Nimesh I. Shah, MUMBAI V. ACIT 4 (2), MUMBAI

ITA 5486/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3903 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 25-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2012
• Court: TRIBUNAL
• Department Lawyers: RAJESHWARI MOTAWANI
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & AMIT SHUKLA (JM) I.T.A. NO. 5486 /MUM/ 2012 (ASSESSMENT YEAR 2009 - 10 ) SHRI NIMESH I. SHAH ROOM NO. 7 11/13, BOTAWALA BUILDING HORNIMAN CIRCLE FORT MUMBAI - 400 023. ACIT - 4(2) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO. ANQPS5918L ASSESSEE BY SHRI NISHIT GANDHI DEPARTMENT BY S MT. RAJESHWARI MOTAWANI DATE OF HEARING 3 .5 . 201 6 DATE OF PRONOUNCEMENT 3 . 5 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE APP EAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9.7.2012 PASSED BY LEARNED CIT(A) - 8, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. 2. SOLITARY ISSUE URGED IN THIS APPEAL RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. 3. WE HAVE HEARD THE P A RTIES AND PERUSED THE RECORD. T HE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS. 6,73,910/ - AND CLAIMED THE SAME AS EXEMPT. BUT IT DID NOT MAKE ANY DISALLOWANCE OUT OF THE EXPENSES IN TERMS OF SEC. 14A OF THE ACT. THE ASSESSEE ARGUED BEFORE THE ASSESSING OFF ICER THAT HE DID NOT INCUR ANY EXPENSE TOWARDS EARNING THE ABOVE SAID EXEMPTED INCOME AND ACCORDINGLY CONTENDED THAT NO DISALLOWANCE U/S. 14A IS CALLED FOR. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY COMPUTED T HE DISALLOWANCE U/S. 14A READ WITH RULE 8D(2(III) OF THE SHRI NIMESH I. SHAH 2 I.T. RULES AT RS. 2,03,701/ - BEING THE AMOUNT EQUAL TO 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT. LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 2. LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM SHARES , WHICH WERE HELD AS STOCK - IN - TRADE AND HENCE THE VALUE OF TRADING SHARES SHOULD BE EXCLUDED FOR COMPUTING THE AVERAGE VALUE OF INVESTM ENT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME FROM ONLY SOME OF SHARES HELD AS INVESTMENT AND HENCE VALUE OF SHARES WHICH DID NOT YIELD DIVIDEND INCOME SHOULD ALSO BE EXCLUDED FROM THE AVERAGE VALUE OF INVESTMENT. HE FURTHER SUBM ITTED THAT IF THIS EXERCISE IS CARRIED OUT , THEN THE DISALLOWANCE TO BE MADE U/S 14A SHALL WORK OUT TO A MINIMUM FIGURE. HE FURTHER SUBMITTED THAT THE ASSESSEES INVESTMENT ACTIVITY IS VERY LESS AND HENCE THERE IS NO REQUIREMENT TO APPLY RULE 8D OF THE I.T . RULES. 3. ON THE CONTRARY , LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT PROVISIONS OF RULE 8D IS APPLICABLE FOR THE YEAR UNDER CONSIDERATION AS PER THE DECISION RENDERED BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTUR ING COMPANY LTD. 328 ITR 81. 4. WE NOTICED FROM THE DETAILS THAT THE ASSESSEE HAS PURCHASED SHARES OF TWO COMPANIES AND SOLD SHARES OF SIX COMPANIES OUT OF INVESTMENT PORTFOLIO. FURTHER THE DIVIDEND INCOME HAS BEEN DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE. AT THE SAME TIME WE NOTICED THAT THERE IS CONSIDERABLE ACTIVITY OF PURCHASE AND SALES OF SHARES IN TRADING PORTFOLIO. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE DISALLOWANCE U/S. 14A IS CALLED FOR. HOWEVER, SINCE SPECIFIC DETAILS OF ACTIVITY IN SHARES ARE AVAILABLE, WE ARE OF THE VIEW THAT THERE IS NO NECESSITY TO APPLY RULE 8D TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, ON THE CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE DISALLOWANCE U/S. 14A MAY BE ESTIMATED ON LUMP - SUM BASIS. ACCORDINGLY WE SET ASIDE THE ORDER SHRI NIMESH I. SHAH 3 OF LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF RS. 15,000/ - AND IN OUR VIEW THE SAME WOULD SATISFY THE REQUIREMENT OF SECTION 14A OF THE ACT , VIS - - VIS THE ACCOUNTS OF THE AS SESSEE . WE ORDER ACCORDINGLY. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 3 .5 .2016 . SD/ - SD/ - (AMIT SHUKLA ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 3 / 5 /20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./AS STT. REGISTRAR) ITAT, MUMBAI PS