NINCRO ETERNAL RESOURCES P., LTD, MUMBAI V. ITO WD 5(2)1, MUMBAI

ITA 5887/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8863 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: COMMISSIONER OF INCOME TAX
• Keywords: Earning of tax free income; Bad and doubtful debts
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALB BENCH, MUMBAI . . , , , , BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.5887/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) M/S. NINCRO ETERNAL RESOURCES PVT. LTD. (NEE. NINCRO INVESTMENTS & FINANCE PRIVATE LIMITED) C/O. M/S. MITESH MEHTA & ASSOCIATES, 432, LAMINGTON ROAD, OPERA HOUSE, 2 ND FLOOR, ABOVE DENA BANK, MUMBAI - 400004 / VS. INCOME TAX OFFICER WARD 5(2)(1) MUMBAI ./ ./ PAN/GIR NO. : AABCN0893J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING:20.10.2016 /DATE OF PRONOUNCEMENT: 25.01.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 23.08.2013 PASSED BY THE COMMISSIONER OF INCOME TAX ASSESSEE BY: MRS. MAMTA PARMAR DEPARTMENT BY: SHRI PRADEEP KUMAR SINGH ITA NO.5887/M/13 A.Y. 2010-11 2 (APPEALS)-9, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.7,49,869/- U/S. 14A. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT GIVING DUE CREDIT TO THE RATIOS LAID DOWN BY THE SEVERAL HIGH COURT AND APEX COURT DECISIONS FOR METHOD OF CALCULATION OF REASONABLE DISALLOWANCE U/S.14A. 3. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE ASSESSEES PLEA THAT THERE ARE HARDLY ANY EXPENSES INCURRED TO DIVIDEND INCOME AS THE SHARES ARE HELD FOR MORE THAN SEVERAL YEARS AND ONLY DEMAT CHARGES ARE INCURRED ON THE SAME. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.2,25,000/-, WHICH WAS REDUCED LESS OUT OF THE BOOKING AMOUNT ADVANCE TO A BUILDER SOME TEN YEARS AGO. THE SAID AMOUNT HAS BEEN WRITTEN OFF AS BAD DEBTS. 5. THE APPELLANT CRAVES TO INSERT NEW GROUNDS, TO ADD, AMEND, ALTER, INSERT, DELETE, EDIT ANY OF THE ABOVE GROUNDS OF APPEAL EITHER IN FULL OR IN PART ON OR BEFORE THE FINAL HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.09.2010 DECLARING A LOSS TO THE TUNE OF RS.41,53,441/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) DATED 29.08.2011. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND 142(1) OF THE ACT WERE ISSUED ITA NO.5887/M/13 A.Y. 2010-11 3 AND SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CARRIED OUT THE BUSINESS OF INVESTMENT AND SHARE TRADING. THE ASSESSEE ALSO CARRIED OUT TRADING ACTIVITY IN SHARES IN WHICH IT SUFFERED A LOSS TO THE TUNE OF RS.38,51,075/- IN ADDITION TO EARNING LONG TERM AND SHORT TERM GAINS ON SALE OF SHARES, INTEREST AND DIVIDEND. THE ASSESSEE EARNED THE DIVIDEND INCOME TO THE TUNE OF RS.20,74,535/- AND LONG TERM CAPITAL GAIN TO THE TUNE OF RS.42,39,908/- WHICH WERE CLAIMED AS EXEMPT U/S.10(34) OF THE ACT IN THE COMPUTATION OF INCOME. THE ASSESSEE DID NOT DISALLOW ANY EXPENDITURE TO EARN THE EXEMPT INCOME, THEREFORE THE ASSESSING OFFICER APPLIED THE PROVISION OF SECTION 14A READ WITH RULE 8D OF THE ACT AND WORKED OUT EXPENDITURE TO INCURRED THE EXEMPT INCOME TO THE TUNE OF RS.7,47,869/-. FEELING AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER, THEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 TO 3:- 3. ISSUE NO.1 TO 3 ARE INTERCONNECTED THEREFORE ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. INFACT ALL THE ISSUES LEADS ONLY ONE CONTROVERSY IN WHICH THE ASSESSEE HAS RAISED THE CONTENTION THAT SECTION 14A READ WITH RULE 8D IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE BEING THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE TO EARN THE EXEMPT INCOME. HOWEVER, THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT NEXUS OF EXPENDITURE TO EARN THE EXEMPT INCOME IS ITA NO.5887/M/13 A.Y. 2010-11 4 REQUIRED TO THE PROVE IN ACCORDANCE WITH LAW BEFORE INVOKING PROVISION OF SECTION 14A READ WITH RULE 8D. THE CIT(A) RELIED UPON THE FINDING OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S.GODREJ & BOYCE LTD. (2010) 328 ITR 81. THE SAID LAW IS APPLICABLE ONLY AFTER THE A.Y.2008-09. IN BRIEF THE SECTION 14A READ WITH RULE 8D OF THE ACT WOULD BE APPLICABLE AFTER THE A.Y. 2008-09. IT IS REQUIRED TO BE SEEN WHETHER THE EXPENDITURE SHOWN TO BE INCURRED TO EARN THE EXEMPT INCOME IS HAVING THE NEXUS WITH THE INVESTMENT OR NOT. THE CONTENTION OF THE ASSESSEE IS THAT PRACTICALLY THE COMPANY DID NOT SPEND ANYTHING SPECIFIC TO EARN THE EXEMPT INCOME OF DIVIDEND AND LONG TERM CAPITAL GAIN, AS THE OLD SHARE INVESTMENTS WERE CARRIED FORWARD FOR WHICH DEMAT CHARGES OF RS.12,535/- WERE PAID FOR THE ENTIRE YEAR WHICH WERE ONLY REQUIRED TO BE DISALLOWED. THERE IS NO OTHER EXPENSE INCURRED. FOR THE PURPOSE OF DISALLOWANCE U/.S14A OF THE ACT FROM A.Y.2008-09, THE ASSESSING OFFICER WHILE ASSESSING THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME DISALLOWED THE EXPENDITURE ON ACCOUNT OF THE SALARY OF STAFF, REMUNERATION, BANK CHARGES, STT AND STAFF WELFARE ETC. WHICH DOES NOT SEEMS JUSTIFIABLE. THE SAID FINDING HAS BEEN CONFIRMED BY THE CIT(A). IT IS NOT IN DISPUTE THAT THE NEXUS OF EXPENDITURE TO INCUR THE EXEMPT INCOME IS LIABLE TO BE CONSIDERED UNDER PROVISION OF SECTION 14A. THE EXPENDITURE ON ACCOUNT OF DIFFERENT PROVISIONS IS NOT LIABLE TO BE CONSIDERED IN ACCORDANCE WITH LAW. ON EXAMINATION OF THE STATEMENT OF EXPENSES ON RECORD, WE ARE OF THE VIEW THAT THE DEMAT CHARGES AND ITA NO.5887/M/13 A.Y. 2010-11 5 STT CHARGES CAN ONLY BE CONSIDERED AS EXPENDITURE TO INCUR THE EXEMPT INCOME. THE OTHER EXPENDITURE DOES NOT SEEMS ANY NEXUS TO EARN THE EXEMPT INCOME. IN VIEW OF THE SAID CIRCUMSTANCES, WE CONFINE THE EXPENDITURE TO INCUR THE EXEMPT INCOME TO THE EXTENT OF DEMAT CHARGES OF RS.12,535/- AND STT CHARGES PF RS.1,20,910/- AS EXPENDITURE TO EARN THE EXEMPT INCOME. THE REMAINING ACCORDINGLY IS HEREBY ORDERED TO BE DELETED. ISSUE NO.4 TO 5:- 4. ISSUE NO.4 AND 5 ARE NOT PRESSED BY THE ASSESSEE, THEREFORE THESE ISSUES ARE HEREBY ORDERED TO BE DISMISSED BEING NOT PRESSED. 5. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2017. SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 25 TH JANUARY, 2017 MP ITA NO.5887/M/13 A.Y. 2010-11 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