ANVIL FINTRADE P. LTD, MUMBAI V. ASST CIT CIR 2(1), MUMBAI

ITA 6788/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2147 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN SHENOY
• Assessee Lawyers: NEELAM C JHADHAV
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.6788/MUM/2012 (ASSESSMENT YEAR 2010-11) M/S.ANVIL FINTRADE PVT. LTD. 201, 2 ND FLOOR, KRISHNA KUNJ, MEHTA ROAD, OPP. SUN FLOWER HOSPITAL, JVPD SCHEME, VILE PARLE (W), MUMBAI -56. PAN: AABCA 9882 E ...... APPELLANT VS. DY.COMMISSIONER OF INCOME TAX 2(1), AAYKAR BHAVAN, CHURCHGATE, MUMBAI 40020 .... RESPONDENT APPELLANT BY : MS. NEELAM C. JHADHA V RESPONDENT BY : SHRI ARUN SHENOY DATE OF HEARING : 06/09/2016 DATE OF PRONOUNCEMENT : 09/11/2016 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-4, MUMBAI DATED 24/10/2013 WHICH IN TURN, ARISES OUT OF AN ORDER P ASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT) DATED 24/12/2012. 2 ITA NO.6788/MUM/2012 (ASSESSMENT YEAR 2010-11) 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESS EE IS AGAINST THE ACTION OF THE INCOME TAX AUTHORITIES IN DETERMINING THE DISA LLOWANCE UNDER SECTION 14A OF THE ACT AT RS.4,31,250/-. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESS EE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS ENGAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES . IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSES SEE HAD EARNED DIVIDEND INCOME OF RS.15,33,691/-, WHICH WAS EXEMPT. THE AS SESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY DISALLOWANCE UNDER SE CTION 14A OF THE ACT SHOULD NOT BE MADE IN RESPECT OF THE EXPENDITURE RE LATABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME. THE ASSESSING OFFICER NOTE S IN THE ASSESSMENT ORDER THAT IT WAS SUBMITTED BY THE ASSESSEE THAT NO EXPEN SES WERE INCURRED IN ORDER TO EARNED THE AFORESAID EXEMPT INCOME. THE ASSESSI NG OFFICER, ACCORDINGLY, COMPUTED THE DISALLOWANCE BY APPLYING THE FORMULA C ONTAINED IN RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962( IN SHORT THE RULE S) AT RS.4,31,250/-. IN APPEAL BEFORE THE CIT(A), ASSESSEE RAISED VARIOUS GROUNDS CHALLENGING THE ORDER OF THE ASSESSING OFFICER AND ONE OF THE POINTS RAISED WAS THAT THE SUO-MOTO DISALLOWANCE MADE BY THE ASSESSEE IN ITS RETURN OF INCOME OF RS.76,685/- BE REDUCED FROM THE DISALLOWANCE COMPUTED BY THE ASSES SING OFFICER. THE CIT(A) HAS UPHELD THE STAND OF THE ASSESSING OFFICER IN PR INCIPLE BUT DIRECTED THAT THE DISALLOWANCE BE REDUCED BY A SUM OF RS.76,685/-,WHI CH WAS SUO-MOTO DISALLOWED BY THE ASSESSEE IN THE RETURN OF INCOME. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A), ASSESSEE IS IN FURTHER APP EAL BEFORE US. 4. BEFORE US, THE SOLITARY PLEA OF THE ASSESSEE IS THAT THE DISALLOWANCE DETERMINED BY THE ASSESSING OFFICER UNDER SECTION 1 4A OF THE ACT IS ERRONEOUS, 3 ITA NO.6788/MUM/2012 (ASSESSMENT YEAR 2010-11) INASMUCH AS, THE SHARES AND SECURITIES HAVE BEEN C ONSIDERED, WHICH OTHERWISE FORM PART OF THE STOCK-IN-TRADE OF THE ASSESSEE. A CCORDING TO THE ASSESSEE, EVEN FOR THE PURPOSES OF WORKING OUT DISALLOWANCE I N TERMS OF RULE 8D OF THE RULES, THE SHARES AND SECURITIES HELD AS STOCK-IN -TRADE ARE LIABLE TO BE EXCLUDED AND IN THIS CONTEXT, HE HAS RELIED UPON TH E FOLLOWING DECISIONS:- (I) R.R.CHOKHANI STOCK BROKERS PVT. LTD. VS. ITO, ITA NO.6826/MUM/2014 DATED 30/10/2015. (II)PARESH P. MEHTA VS. ITO, ITA NO.1715/PN/2015 DA TED 18/03/2016. (III)FUDICIARY SHARES & STOCK BROKERS PVT. LTD. VS. ACIT, (2016) 159 ITD 554(MUM)(TRIB) (IV)CIT VS. INDIA ADVANTAGE SECURITIES LTD., 380 IT R 471(BOM) 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE POINTED OUT THAT CIT(A) HAS UPHELD THE DISALLOWANCE IN TERMS OF THE DECISION OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 -10 DATED 28/12/2012. ON THIS ASPECT OF THE MATTER, LD. REPRESENTATIVE FOR T HE ASSESSEE POINTED OUT THAT THE PURPORTED ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2009-10 DATED 28/12/2012 HAS NOT BEEN RECEIVED BY THE ASSESSEE CO MPANY. IN THIS CONTEXT, HE HAS FURNISHED A COMMUNICATION DATED 27/05/2015 A DDRESSED TO THE OFFICE OF THE CIT(A) -4, WHEREIN IT IS POINTED OUT THAT TH E SAID ORDER HAS SINCE NOT BEEN RECEIVED. BE THAT AS IT MAY, WE PROCEED TO ADJUDI CATE THE CONTROVERSY IN THIS YEAR INDEPENDENTLY, ON THE BASIS OF THE RIVAL STAND S AS EMERGING FROM THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, THE DISPUTE IN THE INSTANT APPEAL LIES IN A NARROW COMP ASS, INASMUCH AS, THE PERTINENT GRIEVANCE OF THE ASSESSEE IS THAT FOR THE PURPOSES OF WORKING OUT THE 4 ITA NO.6788/MUM/2012 (ASSESSMENT YEAR 2010-11) DISALLOWANCE UNDER SECTION 14A OF THE ACT BY APPLYI NG THE FORMULA CONTAINED IN RULE 8D OF THE RULES, THE SHARES AND SECURITIES HELD AS STOCK-IN-TRADE ARE LIABLE TO BE EXCLUDED. ON THIS ASPECT, WE FIND THA T THE CIT(A) IN PARA 5.2.6 OF HIS ORDER HELD THAT EVEN THE SHARES CONSIDERED AS S TOCK-IN-TRADE ARE LIABLE TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE FOLLOWIN G THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DAGA C APITAL MANAGEMENT (PVT.) LTD., 117 ITD 169(SB). IN OUR CONSIDERED OPINION, THE STAND OF THE CIT(A) ON THIS ASPECT IS NOT TENABLE IN VIEW OF THE SUBSEQUEN T DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. INDIA ADVANTAGE S ECURITIES LTD. DATED 14/09/2011 FOR ASSESSMENT YEAR 2008-09. IN THE CAS E OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA), THE TRIBUNAL, AFTER RELYI NG ON THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD . VS. JCIT, 250 CTR 291 (KAR) HELD THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT COULD NOT BE MADE IN RESPECT OF EXEMPT INCOME RECEIVED ON SHARES HELD AS STOCK-IN-TRADE. THE TRIBUNAL ALSO CONSIDERED THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT (PVT.) LTD.,(SU PRA) AND SINCE IT WAS CONTRARY TO THE JUDGMENT OF THE HONBLE KARNATAKA H IGH COURT IN THE CASE OF CCI LTD. (SURPA), THE DECISION OF THE HONBLE KARNA TAKA HIGH COURT WAS FOLLOWED AND THE STAND OF THE ASSESSEE WAS UPHELD. IT IS AL SO NOTABLE THAT THE DECISION OF THE TRIBUNAL DATED 14/09/2011(SUPRA) HAS SINCE B EEN AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE REPORTED AT CIT V. ADVANTAGE SECURITIES LTD ,380 ITR 471(BOM). SUBSEQUENTLY, THE MUMBAI TR IBUNAL IN THE CASE OF R.R.CHOKHANI STOCK BROKERS PVT. LTD. (SUPRA) HAS AL SO A TAKEN A SIMILAR VIEW. FOLLOWING THE AFFIRMATION BY THE HON'BLE BOMBAY HIG H COURT OF THE DECISION OF THE TRIBUNAL IN THE CASE OF INDIA ADVANTAGE SECURIT IES LTD.(SUPRA), WE HOLD THAT THE SHARES AND SECURITIES HELD AS STOCK-IN-TRADE CA NNOT BE CONSIDERED FOR THE 5 ITA NO.6788/MUM/2012 (ASSESSMENT YEAR 2010-11) PURPOSES OF WORKING OUT THE DISALLOWANCE UNDER SECT ION 14A OF THE ACT R.W.S. RULE 8D OF THE RULES. AS A CONSEQUENCE, THE DISALL OWANCE UNDER SECTION 14A OF THE ACT QUANTIFIED BY THE ASSESSING OFFICER AT RS .4,31,250/- IS UNTENABLE AND THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSIN G OFFICER WHO SHALL REWORK THE DISALLOWANCE, IF ANY, AFTER CONSIDERING OUR AFORESA ID DECISION. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A RE ASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS LIMITED ASPECT AS PER LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 09/11/2016 SD/- SD/- ( RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 09/11/2016 VM , SR. PS 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