QUEST INVESTMENT ADVISORS P. LTD, MUMBAI V. ACIT RG 7(2), MUMBAI

ITA 5685/MUM/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0690 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Rule of consistency; Earning of tax free income
• Section: 234B; 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 5685/MUM/2010 AND / I .T.A. NO. 866/MUM/2010 ( / ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 M/S. QUEST INVESTMENT ADVISORS PVT. LTD., 188/3, GURUKRUPA, 1 ST FLOOR, NEXT TO JAIN TEMPLE, JAIN SOCIETY, SION (W), MUMBAI - 400 022 / VS. THE ACIT, RANGE 7(2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAACQ 0371R ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI S.E. DASTUR SHRI MADHUR AGARWAL SHRI YOGESH THAR / RESPONDENT BY : SHRI NEIL PHILIP / DATE OF HEARING : 20 . 0 5 .2015 / DATE OF PRONOUNCEMENT : 20 .0 5 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE TWO APPEALS BY THE ASSESSEE ARE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A) - 1 3 , MUMBAI DT. 2 7 .4.201 0 PERTAINING M/S. QUEST INVESTMENT ADVISORS PVT. LTD. 2 TO ASSESSMENT YEAR S 200 7 - 0 8 & 2008 - 09 . AS BOTH THESE HAVE IDENTICAL ISSUES, THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE WILL TAKE UP FOR A.Y. 2007 - 08 IN ITA NO. 5685/M/2010 2. GROUND NO. 1 RELATE S TO THE DISALLOWANCE OF NOTIONALLY ALLOCATED EXPENSES AMOUNTING TO RS. 83,28,289/ - ON THE ALLEGED GROUND THAT THE SAID EXPENSES HAS BEEN INCURRED FOR THE PURPOSE OF EARNING CAPITAL GAINS. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A CHART EXHIBIT ING THE ASSESSMENT PROCEEDINGS IN RESPECT OF THE ASSESSEE FROM A.Y. 1995 - 96 TO 2012 - 13. IT IS THE SAY OF THE LD. COUNSEL THAT IN 18 ASSESSMENT YEARS, SUCH DISALLOWANCE HAS BEEN MADE ONLY IN RESPECT OF A.Y 2007 - 08 AND 2008 - 09 WHICH ARE UNDER CONSIDERATION BEF ORE THIS BENCH. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ACT OF THE AO IS IN GROSS VIOLATION OF THE PRINCIPLES OF CONSISTENCY LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT 193 ITR 321 AND ALSO BY THE DECISION O F THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS DR. BECK & CO. (IND) LTD. 239 ITR 561. RELIANCE WAS ALSO PLACED ON ANOTHER DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS RAJEEV GRINDING MILLS 279 ITR 86, 4. THE LD. DEPARTMENT AL REPRESENTATIVE COULD NOT BRING ANY DISTINGUISHING FACT/DECISION IN FAVOUR OF THE REVENUE. 5. WITHOUT GOING INTO THE MERITS OF THE CASE, WE HAVE GIVE N A THOUGHTFUL CONSIDERATION TO THE ASSESSMENT STATUS OF PREVIOUS ASSESSMENT YEARS AND ALSO THE SUBSEQU ENT ASSESSMENT YEARS. AS BROUGHT TO OUR NOTICE, WE FIND FORCE IN THE CONTENTION OF THE LD. SENIOR COUNSEL , EXCEPT FOR THE M/S. QUEST INVESTMENT ADVISORS PVT. LTD. 3 ASSESSMENT YEARS WHICH ARE IN APPEAL BEFORE US. THE REVENUE AUTHORITIES HAVE NEVER MADE ANY SUCH DISALLOWANCES IN THE PAST 10 YEARS AND ALSO IN THE SUBSEQUENT 4 YEARS. IT IS NOTHING BUT A TOTAL DEVIATION FROM THE RULE OF CONSISTENCY. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG (SUPRA), WE DIRECT THE AO TO DELETE THE ADDIT ION MADE ON THIS ACCOUNT. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 6. GROUND NO. 2 RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. THE AO HAS COMPUTED THE DISALLOWANCE INVOKING RULE 8D. IT IS A SETTLED POSITION OF LAW THAT APPLICATION OF RULE 8D IS FROM ASSESSMENT 2008 - 09 AS HELD BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS DCIT 328 ITR 81. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE COMPUTATION OF DISALLOWANCE MADE BY THE AO BY INVOKING RULE 8D. HOWEV ER, IN OUR CONSIDERED OPINION, A REASONABLE DISALLOWANCE NEEDS TO BE MADE. THEREFORE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 1% OF THE EXEMPT INCOME. THIS WILL MEET THE ENDS OF JUSTICE. GROUND NO. 2 IS PARTLY ALLOWED. 7. GROUND NO. 3 RELATES TO THE ADDITION OF RS. 90,000/ - . THE AO AT PARA - 12 OF HIS ORDER HAS OBSERVED THAT THE ASSESSEE HAS OFFERED INTEREST INCOME OF RS. 90,000/ - FROM SUNBEAM MONOCHEM PVT. LTD IN A.Y. 2008 - 09 ON THE GROUND THAT TDS CERTIFICATE IS DT. 16.6.2007 AND WAS RECEIVED AFTER 31.3.2007. HOWEVER, SINCE THE INCOME PERTAIN TO A.Y. 2007 - 08, THE AO ADDED THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 8. THE ASSESSEE AGITATED THIS ISSUE BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. M/S. QUEST INVESTMENT ADVISORS PVT. LTD. 4 9. BEFORE US, THE LD. SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE INCOME IS TAXED IN THE YEAR UNDER CONSIDERATION, THE SAME SHOULD NOT BE TAXED IN A.Y. 2008 - 09 . AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NAGRI MILL S CO. LTD. 33 ITR 681. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE LD. SENIOR COUNSEL. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NAGRI MILLS CO. LTD (SUPRA) HAS HELD THAT BUT OBVIOUSLY, JUDGING FROM THE REFERENCES T HAT COME UP TO US EVERY NOW AND THEN, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY TO COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, AS THE INCOME PERTAINS TO A.Y. 2007 - 08, IT HAS TO BE TAXED DURING THE YEAR UNDER CONSIDERATION BUT AT THE SAME TIME IT CANNOT BE TAXED IN A.Y. 2008 - 09. WHILE CONFIRMING THE ADDITION, WE DIRECT THE AO TO ALLOW CREDIT OF TDS FOR A.Y. 2007 - 08 AND REDUCE THE INCOME FROM A.Y. 2008 - 09 AND DENY THE CREDIT OF TDS IN A.Y. 2008 - 09. GROUND NO. 3 IS DISMISSED WITH THE ABOVE DIRECTIONS. 11. THE ASSESSEE HAS ALSO RAISED THE ISSUE RE LATING TO THE LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT. THE LEVY OF INTEREST IS MANDATORY ALTHOUGH CONSEQUENTIAL . W E ACCORDINGLY DIRECT THE AO TO CHARGE INTEREST AS PER THE PROVISIONS OF THE LAW. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS PARTLY ALLOWED. M/S. QUEST INVESTMENT ADVISORS PVT. LTD. 5 ITA NO. 866/MUM/2012 A.Y. 2008 - 09 13. THE FIRST GRIEVANCE OF THE ASSESSEE IS IN RELATION TO THE DISALLOWANCE OF NOTIONALLY ALLOCATED EXPENSES AMOUNT TO RS. 88,05,120/ - . 14. AN IDENTICAL ISSUE HAS BEEN CONSIDER ED AND DECIDED BY US IN ITA NO. 5685/M/10. RESPECTFULLY FOLLOWING OUR OWN DECISION (SUPRA), WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 88,05,120/ - . 15. GROUND NO. 2 HAS NOT BEEN PRESSED BY THE LD. COUNSEL THEREFORE THE SAME IS DISMISSED AS NOT PRESSE D. 16. GROUND NO. 3 RELATES TO LEVY OF INTEREST U/S. 234B & 234C OF THE ACT. THE LEVY OF INTEREST IS MANDATORY ALTHOUGH CONSEQUENTIAL. WE ACCORDINGLY DIRECT THE AO TO CHARGE INTEREST AS PER THE PROVISIONS OF THE LAW. 17. IN THE RESULT, BOTH THE APP EALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY , 2015 SD/ - SD/ - ( JOGINDER SING ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 20 TH MAY , 2015 . . ./ RJ , SR. PS M/S. QUEST INVESTMENT ADVISORS PVT. LTD. 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./ASSTT. REGISTRAR) , / ITAT, MUMBAI