QUEST PORTFOLIO SERVICES P.LTD, MUMBAI V. DCIT CIT 10(3), MUMBAI

ITA 3235/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8716 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 323 5 /MUM/201 5 ( / ASSESSMENT YEAR : 2 0 1 1 - 12 ) QUEST POR TFOLIO SERVICES PVT LTD, 1202, NEELKANTH HEIGHTS, NEAR BANK OF INDIA, BPS CROSS - ROAD, MULUND, (W), MUMBAI - 400080 / VS. DCIT - 10(3), MUMBAI ./ PAN : AA ACQ1454B / APPELLANT BY SHRI MEHUL SHAH / RESPONDENT BY SHRI K MOHANDAS / DATE OF HEARING : 30. 1. 201 7 / DATE OF PRONOUNCEMENT : 30. 1. 2017 / O R D E R PER BENCH: THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE O RDER OF LD.CIT(A) IN APPEAL NO.CIT(A) - 22/DCIT - 10(3)/IT - 260/2013 - 14 DATED 2.3.2015. 2. ASSESSMENT WAS FRAMED BY DCIT CIRCLE - 10(3), MUMBAI FOR THE ASSESSMENT YEAR 2011 - 12 VIDE HIS ORDER DATED 22.11.2013 UNDER SECTION 143(3) OF THE INCOME T AX A CT, 1961 (H EREINAFTER REFERRED TO AS THE ACT). 2 I .T.A. NO. 3235 /MUM/201 5 3. ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE DCIT CONFIRMED THE DISALLOWANCE MADE BY THE AO OF EXPENSES RELATABLE TO EXEMPT INCOME BY INVOKING THE PROVISIONS OF RULES 8D OF THE INCOME TAX RULES, 1962 ( HEREI NAFTER REFERRED TO AND CALLED AS THE RULES) READ WITH SECTION 14A OF THE ACT. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) ERRED IN UPHOLDING ORDER OF THE AO IN DISALLOWING FURTHER RS.6,355,157/ - , INVOKING PROVISIONS OF RULE 8D READ WITH SECTION 14A AGAINST EXEMPT INCOME OF RS.17,79,728/ - IGNORING T HE FACTS THAT THERE WERE MATERIALLY N EXPENDITURE INCURRED IN RELATION TO EARNING EXEMPT INCOME, THE APPELLANT IS A TRADER IN SHARES AND SECURITIES, AND DIVIDENDS WERE INCIDENTAL TO HIS HOLDING SHARES AND SECURITIES, AND A VOLUNTARY DISALLOWANCES OF RS.88,986/ - BEING 5% OF EXEMPT INCOME WAS VOLUNTARILY INV9KED BY THE APPELLANT WHILE FILING THE RETURN OF INCOME 4 . AT THE OUTSET, THE LD.COUNSEL OF THE ASSESSEE FILED A COPY OF TRIBUNAL ORDERS IN ASSESSEES OWN CASE FOR AY 2010 - 11 IN ITA NO.1668/MUM/2014 ORDER DATED 23.9.2016 WHEREIN THE TRIBUNAL HAS DELETED THE SIMILAR DISALLOWANCE AND DIRECTED THE AO TO RESTR ICT THE DISALLOWANCE AT THE RATE OF 10% OF THE DIVIDEND INCOME. FOLLOWING IS THE FINDING OF THE TRIBUNAL AT PARA 5 OF THE ABOVE SAID ORDER 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THERE IS NO DISPUTE THA T THE TRANSACTION IN SHARE, SECURITIES, MUTUAL FUNDS HAS BEEN UNDERTAKEN AS A TRADING ACTIVITY BY THE ASSESSEE AND THE INCOME DERIVED THEREFROM HAS BEEN SHOWN UNDER THE HEAD BUSINESS INCOME. AS CAN BE SEEN, IT IS THE 3 I .T.A. NO. 3235 /MUM/201 5 CONTENTION OF THE ASSESSEE FROM THE S TAGE OF ASSE SSMENT PROCEEDING ITSELF THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN RESPECT OF THE SHARE, SECURITIES, MUTUAL FUNDS ETC. HELD AS STOCK - I N - TRADE. WE FIND, AFORESAID ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE JURISDICTIONAL H IGH COURT WHILE UPHOLDING THE ORDER OF THE ITAT IN CASE OF CIT VS. INDIA ADVANTAGE SECURITIES LTD.(SUPRA) LAYING DOWN THE PROPOSITION THAT NO DISALLOWANCE U/S '14A CAN BE MADE IN RESPECT OF INCOME EARNED FROM SHARES, SECURITIES, MUTUAL FUNDS, HELD AS STOCK - IN - TRADE. HOWEVER, APPLYING THE PRINCIPLE LAID DOWN IN THE CASE OF C IT VS. INDIA ADVANTAGE SECURITIES LTD.(SUPRA), WE DIRECT THE AO TO DISALLOW AN AMOUNT OF 10% OF THE DIVIDEND INCOME TO COMPLY WITH THE PROVISIONS OF SECTION 14A. GROUND RAISED BY THE ASSE SSEE IS PARTLY ALLOWED. 5 . HOWEVER, THE LD.AR STATED THAT THE TRIBUNAL HAS WRONGLY MENTIONED ASSESSMENT YEAR 20 11 - 12 WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2010 - 11. FOR THIS THE LD.AR FILED A PHOTOCOPY OF , ACKNOWLEDGE MENT - NOTICE TO PROVE THAT THIS APPEAL RELATED TO AY 2010 - 11. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT THEY ARE IN THE PRO CESS OF FILING MISC.APPLICATION FOR THAT. WE HAVE NOTICED THAT THIS APPEAL ACTUAL RELATED TO ASSESSMENT YEAR 2010 - 11 AND NOT 2011 - 12. 6 . ON QUERY FRO M THE BENCH , THE LD.SR.DR FAIRLY CONCEDED THAT THE FACTS OF THE CASE, RELATED TO THE DISALLOWANCE OF EXPENSES RELATABLE TO EXEMPT INCOME A RE EXACTLY IDENTICAL IN THIS ASSESSMENT YEAR 2011 - 12 ALSO. ADMITTEDLY , THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1 7,56,470/ - AND INCOME FROM MUTUAL FUNDS OF RS.23,258/ - AS EXEMPT UNDER SECTION 10(34) OF THE ACT AND 10(35) OF THE ACT. WE FIND THAT THE TRIBUNAL DIRECTED THE AO TO RESTRICT DISALLOWANCE AT 10% OF THE DIVIDEND INCOME AND INCOME FROM 4 I .T.A. NO. 3235 /MUM/201 5 MUTUAL FUNDS. R ESPECTFULLY FOLLOWING THE TRIBUNAL DECISION,(SU PRA ) WE DIRECT THE AO ACCORDINGLY. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED ON 30 TH JANUARY, 2017. S D SD ( RAJESH KUMAR) ( MAHAVIR SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 30 . 1.2017. SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI