CREATIVE GLOBAL STOCK BROKING P.LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 3977/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1514 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-06-2016
• Court: TRIBUNAL
• Department Lawyers: S R KIRTANE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 3977 / MUM/201 6 ( ASSESSMENT YEAR : 201 1 - 1 2 ) M/S. CREATIVE GLOBAL STOCK BROKING PVT. LTD., 401, SUN INDUSTRIAL ESTATE, SUN MILL COMPOUND, LOWER PAREL, MUMBAI 4 00 013 VS. DCIT 4(1), MUMBAI PAN/GIR NO. AABCC6279R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RAJIV KHANDELWAL REVENUE BY SHRI S.R.KIRTANE DATE OF HEARING 2 0 / 12 /2016 DATE OF PRONOUNCEMENT 21 / 12 /2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF EXPENSES BY INVOKING PROVISIONS OF SECTION14A READ W ITH RULE 8D(2)(III) AMOUNTING TO RS.12,48,394/ - . 3. IT WAS ARGUED BY LEARNED AR THAT WHILE COMPUTING DISALLOWANCE UNDER RULE 8D ( 2 ) (III), AO HAS TAKEN INTO ACCOUNT THE SHARES HELD AS STOCK IN TRADE, STRATEGIC INVESTMENT AND INVESTMENT IN IMMOVABLE PROPERTY. RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LIMITED IN SUPPORT OF PROPOSITION THAT STOCK IN TRADE SHOULD BE EXCLUDED WHILE COMPUTING DISALLOWANCE U/S.14A. LEARNED ITA NO. 3977/MUM/2016 M/S. CREATIVE GLOBAL STOCK BROKING PVT. LTD., 2 AR ALSO PLACED ON RECORD THE ORDER O F THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 TO 2009 - 10 ORDER DATED 29/06/2016, WHEREIN STRATEGIC INVESTMENTS WERE EXCLUDED FOR COMPUTING DISALLOWANCE UNDER RULE 8D READ WITH SECTION 14A OF THE IT ACT. 4. AS PER LEARNED AR INVESTMENT IN IMMOVABLE PROPERTY DOES NOT EARN ANY DIVIDEND OR EXEMPT INCOME, THEREFORE, SHOULD BE EXCLUDED WHILE COMPUTING THE DISALLOWANCE U/S.14A. 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. FRO M THE RECORD I FOUND THAT THE ASSESSEE IS A BROKER AT THE BSE AND THE NSE AND IS ENGAGED IN THE BUSINESS OF SHARE BROKING, INVESTING AND TRADING IN SHARES AND SECURITIES, MUTUAL FUND DISTRIBUTION, ARBITRAGE ACTIVITY ON EQUITY AND DERIVATIVE SEGMENT, PROVID ING FINANCIAL CONSULTANCY SERVICES. W HILE COMPUTING DISALLOWANCE U/S.14A, AO HAS TAKEN INTO ACCOUNT THE SHARES WHICH WERE HELD AS STOCK IN TRADE AND ON WHICH NO DIVIDEND INCOME WAS EARNED. IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF IND IA ADVANTAGE SECURITIES LIMITED IN ITA NO.6711/MUM/2011 ORDER DATED 14/09/2012, I DIRECT THE AO TO EXCLUDE THE SHARES HELD AS STOCK IN TRADE. 6 . N O DISALLOWANCE IS ATTRACTED IN RELATION TO STRATEGIC INVESTMENTS MADE IN THE SISTER CONCERNS/GROUP COMPANIES WHERE THE ASSESSEE HOLDS SUBSTANTIAL STAKE IS CONCERNED, I FIND THAT THE IDENTICAL ISSUE HAS BEEN RAISED AND DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITA NO. 3977/MUM/2016 M/S. CREATIVE GLOBAL STOCK BROKING PVT. LTD., 3 'KOTAK MAHINDRA CAPITAL CO. LTD. VS. DCIT' IN ITA NOS.5748/M/2012 AND 248/M/2013 FO R A.YS. 2008 - 09 & 2009 - 10 RESPECTIVELY, DECIDED ON 21.01.2015 WHEREIN THE TRIBUNAL HAS MADE THE FOLLOWING OBSERVATIONS: '3. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED THE RECORDS. THE A.O. HAS MADE THE DISALLOWANCE U/S 14A R.W. RULE 8 - D AT 0.5% OF ADMIN ISTRATIVE EXPENSES. THERE WAS NO DISALLOWANCE ON ACCOUNT OF INTEREST WHILE WORKING OUT THE DISALLOWANCE U/S 14 A OF THE INCOME TAX ACT , 1961. IT WAS ARGUED BY THE LEARNED A.R. THAT THE ASSESSEE HAS INVEST MENTS IN COMPANIES WHICH ARE ITS GROUP COMPANIES WHERE THE ASSESSEE HOLDS SUBSTANTIAL STAKE. THE ID. A.R. SUBMITS THAT STRATEGIC INVESTMENTS, PER SE DO NOT REQUIRE ANY DAY TODAY MONITORING AS THEY ARE INHERENTLY LONG TERM IN NATURE. NO EXPENDITURE ON DAY - TO - DAY BASIS IS INCURRED FOR MANAGING THOSE INVESTMENTS. THEREFORE, STRATEGIC INVESTMENT SHOULD BE EXCLUDED FOR ATTRIBUTING ADMINISTRATIVE EXPENSES FOR MAKING DISALLOWANCE U/S 14 A OF THE ACT . THE LD. A. R. HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: - I) HSBC SECURITIES AND CAPITAL MARKETS (I) P. LTD. - ITA NO. 3186/M/08 II) ZENSTAR TECHNOLOGIES LTD. - ITA NO. 4538/M/05 III) SHRI BHALCHANDRA R. SULE - ITA NO. 3684/M/05 IV) EIH ASSOCIATED HOTELS VS. DCI T - ITA NO. 1503/MAD/12 V) INTERGLOBE ENTERPRISES LTD. VS. DCIT - ITA NO. 1362 & 1032/DE1/13 VI) JM FINANCIAL LIMITED VS. ACIT - ITA NO. 4521/M/12 VII) CIT VS. ORIENTAL STRUCTURAL ENGINEERS P. LTD. - ITA 605 OF 2012(HC) VIII) ACIT VS. ORIENTAL STRUCTURAL ENGINEERS P. LTD. ITA NO. 4245/DE1/2011 IX) GARWARE WALL ROPES LTD. VS. ACIT - ITA NO. 5408/M/2012 7 . IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, I DIRECT THE A.O. TO EXCLUDE THE INVESTMENTS MADE IN F OREIGN SUBSIDIARIES AND INVESTMENT MADE IN COMPANIES WHICH ARE STRATEGIC IN NATURE WHILE COMPUTING THE DISALLOWANCE U/S 14 A OF THE ACT IN RESPECT OF ADMINISTRATIVE EXPENSES. 8 . INVESTMENT MADE IN THE IM MOVABLE PROPERTY ALSO DOES NOT EARN ANY EXEMPT INCOME. ACCORDINGLY, I DIRECT THE AO TO EXCLUDE THE INVESTMENT IN ITA NO. 3977/MUM/2016 M/S. CREATIVE GLOBAL STOCK BROKING PVT. LTD., 4 THE IMMOVABLE PROPERTY AMOUNTING TO RS.1,45,78,820/ - WHILE COMPUTING DISALLOWANCE UNDER RULE8D. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALL OWED IN PART IN TERMS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 / 12 /2016 S D/ - (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI ; DATED 21 /12 /201 6 KARUNA SR. PS COPY O F 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. GUARD FILE. //TRUE COPY//