DCIT CENT. CIR. 7(1), MUMBAI V. RARE ENTERPRISES, MUMBAI

ITA 5206/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8775 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 17-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Earning of tax free income; Source of fund
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5206/MUM/2016 (ASSESSMENT YEAR: 2010-11) DCIT, CENTRAL CIRCLE - 7(1) VS. M/S. RARE ENTERPRISES ROOM NO. 653, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 151, NARIMAN BHAVAN NARIMAN POINT MUMBAI 400020 PAN AAGFR8176J APPELLANT RESPONDENT APPELLANT BY: SHRI V. JUSTIN RESPONDENT BY: MS. RUTUJA N. PAWAR DATE OF HEARING: 01.11.2017 DATE OF PRONOUNCEMENT: 01.11.2017 O R D E R PER PAWAN SINGH, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-49, MUMBAI DATED 17.05.2018 FOR A.Y. 2010-11 . 2. REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 14 A OF THE ACT AT RS. 3,35,94,487/- WHICH WAS WORKED OUT AS PER THE PROVISIONS OF RULE 8D BY THE AO WITHOUT APPRECIATING THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE AS WELL AS ADMINISTRATIVE EXPE NDITURE FOR EARNING EXEMPT INCOME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 14 A OF THE ACT AT RS.3,35,94,487/- WITHOUT APPRECIATING THE FACT THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE WAS NOT COMPUTED AS PER PRO VISION TO RULE 8D IN ACCORDANCE WITH THE DIRECTION OF THE HON'BLE BOM BAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. 3. AT THE OUTSET OF THE HEARINGS THE LD AR FOR THE ASS ESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE COV ERED BY THE DECISION OF TRIBUNAL IN FAVOUR OF THE IN ASSESSEES OWN CASE FO R EARLIER YEARS AND ITA NO. 5206/MUM/2016 M/S. RARE ENTERPRISES 2 SUBSEQUENT YEARS IN ITA NO. 891/M/2015 FOR AY 2009- 10 AND ITA NO.3060/M/2016 FOR AY 2011-12. THE LEARNED D.R. FOR REVENUE, AFTER GOING THROUGH THE ORDERS OF THE TRIBUNAL IN ASSESSE ES OWN CASE IN ITA NO. 3060/MUM/2001 DATED 19.04.2017 FAIRLY CONCEDED THAT THE GROUNDS APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE SUBMISSIONS BOTH THE PARTIES AND SEEN THAT SIMILAR ISSUE WAS RAISED FOR A.Y. 2011-12 AND THE C OORDINATE BENCH OF THE TRIBUNAL WHILE REFERRING TO THE DECISION OF THE REV ENUE FOR A.Y. 2004-05 AND 2009-10 PASSED THE FOLLOWING ORDER: - 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE AS SESSEE MS RUTUJA N. PAWAR DREW OUR ATTENTION TO THE FINDING OF THE A O THAT THE ASSESSEE IS ENGAGED IN TRADING OF SHARES AND HOLDIN G THE SHARES AS STOCK IN TRADE AND PAID INTEREST EXPENSES OF RS. 45 ,84,77,832/-. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PARA 5 OF THE AOS ASSESSMENT ORDER WHICH READS AS UNDER: - THE CONTENTION OF THE ASSESSEE ON THE ISSUES CONSI DERED BUT THE SAME CANNOT BE ACCEPTED. THE ASSESSEE IS TRADING IN SHARES AND HELD THE SHARES AS STOCK IN TRADE. THE ASSESSEE HAS PAID NET INTEREST EXPENSES OF RS.458477832/- TO THE PARTIES FROM WHOM SECURED AND UNSECURED LOANS ARE TAKEN. THE ENTIRE F UNDS OF THE ASSESSEE EXCEPT SMALL AMOUNT PERTAINING TO THE PART NER CAPITAL BALANCE ARE INTEREST BEARING FUNDS. EVEN A LAY MAN ON PERUSAL OF THE FINANCIAL STATEMENT OF THE ASSESSEE FIRM CAN DE CIDE THE ISSUE IN THE FAVOUR OF REVENUE THAT INTEREST BEARING FUND S WERE UTILIZED FOR PURCHASE IN SHARES. THEREFORE, THAT THE CONTENT ION OF THE ASSESSEE THAT INTEREST BEARING FUND WERE NOT USED F OR PURCHASE IN SHARES IS NOT CORRECT 4. IN VIEW OF THE ABOVE THE LEARNED COUNSEL FOR T HE ASSESSEE STATED THAT THIS FACT WAS MENTIONED BY THE ASSESSEE BEFORE CIT(A) BUT HE STILL CONFIRMED THE ACTION OF THE AO. NOW, BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIA ADVA NTAGE SECURITIES LTD. IN ITA NO. 1131 OF 2013 DATED 13-04-2015. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT EXACTLY ON IDENTICAL F ACTS, WHEREIN SAME SOURCE OF FUNDS WERE UNDER DISPUTE AND TRIBUNAL IN ITA NO. 55& 56/MUM/2016 FOR THE AY 2004-05 AND 2009-10 RESPECTI VELY HAS ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 2.5 AS UNDER: - 2.5 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE ITA NO. 5206/MUM/2016 M/S. RARE ENTERPRISES 3 IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSER TIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSI TION AND ANALYZED, BEFORE US THE STAND OF THE ASSESSEE IS TH AT SO FAR AS ASSESSMENT YEAR 2004-05 IS CONCERNED IT IS SQUARELY COVERED BY THE DECISION FROM HONBLE BOMBAY HIGH COURT IN CIT VS. INDIA ADVANTAGE SECURITIES LTD. (1131 OF 2013) ORDER DATE D 13.04.2015. SINCE, THE ASSESSEE RECEIVED DIVIDEND O F RS.1,68,00,931/- ON SHARES AND MUTUAL FUND UNITS AC QUIRED AND HELD AS STOCK IN TRADE AND SINCE THE ASSESSEE ITSEL F DISALLOWED A SUM OF RS.41,,95,510/- AS EXPENDITURE ATTRIBUTABLE TO THE EARNING INCOME. THE ISSUE IS SQUARELY COVERED BY TH E DECISION FROM HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS IN DIA ADVANTAGE SECURITIES LTD. (ITA NO.1131 OF 2013) ORDER DATED 1 3/04/2015, THEREFORE, THE DISALLOWANCE U/S 14A R.W.R 8D IS NOT REQUIRED TO BE MADE AND THEREFORE, CANNOT BE SUSTAINED IN VIEW OF THE FOREGOING DECISION. ACCORDINGLY, THE ORDER OF THE L D. COMMISSIONER OF INCOME TAX (APPEAL) IS SET-ASIDE AN D LD. ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITI ON MADE U/S 14A R.W.R 8D OF THE RULES 5. ON QUERY FROM THE BENCH THE LEARNED SR. DR AGR EED THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE RE VENUE BUT HE RELIED ON THE ORDERS OF LOWER AUTHORITIES. 6. AFTER HEARING BOTH THE SIDES AND GOING THROUGH T HE FACTS OF THE CASE. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA) AND IN ASSE SSEES OWN CASE BY THE ORDER OF TRIBUNAL IN EARLIER YEARS. RESPECTI VELY FOLLOWING THE SAME, WE DELETE THE DISALLOWANCE AND ALLOWED THE CL AIM OF THE ASSESSEE. 5. CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR AY 2011-12 IN ITA NO.3060/M/2016, WE DO NOT FIND A NY MERIT IN THE APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST NOVEMBER, 2017. SD/ - SD/ - B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 1 ST NOVEMBER, 2017 ITA NO. 5206/MUM/2016 M/S. RARE ENTERPRISES 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -49, MUMBAI 4. THE PR. CIT, CENTRAL-4, MUMBAI 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.