GRISHMA FINANCIAL SERVICES P.LTD, MUMBAI V. ITO 6(3)-1, MUMBAI

ITA 6553/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62445 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G , MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL, J.M. AND SHRI N. K. BILLAIYA, A.M. ITA NO. : 6553/MUM/2010 ASSESSMENT YEAR : 2006-07 GRISHMA FINANCIAL SERVICES PVT. LTD. 92/4, NIRBHAY NIWAS, BHAU DAJI CROSS ROAD NO.10, MATUNGA, MUMBAI-400 019. PAN NO: AABCG 7337 E VS. INCOME - TAX OFFICER 6(3) - 1, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI M. RAJAN DATE OF HEARING : 17.05.2012 DATE OF PRONOUNCEMENT : 23.05.2012 ORDER PER DINESH KUMAR AGARWAL, J.M. : THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24.05.2010 PASSED BY THE LEARNED CIT(A) FOR T HE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASSESSEE HAS CREDITED DIVIDEND INCOME OF `. 2,81,224/- IN ITS P & L A/C. ITA NO : 6553/MUM/2010 GRISH MA FINANCIAL SERVICES PVT. LTD. 2 ON BEING ASKED TO FURNISH THE DETAILS OF EXPENDITUR E RELATING/ATTRIBUTABLE TO THE EXEMPT INCOME, IT WAS INTER ALIA SUBMITTED BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE DIVID END AND THE DIVIDENDS EARNED ARE INCIDENTAL TO HOLDING OF THE S HARES. IT WAS FURTHER SUBMITTED THAT THE DIVIDENDS ARE IN A WAY, NO EXEMP T FROM TAX AS THE COMPANY IS PAYING TAX ON BEHALF OF THE SHAREHOLDERS U/S.115O OF THE ACT AND THAT NO METHOD IS PRESCRIBED TO ARRIVE AT THE A DMISSIBLE DEDUCTION AS MENTIONED U/S. 14A OF THE ACT. HOWEVER, THE A.O. D ID NOT ACCEPT THE ASSESSEES SUBMISSIONS. THE A.O. AFTER RELYING ON VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (117 ITD 169) WORKED OUT THE DISALLOWANCE U/S.14A AMOUNTING TO `. 15,94,807/- AS PER WORKING GIVEN AT PAGE 3 OF THE ASSESSMENT ORDER AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LEARNED CIT(APPEALS) WHILE AGREEI NG WITH THE VIEWS OF THE A.O., UPHELD THE DISALLOWANCE MADE BY THE A. O. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT( APPEALS) THE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOWIN G GROUNDS OF APPEAL :- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFI CER (AO) OF DISALLOWING A SUM OF `. 15,94,807 BY APPLYING PROVISIONS OF SECTION 14A OF THE ACT. ITA NO : 6553/MUM/2010 GRISH MA FINANCIAL SERVICES PVT. LTD. 3 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CI T(A) OUGHT TO HAVE DIRECTED THE LEARNED AO TO DECIDE A S UM OF `. 15,38,658 OUT THE SAME, BEING INTEREST ON BORROWED FUNDS WHICH RESULTED IN THE APPELLANT EARNING TAXABLE INC OME. 5. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGR EED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. V S. DCIT AND OTHERS [2010] 328 ITR 81 (BOM), THEREFORE, THE SAME MAY BE SET ASIDE TO THE FILE OF THE A.O. THE LEARNED COUNSEL FOR THE A SSESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT AT BANGALORE IN THE CASE OF M/S. CCI LTD. VS. JCIT IN ITA NO.359 OF 201 1 DATED 28.02.2010, WHEREIN IT HAS BEEN HELD THAT WHEN NO EXPENDITURE I S INCURRED BY THE ASSESSEE IN EARNING THE DIVIDEND INCOME, NO NOTIONA L EXPENDITURE COULD BE DEDUCTED FROM THE SAID INCOME. HE ALSO PLACED ON RECORD THE COPY OF THE SAID JUDGMENT. 6. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE QUESTION OF MAKING THE DISALLOWANCE U/S.14A IS NO MORE RESINTEG RA IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. (SUPRA) HOLDING TH AT THE PROVISION OF SECTION 14A ARE APPLICABLE AND THE DISALLOWANCE HAS TO BE WORKED OUT BY THE A.O. ON SOME REASONABLE BASIS AND NOT UNDER RUL E 8D. SINCE THE A.O. WHILE CALCULATING THE DISALLOWANCE U/S.14A HAS ALSO APPLIED RULE 8D ITA NO : 6553/MUM/2010 GRISH MA FINANCIAL SERVICES PVT. LTD. 4 OF THE INCOME TAX RULES, 1962, WHICH IS APPLICABLE FROM THE A.Y. 2008- 09, THEREFORE, WE RESPECTFULLY FOLLOWING THE DECISI ON OF THE HON'BLE JURISDICTIONAL HIGH COURT (SUPRA) DIRECT THE A.O. T O MAKE DISALLOWANCE, IF ANY, IN THE LIGHT OF THE ABOVE DECISIONS, AFTER ALL OWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND S TAKEN BY THE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 7. IN THE RESULT, THE ASSESSEES APPEAL STANDS APPE AL PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 23 RD DAY OF MAY, 2012. SD/ - SD/ - - ( N. K. BILLAIYA ) ( DINESH KUMAR AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT: 23.05.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI