SHREEPATI HOLDING & FINANCE PVT. LTD., MUMBAI V. ACIT RANGE 4(2), MUMBAI

ITA 6577/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2035 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 08-11-2013
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income; Question of law
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.6577/M/2013 (ASSESSMENT YEAR: 2010 - 2011) SHREEPATI HOLDING & FINANCE PVT LTD., 401, 4 TH FLOOR, MEHTA MAHAL, 15 TH MATHEW ROAD, OPERA HOUSE, MUMBAI 400 004. / VS. ACIT, RANGE 4(2), MUMBAI. ./ PAN : AAACS8111R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI DHARMESH SHAH / RESPONDENT BY : SHRI AKHILENDRA YADAV, DR / DATE OF HEARING : 02.11.2016 / DATE OF PRONOUNCEMENT : 02 .11.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 8.11.2013 IS AGAINST THE ORDER OF THE CIT (A) - 8, MUMBAI DATED 23.10.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE DISALLOWANCE U/S 14A OF THE ACT. BRIEF FACTS RELEVANT FOR ADJUDICATION OF THE SAID ISSUE INCLUDES THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 6,08,318/ - . ASSESSEE SUO MOTO DISALLOWED SUM OF RS.30,0 00/ - AS EXPENDITURE DISALLOWABLE U/S 14A OF THE ACT. HOWEVER, IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT, AO MECHANICALLY APPLIED THE FORMULA LAID DOWN IN RULE 8D(2) OF THE IT RULES, 1962 (THE RULES) READ WITH SECTION 14A OF THE ACT. ACCORDINGLY, AO DI SALLOWED SUM OF RS. 24,83,628/ - UNDER RULE 8D(2)(II) AND RS. 4,53,425/ - UNDER RULE 8D(III) OF THE RULES. THUS, NET DISALLOWANCE, AFTER REDUCING RS. 30,000/ - (SUPRA), WORKS OUT TO RS. 29,37,054/ - AND THE SAME IS THE SUBJECT MATTER OF ADJUDICATION BEFORE US. 2 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE, ON THE ABOVE ISSUE OF DISALLOWANCE, BROUGHT OUR ATTENTION TO PAGE 5 OF THE PAPER BOOK IE SCHEDULES - VI AND VII OF THE BALANCE SHEET AND SUBMITTED THAT THE DIVIDEND YIELDED SHARES WERE THE STOCK - IN - TRADE (REFER ENCE SCHEDULE VII - A RELATING TO THE CURRENT ASSETS) OF RS. 8,77,52,726.75 AND THE SHARE INVESTMENT IS NIL (SCHEDULE VI RELATING TO THE INVESTMENTS IS RELEVANT). RELYING ON THE ABOVE BOOK ENTRIES, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE N EVER HAD SHARES AS INVESTMENTS AND DIVIDEND YIELDED SHARES WERE HELD AS STOCK - IN - TRADE CONSISTENTLY OVER THE YEARS. TO SUM UP HIS ARGUMENTS, THE CASE OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D ARE NOT TO BE INVOKED IN THE CASES OF EXEMPT INCOME EARNED OUT OF THE SHARES HELD AS STOCK - IN - TRADE. FOR THIS PROPOSITION, LD COUNSEL FOR THE ASSESSEE RELIED ON THE BINDING JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF DCIT VS. INDIA ADVANTAGE SECURITIES LTD [2016] 380 ITR 471 (B OM) . FURTHER, HE ALSO BROUGHT OUR ATTENTION TO THE SERIES OF THE ORDERS OF THE ITAT, MUMBAI BENCH FOR THE PROPOSITION THAT NO DISALLOWANCE CAN BE MADE UNDER RULE 8D(2)(II) & (III) OF THE RULES. 4. ON HEARING BOTH THE PARTIES, WE FIND, THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE HAS MERITS AND THE ADDITIONS MADE BY THE AO ARE REQUIRED TO BE DELETED. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PARAS FROM THE SAID ORDER OF THE TRIBUNA L IN THE CASE OF DCIT VS. INDIA ADVANTAGE SECURITIES LTD IN IT A NO.3759 & 3576/MUM/2014), DATED 10.2.2016 FOR THE AY 2009 - 10 ARE EXTRACTED AS UNDER: - 10. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT IN THE ORDER OF THE REVENUE THERE IS AN ERROR BY WAY OF INCLUSION OF STOCK - IN - TRADE FOR THE PURPOSE OF DETERMINING THE DISALLOWABLE U/S 14A OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT SUCH INCLUSION OF STOCK - IN - TRADE IS NOT APPROVED BY THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN INCOME TAX APPEAL NO.1131 OF 2013, DATE D 13 TH APRIL, 2015. IN SUPPORT, ASSESSEE FILED THE TRIBUNAL ORDER IN ITA NO.6711/M/2011 (AY 2008 - 2009), DATED 14.9.2012. PARA 6 OF THE SAID TRIBUNALS ORDER (SUPRA) IS RELEVANT IN THIS REGARD AND THE RELEVANT LINES FROM THE SAID PARA 6 ARE EXTRACTED AS U NDER: - 6.......WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE LD CIT (A) IN DELETING THE DISALLOWANCE U/S 14A COMPUTED BY THE AO IN RELATION TO THE STOCK - IN - TRADE...... 11. LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA) DATED 13.4.2015, WHICH IS AGITATED BY THE REVENUE, THE HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER OF THE 3 TRIBUNAL ON THE ABOVE ISSUE. IT IS THE SUBMISSION OF THE LD COUNSEL THAT CONSI DERING THE SAME, ASSESSES CASE MAY BE ALLOWED. 12. WE HAVE HEARD LD REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AS WELL AS THE CITED JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) AND THE ORDER OF THE TRIBUNAL (S UPRA) DATED 14.9.2012. CONSIDERING THE SAME, WE DIRECT THE AO TO COMPLY WITH THE SAID TRIBUNALS ORDER AS WELL AS THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT FOR THE AY 2008 - 2009 AND DECIDE THE ISSUE AFRESH. THE ARGUMENTS RELATING TO THE APPLICABILITY OF THE HIGH COURT JUDGMENT IN THE CASE RELIANCE UTILITIES AND POWER LIMITED [2009] 313 ITR 340 (BOM) IS ALSO REMANDED TO THE FILE OF THE AO FOR SIMILAR ADJUDICATION. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRIN CIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. FURTHER, WE FIND IT RELEVANT TO EXTRACT THE RELEVANT PARA FROM THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDI A ADVANTAGE SECURITIES LTD (SUPRA) AND THE SAME READS AS UNDER: - IT IS THIS REVISED DISALLOWANCE WHICH HAS BEEN ACCEPTED BY THE TRIBUNAL. WE DO NOT FIND THAT BOTH THE QUESTIONS OF LAW CAN BE TERMED AS SUBSTANTIAL SIMPLY BECAUSE THE FIRST ONE IS COVERED A GAINST THE REVENUE BY A JUDGMENT OF THIS COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD VS. DCIT IN ITA NO.626 OF 2010 AND WRIT PETITION NO.758 OF 2010 [2010] 328 ITR 81 (BOM). THE QUESTIONS HAVE BEEN DECIDED BY THIS COURT BOTH THE AUTHORITIES IN THIS CASE HAVE FOLLOWED THIS JUDGMENT AND APPLIED SECTION 14A OF THE ACT AND THE RULE 8D OF THE INCOME TAX RULES, 1962. THEY HAVE BEEN APPLIED CORRECTLY. THE FIRST QUESTION IS, THEREFORE, NOT A SUBSTANTIAL QUESTION OF LAW. 6. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO RELIEF AND THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 2 N D NOVEMBER, 2016. S D / - S D / - ( MAHAVIR SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 02.11 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 4 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI