FIRESTORM ELECTRONICS CORP. P .LTD, MUMBAI V. DCIT (OSD) 1(1), MUMBAI

ITA 5441/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8236 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 02-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS REDDY
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Earning of tax free income
• Section: 234B; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F' BENCH, M UMBAI . , #$% &'( , ') *+ ' % BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ./ ITA NO. 5441/MUM/2011 ( , , , , - - - - / ASSESSMENT YEAR : 2007-08 M/S. FIRESTORM ELECTRONICS CORP. P. LTD. D C I T 1( 1) 5TH FLOOR, THE INTERNATIONAL MUMBAI 16 NEW MARINE LINES CROSS ROAD / VS. NO. N. CHRUCHGATE, MUMBAI 400020 +. ') ./ PAN - AAACF 4730 D ./ / APPELLANT 01./ / RESPONDENT ./ 2 ' / APPELLANT BY : SHRI DIVYESH I. SHAH 01./ 3 2 ' / RESPONDENT BY : SHRI SRINIVAS REDDY 3 4) / DATE OF HEARING : 02.08.2012 5- 3 4) / DATE OF PRONOUNCEMENT : 02.08.2012 *'6 / O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE COMPANY IS DIRECTED AGA INST THE ORDER DATED 18.03.2011 PASSED BY THE CIT(A) I, MUMBAI A ND IT PERTAINS TO A.Y. 2007-08. 2. THOUGH THE ASSESSEE RAISED NUMBER OF GROUNDS, BROAD LY THEY PERTAIN TO: (A) DISALLOWANCE OF A SUM OF ` 26,82,144/- BEING PORTFOLIO MANAGEMENT SERVICE CHARGES INCURRED IN CONNECTION WITH THE TRA NSFER OF THE SHARES AND MUTUAL FUNDS, (B) DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D, AND (C) CHARGEABILITY OF INTEREST UNDER SECTIONS 234B A ND 234C OF THE ACT. 3. AT THE TIME OF HEARING THE LEARNED COUNSEL FAIRLY A DMITTED THAT WITH REGARD TO GROUND NO. 1 THE ISSUE STANDS SQUARELY CO VERED BY THE FOLLOWING ITA NO. 5441/MUM/2011 M/S. FIRESTORM ELECTRONICS CORP. P. LTD. 2 DECISIONS OF THE ITAT MUMBAI BENCHES, WHEREIN IT WA S HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION ON THE SAID CHARGES: - 1. ITA NO. 4501/MUM/2010 DATED 10.08.2011 2. ITA NO. 3287/MUM/2009 DATED 28.09.2011 4. IN THE LIGHT OF THE AFORESAID DECISIONS WE UPHOLD T HE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND REJECT GROUND NO. 1 OF THE ASSESSEE COMPANY. 5. WITH REGARD TO GROUND NO. 2, THE CASE OF THE ASSESS EE COMPANY IS THAT THE AO MADE THE DISALLOWANCE UNDER SECTION 14A OF T HE ACT BY APPLYING RULE 8D IN THE LIGHT OF THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMENT LTD. WHEREAS ON AN APPEAL FILED BEFORE THE CIT(A) THE MATTER WAS SET ASIDE TO THE FILE OF THE AO TO RECON SIDER THE MATTER IN THE LIGHT OF THE VIEW TAKEN BY THE HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF THE LEARNED CIT(A) THE RE VENUE AS WELL AS THE ASSESSEE FILED CROSS OBJECTIONS. UNFORTUNATELY, NEI THER THE ASSESSEES COUNSEL NOR THE DEPARTMENTAL REPRESENTATIVE BROUGHT TO THE NOTICE OF THE BENCH WITH REGARD TO THE PENDENCY OF THE APPEAL FILED BY THE ASSESSEE AND THUS REVENUES APPEAL WAS TAKEN UP FOR HEARING ON 31.05. 2012 WHERE THE MATTER WAS SET ASIDE TO THE FILE OF THE AO TO COMPUTE THE EXPENSES ATTRIBUTABLE TO EXEMPT INCOME AS PER SECTION 14A OF THE ACT. (ITA N O. 5388/MUM/2011 DATED 06.06.2012). BOTH THE LEARNED D.R. AS WELL AS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL HAVING SET ASIDE THE MATTER TO THE FILE OF THE AO, IN REVENUES APPEAL, SIMILAR DIRECT ION MAY BE GIVEN IN THIS APPEAL ALSO TO DISPOSE OF GROUND NO. 2. 6. HAVING REGARD TO THE RIVAL SUBMISSION WE DIRECT THE AO TO RECOMPUTE THE REASONABLE AMOUNT DISALLOWABLE UNDER SECTION 14 A OF THE ACT. WE HOLD ACCORDINGLY. 7. WITH REGARD TO GROUND NO. 3, BOTH THE PARTIES ADMIT TED THAT CHARGEABLILITY OF INTEREST IS MERELY CONSEQUENTIAL IN NATURE. WE DIRECT THE AO ITA NO. 5441/MUM/2011 M/S. FIRESTORM ELECTRONICS CORP. P. LTD. 3 TO RECALCULATE THE INTEREST CHARGEABLE UNDER SECTIO NS 234B AND 234C AFTER GIVING EFFECT TO THIS ORDER. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST 2012. *'6 3 - )' 7 8* 9 02.08.2012 3 : SD/- SD/- (RAJENDRA) (D. MANMOHAN) ') *+ / ACCOUNTANT MEMBER #$%/ VICE PRESIDENT MUMBAI ; 8* DATED: 2 ND AUGUST 2012 *'6 *'6 *'6 *'6 3 33 3 0,4<= 0,4<= 0,4<= 0,4<= >'=-4 >'=-4 >'=-4 >'=-4 / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- I, 4. ? / CIT - I, 5. =@: 0,4, , , / DR F BENCH , ITAT, MUMBAI 6. : / GUARD FILE. *'6 *'6 *'6 *'6 / BY ORDER, 1=4 0,4 //TRUE COPY// # ## # / & & & & (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . , . ./ N.P., SR. PS