NINJA SECURITIES P. LTD, MUMBAI V. ITO 13(1)(1),

ITA 4847/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8049 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHENDR
• Assessee Lawyers: BHUPENDRA SHAHAR
• Keywords: Business income; Earning of tax free income

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./4847/MUM/2016 , /ASSESSMENT YEAR: 2012-13 M/S. NINJA SECURITES (P) LTD. 29, 1ST FLOOR, LAXMI NARAYAN SHOPPING CENTRE, PODDAR ROAD, MALAD MUMBAI-400 097. PAN:AAACN 2336 B VS. INCOME TAX OFFICER-13(1)(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN-DR ASSESSEE BY: SHRI BHUPENDRA SHAH-AR / DATE OF HEARING: 16.02.2017 / DATE OF PRONOUNCEMENT:07.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 20/06/2016,OF THE CIT ( A)-21,MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUS INESS OF COMPUTER SOFTWARE DEVELOPMENT AND CONSULTANCY, FILED ITS RETURN OF IN COME ON 27/ 09/2012,DECLARING LOSS OF RS. 22.59 LAKHS. THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT,U/S.143 (3)OF THE ACT, ON 18/03/2015, DETERMINING ITS INCOME AT RS. 39.90 LAK HS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMING THE DISALLOWANCE OF RS. 21.13 LAKHS U/S.14A R.W.R.8D (2) (II) (III) OF THE INCOME TAX RULES, 19 62 (RULES). DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAD EARNED E XEMPT INCOME, COMPRISING OF DIVIDEND INCOME, RS.31.15 LAKHS,THAT IT HAD ON ITS OWN DISAL LOWED 10% (RS.3.11 LAKHS) OF THE DIVIDEND INCOME AS EXPENSES INCURRED FOR EARNING EXEMPT INCO ME. HOWEVER, THE AO WAS NOT CONVINCED ABOUT THE DISALLOWANCE TO BE MADE.APPLYIN G RULE 8D OF THE RULES, HE COMPUTED THE DISALLOWANCE AT RS.65.60 LAKHS. ALLOWING THE SU O-MOTU DISALLOWANCE, HE DISALLOWED SUM OF RS.62.48 LAKHS. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED T HAT THE INTEREST EXPENDITURE WAS INCURRED IN CONNECTION WITH THE LOAN TAKEN FOR GIVI NG MARGIN MONEY TO THE BROKER FOR F & O TRANSACTIONS AND FOR PURCHASING TRADING STOCK, THAT OTHER EXPENSES WERE ELIGIBLE TO SHARE TRADING, THAT NO EXPENSES WERE INCURRED FOR EARNING EXEMPT INCOME, THAT THE SHARE TRADING 4847/M/16-NINJAS(12-13) 2 INCOME AND FUTURE AND OPTION TRANSACTIONS WERE TAXA BLE, THAT THE DISALLOWANCE COULD NOT EXCEED THE EXEMPT INCOME OF RS.31.15 LAKHS,THAT THE INCOME FROM SHARE TRADING AND FUTURE AND OPTION WERE NOT EXEMPT FROM TAX, THAT RULE 8D A PPLY TO INVESTMENTS,THAT SAME WOULD NOT APPLY WHERE THE SHARES WERE HELD AS STOCK IN TRADE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER, THE FAA HELD THAT IN THE CASES OF DAMANI ESTATES FINANCE PRIVATE LTD (TS-330- ITD-2013) AND DH SECURITIES PRIVATE LTD.(99 DTR 298) THE TRIBUNAL HAD HELD THAT DISALLOWANCE U/S.14 A COULD BE MADE EVEN IF SHARES WERE HELD AS STOCK IN TRADE. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) RELIED UPON THE CASES OF HDFC BANK LTD (383 ITR 529), INDIA ADVANTA GES SECURITIES LTD (380 ITR 471), MAX INDIA LTD (290 CTR 76). THE DEPARTMENTAL REPRES ENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. AFTER HEARING THE RIVAL SUBMISSIONS,WE FIND THAT TH E ONLY ISSUE TO BE DECIDED IS AS TO WHETHER THE EXPENDITURE ELIGIBLE TO STOCK IN TRADE CAN BE DISALLOWED INVOKING THE PROVISIONS OF SECTION 14 A R.W.R.8D OF THE RULES. WE FIND THAT IN THE CASES RELIED UPON BY THE AR,IT HAS BEEN CLEARLY HELD THAT NO DISALLOWANCE U/S.14A R.W. R 8D OF THE RULES,CAN BE MADE FOR THE SECURITIES HELD AS STOCK IN TRADE.THE REASON BEHIND IT IS NOT DIFFICULT TO UNDERSTAND.INCOME ARISING FROM THE BUSINESS OF AN ASSESSEE IS TAXED U NDER THE HEAD BUSINESS AND PROFESSION.SO,ALL THE EXPENSES HAVE TO BE CONSIDERE D WHILE COMPUTING THE BUSINESS INCOME.ON THE OTHER HAND,IF THE SECURITIES ARE HELD AS INVESTMENT AND AN ASSESSEE EARNS EXEMPT INCOME,SAME CAN BE SUBJECTED TO DISALLOWANCE AS ENVISAGED BY THE PROVISIONS OF SECTION 14A.IN THE CASE UNDER CONSIDERATION THE ASS ESSEE IS DEALING IN SHARES AND F &O SEGMENTS AND OFFERING ITS INCOME UNDER THE HEAD BUS INESS INCOME.THEREFORE,IN OUR OPINION,THE FAA WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE FOR EXPENSES INCURRED WITH REGARD TO STOCK IN TRADE. REVERSING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. ! . ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH MARCH, 2017. 07 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( '#$ / RAJENDRA ) # %& / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 07.03 .2017. JV.SR.PS. 4847/M/16-NINJAS(12-13) 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.