DCIT 7(2), MUMBAI V. SRK BUSINESS VENTURE P.LTD, MUMBAI

ITA 6446/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2686 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL E, BENC H MUMBAI BEFORE SHRI N.K.BILLAIYA, AM & SHRI SANJAY GARG, JM ./ ITA NO.6446/MUM/2013 ( / ASSESSMENT YEAR :2009-10) DCIT-7(2), MUMBAI VS. M/S SRK BUSINESS VENTURES PVT. LTD., UNIT- 302, APPLE PLAZA, 3 RD FLOOR, SENAPATI BAPAT MARG, DADAR(W), MUMBAI-400028 ! '# ./ $% ./PAN/GIR NO. : AAKCS 9305 H ( !& /APPELLANT ) .. ( '(!& / RESPONDENT ) $ ) )) ) * * * * ' '' ' /REVENUE BY : SHRI PREMANAND J. +, ) )) ) * * * * ' '' ' /ASSESSEE BY : SHRI K. GOPAL ) ,# / DATE OF HEARING : 22/09/2015 -. ) ,# /DATE OF PRONOUNCEMENT 04/11/2015 /'0 /'0 /'0 /'0 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THE REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13 [HEREINAFTE R REFERRED TO AS THE CIT(A)] , MUMBAI, DATED 22-8-2013, FOR THE ASSESSME NT YEAR 2009-10. 2. THE REVENUE, IN THIS APPEAL, IS AGGRIEVED BY TH E ACTION OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE U/S.14A R.W. RULE 8D(2)(I) AT RS.69,063/- AS AGAINST DISALLOWANCE OF RS.30,57,179 /- MADE BY THE AO. 3. THE FACTS IN BRIEF ARE THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE RECEIVED EXEMPT INCOME BEING DIVIDEND OF R S.37,942/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE AS TO WHY THE DISALLOWANCE OF INTEREST AND OTHER EXPENDIT URE SHOULD NOT BE ITA NO.6446/13 2 MADE U/S.14A. IN RESPONSE TO THIS, THE ASSESSEE FIL ED HIS REPLY, HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE IN THIS REGARD AND DISALLOWED RS.30,57,179/-. IN APPEAL, TH E CIT(A) RESTRICTED THE DISALLOWANCE TO RS.69,063/- OBSERVING AS UNDER :- 6. THE APPELLANT HAS SUBMITTED THAT DETAILS WERE GIVEN TO THE AO IN THE FORM OF ANNEXURE-3 WHICH SHOWS THAT THE S HARES WERE STOCK-IN-TRADE WHICH ARE MOSTLY DERIVATIVES. HOWEVE R, A COPY OF ANNEXURE-3 WAS NOT FILED BY THE APPELLANT. IN VIEW OF THIS, I HAVE GONE THROUGH THE ASSESSMENT FOLDER AND NOTED THAT A O VIDE ORDER SHEET NOTICE DATED 24.11.2011 GIVEN THE OPPOR TUNITY TO THE ASSESSEE FOR SUBSTANTIATING THE CLAIM THAT SHARES W ERE STOCK IN TRADE. THE ASSESSEE VIDE LETTER DATED 25.11.2011 HA S FURNISHED THE SAME BY GIVING DETAILS OF STOCK STATEMENT. HOWE VER, THERE IS NO BIFURCATION OF THE SAME AS INVESTMENT AND STOCK- IN-TRADE. IN VIEW OF THIS, IT CANNOT BE DERIVED THAT APPELLANT H AS NOT INCURRED EXPENSES TOWARDS EARNING OF DIVIDEND ON ITS INVESTM ENTS. THE APPELLANT FAILS ON THIS COUNT. 6.1 NOW COMING TO THE ALTERNATIVE SUBMISSIONS OF TH AT OUT OF TOTAL SECURITIES TRANSACTION TAX (STT) OF RS.30,17, 923/- PAID FOR DERIVATIVES ITSELF IS RS.29,47,477/- AND IT IS ONLY STT OF RS.69,063/- WHICH PERTAINS THE TRANSACTIONS OF SALE OR PURCHASE OF SHARES AND WHICH HAVE NOT BEEN TREATED AS STOCK- IN-TRADE BY THE APPELLANT ALSO. IN VIEW OF THIS, I AM IN AGREEM ENT WITH THE APPELLANT IN PRINCIPLE THAT STT RELATING TO SHARE T RANSACTION ONLY AT THE MOST CAN BE DISALLOWED U/R 8D R.W.S14A. ACCO RDINGLY, AO DIRECTED TO REWORKOUT DISALLOWANCE U/R.8D BY TAKING STT OF RS.69,063/- WHICH IS DIRECTLY RELATED TO SHARE TRAN SACTION ON WHICH DIVIDEND HAS BEEN EARNED. IN THE RESULT, GROU ND NO.3 IS PARTLY ALLOWED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE ORDERS OF REVENUE AUTHOR ITIES. THE LD. A.R. HAS RELIED UPON THE DECISION OF THE HONBLE 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 BOMBAY H IGH COURT HAS ITA NO.6446/13 3 UPHELD THE FINDING OF THE TRIBUNAL HOLDING THAT WHI LE MAKING THE DISALLOWANCE UNDER RULE 8D, THE SHARES HELD AS STOC K IN TRADE SHOULD NOT BE CONSIDERED, ONLY THE SHARES TAKEN AS INVESTMENT IN THE ACCOUNT BE CONSIDERED FOR COMPUTATION OF DISALLOWANCE OF EXPEN DITURE UNDER RULE 8D. THE LD. A.R. HAS SUBMITTED THAT THE DIVIDEND EARNED IN RESPECT OF SHARES HELD IN STOCK IN TRADE IS INCIDENTAL TO THE BUSINES S OF THE ASSESSEE AND THE INVESTMENT IN THE SHARES HELD AS STOCK IN TRADE WAS NOT MADE FOR EARNING OF EXEMPT INCOME. WE FIND THAT THIS TRIBUNAL IN THE CASE OF DCIT VS. INDIA ADVANTAGE SECURITIES LTD. IN ITA NO.6711/M/2011 VIDE ORDER D ATED 14.09.2012 WHILE RELYING UPON THE DECISION OF THE HONBLE KERALA HIG H COURT IN THE CASE OF CIT VS. SMT. LEENA RAMACHANDRAN (339 ITR 296) AND FURTHER ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CCL LTD. VS. JCIT 250 CTR 291 HAS HELD THAT DISALLOWANCE UN DER SECTION 14A IN RELATION TO DIVIDEND RECEIVED FROM TRADING SHARES C ANNOT BE MADE. THE SAID FINDING OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIA ADV ANTAGE SECURITIES LTD. IN ITA NO.1131 OF 2013 VIDE ORDER DATED 17.03 .2015 (SUPRA). THE SAID DECISION HOLDS BINDING PRECEDENT UPON THIS TRI BUNAL. 6. IN VIEW OF THE ABOVE, IT CANNOT BE SAID THAT THE STT PAID BY THE ASSESSEE FOR SHARES HELD IN STOCK IN TRADE IS LIABL E TO BE CONSIDERED FOR DISALLOWANCE OF DIRECT EXPENDITURE UNDER RULE 8D2(1 ) OF THE ACT. THE SAID STT PAID BY THE ASSESSEE WAS IN RELATION TO THE SHA RE TRADING BUSINESS OF ITA NO.6446/13 4 THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE OF DIREC T EXPENDITURE TO THE EXTENT OF STT PAID IN RELATION TO THE SHARES HELD A S INVESTMENT. THEREFORE, THERE IS NO MERIT IN THE APPEAL OF THE R EVENUE AND THE SAME IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04/11/20 15. SD/- SD/- N.K.BILLAIYA SANJAY GARG '# / '# / '# / '# / / ACCOUNTANT MEMBER / / / / / JUDICIAL MEMBER MUMBAI ; 1/ DATED 04/11/2015 '. .3 /PKM , . / PS /'0 /'0 /'0 /'0 ) )) ) ',38 ',38 ',38 ',38 9'8, 9'8, 9'8, 9'8, / COPY OF THE ORDER FORWARDED TO : /'0 /'0 /'0 /'0 / BY ORDER, : :: : / ; ; ; ; $ $ $ $ ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. !& / THE APPELLANT 2. '(!& / THE RESPONDENT. 3. <, ( ) / THE CIT(A), MUMBAI. 4. <, / CIT 5. 8=> ', , , / DR, ITAT, MUMBAI 6. >? @ / GUARD FILE. (8, ', //TRUE COPY//