ACIT, CIRCLE-7 (3)(2), MUMBAI V. M/S. PRIME SECURITIES LTD., MUMBAI

ITA 5218/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1433 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 08-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) C BENCH, MUMBAI BEFORE SHRI C.N. PRAS AD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN, HON'BLE ACCOUNTANT MEMBER IT A. NO. 5218 /MUM/201 9 (A.Y: 201 31 - 14) ACIT CIRCLE - 7(3)(2) ROOM NO. 128A, 1 ST FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. M/S. PRIME SECURITIES LTD., 1109/1110, 11 TH FLOOR MAKER CHAMBERS - 5 NARIMAN POINT, MUMBAI - 400021 PAN: AAACP4089M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.P. BAIRAGRA DEPARTMENT BY : MS. SHREEKALA PARDESHI DATE OF HEARING : 10.02.2021 DATE OF PRONOUNCEMENT : 10.02.2021 O R D E R PER C.N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER OF THE LD. COMMISSI ONER OF INCOME - TAX (APPEALS) - 13 , MUMBAI [HEREINAFTER FOR SHORT 'LD. CIT(A)] DATED 17.05.2019 FOR THE A.Y. 2013 - 14 IN RESTRICTING THE DISALLOWANCE U/S. 14A OF THE ACT. TO THE EXTENT OF DIVIDEND INCOME OF .8,03,277/ - EARNED BY THE ASSESSEE DURING THE YEAR. 2 ITA.NO. 5218/MUM/2019 (A.Y: 20131 - 14) M/S. PRIME SECURITIES LTD., 2. BRIEFLY STATED THE FACTS ARE, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT COMPUTED THE DISALLOWANCE OF .1,90,16,365/ - U/S. 14A R.W. RULE 8D OF I.T. RULES . SINCE ASSESSEE MADE SUO - MOTO DISALLOWANCE OF .2,00,819/ - , ASSESSING OFFICER RESTRICTED THE DISALLOWANCE TO .1,88,15,516/ - . ON APPEAL LD.CIT(A) RESTRICTED THE DISALLOWANCE TO THE DIVIDEND INCOM E EARNED BY THE ASSESSEE DURING THE YEAR. AGAINST THIS ORDER REVENUE IS IN APPEAL BEFORE US IN RESTRICTING THE DISALLOWANCE U/S.14A TO THE EXTENT OF DIVIDEND INCOME EARNED BY THE ASSESSEE. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE EARNED DIVIDEND INCOME OF . 8,03,277 / - . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE U/S. 14A R.W. RULE 8D CANNOT EXCEED DIVIDEND INCOME AND REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A). LD. C OUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PCIT V. STATE BANK OF PATIALA ( 259 TAXMAN .COM 314 ) WHEREIN IT WAS HELD THAT DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED EXEMPT INCOME. LD. COUNSEL FOR THE ASSESSE E FURTHER RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. HDFC BANK LTD [366 ITR 505]. 3 ITA.NO. 5218/MUM/2019 (A.Y: 20131 - 14) M/S. PRIME SECURITIES LTD., 4. LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PCIT V. STATE BANK OF PATIALA (SUPRA) RESTRICTED THE DISALLOWANCE U/S.14A TO THE EXTENT OF DIVIDEND INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 3.2 DECISION: - THE AO MADE DISALLOWANCE OF RS.1,90,16,365/ - UNDER RULE 8D R.W.S .L4A, WHICH COMPRISED OF RS. 1 ,54,17,929/ - UNDER RULE 8D(2)(II) AND RS.35,98,436/ - UNDER RULE 8D(2)(III). THE ASSESSEE SUBMIT TED THAT (I) IT HAS SUO MO TO DISALLOWED A SUM OF RS.2,77,59,462/ - OUT OF INTEREST EXPENSES PAID TO RELIGARE FINVEST LTD., WHICH WAS RELATED TO INVESTMENT, (II) IT HAS SUFFICIENT OWN FUNDS WHICH WERE MORE THAN THE T OTAL INVESTMENT, THEREFORE IN VIEW OF HO NBLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF H DFC BANK LTD. (SUPRA), NO DISALLOWANCE SHOULD BE MADE OUT OF INTEREST PAYMENT. I HAVE CONSIDERED THE FACTS OF THE CASE. THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE IS MORE THAN THE DISALLOWANCE MADE BY AO AND CONSI DERING THE FACTS OF THE CASE I AM OF THE OPINION THAT NO FURTHER DISALLOWANCE IS CALLED FOR UNDER RULE 8D(2)(II). REGARDING DISALLOWANCE UNDER RULE 8D(2)(III), FOLLOWING THE HON'BLE SUPREME COURT JUDGEMENT IN THE CASE OF PC IT VS. STATE BANK OF PATIALA (SU PRA), THE ASSESSEE REQUESTED THAT THE DISALLOWANCE CANNOT BE MORE THAN THE EXEMPT INCOME. 4 ITA.NO. 5218/MUM/2019 (A.Y: 20131 - 14) M/S. PRIME SECURITIES LTD., THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR WAS RS.8,03,277/ - . RESPECTFU LLY FOLLOWING THE DECISION OF H ON'BLE SUPREM E COURT MENTIONED ABOVE, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE UNDER RULE 8D(2)(III) TO RS.8,03,277/ - . 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PCIT V. STATE BANK OF PATIALA (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE DISALLOWANCE U/S.14A TO THE EXTENT OF DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE VIRTUAL COURT ON 1 0.02 .2021. SD/ - SD/ - (N.K. PRADHAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 10 / 02/2021 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM