INFINA FINANCE P.LTD, MUMBAI V. ADDL CIT RG 2(2), MUMBAI

ITA 3617/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9808 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 3617 / MUM/20 1 5 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. INFINA FINANCE PVT. LTD., 7 TH FLOOR, DANI CORPORATE PARK, 158, CST ROAD, KALINA, SAN TACRUZ (E), MUMBAI 400 098 VS. ADDL. CIT RG 2(2), AAYAKAR BHAVAN, MUMBAI 400 020 PAN/GIR NO. AACCM1561D APPELLANT ) .. RESPONDENT ) ASSESSEE BY MR. FARROKH IRANI REVENUE BY MR. RAM TIWARI DATE OF HEARING 06 / 07 /201 7 DAT E OF PRONOUNCEME NT 23 / 08 /201 7 / O R D E R PER R.C.SHARMA (A.M) : T HIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 5, MUMBAI DATED 10/03/2015 FOR THE A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S. 143(3) O F THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR DISALLOWANCE MADE U/S.14A R.W.R. 8D (2)(III) OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENT AND FINANCING ACTIVITY. DURING THE COURSE OF SCRUTINY ASSESSMENT, AO FOUND THAT ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.48.51 LAKHS. THE ASSESSEE HAS SUO - MOTO OFFERED DISALLOWANCE ITA NO. 3617/MUM/2015 M/S. INFINA FINANCE PVT. LTD., 2 U/S.14A AMOUNTING TO RS.29,28,090/ - . HOWEVER, BY INVOKING RULE 8D (2)(III), A O HAS WORKED OUT ADDITION OF RS.1,03,42,250/ - U/S. 14A. 5. BY THE IMPUGN ED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 6. IT WAS VEHEMENTLY ARGUED BY LEARNED AR THAT RECORDING OF SATISFACTION OF THE AO IS SINE QUA NON FOR INVOKING APPLICABILITY OF RULE 8 D. AS PER LEARNED AR THE METHOD PRESCRIBED IN THE RULE 8 D IS TO BE APPLIED ONLY IF THE AO IS NOT SATISFIED WIT H THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF EXPENDITURE INC URRED FOR EARNING THE EXEMPT INCOME. THE ASSESSEE HAS SUB MITTED A DETAILED WORK I N G OF EXPE NDITURE INCURRED FOR EARNING INCOME NOT CHARGEABLE TO TAX. THE A O HAS NOT REJECTED THE CORRECTNESS OF THE CLAIM OF ASSESSEE AND SUMMARILY AND MECHANICALLY APPLIED THE PROVISIONS OF RULE 8 D . THERE WAS NO BASIS FOR MAKING SUCH A DIS ALLOWANCE IN ACCORDANCE WITH RULE 8 D R/W SECTION 14A WITHOUT ESTABLISHING THAT SUCH EXPENDITURE WAS INDEED INCURRED FOR EARNING EXEMPT DIVIDEND INCOME. LEARNED AR INVITED OUR ATTENTION TO THE DETAIL OF INVESTMENT WHICH ALSO INCLUDES INVESTMENT WHICH WAS HE LD AS STOCK IN TRADE. HE RELIED ON THE FOL LOWING JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE PROPOSITIONS THAT SHARES HELD AS STOCK - IN - TRADE ARE TO BE EXCLUDED WHILE WORKING OUT 14A DISALLOWANCE. SR. NO. NAME OF THE CASE CITAT ION 1 BIDHATA SYNTHETIC MILLS P LTD V ACIT ITA NO. 3255/M/2012 & 3424/M/2012 2. ARJ SHARES & STOCK BROKERS P. LTD V DCIT ITA NO. 1473/M/2012 3 ACI T V. SMT. NINA SUNIL DALAL ITA NO. 169/M/2013 & 1846/M/2014 ITA NO. 3617/MUM/2015 M/S. INFINA FINANCE PVT. LTD., 3 4 M AYTAS IN VESTMENT TRUST V ACIT ITA NO. 4948/M/2016 & 5590/M/2016 5 DCB BANK LTD V ACIT ITA NO. 820/M/2014 & 615/M/2014 6 YES BANK V ADIT ITA NO. 3357& 3388/M/2013 7 CI T V I NDIA ADVANTAGE SECURITIES LTD ITA NO. 1131 OF 2013 8 DCIT V IN DIA ADVANTAG E SECURITIES LTD ITA NO. 6711/M/2011 9 CCI LTD V/ S JCIT 20 TAXMANN.COM 196 (KAR) 10 DCIT V. G.K.K CAPITAL MARKETS (P) LTD GA NO. 1150 OF 2015 ITAT NO.52 OF 2015 11 DCIT V. G. K.K CAPITAL MARKETS (P) LTD ITA NO. 805/KO1/2012 12 AM IDEEP INVESTMENTS CONSULTANTS ITA NO. 1111/M/2015 13 AHA HO LDING S PRIVATE LTD ITA NO. 8395/M/2011 14 AMBIT SECURITIES BROKIN G P. LTD V/ S. ACIT ITA NO. 7856/M/2011 15 ACIT V / S. PRESCIENT SECURITIES P. LTD. ITA. NO. 5281/M/2011 16 C IT V. SMT. LEENA RAMACHANDRAN 339 ITR 296(KER) 17 MSA SECURITIES SERVICES (P) LTD V. ACIT 33 TAXMANN.COM 508(CHENNAI) 18. DCIT VS . GULSHAN INVESTMENT CO. LTD., ITA 666/KOL/2012 19 PA RESH PRITAMLAL MEHTA VS. ITO ITA NO.1715/PN/2015 20 BP EAUITIES PRIVATE LTD V. DCIT ITA NO. 6802/M/2014 21 ACIT V/ S. VISARIA SECURITIES P. LTD. ITA NO. 6900/M/2013 22 ARCHWAY INVESTMENT COMPANY LTD V ITO ITA NO. 8461/M/2010 & 5598/M/2011 23 FIDUCIARY SHARES & STOCKS P. LTD V . ACIT ITA NO. 321/M/2013 7. OUR ATTENTION WAS ALSO INVITED TO THE STRATEGIC INVESTMENT MADE BY THE ASSESSEE WHICH WERE REQUIRED TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE UN DER RULE 8D(2). IN SUPPORT OF THE PROPOSITION THAT STRATEGIC ITA NO. 3617/MUM/2015 M/S. INFINA FINANCE PVT. LTD., 4 INVESTMENTS ARE TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE. RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. SR NO. NAME OF THE CASE CITATION 1 CREATIVE GLOBAL STOCK BROKERS P. LTD V. DCIT ITA NO.3977/M/2016 2 JM FINANCIAL LIMITED VS. DCIT ITA NO. 7020 & 7021 /M/2014 3 JM FINANCIAL LIMITED VS. DCIT ITA NO. 92/M/2012 4 PROVOQUE (INDIA) LTD V. DCIT ITA NO.2155/M/2013 5 ACIT V. TOPS SECURITY LTD ITA NO.6777 & 7151/M/2011 6 HARENDRA D. SHAH V. ACIT ITA NO. 4367/M 2014 7 DCIT V. MAN INFRAPROJECTS P.LTD ITA NO.5654/M/2014 8 AHA HOLDINOS PRIVATE LTD I TA NO. 8395/M/2011 9 DCIT VS. PREMIER FINANCE & TRADING CO. LTD ITA NO. 1655,2862/M/13 ,4416, 4216/M/14 10 ADITVA BIRLA NUVO LTD. ITA /8427 8483/M/2010 11 M/S KJMC FINANCIAL SERVICES LTD ITA NO.1818/M/2013 12 M/S APTECH LIMITED VS. DCIT ITA NO.946 AND 723/M/2013 13 GODREJ & BOYCE MFG. CO. LTD VS. ACIT ITA NO.8488, 8502/M/2011, 658,189 , 6670 , 5659/M/2013 14 ARCHWAY INVESTMENT COMPANY LTD V ITO ITA NO. 8461/M/2010 & 5598/M/2011 15 ADITYA BIRLA NUVO LTD., ITA/660,661&662/M/2009 16 ACIT VS. PROFICIENT REAL ESTAT 2009 - 10 ITA NO.6988/M /2014 18 EIH ASSOCIATED HOTELS VS. DCIT ITA NO. 1503/MAD/2012 19 INTERGLOBE ENTERPRISES LTD VS. DCIT ITA NO. 1362& 1032/DEL/2013 20 JM FINANCIAL LIMITED VS. ACIT ITA NO. 4521/M/2012 21 CIT VS. ORIENTAL STRUCTURAL ENOINEERS PVT LTD ITA NO. 605 OF 2012 (DELHI HIQH COURT) 22 ACIT VS. ORIENTAL STRUCTURAL ENOINEERS PVT LTD ITA NO. 4245/DEI/2011 23 GARWARE WALL ROPES LTD VS. ACIT ITA NO. 5408/M /2012 24 BINANI INDUSTRIES LTD ITA NO. 144/KOL /2013 25 BHUPLNDER INVERSTMENT CO - PVT, LTD V. DCIIT ITA NO. 6326/M/ 2011 ITA NO. 3617/MUM/2015 M/S. INFINA FINANCE PVT. LTD., 5 8. FURTHER ATTENTION WAS ALSO INVITED TO THE INVESTMENT WHICH HAS NOT YIELDED ANY EXEMPT INCOME LIKE BU SINESS STANDARD LIMITED. 9 . AS PER LEARNED AR ASSESSEES INVESTMENT IN UNLI S TED SHARES WHICH GENERATE CAPITAL GAINS LIABLE TO TAX ARE TO BE EXCLUDED WHILE COMPUTING OVERALL INVESTMENT FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER RULE 8D. 10. ON THE OTHER H AND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 1 1 . SHARES OF UNLISTED COMPANY WHICH ARE LIABLE TO CAPITAL GAIN TAX ARE TO BE EXCLUDED , FO R THIS PURPOSE R ELIANCE WAS PLACED ON THE DECISION OF CO - ORDINATE BENCH IN CASE OF FEDEX SECURITIES LTD ., IN ITA NO.8678/MUM/2011 ORDER DATED 21/01/2014. 12 . IN SUPPORT OF THE PROPOSITION THAT NO DISALLOWANCE U/S.14A IS WARRANTED IN RESPECT OF INVESTMENT WHICH YIELDED NO EXEMPT INCOME. R ELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. SR. NO. NA ME OF THE CASE CITATION 1 INTEGRATED COAL MINING LTD., 67 TAXMANN.COM 260 (KOL) 2 ACB INDIA LTD., 62 TAXMANN.COM 71 (DELHI HC) 3 REI AGRO LTD., 35 TAXMANN.COM 404 (KOL) 4 SARABHAI HOLDING PVT. LTD., ITA NO.2328/AHD/2012 1 3 . WE HAVE CONSIDERED RIVAL C ONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON VARIOUS JUDICIAL PRONOUNCEMENTS CITED ABOVE BY LEARNED AR IN SUPPORT OF THE ITA NO. 3617/MUM/2015 M/S. INFINA FINANCE PVT. LTD., 6 PROPOSITION THAT NO DISALLOWANCE IS WARRANTED IN RESPECT OF INVESTMENT IN SHAR ES HELD AS STOCK IN TRADE, YIELDING NO EXEMPT INCOME, SHARES IN UNLISTED COMPANIES GENERATING TAXABLE CAPITAL GAINS AND IN RESPECT OF SHARES HELD AS STRATEGIC INVESTMENT. RESPECTFULLY, FOLLOWING THE JUDICIAL PRONOUNCEMENTS REFERRED ABOVE, WE DIRECT THE AO TO RE - COMPUTE DISALLOWANCE U/S.14A BY EXCLUDING SHARES HELD AS STRATEGIC INVESTMENT, SHARES IN UNLISTED COMPANIES YIELDING TAXABLE CAPITAL GAINS, SHARES HELD AS STOCK IN TRADE AND THE INVESTMENT WHICH HAVE NOT YIELDED EXEMPT INCOME. WE DIRECT ACCORDINGLY. 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 23 / 08 /2017 S D/ - ( AMARJIT SINGH ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 23 / 08 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. G UARD FILE. //TRUE COPY//