Poonawalla Shares and Securities Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 4, Pune

ITA 391/PUN/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3737 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 26-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: RAJSHEKHAR ABHYANKAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI , J UDICIAL M EMBER . / I TA NO. 391 /PUN/20 18 / ASSESSMENT YEAR : 2013 - 14 POONAWALLA SHARES & SECURITIES PVT. LTD. SAROSH BHAVAN, 16 - B/1, DR. AMBEDKAR ROAD, PUNE - 411 001 PAN : AAACP6087H ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4, PUNE. / RESPONDENT A SSESSEE BY : SHRI RAJSHEKHAR ABHYANKAR REVENUE BY : SHRI S.P WALIMBE / DATE OF HEARING : 08.06 .202 1 / DATE OF PRONOUNCEMENT : 08 . 06 .2021 / ORDER PER INTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL), PUNE - 3 DATED 12.01.2018 FOR THE ASSESSMENT YEAR 2013 - 14. 2 ITA NO. 391 /PUN/20 18 A.Y. 2013 - 14 2. THE APPELLANT COMPANY RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) : 1. ERRED IN CONCLUDING THAT THE ASSESSING OFFICER HAD CONSIDERED FACTS OF THE CASE AND RECORDED HIS SATISFACTION ABOUT APPLICATION OF RULE 8D. 2. ERRED CONFIRMING THE DISALLOWANCE OF RS.11,87,427/ - MADE BY THE ASSESSING OFFICER U/S.14A READ WITH RULE 8D. 3. WITHOUT PREJUD ICE TO GROUND NO.1, THE LEARNED CIT(APPEALS) ERRED IN NOT CONSIDERING THE SUBMISSIONS OF THE APPELLANT COMPANY INCLUDING THE ALTERNATE METHODS TO COMPUTE THE DISALLOWANCE U/S.14A AS SUGGESTED BY THE APPELLANT COMPANY. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND WITHDRAW ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE BRIEF FACTS IN THIS CASE ARE THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES AND SECURITIES AND BROKER AGE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013 - 14 WAS FILED ON 28.09.2013 DECLARING TOTAL INCOME OF RS.1,36,49,310/ - . THE SCRUTINY ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 4, PUNE ( IN SHORT THE AO) VIDE ORDER DATED 29.01.2016 AT TOTAL INCOME OF RS.1,47,77,369/ - . WHILE DOING SO, THE ASSESSING OFFICER MADE ADDITION OF RS.11,87,427/ - U/S.14A OF THE ACT REJECTING THE CONTENTION OF THE APPELL ANT THAT NO INDIRECT EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME. WHILE ACCEPTING THE DISALLOWANCE OFFERED BY THE APPELLANT AS DIRECT COST OF RS.2,81,422/ - , THE ASSESSING OFFICER MADE ADDITION OF RS.11,87,427/ - AS INDIRECT EXPENDITURE. 4. BEING AGGRIE VED BY THE ABOVE ASSESSMENT ORDER, AN APPEAL WAS PREFERRED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) CONTENDING THAT NO INDIRECT EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME. I N ABSENCE OF RECORDING SATISFACTION AND AS TO WHETHER OF THE CLAIM OF THE ASSESSEE THAT NO 3 ITA NO. 391 /PUN/20 18 A.Y. 2013 - 14 DISALLOWANCE SHOULD BE MADE. ALTERNATIVELY, IT WAS CONTENDED THAT FOR THE PURPOSE OF COMPUTING AVERAGE VALUE OF INVESTMENT, VALUE OF INVESTMENT WHICH YIELDS EXEMPT INCOME ALONE HAS TO BE CONSIDERED. HOWEVER, THIS CONTENTI ON WAS REJECTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) VIDE HIS IMPUGNED ORDER. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE ASSESSEE COMPANY IS BEFORE US IN THE PRESENT APPEAL. 6. BEFORE US, LD. COUNSEL - A UTHORIZED REPRESENTATIVE STATED THAT THE GROUND OF APPEAL RELATING T O THE RECORDING OF SATISFACTION THAT NO INDIRECT EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME WAS NOT PRESSED DURING THE COURSE OF HEARING OF APPEAL. ALTERNATIVELY, HOWEVER, HE SUBMITTED THA T FOR THE PURPOSE OF COMPUTING THE DISALLOWANCE UNDER SUB CLAUSE (III) OF SUB - RULE (2) OF RULE 8D ONLY THE AVERAGE VALUE OF INVESTMENT WHICH YIELD ED NO EXEMPT INCOME HAS TO BE EXCLUDED WHILE COMPUTING AVERAGE VALUE OF INVESTMENT . IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, 374 ITR 108 ( DELHI). 7. ON THE OTHER HAND, THE LD. CIT - DR PLACED STRONG RELIANCE ON THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEAL). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD . THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IS MANNER OF COMPUTING THE AMOUNT OF DISALLOWANCE UNDER SUB CLAUSE (III) OF SUB - RULE (2) OF RULE 8D OF THE RULE. THE ISSUE AS REGARDS TO THE APPLICABILITY OF PROVISION OF SECTION 14A OF THE ACT IS NOT UNDER CHALLENG E BEFORE US. THE HONBLE SPECIAL BENCH OF INCOME TAX APPELLATE TRIBUNAL, DELHI IN THE CASE OF ASSTT. CIT VS. VIREET INVESTMENT (P) LTD. , 188 TTJ (D EL)(SB) 1 HAS HELD THAT WHILE COMPUTING 4 ITA NO. 391 /PUN/20 18 A.Y. 2013 - 14 THE AMOUNT OF DISALLOWANCE UNDER SUB CLAUSE (III) OF SUB - RULE (2) OF RULE 8D OF THE RULE, THE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME ALONE HAS TO BE CONSIDERED FOR THE PURPOSE OF ARRIVING AT AVERAGE VALUE O F INVESTMENT, O N THE SIMILAR LINES, THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA.) AND THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF MARG LTD. VS. CIT, 318 CTR (MAD.) 148 AND FOLLOWED SUBSEQUENTLY BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SHRIRAM OWNERSHIP TRUST 318 CTR (MAD.) 233 AND ALSO BY THE KARNATAKA HIGH COURT IN THE CASE OF PRAGATHI KRISHNA GRAMIN BANK VS. JT. CIT , 95 TAXMAN.COM 41 (KAR.). 9. IN LIGHT OF THE ABOVE DECISIONS, WE FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT THAT THE AMOUNT OF INVESTMENT WHICH YIELD ED EXEMPT INCOME ALONE SHOULD BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ARRIVING AT AVER AGE VALUE OF INVESTMENT AS ENVISAGED UNDER SUB CLAUSE (III) OF SUB - RULE (2) OF RULE 8D OF THE RULE. ACCORDINGLY, WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR THE PURPOSE OF COMPUTING THE AMOUNT OF DISALLOWANCE IN THE ABOVE MENTIONED MANN ER. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 08 TH DAY OF JUNE , 20 2 1 . S D/ - S D/ - S.S. VISWANETHRA RAVI INTURI RAMA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER / PUNE; / DATED : 08 TH JUNE , 202 1 SB 5 ITA NO. 391 /PUN/20 18 A.Y. 2013 - 14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEAL), PUNE - 3 4. THE PR. CIT - 2, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. / BY ORDER, // T RUE C OPY // / PRIVATE SECRETARY , / ITAT, PUNE . 6 ITA NO. 391 /PUN/20 18 A.Y. 2013 - 14 DATE 1 DRAFT DICTATED ON 08.06 .202 1 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 08 . 06 .202 1 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER