SHREYAS R. MEHTA, MUMBAI V. ACIT 10(3), MUMBAI

ITA 3502/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4527 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Assessee Lawyers: AJAY C GOSAILA
• Keywords: Tax effect; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3502/M/2018 ASSESSMENT YEAR: 2012-13 SHREYAS R. MEHTA, C/O RASIKLALHIRALAL & CO., EC 4051-52, BHARAT DIAMOND BOURSE, BANDRA KURLA COMPLEX, MUMBAI 400 051 PAN: AACPM8602L VS. ACIT 10(3)(1), ROOM NO.212, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI AJAY C. GOSAILA, A.R. REVENUE BY : SHRI MANISH KUMAR SINGH, D.R. DATE OF HEARING : 19.03.2019 DATE OF PRONOUNCEMENT : 22.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 27.03.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) UPHOLDING THE DISALLOWANCE OF RS.2,35,75 7/- AS MADE BY THE AO UNDER SECTION 14A OF THE ACT READ WITH RU LE 8D. 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE HAS SHARE INVESTMENTS OF RS.4,71,57,448/- AS ON 31.03.2012 AND HAS ALSO R ECEIVED ITA NO.3502/M/2018 SHREYAS R. MEHTA 2 EXEMPT DIVIDEND INCOME OF RS.88,79,784/-. THE AO F URTHER OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY DISALLO WANCE OF EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOM E UNDER SECTION 14A OF THE ACT READ WITH RULE 8D. THE ASSE SSEE SUBMITTED THAT NO DISALLOWANCE HAS BEEN MADE DURING THE YEAR IN VIEW OF THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.4495/M/2014 A.Y. 2 010-11 WHEREIN THE TRIBUNAL DELETED THE DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D. THE AO DID NOT ACCE PT THE CONTENTIONS OF THE ASSESSEE BY OBSERVING THAT THE D ECISION OF THE ITAT IN RESPECT OF DELETION OF DISALLOWANCE UNDER S ECTION 14A WAS NOT ACCEPTED ON MERIT BUT DUE TO LOW TAX EFFECT INVOLVED IN THE SAID CASE IN TERMS OF CIRCULAR NO.21 OF 2015 DA TED 10.12.2015 AND CONSEQUENTLY NO APPEAL WAS FILED BY THE REVENUE. FINALLY, THE AO INVOKED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND CALCULATED THE DISALLOWANCE A T RS.2,35,757/- BY APPLYING 0.5% ON THE AVERAGE INVES TMENT UNDER RULE 8D(2)(III). 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) UPH ELD THE ORDER OF THE AO AFTER TAKING INTO ACCOUNT THE CONTE NTIONS AND SUBMISSIONS OF THE ASSESSEE BY DISMISSING THE APPE AL OF THE ASSESSEE. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE NOTE THAT THE ASSESSEE IS TRADING IN DIA MONDS, SHARES AND SECURITIES AND DERIVATIVES AND MAINTAINED SEPAR ATE BOOKS OF ACCOUNTS IN RESPECT OF INVESTMENTS IN SHARES AND SE CURITIES AND FOR TRADING IN DIAMONDS, SHARES AND SECURITIES. DU RING THE COURSE OF HEARING, THE LD. A.R. BROUGHT BEFORE US THE COPIES OF ITA NO.3502/M/2018 SHREYAS R. MEHTA 3 BALANCE SHEET AND THE PROFIT & LOSS ACCOUNT IN RESP ECT OF TRADING IN DIAMONDS AND INVESTMENTS IN SHARES, COPIES WHERE OF ARE FILED AT PAGE NO.7A & 7B OF THE PAPER BOOK AND THE INVES TMENTS WERE SHOWN IN THE BALANCE SHEET WHEREAS FOR THE TRADING SECTION THE COPY OF BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND CAPITAL ACCOUNT OF THE PROPRIETOR ARE FILED AT PAGE NO.4, 5 & 6 OF THE PAPER BOOK. WE OBSERVE FROM PAGE NO.6 WHICH IS A C OPY OF CAPITAL ACCOUNT THAT ASSESSEE HAS CREDITED THE DIVI DEND RECEIVED OF RS.72,42,566/- IN THE CAPITAL ACCOUNT AND THE EX PENSES IN RESPECT OF D-MAT CHARGES AND STT PAID AND OTHER CHA RGES WERE DEBITED IN THE CAPITAL ACCOUNT. SIMILARLY, THE PRO FIT FROM ARBITRATION DERIVATIVE ETC. HAVE BEEN CREDITED IN T HE PROFIT & LOSS ACCOUNT. ACCORDING TO THE LD. A.R., THE ASSESSEE H AS NOT CLAIMED ANY EXPENDITURE IN RESPECT OF INVESTMENTS A ND SHARES AND WHATEVER EXPENDITURE INCURRED WERE DEBITED IN T HE CAPITAL ACCOUNT OF THE ASSESSEE AND THEREFORE NO DISALLOWAN CE IS REQUIRED TO BE MADE UNDER RULE 8D. MOREOVER, THE L D. A.R. SUBMITTED THAT THE DIVIDEND ON INVESTMENTS WERE CRE DITED IN THE CAPITAL ACCOUNT AND THE CORRESPONDING EXPENSES SUCH AS D-MAT CHARGES AND STT PAID AND OTHER CHARGES WERE ALSO DE BITED IN THE CAPITAL ACCOUNT. 6. THE LD. D.R., ON THE OTHER HAND, SUBMITTED BEFOR E THE BENCH THAT WHEN THE BOOKS OF ACCOUNTS IN RESPECT OF TRADING IN SHARES AND SECURITIES WERE MAINTAINED SEPARATELY E VEN THEN THE DISALLOWANCE UNDER RULE 8D2(III) IS REQUIRED TO BE MADE AS PER PROVISIONS OF SECTION 14A. THE LD. D.R. DREW OUR A TTENTION TO THE SALARY PAID OF RS.60,000/- AS IS CLEAR FROM THE INCOME AND EXPENDITURE ACCOUNT FILED AT PAGE NO.5 AND SUBMITTE D THAT SOME DISALLOWANCE HAS TO BE MADE OUT OF THAT AS SOME AMO UNT OF ITA NO.3502/M/2018 SHREYAS R. MEHTA 4 HUMAN EFFORTS ARE REQUIRED EVEN IN MAKING THE INVES TMENTS IN SHARES. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE O F THE VIEW THAT SOME DISALLOWANCE HAS TO BE MADE UNDER RULE 8D (2)(III). IN THE PRESENT CASE, THE ASSESSEE HAS PAID SALARY OF R S.60,000/- DURING THE YEAR. ACCORDINGLY, SOME DISALLOWANCE HA S TO BE MADE OUT OF THE SAID AMOUNT AS WE FIND FORCE IN THE ARGU MENTS OF THE LD DR. THEREFORE, WE CONSIDER IT FIT AND REASONABL E TO MAKE IT LUMP SUM DISALLOWANCE OF RS.15,000/- AS AGAINST RS.2,35,757/-. ACCORDINGLY, THE APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. THE AO IS DIRECTED ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2019. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.03.2019. * 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.