SONAL SHARES & STOCK BROKERS P. LTD, MUMBAI V. ADDL CIT RG 4(2), MUMBAI

ITA 5721/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6287 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 01-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAHUA SARKAR
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA 5721/M/09, M/S SONAL SHARES AND STOCK BROKERS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I BEFORE SHRI D. MANMOHAN, V.P. AND SHRI P.M. JAGTAP , A.M. ITA NO. 5721/MUM/09 ASSESSMENT YEAR 2006-07 M/S SONAL SHARES & STOCK BROKERS P. LTD., 6 & 7, NANABHAI MANSION, IST FLOOR, SIR P. M. ROAD, FORT, MUMBAI 400 001. PAN AAACS 8221 N VS. ACIT RANGE 4(2), AAYAKAR BHAWAN, M.K. ROAD, MUMBAI . 20 APPELLANT RESPONDENT APPELLANT BY SHRI SAMEER G. DALA L RESPONDENT BY MS. MAHUA SARKAR ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, MUMBAI DATED 17.08.2009 AND THE SOLITARY ISSUE ARIS ING OUT OF THE SAME RELATES TO THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF EXPENSES INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8-D OF THE INCOME TAX RULES 196 2. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPA NY WHICH IS ENGAGED IN THE BUSINESS OF SHARE BROKING, SHARE TRADING AND INVESTMENT. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 20.10.2006 DECLARI NG TOTAL INCOME OF ` 8,19,23,695/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD EARNED DIVIDEND INCOME OF ` 21,55,818/- WHICH WAS CLAIMED TO BE EXEMPT FROM TAX . ACCORDING TO THE A.O., THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO EA RNING OF THE SAID EXEMPT INCOME WAS 2 ITA 5721/M/09, M/S SONAL SHARES AND STOCK BROKERS P. LTD. LIABLE TO BE DISALLOWED U/S 14A. RELYING ON THE DE CISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 1 69 (MUM) (SB), HE WORKED OUT THE QUANTUM OF SUCH EXPENSES ATTRIBUTABLE TO EARNING DI VIDEND INCOME BY APPLYING RULE 8-D AT ` 3,50,746/-, AND THE EXPENSES TO THAT EXTENT WERE D ISALLOWED BY HIM BY INVOKING THE PROVISIONS OF SECTION 14A. ON APPEAL, THE LD. CIT(A ) CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IN ITS RECENT JUDGMENT DELIVERED IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. (ITA NO. 626 OF 2010 DTD. 12.08.2010), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D OF THE INCOME TAX RULES 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2008-09. IT HAS ALSO BEEN HELD THAT THE QUANTUM OF DISALLOWANCE U/S 14A FOR THE YEARS EARLIER TO A.Y. 2008-09 HAS TO BE WORKED OUT BY ADO PTING SOME REASONABLE METHOD. KEEPING IN VIEW THE SAID DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA), WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE WITH A DIRECTION TO QUANTIFY THE DISALLOWANCE OF EXPENSES WHICH IS LIABLE TO BE MADE U/S 14A BY ADOPTING SOME REASONABLE METHOD. NEEDLESS TO SAY THAT THE A.O. SH ALL AFFORD SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 24 TH NOVEMBER, 2010. SD/- SD/- (D. MANMOHAN) (P.M. JAGTAP) VICE PRESIDENT ACCOUNTA NT MEMBER MUMBAI, DATED 24 TH NOVEMBER , 2010. 3 ITA 5721/M/09, M/S SONAL SHARES AND STOCK BROKERS P. LTD. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV - MUMBAI 4. THE CIT- 4 MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 5721/M/09, M/S SONAL SHARES AND STOCK BROKERS P. LTD. ` DATE INITIALS 1. DRAFT DICTATED 1.11.10, 3.11.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 2.11.10, 3.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.