MOTILAL OSWAL INVESTMENT ADVISORS P.LTD, MUMBAI V. ADDL CIT RG 3(2), MUMBAI

ITA 3010/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83487 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business income; Rule of consistency
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B BENCH. . . , , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 3010/MUM/2012, ! ! ! ! / ASSESSMENT YEAR-2008-09 MOTILAL OSWAL INVESTMNET ADVISORS PVT. LTD., 2ND FLOOR, PALM SPRING CENTRE, NEW LINK ROAD, MALAD (W), MUMBAI-400064 VS ADDL. CIT 3(2), C-11, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN: AAECM6353P ( '# / APPELLANT) ( $%'# / RESPONDENT) &' &' &' &' ( ( ( ( / ASSESSEE BY : SHRI VIJAY MEHTA ) ( / REVENUE BY : SHRI VIVEK BATRA ) )) ) '* '* '* '* / DATE OF HEARING : 12-08-2014 +,! ) '* / DATE OF PRONOUNCEMENT : 12-08-2014 , 1961 ) )) ) 254 )1( '-' '-' '-' '-' . . . . ORDER U/S..254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM : CHALLENGING THE ORDER DATED.14.03.2012 OF THE CIT(A )-4,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS APPEAL: BEING AGGRIEVED BY THE ORDER OF THE HON'BLE COMMISS IONER OF INCOME TAX (APPEALS)- 4 MUMBAI, THIS APPEAL PETITION IS SUBMITTED ON THE FOLLOWING GROUNDS WHICH IT IS PRAYED MAY BE CONSIDERED INDEPENDENTLY WITHOUT PREJUDICE TO ONE ANOTHER; 1. DISALLOWANCE US/14A. 1.01) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS 11,54,860/- VIDE RULE 8D(2) BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT WITHOUT APPRECIATING THAT ALL THE EXPENS ES DEBITED TO THE PROFIT AND LOSS ACCOUNT ARE INCURRED FOR THE PURPOSE OF THE BUSINESS INCOME AND ALLOWABLE AS BUSINESS EXPENSE. THUS THE DISALLOWANCE BEING BAD-IN-LAW NEEDS TO BE DELETED. 1.02) WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT AD MITTING, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT AP PRECIATING THAT THE RESORT CANNOT BE MADE TO RULE 8D(2) SINCE THE LEARNED AO HAS FAILED TO PROVI DE ANY COGENT REASONS FOR NOT ACCEPTING THE DISALLOWANCE OF RS 42,649/- ALREADY MADE BY THE APP ELLANT AS REASONABLE. THUS ENHANCING DISALLOWANCE U/S 14A BY RS 11,54,860/- BY RESORTING TO THE COMPUTATIONAL MACHINERY OF RULE 8D(2) IS BAD-IN-LAW AND NEEDS TO BE DELETED. 2. THE APPELLANT COMPANY CRAVES LEAVE TO ADD, TO AM END, ALTER/DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF INVESTM ENT BANKING AND ADVISORY SERVICES, FILED ITS RETURN OF INCOME ON 26.09.2008 DECLARING INCOME OF RS. 26.83 CRORES. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ON 31.03.2003 DETERMINING THE INCOME OF THE ASSESSEE AT RS.26.97 CRORES U/S.143(3) OF THE ACT. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME AMOUNTING TO RS.73.48 LA KHS AND SAME WAS CLAIMED EXEMPT FROM TAXATION, THAT IT HAD NOT DEBITED ANY EXPENSES FOR EARNING THE SAID INCOME. HE HELD THAT AS PER THE 2 ITA NO. 3010/MUM/2012 MOTILAL OSWAL INVESTMNET ADVI SORS PVT. LTD AMENDED PROVISIONS OF SECTION 14A OF THE ACT EXPEND ITURE INCURRED IN RELATION TO INCOME NOT INCLUDED IN TOTAL INCOME COULD NOT BE ALLOWED. INVO KING THE PROVISIONS OF THE SAID SECTION R.W. RULE 8D OF THE I.T RULES, 1962(RULES), HE MADE THE FOLLOWING DISALLOWANCE. S.NO. PARTICULARS AMOUNT ( RS) 1 OPENING BALANCE OF INVESTMENT 21805174/- 2 CLOSING BALANCE OF INVESTMENT 416446985/- 3 AVERAGE INVESTMENT (1+2)/2 219626080/- 4 0.5% OF AVERAGE INVESTMENT 1098130/- 5 ALLOCABLE EXPENSES 56729/- 6 TOTAL DISALLOWANCE (4+5) 1154860/- 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRE D AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).IT WAS ARGUED BEFORE HIM THAT AO HAD NOT MENTIONED THE DEFECTS WITH THE CALCULATION MADE BY THE ASSESSEE, THAT HE SHOULD HA VE REJECTED THE CLAIM OF THE ASSESSEE BEFORE APPLYING THE PROVISIONS OF RULE 8D, THAT NIL/NEGLIG ENCE EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOME, THAT BORROWED FUNDS WERE NOT UTILI SED BY THE ASSESSEE.AFTER CONSIDERING THE FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE,FAA HELD THAT AO HAD MADE NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE,THAT ONLY DISALLOWA NCE WAS ON ACCOUNT OF ADMINISTRATIVE EXPENSES, THAT A PART OF ADMINISTRATIVE EXPENDITURE WAS TO BE DISALLOWED, THAT THE ASSESSEE HAD ALSO WORKED OUT A SMALL AMOUNT OF RS.42,649/- U/S.14A OF THE AC T.REFERRING TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. (328 ITR 81),HE HELD THAT RULE 8D WAS CORRECTLY APPLIED BY THE AO. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE HAD FOLLOWED THE SIMILAR METHODOLOGY IN THE SUBSEQUENT YEARS,THAT THE AO HAD NOT MADE ANY DISALLOWANCE AND HAD ACCEPTED THE CALCULATION FURNISHED BY THE ASSESSEE FOR THE AY 2009-10, 2010-11 AND 2011-12. HE REFERRED TO PAGE NO. 36 TO 48 OF THE PAPER BOOK.IT WAS FURTHER ARGUED THAT THERE WAS NO DEFECT IN THE METHOD OF ADOPTED BY THE ASSESSEE, THAT RULE OF CONSISTENCY REQUIRED THAT THE AO SHOULD ACCEPTE THE SAME METHODOLOGY FOR THE YEAR UNDER CON SIDERATION. HE RELIED UPON THE ORDER OF THE GOPAL PUROHIT (336 ITR 287) BOMBAY HIGH COURT IN TH IS REGARD.DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE SUBSEQUENT THREE AYS I.E. 2009-10, 2010-11 AND 2011 -12;WHILE MAKING THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE RULES;THE AO HAD ACCEPTED THE D ISALLOWANCE MADE BY THE ASSESSEE. IN ALL THE THREE YEARS THE ASSESSEE HAD GIVEN A CHART WHEREIN DETAILS OF ADMINISTRATIVE EXPENSES AND PROPORTIONATE DISALLOWANCE WAS MADE AND THE AO HAD NOT DISTURBED THE COMPUTATION MADE BY THE ASSESSEE.CONSIDERING THE ABOVE FACTS, WE ARE OF THE OPINION THAT MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO,FOR FRESH ADJUDICATION. HE IS DI RECTED TO RE-WORK THE PROPORTIONATE DISALLOWANCE, FOLLOWING THE SAME METHODOLOGY WHICH WAS ADOPTED FO R THE SUBSEQUENT THREE AYS, IF THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FAC TS OF THE SUCCEEDING AYS.EFFECTIVE GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE, IN PAR T. 3 ITA NO. 3010/MUM/2012 MOTILAL OSWAL INVESTMNET ADVI SORS PVT. LTD AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. /'0 &' ) VA'KR% 2 ) ' 34 . ORDER PRONOUNC ED IN THE OPEN COURT ON 12TH AUGUST 2014 . . ) +,! 5 6 12,08, 201 4 , ) - 7 SD/- SD/- ( . . / I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 6 /DATE: 12.08 . 2014. SK . . . . ) )) ) $'8 $'8 $'8 $'8 98!' 98!' 98!' 98!' / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '# 2. RESPONDENT / $%'# 3. THE CONCERNED CIT(A)/ : ; , 4. THE CONCERNED CIT / : ; 5. DR B BENCH, ITAT, MUMBAI / 8<- $' CH , . . . 6. GUARD FILE/ - / %8' %8' %8' %8' $' $'$' $' //TRUE COPY// . / BY ORDER, = / 3 DY./ASST. REGISTRAR , /ITAT, MUMBAI