DCIT CEN CIR 7(1), MUMBAI V. RARE ENTERPRISES, MUMBAI

ITA 3825/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0184 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATH SWAMY
• Assessee Lawyers: S C TIWARI MS RUTUJA N PAWAR
• Keywords: Source of fund
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI G.S. PANNU, HON'BLE ACCOUNTANT MEMBER & SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA.NO. 3825 /MUM/201 6 (A.Y: 2011 - 12 ) DY . COMMISSIONER OF INCOME TAX CC - 7( 1 ), R.NO.653 , 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S RARE ENTERPRISES 151, NARIMAN BHAVAN, MUMBAI 400 021 PAN NO: AAEFR 8176 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.C TIWARI MS. RUTUJA N. PAWAR REVENUE BY : SHRI MANJUNATH SWAMY DATE OF HEARING : 06 .12. 2017 DATE OF PRONOUNCEMENT : 05 .03 .2018 O R D E R PER C. N. PRASAD (JM) 1. TH IS APPEAL IS FILED BY THE REVENUE AGAI N ST THE ORDER OF THE LD.CIT(A) - 49 , MUMBAI DATED 02.03.2016 FOR THE ASSESSMENT YEAR 2011 - 12. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS REGARDING DISALLOWANCE U/S. 14A OF THE ACT IN RESPECT OF INVESTMENTS HELD AS STOCK IN TRADE. 2. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR 2009 - 10 IN 2 ITA.NO.3825/MUM/2016 (A.Y: 2011 - 12) M/S RARE ENTERPRISES ITA.NO.891/MUM/2015 DATED 16.12.2016 AND IN THE CURRENT ASSESSMENT YEAR IN THE APPEAL OF THE ASSESSEE IN ITA.NO.3060/MUM/2016 DATED 19.04.2017 IT HAS BEEN DECIDED THAT NO DISALLOWANCE IS REQUIRED U/S.14A OF THE ACT ON THE INVESTMENTS HELD AS STOCK - IN - TRADE IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. INDIA ADVANTAGE SECURITIES LTD. IN ITA.NO. 1131 OF 2013 DATE D 13.04.2015. THEREFORE , IT IS SUBMITTED THAT IN VIEW O F T HE ABOVE DECISION THE REVENUE APPEAL IS LIABLE TO BE DISMISSED. 3. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 4. ON HEARING BOTH THE PARTIES, WE FIND THAT IN THE APPEAL OF THE ASSESSEE FOR THE CURRENT ASSESSMENT YEAR IN ITA.NO. 3060/MUM/2016 DATED 19.04.2017 THE TRIBUNAL FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. INDIA ADVAN TAGE SECURITIES LTD. (SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER: - 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE EXPENSES RELATABLE TO EXEMPTED INCOME BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE RULES DESPITE THE FACT THAT THE ASSESSEE IS A TRADER IN SHARES AND HELD THE SHARE S AND STOCKS AS STOCK IN TRADE. 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE MS RUTUJA N. PAWAR DREW OUR ATTENTION TO THE FINDING OF THE AO THAT THE ASSESSEE IS ENGAGED IN TRADING OF SHARES AND HOLDING THE SHARES AS STOCK IN TRADE AND PAID INTEREST EXPENSES OF RS. 45,84,77,832/ - . THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PARA 5 OF THE AOS ASSESSMEN T ORDER WHICH READS AS UNDER: - 3 ITA.NO.3825/MUM/2016 (A.Y: 2011 - 12) M/S RARE ENTERPRISES THE CONTENTION OF THE ASSESSEE ON THE ISSUES CONSIDERED BUT THE SAME CANNOT BE ACCEPTED. THE ASSESSEE IS TRADING IN SHARES AND HELD THE SHARES AS STOCK IN TRADE. THE ASSESSEE HAS PAID NET INTEREST EX PENSES OF RS.458477832/ - TO THE PARTIES FROM WHOM SECURED AND UNSECURED LOANS ARE TAKEN. THE ENTIRE FUNDS OF THE ASSESSEE EXCEPT SMALL AMOUNT PERTAINING TO THE PARTNER CAPITAL BALANCE ARE INTEREST BEARING FUNDS. EVEN A LAY MAN ON PERUSAL OF THE FINANCIAL S TATEMENT OF THE ASSESSEE FIRM CAN DECIDE THE ISSUE IN THE FAVOUR OF REVENUE THAT INTEREST BEARING FUNDS WERE UTILIZED FOR PURCHASE IN SHARES. THEREFORE, THAT THE CONTENTION OF THE ASSESSEE THAT INTEREST BEARING FUND WERE NOT USED FOR PURCHASE IN SHARES IS NOT CORRECT 4. IN VIEW OF THE ABOVE THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THIS FACT WAS MENTIONED BY THE ASSESSEE BEFORE CIT(A) BUT HE STILL CONFIRMED THE ACTION OF THE AO. NOW, BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THIS I SSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIA ADVANTAGE SECURITIES LTD. IN ITA NO. 1131 OF 2013 DATED 13 - 04 - 2015. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT EXACTLY ON IDENTICAL FACTS, WHEREIN SAME SOURCE OF FUNDS WERE UNDER DISPUTE AND TRIBUNAL IN ITA NO. 55& 56/MUM/2016 FOR THE AY 2004 - 05 AND 2009 - 10 RESPECTIVELY HAS ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 2.5 AS UNDER: - 2.5 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, BEFORE US THE STAND OF T HE ASSESSEE IS THAT SO FAR AS ASSESSMENT YEAR 2004 - 05 IS CONCERNED IT IS SQUARELY COVERED BY THE DECISION FROM HONBLE BOMBAY HIGH COURT IN CIT VS. INDIA ADVANTAGE SECURITIES LTD. (1131 OF 2013) ORDER DATED 13.04.2015. SINCE, THE ASSESSEE RECEIVED DIVIDEND OF RS.1,68,00,931/ - ON SHARES AND MUTUAL FUND UNITS ACQUIRED AND HELD AS STOCK IN TRADE AND SINCE THE ASSESSEE ITSELF DISALLOWED A SUM OF RS.41,95,510/ - AS EXPENDITURE ATTRIBUTABLE TO THE EARNING INCOME. THE ISSUE IS SQUARELY COVERED BY THE DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN 4 ITA.NO.3825/MUM/2016 (A.Y: 2011 - 12) M/S RARE ENTERPRISES CIT VS INDIA ADVANTAGE SECURITIES LTD. (ITA NO.1131 OF 2013) ORDER DATED 13/04/2015, THEREFORE, THE DISALLOWANCE U/S 14A R.W.R 8D IS NOT REQUIRED TO BE MADE AND THEREFORE, CANNOT BE SUSTAINED IN VIEW OF THE FOREGOING DE CISION. ACCORDINGLY, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS SET - ASIDE AND LD. ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE U/S 14A R.W.R 8D OF THE RULES 5. ON QUERY FROM THE BENCH THE LEARNED SR. DR AGREED THAT THE ISSU E IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BUT HE RELIED ON T HE ORDERS OF LOWER AUTHORITIES. 6. AFTER HEARING BOTH THE SIDES AND GOING THROUGH THE FACTS OF THE CASE. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA) AND IN ASSESSEES OWN CASE BY THE ORDER OF TRIBUNAL IN EARLIER YEARS. RESPECTIVELY FOLLOWING THE SAME, WE DELETE THE DISALLOWANCE AND ALL OWED THE CLAIM OF THE A SSESSEE. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. 5. WE ALSO FIND THAT SIMILAR VIEW HAS BEEN TAKEN IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 WHERE IN THE COORDINATE BENCH HELD AS UNDER: - 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE ASSESSMENT ORDER ITSELF, THE ASSESSING OFFICER HAS ACCEPTED THAT THE ENTIRE INVESTMENT IN SHARES AND SECURITIES IS HELD AS STOCK IN TR ADE BY THE ASSESSEE. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN INDIA ADVANTAGE SECURITIES LTD., NO DISALLOWANCE CAN BE MADE. KEEPING IN VIEW THE AFORESAID PROPOSITION OF LAW, THE TRIBUNAL, MUMBAI BENCH, WHILE DECIDING A SSESSEES APPEAL FOR THE VERY SAME ASSESSMENT YEAR HAS PASSED AN ORDER DATED 4TH AUGUST 2016, IN ITA NO .55 AND 56/MUM/2016, DELETING THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS). IN VIEW OF THE AFORESAID, W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. GROUND RAISED BY THE DEPARTMENT IS DISMISSED. 5 ITA.NO.3825/MUM/2016 (A.Y: 2011 - 12) M/S RARE ENTERPRISES 6. FOLLOWING THE ABOVE DECISION S , WE REJECT THE GROUNDS OF REVENUE AS THERE IS NO INFIRMITY IN THE ORDER P ASSED BY THE LD.CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 05 TH MARCH , 2018 . SD/ - SD/ - ( G.S. PANNU ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 05 / 03 / 2018 GIRIDHAR , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM BAI