ITO 3(1)(4), MUMBAI V. HEADWAY CAPITAL ADVISORS LTD, MUMBAI

ITA 5464/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0218 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 24-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR SINGH LD
• Assessee Lawyers: NEELKANTH KHANDELWAL LD
• Keywords: Earning of tax free income; Revised return
• Section: 143(3); 14A

Judgement Text

ITA NO.5464/MUM/2017 HEADWAY CAPITAL ADVISORS LTD ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5464/MUM/2017 ( / ASSESSMENT YEAR: 2014-15) INCOME T AX OFFICER - 3(1)(4) ROOM NO.666 AAYKAR BHAVAN MUMBAI-400 020. / VS. HEADWAY CAPITAL ADVISORS LTD. 1006, RAHEJA CENTRE FREE PRESS MARG NARIMAN POINT MUMBAI-400 021 ./ ./PAN/GIR NO. AAACO-1907-F ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : NEELKANTH KHANDELWAL- LD.AR REVENUE BY : MANOJ KUMAR SINGH-LD. DR / DATE OF HEARING : 13/11/2018 / DATE OF PRONOUNCEMENT : 05/12/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-8/IT-343/16-17 DATED 29/06/2017 ITA NO.5464/MUM/2017 HEADWAY CAPITAL ADVISORS LTD ASSESSMENT YEAR: 2014-15 2 QUA DELETION OF DISALLOWANCE U/S 14A FOR RS.184.08 LACS . THE EFFECTIVE GROUND READ AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.1,84,08,568/- MADE U/S.14A R.W.R.8D TO THE TOTAL INCOME OF THE ASSESSEE WITHOUT APPRECIATING T HE FACT THAT THE ADDITION WAS MADE RELYING ON THE DECISION OF THE HON'BLE ITA T, MUMBAI, IN THE CASE OF M/S AMERICAN EXPRESS BANK LTD., AND M/S D.H SECURIT IES PVT. LTD., WHEREIN IT WAS HELD THAT SHARES HELD AS STOCK-IN-TRADE ARE ALS O TO BE TAKEN INTO ACCOUNT WHILE WORKING OUT THE DISALLOWANCE U/S.14A R.W.R. 8 D. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT STOCK-IN-TRADE IS NOT TO BE CONSIDERED AS INVESTMENT FOR THE PURPOSE OF DETERMINING DISALLOWANCE U/S.14A R.W.R. 8D WHEN STOCK-IN- TRADE IS NOTHING BUT BUSINESS INVESTMENT. 2.1 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER-3(1)(4), MUMBAI [AO] U/S 143(3) OF THE INCO ME TAX ACT, 1961 ON 22/12/2016 WHEREIN THE INCOME OF THE ASSESSEE HAS B EEN ASSESSED AT RS.183.15 LACS UNDER NORMAL PROVISIONS AFTER CERTAI N ADDITIONS / ADJUSTMENTS AS AGAINST REVISED RETURNED INCOME OF NIL. DURING IMPUGNED AY, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE ENGAGED IN CAPITAL MARKET ADVISORY SERVICES, TRADING IN SHARES AND FINANCING ACTIVITIES. AS EVIDENT FROM GROUNDS OF APPEAL, THE SOLE SUBJECT MATTER OF THE PRESENT APPEAL IS DISALLOWANCE U/S 14 A. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.10,98,665/- AGA INST WHICH THE ASSESSEE HAD NOT OFFERED ANY SUO-MOTO DISALLOWANCE IN THE COMPUTATION OF INCOME. ACCORDINGLY, THE LD. AO PROCEEDED TO COM PUTE THE DISALLOWANCE U/S14A READ WITH RULE 8D. THE ASSESSEE SUBMITTED THAT NO EXPENDITURE WAS INCURRED TO EARN THE SAME AND THE S HARES WERE HELD AS STOCK IN TRADE AND FURTHER, THE DISALLOWANCE U/S 14 A COULD NOT BE MADE AGAINST THE STOCK IN TRADE IN TERMS OF CERTAIN JUDI CIAL PRONOUNCEMENTS. ITA NO.5464/MUM/2017 HEADWAY CAPITAL ADVISORS LTD ASSESSMENT YEAR: 2014-15 3 HOWEVER, NOT SATISFIED, LD. AO, APPLYING RULE 8D, C OMPUTED AGGREGATE DISALLOWANCE OF RS.184.08 LACS WHICH COMPRISED-OFF OF INTEREST DISALLOWANCE U/R 8D(2)(II) FOR RS.175.57 LACS AND E XPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.8.51 LACS. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH S UCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 29/06/2017 WHEREIN THE ADDITIONS WERE DELETED IN VIEW OF THE FACT THAT NO DISALLOWAN CE COULD BE MADE AGAINST INVESTMENTS WHICH WERE HELD AS STOCK-IN-TRA DE. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI MANOJ KUMAR SINGH SUBMITTED THAT THE STAND OF LD. CIT(A) THAT NO DISA LLOWANCE WAS CALLED FOR AGAINST INVESTMENT HELD AS STOCK-IN-TRAD E COULD NO LONGER BE SUSTAINED IN VIEW OF THE LATEST JUDGMENT OF HONBLE APEX COURT RENDERED IN MAXOPP INVESTMENT LTD. VS CIT [12/02/2018 91 TAXMAN N.COM 154]. PER CONTRA, LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI NEELKANTH KHANDELWAL SUPPORTING THE STAND OF FIRST APPELLATE AUTHORITY SUBMITTED THAT LD. AO FAILED TO RECORD PROPER SATIS FACTION AS ENVISAGED BY LAW BEFORE PROCEEDING TO APPLY RULE 8D. ARGUMENT S HAVE BEEN ADDUCED TO SUBMIT THAT DISALLOWANCE COULD NOT EXCEE D THE EXEMPT INCOME EARNED BY THE ASSESSEE DURING IMPUGNED AY. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS A ND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRONOUNCEMENT S RELIED UPON BY RESPECTIVE REPRESENTATIVES. SO FAR AS THE LEGAL GRO UNDS AGITATING THE RECORDING OF PROPER SATISFACTION BY LD. AO IS CONCE RNED, WE FIND THAT THAT THE ASSESSEE HAD NOT OFFERED ANY DISALLOWANCE AGAIN ST THE EXEMPT INCOME IN THE COMPUTATION OF INCOME. ON THE OTHER H AND, LD. AO NOTED ITA NO.5464/MUM/2017 HEADWAY CAPITAL ADVISORS LTD ASSESSMENT YEAR: 2014-15 4 THAT THE ASSESSEE CLAIMED INTEREST EXPENDITURE OF M ORE THAN RS.1.80 CRORES IN THE PROFIT & LOSS ACCOUNT. THE LD. AO, IN PARA 5.2, FURTHER NOTED THAT CERTAIN ADMINISTRATIVE EXPENDITURE ARE CERTAIN LY REQUIRED TO BE INCURRED TO MAINTAIN THE INVESTMENTS AND THEREFORE, IT WAS NOT CORRECT TO SAY THAT NO EXPENDITURE WAS INCURRED IN MAKING THE INVESTMENTS. AFTER PERUSAL OF VARIOUS JUDICIAL PRONOUNCEMENTS AND CIRC ULARS ISSUED BY CBDT, LD. AO IN PARA 5.6 , NOT SATISFIED WITH GENUINENESS OF CLAIM MADE BY THE ASSESSEE, REACHED A CONCLUSION THAT THE PROV ISIONS OF RULE 8D WERE APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR OPINION, NOTHING MORE WAS REQUIRED FROM LD. AO BEFORE PROCEEDING TO APPLY RULE 8D AND THEREFORE, WE DISMISS THIS PLEA AS RAISED BY LD. AR . 5.2 SO FAR THE APPLICABILITY OF PROVISIONS OF SECTI ON 14A AND RULE 8D TO THE INVESTMENTS HELD AS STOCK-IN-TRADE IS CONCERNED, WE FIND THAT THE ISSUE IS NO LONGER RES INTEGRA IN VIEW OF THE RECENT JUDGMENT OF HONBLE APEX COURT RENDERED IN MAXOPP INVESTMENT LTD. VS CIT [12/02/2018 91 TAXMANN.COM 154] WHEREIN HONBLE COURT HAS APPROVED THE APPLICABILI TY OF DISALLOWANCE TO STOCK-IN-TRADE AS WELL. THE LD. CIT(A) HAS PROVIDED RELIEF TO THE ASSESSEE ON THE PREMISE THAT NO DISAL LOWANCE WAS CALLED FOR AGAINST STOCK-IN-TRADE WHICH HAS BEEN OVER-RULED FO R THE AFORESAID JUDGMENT OF HONBLE APEX COURT. THEREFORE, KEEPING IN VIEW THE FACT THAT THE LOWER AUTHORITIES HAD DIVERGENT VIEW ON THE ISS UE AND DID NOT HAVE THE BENEFIT OF AFORESAID JUDGMENT OF HONBLE APEX C OURT, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF LD. AO FOR R E-ADJUDICATION IN TERMS OF THE AFORESAID JUDGMENT & IN THE LIGHT OF ARGUMEN TS RAISED BY LD. AR BEFORE US. THE ASSESSEE, IN TURN, IS DIRECTED TO PR OVIDE RELEVANT EXPLANATION / DOCUMENTS TO SUBSTANTIATE HIS CLAIM, IN THIS REGARD FAILING ITA NO.5464/MUM/2017 HEADWAY CAPITAL ADVISORS LTD ASSESSMENT YEAR: 2014-15 5 WHICH LD. AO SHALL BE AT LIBERTY TO ADJUDICATE THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. RESULTANTLY, THE APPEAL STANDS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DECEMBER, 2018 SD/- SD/- (PAWAN SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05/12/2018 SR.PS:- JAISY VARGHESE !'#$ # / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * +!$, , , , / DR, ITAT, MUMBAI 6. + -./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.