DCIT 10(1), MUMBAI V. NEERAJ BATRA, MUMBAI

ITA 5376/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8260 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 02-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEKANAND PREMPURNA
• Assessee Lawyers: AMEET PATEL
• Keywords: Transactions in derivatives; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUM BAI . , , BEFORE SHRI D. KARUNAKARA RAO, AM & SHRI AMIT SHUKL A, JM ./ ITA NO. 5376/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) D C I T 10(1) / VS. SHRI NEERAJ BATRA ROOM NO. 455, 4 TH FLOOR AAYAKAR BHAVAN, MK ROAD MUMBAI 400020 OFFICE NO. 4, SHILPA, 7 TH ROAD, PRABHAT COLONY, SANTACRUZ (E) MUMBAI 400055 ./ PAN AACPB8696H ! / APPELLANT '# ! / RESPONDENT ! $ % / APPELLANT BY: SHRI VIVEKANAND PREMPURNA '# ! $ % / RESPONDENT BY: SHRI AMEET PATEL &' $ ( / DATE OF HEARING: 04.12.2014 )*+ $ ( / DATE OF PRONOUNCEMENT: 04.12.2014 / O R D E R PER D. KARUNAKARA RAO, AM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-21, MUMBAI DATED 15.05.2013 FOR AY 2008-09 IN CONNECTIO N WITH DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE I.T. RUL ES, 1962. 2. AT THE OUTSET THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIVIDEND INCOME OR ` 31.79 LAKHS WAS CLAIMED AS EXEMPT UNDER SECTION 10(34) OF THE ACT. AS PER ASSESSEES COMPUTATION OF EXPENDITURE ` 3,287/- IS THE DISALLOWABLE EXPENSES UNDER SECTION 14A. REJECT ING THE ABOVE COMPUTATION OF DISALLOWANCE OF EXPENSES, ALTHOUGH T HE AO WORKED OUT THE DISALLOWANCE AT ` 53,06,196/- APPLYING PROVISIONS OF RULE 8D, HE DID NOT ADD THE SAME. HOWEVER, HE RESTRICTED THE IS TO ` 16,97,872/- (17,01,159 3,287). THUS, THE AO HAS NOT STRICTLY APPLIED PROVISIONS OF RULE 8D. IN PRINCIPLE HE DISALLOWED THE AMOUNTS DEBITED TO THE PROFIT & LOSS ACCOUNT. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT OF ` 17,01,159/- WAS INCURRED IN CONNECTION WITH THE BUS INESS INCOME DERIVED FROM DERIVATIVES TRANSACTIONS, WHICH THE BUSINESS O F THE ASSESSEE. ITA NO. 5376/MUM/2013 SHRI NEERAJ BATRA 2 3. THE CIT(A) FOUND THAT THE SAID EXPENDITURE IS DIREC TLY CONNECTED WITH THE TAXABLE INCOME OF THE ASSESSEE AND GRANTED RELI EF RELYING ON THE BINDING COORDINATE BENCH DECISION IN THE CASE OF JUSTICE SA M P. BHARUCHA IN ITA NO. 3889/MUM/2011. 4. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AGAINST T HE ORDER OF THE CIT(A). BEFORE US THE LEARNED D.R. RELIED ON THE OR DER OF THE AO. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE SAID EXPENDITURE OF ` 16,97,872/- WAS INCURRED IN CONNECTION WITH PAYMENT OF STT, THE FACT OF WHICH WAS APPRECIATED B Y THE CIT(A). HE ALSO RELIED ON PAGES 8 & 9 OF THE PAPER BOOK AND DEMONST RATED THAT THE IMPUGNED EXPENDITURE WAS INCURRED FOR BUSINESS PURP OSES AND NOT FOR EARNING EXEMPT INCOME. 6. AFTER HEARING THE PARTIES AND PERUSING THE CONTENT S OF PARA 4.2 OF THE ORDER OF THE AO WHEREIN THE AO MENTIONED THAT THE A SSESSEE HAS NOT CATEGORISED THE EXPENSES INCURRED FOR MAKING INVEST MENT AND THE SAME IS NO CORRECT CONSIDERING THE INFORMATION AVAILABLE. FURT HER, WE PERUSED PARA 4.3 OF THE IMPUGNED ORDER WHICH CONTAINS THE REASONING OF THE CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE. THE RELEVANT CONTE NTS OF THE SAID PARAGRAPH IS REPRODUCED AS UNDER: - 4.3 ..... ON EXAMINATION IT IS CLEAR THAT THERE AR E TWO MAIN EXPENSES INCURRED BY THE APPELLANT. ONE IS EXPENDITURE PAID AS STT FOR EARNING THE TAXABLE INCOME WHICH IS ABOUT RS.17,01,159/- AN D THIS EXPENDITURE HAS DIRECT NEXUS WITH THE EARNING OF TAXABLE INCOME . WHERE THERE IS A DIRECT NEXUS OF TAXABLE INCOME MUMBAI TRIBUNAL IN T HE CASE OF JUSTICE SAM P. BHARUCHA VS. ADD. CIT IN ITA NO. 3889/MUM/20 11 HELD THAT IF EXPENDITURE IS INCURRED WITH VIEW TO EARN TAXABLE I NCOME AND THERE IS EXPENDITURE INCURRED AND TAXABLE INCOME THIS DISALL OWANCE CAN BE MADE U/S. 14A MERELY BECAUSE SOME TAX EXEMPT INCOME IS RECEIVED BY THE ASSESSEE. HENCE IN VIEW OF THIS ABOVE DECISION, DIRECT NEXUS OF EXPENDITURE FOR PAYMENT OF STT IS TO BE CALCULATED HENCE, MAXIMUM DISALLOWANCE CAN BE RESTRICTED ONLY TO OTHER EXPEND ITURE I.E. RS.1,32,323/-. HENCE DISALLOWANCE ON THIS GROUND IF RESTRICTED TO RS.1,32,323/- INSTEAD OF RS.16,97,870/-. OUT OF THI S RS.1,32,323/- AS APPELLANT HAS OFFERED INCOME OF RS.3,287/- THIS HAS TO BE EXCLUDED AND THE DISALLOWANCE IS (1,32,323 3,287). DISALLOWANC E IS RESTRICTED TO RS.1,29,036/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT T HE CIT(A) RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE ON APPRECIATING THE FACT THAT THE EXPENDITURE IN ITA NO. 5376/MUM/2013 SHRI NEERAJ BATRA 3 QUESTION WAS INCURRED FOR BUSINESS PURPOSES AND NOT FOR EARNING EXEMPT INCOME. ACCORDINGLY THE GROUND RAISED BY THE REVENU E IS REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ,- . $ / ,. $ . 01 ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2014. $ )*+ / 2&- 04.12.2014 * $ 3' SD/- SD/- (AMIT SHUKLA) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 4' MUMBAI, 2& DATED: 4 TH DECEMBER, 2014 COPY TO: 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. ( )/ THE CIT(A) 21, MUMBAI 4. / THE CIT 10, MUMBAI CITY 5. 563 '&78 , ( 78 , 4' THE DR, B BENCH, ITAT, MUMBAI 6. 39 :' / GUARD FILE. & / BY ORDER #5 ' //TRUE COPY// ! ASSISTANT REGISTRAR , 4' ITAT, MUMBAI BENCHES, MUMBAI N.P.