.,ACIT., CIR.-4(2), MUMBAI V. VINOD K. NEVATIA, MUMBAI

ITA 3408/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62457 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NATASHA MANGAT
• Assessee Lawyers: M RAJAN
• Keywords: Business income; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE SHRI VIJAY PAL RAO, J.M. AND SHRI N. K. BILL AIYA, A.M. ITA NO. : 3408/MUM/2011 ASSESSMENT YEAR : 2007-08 THE ACIT, CIR. 4(2), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 VS. SHRI VINOD K. NEVATIA 165, SHREE SADAN, SION (E), MUMBAI-400 022 PAN NO. AAEPN 8175 H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M. RAJAN RESPONDENT BY : MS. NATASHA MANGAT DATE OF HEARING : 23.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 ORDER PER N. K. BILLAIYA, A.M.: WITH THIS APPEAL, THE REVENUE HAS SHOWN ITS GRIEVA NCE AGAINST THE ORDER OF THE LD. CIT(A)-8, MUMBAI DATED 18.02.2011 FOR THE A.Y. 2007- 08. 2. GROUND NO. 1 RELATES TO THE TREATMENT OF INCOME OF `. 9,89,398/- CLAIMED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN AND TREATED BY THE A.O. AS BUSINESS INCOME. WE FIND THAT THE FACTS INVOLVED IN THIS GROUND ARE IDENTICAL WITH THE FACTS FOR THE A.Y. 2005-06. IN THAT YEAR ALSO, THE MATTER WENT UP TO THE ITAT THOUGH ON DIFFERENT QUAN TUM. THE ITAT MUMBAI F BENCH HAS CONFIRMED THE FINDING OF THE L D. CIT(A) AND HELD THAT THE INCOME SHOULD BE TAKEN UNDER THE HEAD SHO RT TERM CAPITAL GAINS. WE FIND THAT THE FACTS INVOLVED IN GROUND NO. 1 FOR THE YEAR UNDER ITA NO : 3408/MUM/2011 SHRI VINOD K. NEVATIA 2 CONSIDERATIONS ARE IDENTICAL WITH THE FACTS OF THE A.Y. 2005-06. RESPECTIVELY, FOLLOWING THE FINDINGS OF THE ITAT FO R THE A.Y. 2005-06 GROUND NO.1 IS DISMISSED. 3. BY GROUND NO. 2, THE REVENUE HAS SHOWN ITS GRIEV ANCE AGAINST THE DELETION OF THE ADDITION OF `. 8,14,060/- MADE U/S.14A READ WITH RULE 8D. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS SHOWN TAX FREE DIVIDEND INCOME OF `. 1,23,67,754/- AGAINST WHICH NO EXPENDITURE WERE SHO WN. ON POINTING OUT, THE ASSESSEE REPLIED THAT IT HAS INCURRED NO E XPENDITURE FOR EARNING THIS EXEMPT INCOME. INVOKING THE PROVISIONS OF SEC TION14A, ALONG WITH RULE 8D, THE A.O. WENT ON TO CALCULATE THE DIS-ALLO CATED EXPENDITURE AT `. 8,14,060/-. 4. THE MATTER WAS ARGUED BEFORE THE LD. CIT(A). TH E LD. CIT(A) FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT REPORTED IN 328 ITR 81 HELD THAT RULE 8D IS NOT APPLICABLE AND DELE TED THE ADDITION OF `. 8,14,060/-. HOWEVER, THE LD. CIT(A) WAS OF THE VIE W THAT THE AMOUNT OF EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME I S REQUIRED TO BE DETERMINED ON A REASONABLE BASIS AND DISALLOWED AS PER THE PROVISIONS OF SECTION 14A. IT WAS ARGUED BEFORE THE LD. CIT(A) T HAT NO EXPENDITURE HAD BEEN INCURRED TO EARN EXEMPT INCOME. HOWEVER, THE LD. CIT(A) DISMISSED THIS CONTENTION OF THE ASSESSEE AND HELD THAT THE Q UANTUM OF EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME SHOULD BE AT THE RATIO OF THE TOTAL EXPENDITURE DEBITED TO P & L ACCOUNT IN PROPORTION THAT THE VALUE OF TRANSACTION IN SHARES WHICH HAS YIELDED EXEMPT INCO ME BEARS TO THE VALUE OF TOTAL TRANSACTIONS IN SHARE AS PER THE FOL LOWING FORMULA :- ITA NO : 3408/MUM/2011 SHRI VINOD K. NEVATIA 3 AMOUNT OF EXPENDITURE ALLOWABLE TO EARNING OF EXEMP T INCOME = TOTAL EXPENDITURE DEBITED TO P & L A/C. (DIRECT & I NDIRECT) X VALUE OF TRANSACTION IN SHARE YIELDING EXEMPT INCOME) VALUE OF TOTAL TRANSACTIONS IN SHARE. 4.1 IT WAS ALSO POINTED OUT BY THE LD. CIT(A) THAT THE APPELLANT HIMSELF HAS ACCEPTED THAT SUCH EXPENDITURE IS `. 1,93,916/-. HOWEVER, THE LD. CIT(A) DIRECTED THE A.O. TO DETERMINE THE DISALLOWA NCE AS DIRECTED ABOVE OR `. 1,93,961/- WHICHEVER IS MORE. 5. WE FIND THAT THE LD. CIT(A) HAS GIVEN A VERY SOU ND BASIS FOR DETERMINING THE DISALLOWANCE. WE DO NOT FIND ANY E RROR IN THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, THIS GROUND IS DISPOS ED OFF. 6. GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE, ACCOR DINGLY THE SAME ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2012. SD/- - SD/- ( VIJAY PAL RAO ) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 25.05.2012 ITA NO : 3408/MUM/2011 SHRI VINOD K. NEVATIA 4 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI