JBF FINANCE LTD, MUMBAI V. ACIT CIR 4(2), MUMBAI

ITA 3052/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3826 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 18-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHABANA PARVEEN
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Business income; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.3052/M/2012 ASSESSMENT YEAR: 2008-09 M/S. JBF FINANCE LIMITED, C/O. JBF INDUSTRIES LIMITED, EXPRESS TOWER, 8 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN: AAACJ 2576J VS. A.C.I.T., CIRCLE 4(2), MUMBAI. (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVARAM, A.R. REVENUE BY : MISS. SHABANA PARVEEN, D.R. DATE OF HEARING : 02.05.2016 DATE OF PRONOUNCEMENT : 06.05.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.02.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE ASSESSEE HAS TAKEN TWO EFFECTIVE GROUNDS OF APPEAL. THE FIRST GROUND IS IN RELATION TO THE DISALLOWANCE MADE BY T HE LOWER AUTHORITIES UNDER SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES ON ACCOUNT OF EXPENDITURE ATTRIBUTABLE TO THE EARNI NG OF TAX EXEMPT INCOME. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.23,41,9 06/- AS COMPUTED AS PER THE FORMULA PRESCRIBED UNDER RULE 8D. HOWEVER, THE ASSESSEE ITSELF HAD OFFERED AN AMOUNT OF RS.30,30,642/- AS DISALLOWANCE OF EXPE NDITURE UNDER SECTION ITA NO.3052/M/2012 M/S. JBF FINANCE LIMITED 2 14A. THE LD. COUNSEL HAS STATED THAT THE DISALLOWA NCE THAT HAS BEEN SUO-MOTO OFFERED BY THE ASSESSEE HAS NOT BEEN REDUCED FROM T HE TOTAL DISALLOWANCE MADE AS PER RULE 8D. HE, THEREFORE, HAS SUBMITTED THAT DOUBLE DISALLOWANCE HAS BEEN MADE BY THE LOWER AUTHORITIES UNDER SECTION 14A REA D WITH RULE 8D. 4. AFTER CONSIDERING THE ABOVE SUBMISSIONS, WE REST ORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER (HEREINAFTER REFERRED TO A S THE AO) TO VERIFY AS TO WHETHER THE DISALLOWANCE OF RS.30,30,642/- SUO-MOTO OFFERED BY THE ASSESSEE HAS NOT BEEN REDUCED FROM THE DISALLOWANCE CALCULAT ED UNDER RULE 8D AND IF FOUND SO, THE AO TO REDUCE THE SAME ACCORDINGLY. T HIS GROUND IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. 2. THE SECOND GROUND TAKEN BY THE ASSESSEE IS IN RE LATION TO THE TREATMENT OF INCOME EARNED FROM TRANSACTIONS IN SHARES AND SECUR ITIES AS BUSINESS INCOME BY THE LOWER AUTHORITIES AS AGAINST SHORT TERM CAPITAL GAINS RETURNED BY THE ASSESSEE. THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ASSESSEE HAS CONSISTENTLY BEEN TREATING THE INCOME FROM SHARE TR ANSITIONS AS INVESTMENTS AND THAT THERE WAS NO JUSTIFICATION ON THE PART OF LOWE R AUTHORITIES IN TREATING THE INCOME FROM SHARE TRANSACTIONS AS BUSINESS INCOME O F THE ASSESSEE. 3. THE LD. D.R., ON THE OTHER HAND, HAS STATED THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE USED BORROWED FUNDS FOR THE PURPOSE OF MAKING THE INVESTMENTS AND THEREFORE THE FACTS OF THE YEAR UND ER CONSIDERATION ARE DIFFERENT FROM THE EARLIER ASSESSMENT YEAR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND FROM THE IMPUGNED ORDER THAT THE LD. CIT(A) HIMSELF HAS MADE AN OBSER VATION THAT THE ASSESSEE HAS SHOWN INCOME IN THE P & L ACCOUNT UNDER TWO DIF FERENT HEADS; ONE AS PROFIT FROM DEALING IN SHARES AND THE SECOND AS PRO FIT ON SALE OF INVESTMENTS. THE LD. CIT(A) HAS ALSO OBSERVED THAT IT IS WELL SE TTLED PRINCIPAL THAT THE ASSESSEE CAN HAVE TWO DIFFERENT PORTFOLIOS. THE LD . A.R. OF THE ASSESSEE HAS ITA NO.3052/M/2012 M/S. JBF FINANCE LIMITED 3 STATED THAT THE ASSESSEE HAS TREATED THE INCOME FRO M SALE AND PURCHASE OF SHARES AS CAPITAL GAINS IN RELATION TO THE INVESTMENT PORT FOLIO ONLY. HE HAS FAIRLY AGREED THAT THE INCOME EARNED IN RELATION TO TRADIN G PORTFOLIO IS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE LD. A.R. HAS FURTHER SUBMITTED THAT NOT ONLY IN THE EARLIER ASSESSMENT YEAR BUT IN THE SUBS EQUENT ASSESSMENT YEAR ALSO, THE INCOME EARNED IN RELATION TO INVESTMENT PORTFOL IO OF THE ASSESSEE HAS BEEN ACCEPTED AS CAPITAL GAINS BY THE REVENUE AUTHORITIE S. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND JUSTIFICATION ON THE PART OF REVENUE AUTHORITIES FOR SHIFTING OF STAND FOR THE YEAR UNDER CONSIDERAT ION WHEN THE ASSESSEE HAD CONSISTENTLY BEEN ACCEPTED AS INVESTOR IN RELATION TO THE INVESTMENT PORTFOLIO, NOT ONLY IN THE EARLIER ASSESSMENT YEARS BUT ALSO I N THE SUBSEQUENT ASSESSMENT YEAR. WE, THEREFORE, DIRECT THE AO TO TREAT THE IN COME EARNED BY THE ASSESSEE IN RELATION TO INVESTMENT PORTFOLIO AS CAPITAL GAIN S. THIS ISSUE IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.05.2016. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 06.05.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.