ITO 3(1)(2), MUMBAI V. DEVKANT SYENTHETICS (I) P.LTD, MUMBAI

ITA 4718/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9546 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: R S KHANDELWAL
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH , JUDICIAL MEMBER ITA NO. 4718 /MUM/201 6 : A.Y : 201 2 - 1 3 ITO - 3(1)(2), MUMBAI (APPELLANT) VS. M/S. DEVKANT SYNTHETICS (I) PVT. LTD., 1006, RAHEJA CENTRE, 10 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN : AAACD2102K (RESPONDENT) APPELLANT BY : SHRI RAJESH KUMAR YADAV RESPONDENT BY : SHRI R.S. KHANDELWAL DATE OF HEARING : 0 8 /0 8 /2017 DATE OF PRONOUNCEMENT : 15 /09/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 8 , MUMBAI DATED 22 . 04 .201 6 , PERTAINING TO THE ASSESSMENT YEAR 201 2 - 1 3 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER, MUMBAI DATED 31 .0 3 .201 5 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO. 4718/MUM/2016 M/S. DEVKANT SYNTHETICS (I) PVT. LTD. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT TO 5% OF DIVIDEND EARNED DURING THE YEAR, RELYING UPON THE HON'BLE ITATS DECISION FOR THE A.YRS. 2010 - 11 AND 2011 - 12 IN ASSES SEES OWN CASE WITHOUT APPRECIATING THE FACT THAT THE A.O. HAD CORRECTLY WORKED OUT THE DISALLOWANCE AS PER THE PROVISIONS OF SECTION 14A R.W.S. 8D. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER RESTORED. 3. IN BRIEF, THE RELEVANT FACTS CAN BE SUMMARISED AS FOLLOWS. THE ASSESSEE IS, INTER - ALIA , ENGAGED IN THE ACTIVITY OF INVESTMENT AS WELL AS TRADING IN SHARES AND SECURITIES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.37,30,170/ - , WHICH WAS EXEMPT IN TERMS OF SEC.10(34) OF THE ACT AND ASSESSEE WAS INCURRING INTEREST EXPENDITURE AS WELL AS OTHER EXPENSES AND, THEREF ORE, REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE RELEVANT EXPENSES NOT BE DISALLOWED IN TERMS OF SEC. 14A OF THE ACT. BEFORE THE ASSESSING OFFICER, ASSESSEE CONTENDED THAT IT WAS ENGAGED IN SHARE TRADING ACTIVITY AND THAT THE SHARES AND SECURITIES W ERE HELD FOR TRADING PURPOSES. ASSESSEE HAD RECEIVED DIVIDEND ON SHARES PURELY AS AN INCIDENTAL INCOME WHEREAS ITS SUBSTANTIVE PURPOSE WAS TO EARN TRADING INCOME. BE THAT AS IT MAY, THE ASSESSING OFFICER APPLIED THE FORMULA CONTAINED IN RULE 8D OF THE IN COME TAX RULES, 1962 (IN SHORT THE RULES) AND COMPUTED THE DISALLOWANCE OF RS.4,16,40,986/ - FOR THE PURPOSES OF SEC. 14A OF THE ACT. OUT OF THE TOTAL DISALLOWANCE, RS.3,87,71,910/ - WAS WORKED OUT FROM INTEREST EXPENDITURE IN TERMS OF RULE 8D(2)(II) OF T HE RULES AND BALANCE OF RS.28,69,076/ - WAS WORKED OUT AS PER RULE 3 ITA NO. 4718/MUM/2016 M/S. DEVKANT SYNTHETICS (I) PVT. LTD. 8D(2)(III) OF THE RULES. WHEN THE MATTER REACHED THE CIT(A), ASSESSEE CANVASSED THAT THE DISALLOWANCE U/S 14A OF THE ACT MADE IN THE INSTANT YEAR IS SIMILAR TO THAT MADE IN ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12, WHICH HAVE SINCE BEEN CONSIDERED BY THE TRIBUNAL IN ITA NO S . 2663 TO 2665/MUM/2015 DATED 28.10.2015 (AND CORRIGENDUM DATED 16.11.2015) AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN RESTRICTED TO 5% OF THE DIVIDE ND INCOME. THE CIT(A) CONSIDERED THE SUBMISSIONS PUT FORTH BY THE ASSESSEE AND HAS CONCLUDED THAT THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE SIMILAR TO THOSE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009 - 10, 2010 - 11 AN D 2011 - 12 AND, THEREFORE, HE FOLLOWED THE PRECEDENTS AND RESTRICTED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT TO 5% OF THE DIVIDEND INCOME. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US AS PER THE AFORESTATE D GROUNDS OF APPEAL. 4. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE FILED A PAPER BOOK, INTER - ALIA , ENCLOSING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AS ALSO THE COPY OF THE ORDER OF THE TRIBUNAL DATED 28.10.2015 (WITH CORRIGENDUM) ( S UPRA ). RELIANCE HAS ALSO BEEN PLACED ON THE JUDGMENT S OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD., ITA NO. 1131 OF 2013 DATED 17.03.2015 AND IN THE CASE OF HDFC BANK LTD. , WRIT PETITION NO. 1753 OF 2016 DATED 25.02.2016 . 5. THE LD. DR APPEARING FOR THE REVENUE HAS SOUGHT TO PLACE RELIANCE ON THE STAND OF THE ASSESSING OFFICER, BUT HAS NOT CANVASSED ANY 4 ITA NO. 4718/MUM/2016 M/S. DEVKANT SYNTHETICS (I) PVT. LTD. ARGUMENTS WHICH WOULD DISTRACT FROM THE FINDING OF THE CIT(A) THAT THE FACTS AND CIRCUMSTANCES OF THE CASE IN THIS YEAR ARE SIMILAR TO THOSE IN ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12 , WHICH HAVE SINCE BEEN CONSIDERED BY THE TRIBUNAL . IN THIS VIEW OF THE MATTER, WE ARE UNABLE TO INTERFERE WITH THE FINDING OF THE CIT(A), WHICH IS BASED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 2663 TO 2665/MUM/2015 DATED 28.10.2015 (SUPRA). NOTABLY, THE DECISION OF THE TRIBUNAL DATED 28.10.2015 (SUPRA) CONTINUES TO HOLD THE FIELD AND HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. 6. IN THE RESULT, APPEAL OF T HE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 T H SEPTEMBER, 2017. SD/ - SD/ - ( AMARJIT SINGH ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 1 5 T H SEPTEMBER , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER ASSTT. REGISTRAR /SR. PRIVATE SECRETARY I.T.A.T, MUMBAI