M/s.Geojit BNP Paribas Financial Services LTd(Formerly Geojit Fianacial services Ltd), Cochin V. The ADCIT, Ernakulam

ITA 445/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90778 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: K GOPI
• Keywords: Business expenditure; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 ITA NOS 444 TO 446/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI V DURGA RAO, JM AND SHRI B.R. BASKARAN, AM I.T.A. NOS 444 TO 446/COCH/2014 (ASSESSMENT YEARS : 2007-08 TO 2009-10) M/S GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD VS TH E ADDL CIT (FORMERLY GEOJIT FINANCIAL SERVICES LTD) RANGE-1, ERNAKULAM FINANCIAL TOWE3RS, KALOOR, KOCHI-17 PAN : AABCG1935E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K GOPI RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 05-05-2015 DATE OF PRONOUNCEMENT : 08-05-2015 O R D E R PER SHRI V DURGA RAO, JM THESE THREE APPEALS ARE DIRECTED AGAINST THE INDEP ENDENT ORDERS PASSED BY THE LD.CIT(A) FOR THE ASSESSMENT YEARS 2007-08 T O 2009-10. 2. THE ASSESSEE IS ENGAGED IN RENDERING SHARE BROKI NG, DEPOSITORY SERVICES, FINANCIAL PRODUCTS DISTRIBUTION AND PORTFOLIO MANAG EMENT SERVICES. FOR THE ASSESSMENT YEAR 2007-08 THE ASSESSEE DECLARED TOTAL INCOME OF RS. 28,35,86,433 IN ITS RETURN OF INCOME FILED ON 30-10 -2007. THE ASSESSING OFFICER, HOWEVER, COMPUTED THE TOTAL INCOME AT RS. 61,68,04, 732 IN HIS ASSESSMENT FRAMED U/S 143(3) ON 04-12-2009 BY MAKING DISALLOWA NCE OF RS. 18,62,300 UNDER SECTION 14A R.W.R 8D OF THE I.T. RULES, 1962. ON A PPEAL, THE LD.CIT(A) CONFIRMED 2 ITA NOS 444 TO 446/COCH/2014 THE DISALLOWANCE TO THE EXTENT OF RS. 17,74,300 BY ALLOWING RELIEF OF RS. 88,000 SINCE THE ASSESSEE HAS ALREADY OFFERED THE SAME. 3. FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSEE RET URNED INCOME OF RS. 74,7060,850 ON 29-09-2008 WHEREAS THE ASSESSING OFF ICER COMPUTED AN INCOME OF RS. 86,41,87,646 IN THE ASSESSMENT FRAMED U/S 14 3(3) ON 07-12-201 BY MAKING DISALLOWANCE OF RS. 38,32,397 U/S 14A R.W.R 8D OF THE ACT TOGETHER WITH OTHER DISALLOWANCES. ON APPEAL THE CIT(A) CONFIRME D THE DISALLOWANCE TO THE EXTENT OF RS. 37,16,987 THEREBY ALLOWING A RELIEF O F RS. 1,15,410, BEING THE AMOUNT DISALLOWED BY THE ASSESSEE ITSELF. 4.. FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSEE RE TURNED INCOME OF RS.16,68,17,724 ON 26-09-2009 WHEREAS THE ASSESSING OFFICER COMPUTED AN INCOME OF RS. 29,82,71,955 IN THE ASSESSMENT FRAMED U/S 143(3) ON 28-12-2011 BY MAKING DISALLOWANCE OF RS. 49,38,822 U/S 14A R.W .R 8D OF THE ACT TOGETHER WITH OTHER DISALLOWANCES. ON APPEAL THE CIT(A) CON FIRMED THE DISALLOWANCE TO THE EXTENT OF RS.47,80,822 THEREBY ALLOWING A RELIE F OF RS.1,58,000, BEING THE AMOUNT DISALLOWED BY THE ASSESSEE ITSELF. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT BORROWED ANY FUNDS FOR MAKING INVESTMENTS FOR EARNI NG EXEMPT INCOME AND THAT ONLY OWN FUNDS WERE USED FOR THE PURPOSE. THE ASSE SSING OFFICER WITHOUT EXAMINING THE BOOKS OF ACCOUNT AND THE EXPLANATION FURNISHED BY THE ASSESSEE 3 ITA NOS 444 TO 446/COCH/2014 MECHANICALLY APPLIED SECTION 14A R.W.R 8D OF THE I. T. RULES SO AS TO MAKE THE DISALLOWANCE. THE LD.DR, ON THE OTHER HAND VEHEMEN TLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HOWEVER, BOTH THE PARTIES B EFORE US HAVE AGREED THAT THEY HAVE NO OBJECTION IN REMITTING THE MATTER BEFORE TH E ASSESSING OFFICER FOR RECONSIDERATION. 5. WE HAVE CONSIDERED SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT THE AGREED PROPOSITION BEFORE US THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER SO THAT THE ASSES SEE COULD BE HEARD EXTENSIVELY AND THE BOOKS OF ACCOUNTS VERIFIED PROPERLY, IS A T ENABLE PROPOSITION. IN THAT VIEW OF THE MATTER THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE BOOKS O F ACCOUNTS PROPERLY AND THE EXPLANATION WHICH IS ALREADY ON RECORD AS ALSO THE SUBMISSIONS THAT MAY BE FILED BY THE ASSESSEE AND THEN DECIDE THE ISSUE IN ACCORD ANCE WITH LAW. 6. FOR ASSESSMENT YEAR 2008-09 THE ASSESSEE HAS RAI SED ANOTHER ISSUE BY WAY OF APPEAL GROUND NO.3 WHICH READS AS FOLLOWS: 3. (A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LOSS ON SALE OF INVESTMENT IS TO BE ASSESSED UNDER THE HE AD CAPITAL GAINS. (B) ALTERNATIVELY, IF FOR ANY REASON THE ASSESSMEN T OF SUCH SALE IS CONFIRMED UNDER CAPITAL GAINS, SUCH LOSS FOR A.Y. 2008-09 IS TO BE SET OFF AGAINST THE INCOME 4 ITA NOS 444 TO 446/COCH/2014 ASSESSED UNDER THE HEADED CAPITAL GAINS IN A.Y. 2008-09. 7. THE ASSESSEE, IN ITS PROFIT AND LOSS ACCOUNT HAS DEBITED AN AMOUNT OF RS.12,36,095 BEING LOSS ON NON TRADE INVESTMENTS. T HIS LOSS WAS INCURRED ON DISPOSAL OF INVESTMENTS MADE IN MUTUAL FUNDS / GOVE RNMENT SECURITIES AND CLAIMED AS BUSINESS LOSS. ACCORDING TO THE ASSESSI NG OFFICER, THIS LOSS IS IN THE NATURE OF SHORT TERM CAPITAL LOSS AND NOT BUSINESS EXPENDITURE; THEREFORE, CANNOT BE SET OFF AGAINST INCOME FROM BUSINESS. HENCE, TH E ASSESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE AND DISALLOWED THE LOSS CLAIM ED. THE CIT(A) CONFIRMED THE DISALLOWANCE. 8. BEFORE, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE IS IN THE BUSINESS OF SHARES AND SECURITIES. THE LOSS I NCURRED BY THE ASSESSEE HAS TO BE TREATED AS A BUSINESS LOSS. IT IS ALSO SUBMITTE D ALTERNATIVELY THAT IF AT ALL THE LOSS HAS TO BE TREATED AS A CAPITAL LOSS, THE SAME MAY BE ALLOWED TO BE SET OFF AGAINST THE CAPITAL GAINS. THE LD.DR PUT RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE FIND THAT THE ASSESSING OFFICER HAS NOT DISCU SSED ANYTHING ABOUT THE DETAILS OF INVESTMENTS MADE BY THE ASSESSEE AS TO H OW THE INVESTMENTS MADE BY THE ASSESSEE WERE CAPITAL INVESTMENTS. UNLESS A FI NDING TO THAT EFFECT IS REACHED, IT IS NOT POSSIBLE TO TAKE TO A DECISION O N THIS ISSUE. THEREFORE, WE DEEM IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR 5 ITA NOS 444 TO 446/COCH/2014 RECONSIDERATION. ACCORDINGLY, THE ISSUE IS RESTORE D TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECORD A FINDING TO THE EFFECT WHETHER THE INVESTMENTS IN QUESTION WERE CAPITAL INVESTMENTS OR TRADING INVEST MENTS AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSES SING OFFICER IS ALSO DIRECTED TO CONSIDER THE ALTERNATIVE SUBMISSION NOW RAISED BY T HE ASSESSEE. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, 08 TH DAY OF MAY, 2015. SD/- SD/- ( B.R. BASKARAN) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 08 TH MAY, 2015 PKJ/- COPY TO: 1. M/S GEOJIT BNP PARIBAS FINANCIAL SERVCIES LTD, ( FORMERLY GEOJIT FINANCIAL SERVICES LTD), FINANCIAL TOWE3RS, KALOOR, KOCHI-17 2. THE ADDL CIT, RANGE-1, ERNAKULAM 3. THE CIT(A)-II, KOCHI 4. THE CIT, COCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, COCHIN BENCH