DCIT 24(2), MUMBAI V. MUDRA SECURITIES, MUMBAI

ITA 340/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4168 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MISHRA ITA NO M; ITA M A Y
• Keywords: Earning of tax free income; Tax effect
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , ! '#, $ , % BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.6168/M/11 ( $ & '& / ASSESSMENT YEAR: 2008-09) M/S. MUDRA SECURITIES 401/402, BUSINESS CLASSIC, CHINCHOLI BUNDER ROAD, MALAD (WEST), MUMBAI - 400064 / VS. JT. COMMISSIONER OF INCOME TAX RANGE 24(2) MUMBAI / I.T.A. NO.340/M/14 ( $ & '& / ASSESSMENT YEAR: 2009-10) DY. COMMISSIONER OF INCOME TAX 24(2) C-13, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BKC, BANDRA (EAST) MUMBAI - 400051 / VS. M/S. MUDRA SECURITIES 401/402, BUSINESS CLASSIC, CHINCHOLI BUNDER ROAD, MALAD (WEST), MUMBAI - 400064 ./ ./ PAN/GIR NO. : AAHFM5035E ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 31.12.2015 !' /DATE OF PRONOUNCEMENT: 05.02.2016 ASSESSEE BY: SHRI SUNIL HIRAWAT DEPARTMENT BY: SHRI S.K.MISHRA ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 2 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-34, MUMBAI [HE REINAFTER REFERRED TO AS THE CIT(A)] DATED 29.07.2011 RELEV ANT TO THE ASSESSMENT YEAR 2008-09. THE REVENUE HAS ALSO FILE D THE APPEAL AGAINST COMMISSIONER OF INCOME TAX (APPEALS)-34 DAT ED 08.11.2013 RELEVANT TO THE ASSESSMENT YEAR 2009-10. SINCE THE PARTIES ARE THE SAME AND THE MATTER OF CONTROVERSY IS ALSO THE SAME THEREFORE THESE APPEALS ARE CLUBBED TOGETHER AND TO BE ADJUDICATED TOGETHER FOR THE SAKE OF CONVENIENCE. ITA NO. 6168/M/11:- 2. FIRSTLY, WE TOOK THE APPEAL NO.6168/M/11 FOR ADJ UDICATION. IN THE SAID APPEAL THE ASSESSEE HAS TAKEN THE FOLLOWIN G GROUNDS:- 1. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE DISALLOWANCES OF RS.10,48,632/-U/S. 14A READ WITH RULE 8D(2)(II). UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DELETED THE ADDITION OF RS.10,48,632/ - . 2. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,42,130/- U/S. 14A READ WITH RULE 8D(2)(III). UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE BEEN DELETED THE ADDITION OF RS.1,42,130/-. ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 3 3. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD FAILED TO APPRECIATE THAT RULE 8D IS NOT APPLICABLE TO THE CASE OF THE APPELLANT. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE HELD SO. 4. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS.11,90,762/- U/S. 14A OF THE I.T. ACT, 1961. UND ER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID DISALLOWANCE OF RS.11,90,762/-. 3. THE ASSESSEE IS A FIRM. THE E-RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS.5,51,72,227/- WAS FILED FOR A.Y.2008-0 9 ON 09.09.2008. SUBSEQUENTLY, COPY OF RETURN OF INCOME WAS FILED AL ONG WITH PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND TAX AUDIT REPOR T U/S. 44AB OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). THE CASE WAS SELECTED FOR SCRUTINY. STATUTORY NOTICES UNDER SECTION 143( 2) WERE ISSUED ON 23.09.2009 AND THEREAFTER NOTICE 142(1) OF THE ACT ALONG WITH QUESTIONNAIRES WERE ISSUED AND SERVED UPON THE ASSE SSEE. SINCE THE ASSESSEE HAS SHOWN DIVIDEND (EXEMPT) INCOME OF RS.1 2,77,518/-, THEREFORE, THE ASSESSEE WAS ASKED ABOUT DISALLOWANC E OF EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME U/S 14A OF THE A CT. ON RECEIPT OF THE DEPARTMENT QUERY THE ASSESSEE FILED THE REPLY D ATED 03.11.2010 AND TOOK THE PLEA THAT ALL THE SHARES HAVE BEEN HELD AS STOCK IN TRADE AND THEREFORE THERE WOULD NOT BE ANY DISALLOWANCE U/S. 14A OF THE ACT. THEREAFTER, THE ASSESSING OFFICER, CONSIDERING THE MATTER AND IN VIEW OF THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. RE PORTED IN 117 ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 4 ITD 169 DISALLOWED THE EXPENDITURE TO THE TUNE OF R S.11,90,762/- U/S. 14A OF THE ACT AND ACCORDINGLY ASSESSED THE INCOME. FEELING AGGRIEVED BY THE ORDER OF ASSESSING OFFICER THE ASS ESSEE FILED THE APPEAL BEFORE CIT(A) WHO CONFIRM THE ORDER OF ASSES SING OFFICER. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS BE FORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D CAREFULLY. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED T HAT THE ASSESSEES SHARES SHOWN AS STOCK IN TRADE AND SUCH STOCK IN TR ADE COULD NOT BE TAKEN INTO ACCOUNT WHILE COMPUTING THE DISALLOWANC E UNDER RULE 8D OF THE ACT. THE LEARNED REPRESENTATIVE OF THE ASSE SSEE HAS ARGUED THAT THIS CASE IS FULLY COVERED BY THE ORDER DATED 14.09 .2012 PASSED IN CASE OF DCIT RANGE 9(2) VS. M/S. INDIA ADVANTAGE SECURIT IES LTD., INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH WHEREIN THE CIT (A) DELETED THE DISALLOWANCE U/S. 14A OF THE ACT COMPUTED BY TH E ASSESSING OFFICER IN RELATION TO THE STOCK IN TRADE. ON THE OTHER HAND THE LEARNED REPRESENTATIVE OF THE DEPARTMENT STRONGLY RELIED UP ON THE ORDER OF CIT(A) IN QUESTION. KEEPING IN VIEW OF THE ARGUMEN TS ADVANCED BY THE REPRESENTATIVE OF THE PARTIES AND PERUSED THE R ECORD CAREFULLY IT CAME INTO THE NOTICE THAT THE ONLY MATTER OF CONTRO VERSY IS THAT WHETHER THE SHARES WHICH HAS BEEN SHOWN AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS COULD NOT BE TAKEN INTO ACCOUNT W HILE COMPUTING THE EXPENDITURE TO EARN THE EXEMPT INCOME U/S 14A R EAD WITH RULE ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 5 8D OF THE ACT OR NOT. THE ASSESSEE HAS ALSO PLACE RELIANCE ON THE JUDGEMENT PASSED BY THE HONBLE HIGH COURT OF KARNA TAKA IN THE CASE OF CCL LTD. VS. JCIT (250 CTR 291). ON THE BASIS O F SAID JUDGEMENT CO-ORDINATE BENCH OF MUMBAI IN CASE DCIT RANGE 9(2 ) VS. M/S. INDIA ADVANTAGE SECURITIES LTD.,(SUPRA) DATED 14.09 .2012 HAS ALSO HELD THAT THE EXPENDITURE INCURRED IN RELATION TO T HE STOCK IN TRADE IS NOT LIABLE TO BE COMPUTED U/S. 14A OF THE ACT. WE NOTICE THAT THE DECISION WAS RENDERED IN THE CASE OF M/S. INDIA ADV ANTAGE SECURITIES LTD IN RESPECT OF INTEREST EXPENDITURE ONLY. IN R ESPECT OF ADMINISTRATIVE EXPENSES THE DECISION OF LEARNED CIT (A) IN MAKING ADDITION WAS IMPLIEDLY CONFIRMED. IN VIEW OF THE S AID CIRCUMSTANCES AND BY FOLLOWING ORDER OF CO-ORDINATE BENCH IN CASE OF DCIT RANGE 9(2) VS. M/S. INDIA ADVANTAGE SECURITIES LTD.,(SUPR A) DATED 14.09.2012, WE ARE OF THE VIEW THAT THE STOCK IN T RADE IS NOT REQUIRED TO BE ACCOUNTED FOR CALCULATING THE DISALLOWANCE OF INTEREST U/S. 14A OF THE ACT. IN RESPECT OF ADMINISTRATIVE EXPENSES, WE DIRECT THE AO TO COMPUTE THE SAME AT 10% DIVIDEND INCOME AND DISALLO WED THE SAME U/S. 14A OF THE ACT. IN RESULT THE APPEAL OF THE ASSESSEE IS HEREBY PARTLY ALLOWED ACCORDINGLY. ITA NO. 340/M/14:- 5. NOW COMING TO THE APPEAL NO.340/M/14 RELEVANT TO THE ASSESSMENT YEAR 2009-10. WE NOTICE THAT THE TAX EF FECT INVOLVED IN ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 6 THIS APPEAL ON THE DISPUTED ISSUES IS LESS THAN RS. 10 LAKHS. FOR THE SAKE OF CONVENIENCE, WE TABULATE BELOW THE RELEVANT DETA ILS:- S.NO. NAME OF ASSESSEE AMOUNT IN DISPUTE(FOR QUANTUM APPEAL) IN RS. PENALTY DELETED OR REDUCED BY LD CIT(A) IN RS. 1 M/S. MUDRA SECURITIES (FOR A.Y.2009-10) 11,46,923/- -- 6. WE NOTICE THAT THE REVENUE IS CONTESTING THE DEC ISION OF LD CIT(A) IN GRANTING RELIEF TO THE EXTENT STATED ABOV E AND HENCE THE TAX EFFECT INVOLVED ON THE ABOVE SAID DISPUTED AMOUNTS WORKS OUT TO LESS THAN RS.10 LAKHS. RECENTLY THE CBDT HAS ISSUED A C IRCULAR NO.21/2015 DATED 10.12.2015 PRESCRIBING NEW MONETAR Y LIMITS FOR PREFERRING APPEALS AGAINST THE ORDERS PASSED BY LD CIT(A) BEFORE THE TRIBUNAL. THE RELEVANT PORTION OF THE CIRCULAR CIT ED ABOVE READS AS UNDER: F NO 279/MISC. 142/2007-ITJ (PT) GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD DIRECT TAXES CIRCULAR NO. 21/20 15 NEW DELHI THE 10TH DECEMBER, 2015 SUB :REVISION OF MONETARY LIMITS FOR FILING OF APPE ALS BY THE DEPARTMENT BEFORE INCOME TAX APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE SUPREME COURT - MEASURES FOR REDUCING LITIGATION REG ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 7 REFERENCE IS INVITED TO BOARD'S INSTRUCTION NO 5/20 14 DATED 10.07.2014 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FI LING DEPARTMENTAL APPEALS (IN INCOME-TAX MATTERS) BEFORE APPELLATE TR IBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT WERE SPECIF IED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, I T HAS BEEN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MER ITS BEFORE APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT KEEPING IN VIEW THE MONETARY LIMITS AND CONDITIONS SPECIFIED B ELOW. 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HE REUNDER: S NO APPEALS IN INCOME - TAX MATTERS MONETARY L IMIT (IN RS) 1 BEFORE APPELLATE TRIBUNAL 10,00,000/ - 2 BEFORE HIGH COURT 20,00,000/ - 3 BEFORE SUPREME COURT 25,00,000/ - IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCR IBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DI FFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY TH E AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS IN TENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'DISPUTED ISSUES'). HOW EVER THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT WHERE CHARGEAB ILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTERES T IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EF FECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 5. . 6 ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 8 7. 8. . 9. .. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PEND ING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED . APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 11. .. IT CAN BE NOTICED THAT THE CBDT HAS FURTHER CLARIFI ED THAT THIS NEW CIRCULAR/INSTRUCTION SHALL APPLY RETROSPECTIVELY, I .E., EVEN TO THE PENDING APPEALS. IT IS ALSO STATED THAT THE QUANTUM OF PENALTY DELETED OR REDUCED SHALL BE CONSIDERED FOR DETERMINING THE MONETARY LIMITS. 7. IT IS WELL SETTLED PROPOSITION THAT THE CIRCULAR S ISSUED BY THE CBDT ARE BINDING ON THE INCOME TAX AUTHORITIES. FO R THIS PROPOSITION, ONE MAY GAINFULLY REFER TO THE DECISIO NS RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO A NDOLAN (2003)(177 TAXATION 775) AND PRADIP J MEHTA VS. CIT (2008)(300 ITR 231). HENCE, THE LATEST CIRCULAR ISSUED BY THE CBDT (REFERRED SUPRA) IS BINDING ON THE INCOME TAX AUTHORITIES. A CCORDINGLY, WE FIND MERIT IN THE SUBMISSIONS OF LD A.R THAT THIS APPEAL IS NOT MAINTAINABLE, SINCE TAX EFFECT INVOLVED IN THIS APP EAL IS LESS THAN RS.10 LAKHS. ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO.6168/M/2011 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 9 8. ACCORDINGLY, ASSESSEES APPEAL A.Y. 2008-09 IS P ARTLY ALLOWED AND REVENUES APPEAL FOR A.Y.2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016 SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 5 TH FEBRUARY, 2016 MP MP MP MP ) * +$!', -,'! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ) / BY ORDER, - & //TRUE COPY// ./# (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI