) SUSTAINED THE DISALLOWANCE REFERRING TO THE DECISION OF THIRD MEMBER OF MUMBAI BENCH IN THE CASE OF DH SECURITIES PVT. LTD. OBSERVING THAT EVEN STOCK - IN - TRADE SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S 14A. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE IN SO FAR AS DEMAT CHARGES ARE CONCERNED SUBMITS THAT THE DEMAT CHARGES DEBITED TO THE ACCOUNTS ARE NOT ON ACCOUNT OF ASSESSEES INVESTMENTS, BUT THEY ARE IN RESPECT OF INVESTMENTS MADE ON BEHALF OF THE CLIENTS. THE LD. COUNSEL SUBMITS THAT DEMAT CHARGES COLLECTED FROM THE CLI ENTS WERE PAID TO THE EXCHANGES, T HEREFORE, THE SAME SHOULD NOT BE CONSIDERED AS DIRECT EXPENSES UNDER RULE 8D2(I). COMING TO THE EXCLUSION OF STOCK - IN - TRADE FOR THE PURPOSE OF COMPUTING AVERAGE INVESTMENTS UNDER RULE 8D2(III), THE LD. COUNSEL PLACED 3 ITA NO. 2673/MUM/2015 (A.Y.2010 - 11) M/S AJMERA ASSOCIATES LTD. RELIANCE ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PR.CIT VS. STATE BANK OF PATIALA [ (2017) 78 TAXMAN.COM 3. ] 5. THE LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION RELIED ON. IN SO FAR AS THE DEMAT CHARGES ARE CONSIDERED, WE ARE OF THE VIEW THAT DEMAT CHARGES COLLECTED BY THE ASSESSE ITS FROM CLIENTS ON INVEST MENTS MADE ON BEHALF OF THE CLIENTS SHALL NOT BE DISALLOWED AS DIRECT EXPENSES SINCE THESE AMOUNTS WERE COLLECTED AND PAID TO THE EXCHANGES . H OWEVER AT THE SAME TIME IT CAN NOT BE RULED OUT OF ASSESSEE INCURRING DEMAT CHARGES ON THE TRANSACTIONS RELATIN G TO THE ASSESSEES INVESTMENTS, A S THE ASSESSEE IS INTO TRADING OF SHARES AS WELL AS STOCK BROKER . T HEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER SHALL FIND OUT THE DEMAT CHARGES ON ACCOUNT OF ASSESSEES INVESTMENTS AND CONSIDER THE SAME FOR DISALLOWAN CE UNDER RULE 8D(2)(I) AS DIRECT EXPENSES. HENCE THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7. COMING TO STOCK - IN - TRADE, THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PR.CIT VS.STATE BANK OF PATIALA (SUP RA) HELD THAT STOCK - IN - TRADE IS NOT AN INVESTMENT AND THEREFORE WHILE COMPUTING THE AVERAGE VALUE OF INVESTMENTS UNDER RULE 8D(2)(III) SHARES HELD AS STOCK - IN - TRADE SHOULD BE EXCLUDED. BEFORE THERE ARE NO DETAILS OF THE INVESTMENTS HELD AS STOCK - IN - TRADE. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE THE ACCOUNTS OF THE ASSESSEE AND ASCERTAIN THE INVESTMENTS WHICH ARE HELD AS STOCK IN TRADE AND DECIDE THE ISSUE IN THE LIGHT OF THE 4 ITA NO. 2673/MUM/2015 (A.Y.2010 - 11) M/S AJMERA ASSOCIATES LTD. DECISION PASSED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS ALSO REQUIRED TO PROVIDE NECESSARY DETAILS FOR COMPLETION OF THE ASSESSMENT. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27 TH DAY OF APRIL 2017 . SD/ - SD/ - ( ASHWANI TANEJA ) ( C.N.PRASAD ) / / ACCOUNTANT MEMBER JUDICIAL MEMBER / MUMBAI; / DATED 27 .04. 2017 LR, SPS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT. REGISTRAR) , / ITAT, MUM 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. // TRUE COPY / /