DCIT 1(1)(1), MUMBAI V. DISPALY TRADING P.LTD, MUMBAI

ITA 3008/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 4709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/ SHRI MAHAVIR SINGH ( J M) & RAJESH KUMAR ( A M) I.T.A. NO. 3008 /MUM/20 1 7 (ASSESSMENT YEAR 20 12 - 13 ) ACIT 1(1)(1) 579, AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. DISPLAY TRADING PVT. LTD. 3 RD FLOOR, RAJBHUNDUR MANSION, MUMBAI SAMACHAR MARG MUMBAI - 400 001. PAN : AADCD5762E ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI HARESH P. SHAH DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 15 . 11 . 201 8 DATE OF PRONOUNCEMENT 30 . 11 . 201 8 O R D E R PER MAHAVIR SINGH ( J M) : - THIS APPEAL BY REVENUE IS EMANATING FROM THE ORDER BY THE LEARNED CIT(A) - 2, MUMBAI IN ITA NO. CIT(A) - 2/IT - 350/2014 - 15 VIDE ORDER DATED 27.1.2017. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE 1(1)(1), MUMBAI U/S. 143(3) OF THE I.T.ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) FOR A.Y. 2012 - 13 VIDE ORDER DATED 27.2.2015. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER BY THE LEARNED CIT(A) DELETING DISALLOWANCE OF EXPENSES RELATABLE TO EXEMPT INCOM E BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT. FOR THIS THE REVENUE HAS RAISED FOLLOWING GROUND : - 1. 'WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE U/S 14A OF RS. 88,02,O28/ - T BY RELYING ON THE DECISION OF HON T BLE KARNATAKA HIGH COURT GIVEN IN THE CASE OF CCL LTD., AND HOLDING THAT DISALLOWANCE U/S 14A CANNOT BE MADE WHEN SHARES ARE HELD IN STOCK, IGNORING THE DECISION OF JIIRISDICTIONAL ITAT MUMBAI, IN THE CASE OF D.H. SECURITIES PVT. LTD. VS DCIT, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF REVENUE, EVEN AFTER 2 CONSIDERING THE DECISION OF HON'BLE KARNATAKA HIGH COURT DECISION IN THE CASE OF CCL LTD. ? 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THRO UGH THE FACTS AND CIRCUMSTANCES. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS SHOWN DIVIDEND INCOME OF ` 10,47,172/ - AND CLAIMED THE SAME AS EXEMPT. ACCORDING TO THE ASSESSING OFFICER T HE ASSESSEE HAS NOT INCU RR ED ANY EXPENDITURE TO EARN THIS EXEMPT INCO ME AND HENCE HE INVOKED PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE I.T. RULES, 1962 (HEREINAFTER RULES) AND MADE DISALLOWANCE U/R. 8D(2)(I) AT ` 2,232/ - AND U/R. 8D(2) (II) AT ` 82,58,265/ - AND U/R. 8D(2)(III) AT ` 5,41,531/ - . ACCORDINGLY, THE ASS ESSING OFFICER MADE TOTAL DISALLOWANCE AT ` 88,02,028/ - . THE LEARNED CIT(A) DELETED THE ADDITION ONLY ON ONE PREMISE THAT THE ASSESSEE HELD THESE SHARES AS STOCK IN TRADE PREDOMINANTLY FOR TRADING AND NOT AS AN INVESTMENT. ACCORDINGLY THE LEARNED CIT(A) DE LETED THE ADDITION. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. WE FIND FROM CASE RECORD, THE FACTS OF THE CASE AND ARGUMENTS OF BOTH SIDE THAT THE LEARNED CIT(A) DELETED ADDITION ONLY ON ONE PREMISE THAT THE ASSESSEE HELD THESE SHARES AS STOCK - IN - TRADE WAS PREDOMINANTLY FOR TRADING AND NOT AS INVESTMENT. WE FIND THAT THIS ISSUE NOW CIRCUMSTANCES COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (CIVIL APPEAL NO. 104 - 1 09 OF 2015 DATED 12.2.2018 AND OTHERS) . LEARNED COUNSEL FAIRLY AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BUT ONLY REQUESTED THAT IN VIEW OF THIS VERY DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTME NT LTD. (SUPRA) DISALLOWANCE SHOULD BE RESTRICTED TO THE EXEMPT INCOME ONLY. LEARNED COUNSEL FURTHER STATED THAT THIS ISSUE IS COVERED BY THE DECISION OF HON'BLE BOMBAY HIGH COUR T (NAGPUR BENCH), WHEREIN FOLLOWING CHEM INVESTMENT OF HON'BLE DE L HI HIGH COUR T DECISION , HAS HELD THAT DISALLOWANCE SHOULD BE RESTRICTED TO THE EXEM PT INCOME BY OBSERVING AS UNDER : - 3 FOR THIS THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT, NAGPUR BENCH IN THE CASE OF PR. CIT VS. BA LLARPUR INDUSTRIES LIMITED IN INCOME TAX APPEAL NO. 51 OF 2016, WHEREIN THIS ISSUE HAS BEEN CONSIDERED AND FINALLY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LIMITED VS. CIT (2015) 378 ITR 33 (DELHI) HELD AS UNDER: - ON H EARING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOTH THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT THAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE AUTHORITIES RELI ED ON THE JUDGMENT OF THE DELHI HIGH COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOME , WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIVED BY THE ASSESSEE AND THE SAME WAS INCL UDIBLE IN THE TOTAL INCOME. IN THE FACTS OF THE CASE, THE AUTHORITIES HELD THAT SINCE THE INVESTMENTS MADE BY THE ASSESSEE IN THE SISTER CONCERNS WERE NOT THE ACTUAL INCOME RECEIVED BY THE ASSESSEE, THEY COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME. 5. IN VIEW OF THE ABOVE FACTS AND CASE LAW CITED (SUPRA), WE ARE OF THE VIEW THAT THE APPEAL OF THE REVENUE I S TO BE ALLOWED FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) BUT THE DISALLOWANCE IS TO BE RESTRIC TED TO THE EXTEN T INCOME I.E. ` 10,47,172/ - INSTEAD 4 MADE BY THE ASSESSING OFFICER BY ` 88,02,028/ - . WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 30 . 11 .201 8 . SD/ - SD/ - ( RAJESH KUMAR ) ( MAHAVIR SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 30 / 11 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI