SHAREKHAN LTD, MUMBAI V. DCIT CEN CIR 3(3) , MUMBAI

ITA 5284/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9888 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 12-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N PADNABHANSR
• Assessee Lawyers: HIRO RAI LD
• Keywords: Earning of tax free income; Speculation loss; Rule 8D
• Section: 143(3); 14A; 43(5); 73

Judgement Text

ITA NO.5284/MUM/2018 & ITA NO.5791/MUM/2018 M/S. SHARE KHAN LTD. ASSESSMENT YEAR :2015-16 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI MANOJ KUMAR AGGARWAL, AM AND HONBLE SHRI RAVISH SOOD, JM ./ I.T.A. NO.5284/MUM/2018 ( / ASSESSMENT YEAR:2015-16) M/S. SHARE KHAN LTD. 10 TH FLOOR, BETA BUILDING LODHA-I, THINK TECHNO PARK OPP. KANJURMARG STATION MUMBAI-400 042. / VS. D CIT - CC - 3 R.NO.1923,19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 ./ ./PAN/GIR NO. AAECS-5096-H ( ! /APPELLANT ) : ( '#! / RESPONDENT ) & ./ I.T.A. NO.5791/MUM/2018 ( / ASSESSMENT YEAR:2015-16) D CIT - CC - 3 R.NO.1923,19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI 400 021 / VS. M/S. SHARE KHAN LTD. 10 TH FLOOR, BETA BUILDING LODHA-I, THINK TECHNO PARK OPP. KANJURMARG STATION MUMBAI-400 042. ./ ./PAN/GIR NO. AAECS-5096-H ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : SHRI HIRO RAI-LD. AR REVENUE BY : SHRI N. PADNABHAN-SR.AR / DATE OF HEARING : 06/01/2020 / DATE OF PRONOUNCEMENT : 06/01/2020 ITA NO.5284/MUM/2018 & ITA NO.5791/MUM/2018 M/S. SHARE KHAN LTD. ASSESSMENT YEAR :2015-16 2 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID CROSS APPEALS FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2015-16 CONTEST THE ORDER OF LD. COMMISSIO NER OF INCOME TAX (APPEALS)-51, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-51/IT-123/DCIT-CC 3(3)/2017-18 DATED 19/07/2018. 1.2 THE GROUND RAISED BY ASSESSEE READS AS UNDER: - 1. UNDER THE FACTS AND IN LAW, THE HONBLE CIT(A) H AS ERRED IN DISALLOWING RS.32,18,938/- UNDER RULE 8D(III) R.W.S. 14A OF THE INCOME TAX ACT, 1961. 1.1 THE HONBLE CIT(A) FAILED TO APPRECIATE THE SUB MISSION MADE BY THE APPELLANT. 1.2 THE HONBLE CIT(A) FAILED TO APPRECIATE THE FAC T THAT CONSIDERING ITS BUSINESS OPERATIONS, THE APPELLANT SUO MOTO HAS DISALLOWED R S.7,50,000/- AS ADMINISTRATIVE EXPENSE. 2.UNDER THE FACTS AND IN LAW, THE APPEAL ORDER PASS ED BY THE HONBLE CIT(A)-51 IS NOT IN ACCORDANCE WITH THE LAW. 1.3 THE GROUNDS RAISED BY REVENUE READS AS UNDER: - 1.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER THAT THE TRANSACTIONS ARE COVERED UNDER SECTION 43(5) READ WITH EXPLANATION T O SECTION 73 OF THE ACT AND THE FINDING WAS ELABORATED BY THE AO IN HIS ASSESSMENT ORDER . 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN LAW IN DELETING THE DISALLOWANCE MADE UN DER RULE 8D(2)(II) OF RS.33,84,594 AS LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE SAME IS SQUARELY COVERED UNDER RULE 8D(2)(II) OF THE INCOME TAX RULES, 1962. 1.4 THE LEARNED AUTHORIZED REPRESENTATIVE FOR ASSES SEE (AR), AT THE OUTSET, SUBMITTED THAT THE ISSUES ARE RECURRING IN NATURE AND THE SAME ARE COVERED BY EARLIER ORDERS OF THE TRIBUNAL. THE COPIES OF THE ORDERS HAVE BEEN PLACED ON RECORD. THE LD. DR RELIED UPON THE ORDER OF LD.AO. ITA NO.5284/MUM/2018 & ITA NO.5791/MUM/2018 M/S. SHARE KHAN LTD. ASSESSMENT YEAR :2015-16 3 IN THE ABOVE BACKGROUND, OUR ADJUDICATION TO THE IS SUES RAISED IN CROSS- APPEALS WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 2. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE B EING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS SHARE BROKER WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S. 143(3) O N 29/09/2017 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED A T RS.208.91 CRORES AFTER CERTAIN ADDITIONS/DISALLOWANCES AS AGA INST RETURNED INCOME OF RS.207.08 CRORES E-FILED BY THE ASSESSEE ON 28/1 1/2015. THE DISALLOWANCE OF BUSINESS LOSS AND DISALLOWANCE U/S 14A AS MADE BY LD. AO FORM SUBJECT MATTER OF CROSS-APPEALS BEFORE US. 3.1 DISALLOWANCE OF BUSINESS LOSS DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT A SSESSEE CLAIMED SETTLEMENT LOSS OF RS.123.94 LACS. THE ASSESSEE EXP LAINED THAT THE ASSESSEE BEING BROKER FOR CLIENTS, WAS EXECUTING OR DERS IN BULK. WHILE EXECUTING THE DEALS, THERE WERE CHANCES OF ERRORS A ND THE LOSS ARISING THEREFROM WAS IN THE COURSE OF BUSINESS AND HENCE, ALLOWABLE. RELIANCE WAS PLACED ON THE DECISION OF MUMBAI TRIBUNAL IN TH E CASE OF M/S. IDFC SSKI SECURITIES PVT. LTD. WHEREIN SIMILAR DISALLOWANCE WAS ALLOWED AND REVENUES APPEAL AGAINST THE SAID ORDER WAS DISMISS ED BY HON'BLE BOMBAY HIGH COURT. THE ATTENTION WAS ALSO DRAWN TO THE FAVORABLE DECISION GIVEN BY TRIBUNAL, ON SIMILAR FACTUAL MATR IX, IN AYS 2009-10 & 2010-11. HOWEVER, REJECTING THE SAME, THE LOSS WAS TREATED AS SPECULATION LOSS AND ADDED TO THE INCOME OF THE ASS ESSEE. THE LEARNED CIT(A), RELYING UPON THE DECISION OF TR IBUNAL FOR AYS 2009- 10 & 2010-11 AND ALSO ON THE APPELLATE ORDERS FOR A YS 2011-12 TO 2014- ITA NO.5284/MUM/2018 & ITA NO.5791/MUM/2018 M/S. SHARE KHAN LTD. ASSESSMENT YEAR :2015-16 4 15, DELETED THE DISALLOWANCE. AGGRIEVED, THE REVENU E IS UNDER APPEAL BEFORE US. WE FIND THAT THE ISSUE IS RECURRING IN NATURE AND L D. CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL FOR AYS 2009-10 & 2010-11 , WHILE GRANTING RELIEF TO THE ASSESSEE. THIS ORDER HAS ALSO BEEN FOLLOWED BY TRIBUNAL IN AY 2014-15, ITA NO. 6930/M/17 ORDER DATED 26/04/2019. RESPECTFULLY FOLLOWING THE CONSISTENT STAND OF TRIBUNAL, WE DISM ISS THIS GROUND OF APPEAL. 3.2 DISALLOWANCE U/S. 14A THE ASSESSEE EARNED EXEMPT INCOME OF RS.11.38 CRORE S AND OFFERED SUO-MOTO DISALLOWANCE OF RS.7.50 LACS IN THE RETURN OF INCOME. HOWEVER NOT SATISFIED WITH ASSESSEES WORKING, LD.AO, INVOK ING RULE 8D, COMPUTED AGGREGATE DISALLOWANCE OF RS.66.03 LACS WH ICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.33.84 LACS AND EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.32.18 LACS THE LEARNED CIT(A), RELYING UPON TRIBUNALS ORDER F OR 2008-09, DELETED INTEREST DISALLOWANCE IN VIEW OF THE FACT THAT OWN FUNDS AVAILABLE AT THE DISPOSAL OF ASSESSEE WERE MUCH HIGHER THAN THE AMOU NT OF INVESTMENTS. THE MATTER OF EXPENSE DISALLOWANCE WAS RESTORED BAC K TO THE FILE OF LD. AO FOR RE-ADJUDICATION AS PER THE DIRECTIONS OF TRI BUNAL IN 2008-09. AGGRIEVED, THE ASSESSEE AS WELL AS REVENUE ARE UNDE R APPEAL BEFORE US. UPON DUE CONSIDERATION, WE FIND THAT IT IS QUITE EV IDENT FROM ASSESSEES FINANCIAL STATEMENTS THAT OWN FUNDS AVAILABLE AT TH E DISPOSAL OF ASSESSEE WERE MUCH HIGHER THAN THE AMOUNT OF INVESTMENTS AND THEREFORE, A PRESUMPTION WAS DRAWN IN ASSESSEES FAVOR THAT INVE STMENTS WERE OUT OF ITA NO.5284/MUM/2018 & ITA NO.5791/MUM/2018 M/S. SHARE KHAN LTD. ASSESSMENT YEAR :2015-16 5 OWN FUNDS. THEREFORE, IN SUCH AN EVENTUALITY, NO IN TEREST DISALLOWANCE WOULD BE WARRANTED. SO FAR AS THE EXPENSE DISALLOWA NCE IS CONCERNED, LD. AO HAS BEEN DIRECTED TO RECOMPUTE THE SAME AS P ER TRIBUNALS DIRECTIONS IN AY 2008-09. THEREFORE, NO FAULT COULD BE FOUND IN THE SAME. THE GROUND RAISED BY ASSESSEE AS WELL AS REVENUE ST AND DISMISSED. 4. IN THE RESULT, THE CROSS-APPEALS STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JANUARY,2020. SD/- SD/- (RAVISH SOOD) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06/01/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !/ THE APPELLANT 2. '#!/ THE RESPONDENT 3. O ( ) / THE CIT(A) 4. O / CIT CONCERNED 5. XY'%Z, Z, / DR, ITAT, M UMBAI 6. Y[\] / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.