JMP SECURITIES P. LTD, MUMBAI V. ADDL CIT 4(3), MUMBAI

ITA 5688/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3880 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 11-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Sale consideration of property below Jantri Value; Earning of tax free income
• Section: 14A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5688/M/2013 ASSESSMENT YEAR: 2010-11 M/S. JMP SECURITIES PVT. LTD., ELITE SQUARE, 27, PARIN NARIMAN STREET, BAZARGATE, NEAR KHAUGALLI, OPP. PARSI AGYARI, FORT, MUMBAI 400 001 PAN: AAACJ 8850C VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 4(3), ROOM NO.649, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K. GOPAL, A.R. REVENUE BY : SHRI K. MOHANDAS, D.R. DATE OF HEARING : 16.02.2016 DATE OF PRONOUNCEMENT : 19.02.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 08.08.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2010-11. 2. THE ASSESSEE HAS TAKEN TWO EFFECTIVE GROUNDS OF APPEAL. FIRST GROUND IS IN RELATION TO DISALLOWANCE UNDER SECTION 14A OF RS .21,51,422/- AND THE SECOND GROUND IS IN RELATION TO DISALLOWANCE OF DEPRECIATI ON ON CAR. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE STATED AT BAR THAT AS PER THE INSTRUCTIONS OF HIS CLIENT, HE DOES NOT PRESS GROUND NO.2. GROUND NO.2 IS THER EFORE DISMISSED AS BEING NOT PRESSED. 3. NOW COMING TO THE GROUND NO.1. THE LD. A.R. HAS STATED THAT THOUGH IN THE RETURN OF INCOME THE ASSESSEE HAD NOT OFFERED A NY DISALLOWANCE UNDER ITA NO.5688/M/2013 M/S. JMP SECURITIES PVT. LTD. 2 SECTION 14A ON ACCOUNT OF EXPENDITURE INCURRED FOR EARNING OF EXEMPT INCOME, HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, THE ASS ESSEE HAD OFFERED DISALLOWANCE OF RS.7,20,936/- UNDER SECTION 14A CAL CULATED AS PER THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962 . THE AO, HOWEVER, HAS MADE A DISALLOWANCE OF RS.21,51,422/-. THE AO, WHI LE DOING SO, HAS ALSO CONSIDERED THE AMOUNT INCURRED FOR PURCHASE OF STOC K IN TRADE IN SHARES. THE CONTENTION OF THE LD. A.R. IS THAT WHILE CALCULATIN G THE DISALLOWANCE UNDER SECTION 14A, THE AMOUNT INVESTED FOR THE PURPOSE OF BUSINESS I.E. ON THE SHARES WHICH ARE HELD AS STOCK IN TRADE IS REQUIRED TO BE EXCLUDED. THE LD. A.R., IN THIS RESPECT, HAS RELIED UPON THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIA ADVANTAGE SECURITIES LTD . IN ITA NO.1131 OF 2013 VIDE ORDER DATED 17.03.2015 WHEREIN THE HONBLE BOM BAY HIGH COURT HAS UPHELD THE FINDING OF THE TRIBUNAL HOLDING THAT WHI LE MAKING THE DISALLOWANCE UNDER RULE 8D, THE SHARES HELD AS STOCK IN TRADE SH OULD NOT BE CONSIDERED; ONLY THE SHARES TAKEN AS INVESTMENT IN THE ACCOUNT BE CO NSIDERED FOR COMPUTATION OF DISALLOWANCE OF EXPENDITURE UNDER RULE 8D. THE LD. A.R. HAS SUBMITTED THAT THE DIVIDEND EARNED IN RESPECT OF SHARES HELD IN ST OCK IN TRADE IS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE AND THE INVESTMENT IN THE SHARES HELD AS STOCK IN TRADE WAS NOT MADE FOR EARNING OF EXEMPT INCOME. 4. WE HAVE EXAMINED THE ABOVE CONTENTIONS OF THE AS SESSEE. WE FIND THAT THE TRIBUNAL IN THE CASE OF DCIT VS. INDIA ADVANTA GE SECURITIES LTD. IN ITA NO.6711/M/2011 VIDE ORDER DATED 14.09.2012 WHILE RE LYING UPON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CI T VS. SMT. LEENA RAMACHANDRAN (339 ITR 296) AND FURTHER ON THE DECIS ION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CCI LTD. VS. JCI T 250 CTR 291 HAS HELD THAT DISALLOWANCE UNDER SECTION 14A IN RELATION TO DIVIDEND RECEIVED FROM TRADING SHARES CANNOT BE MADE. THE SAID FINDING OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL BOMBAY HIGH CO URT IN THE CASE OF CIT VS. INDIA ADVANTAGE SECURITIES LTD. IN ITA NO.1131 OF 2013 VIDE ORDER DATED ITA NO.5688/M/2013 M/S. JMP SECURITIES PVT. LTD. 3 17.03.2015 (SUPRA). THE SAID DECISION HOLDS BINDIN G PRECEDENT UPON THIS TRIBUNAL. 5. THE LD. D.R. HAS ALSO FAIRLY AGREED THAT THE ISS UE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA). 6. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF T HE ASSESSEE AND THE AO IS DIRECTED TO COMPUTE THE DISALLOWANCE BY EXCLUDING T HE AMOUNT INVESTED IN STOCK IN TRADE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.02.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.