HIRAK LEASING & INVESTMENT P.LTD, MUMBAI V. ASST CIT (OSD) CIR 2(1), MUMBAI

ITA 6815/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83530 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 25-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.6815/MUM/2012 (A.Y.2009-10) HIRAK LEASING & INVESTMENT PVT. LTD. 217A, P. JEEJIBHOY TOWER, BOMBAY STOCK EXCHANGE, 2 ND FLOOR, FORT, MUMBAI 400001 PAN:AAACH 1188F ASST. COMMISSIONER OF INCOME TAX-(OSD) CIRCLE 2(1), AAYKAR BHAVAN, MUMBAI 400020 ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI K.SHIVRAM & MS NEELAM C. JADHAV ()$% * + * + * + * + /RESPONDENT BY :SHRI JAVED AKHTAR ' * ,-' / / / / DATE OF HEARING : 25.8.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 25.08.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-4 MUMBAI DATED 24/08/2012 FOR ASSESSM ENT YEAR 2009-10 GROUNDS OF APPEAL READ AS UNDER: DISALLOWANCE OF RS. 32,98,764/- U/S. 14A R.W. RULE 8D: THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWA NCE OF RS.32,98,764/- U/S. 14A R.W. RULE 8D (I.E. RS.34,18,764/- RS. 1,20,000/-) WITHOU T APPRECIATING THAT NO DIRECT OR INDIRECT EXPENDITURE WAS ATTRIBUTABLE TO EARNING OF EXEMPT INCOME AS THE ASSESSEE WAS CARRYING ON BUSINESS OF TRADING IN SHARES AND SECUR ITIES. 2. THE LEARNED CTT(A) ERRED IN NOT APPRECIATING THA T RULE 8D CANNOT BE INVOKED IN FACTS OF PRESENT CASE AS THE SHARES ARE HELD AS STOCK IN TRADE, SECONDLY THE INVESTMENT IN SHARES OF RS.35.29 CRORES WAS MADE OUT OF OWN FUNDS OF RS.62.98 CRORES AND NO INTEREST EXPENDITURE WAS INCURRED, HOWEVER WITHOUT PREJUDICE THE ASSESSEE HAD OFFERED RS. 1,20,000/- IN TAX AUDIT REPORT / RETURN OF INCO ME BEING EXPENDITURE INCURRED FOR EARNING EXEMPTED INCOME. THEREFORE THERE CANNOT BE ANY NOTIONAL DISALLOWANCE. 3. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TH E ASSESSEE HAS EARNED NET INTEREST INCOME OF RS. 1,64,49,256/- (I.E. INTEREST RECEIVED RS.1,92,78,708/- INTEREST PAID RS. ITA NO.6815/MUM/2012 (A.Y.2009-10) 2 28,29,452/-). THEREFORE THERE CANNOT BE ANY DISALLO WANCES AS FOR AS INTEREST EXPENDITURE IS CONCERNED UNDER RULE 8D (2)(II). 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE BORROWINGS MADE WERE UTILIZED FOR THE PURPOSE OF ASSESSEES BUSINESS I.E. TRADING IN SHARES, HENCE INTEREST EXPENDITURE OF RS.28,29,452/- WAS ALLOWABLE U/S. 36(1)(III) OF THE ACT. 2. AT THE OUTSET IT WAS POINTED OUT BY LD. AR THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS COVERED BY THE EARLIER ORDER OF THE TRIBU NAL FOR A.Y 2008-09 AND THE MATTER WAS RESTORED BACK TO THE FILE OF AO. REFERENCE IN THIS REGARD WAS MADE TO THE ORDER OF THE TRIBUNAL DATED 13/1/2014 IN ITA NO.8360/MUM/ 2011, COPY OF THE ORDER IS PLACED AT PAGES 44 TO 48 OF THE PAPER BOOK. REFERE NCE WAS MADE TO THE FOLLOWING OBSERVATIONS: 9. WE HAVE HEARD THE ARGUMENTS HAVE PURSUED THE MAT ERIAL AND SYNOPSIS PLACED ON RECORD BY THE AR. THE ISSUE BEFORE US IS WHETHER CERTAIN EXPENSES SHOULD BE ALLOCATED TOWARDS INCOME WHICH HAS BEEN CLAIMED TO BE EXEMPT. THE AR HAS VEHEMENTLY ARGUED THAT THERE WAS NO EXPENDITURE WHI CH WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF EARNING OF DIVIDEND, AS THE INVESTMENT HAD BEEN COMING FROM PRECEDING YEARS AND THE ASSESSEE HAS EA RNED INCOME FROM DIVIDEND ONLY FROM THOSE SHARES. IN THE SYNOPSIS, T HE ASSESSEE HAS HIGHLIGHTED THAT DIVIDEND RECEIVED FROM SIT AND INVESTMENTS HAV E TO BE BIFURCATED AND PROPORTIONATE DISALLOWANCE HAS TO BE MADE AS HAS BE EN DIRECTED BY THE ITAT IN THE PRECEDING YEAR AND TO APPLY A CONSISTENT APPROA CH, THIS YEAR SHOULD ALSO BE RESTORED TO THE FILE OF THE AO. THE AR HAS ALSO REF ERRED TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD VS. JCI T, REPORTED IN 206 TAXMAN 250, WHEREIN IT HAS BEEN HELD DIVIDEND RECEIVED IN SIT SHOULD BE EXCLUDED. IN THE CASE OF ACIT VS PERSCINT SECURITIES PVT LTD, IT A NO. 5281/MUM/2011 (WHERE ONE OF US WAS A PARTY), HAVE ALSO TAKEN SIMILAR VIE W. 10. IN OUR VIEW, THE ISSUE TO BE RESTORED TO THE AO IS REQUIRED ALSO BECAUSE THE AO HAS NOT COMPLIED WITH THE PROVISIONS OF SECTIONS 14 A(2), WHICH READS AS UNDER, THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT O F EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCR IBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THIS ACT. 3. LD. DR DID NOT OBJECT TO AFOREMENTIONED SUBMISS IONS OF LD. AR. 4. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES WE RESTORE THE ISSUE RAISED IN THE PRESENT APPEAL TO THE FILE OF AO WITH SIMILAR DIRECTIONS AS HAVE BEEN GIVEN BY THE TRIBUNAL IN RESPECT OF ASSESSMENT YEAR 2008-09 FOR IMPUGNED DISALLOWANCE. ITA NO.6815/MUM/2012 (A.Y.2009-10) 3 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH AUG., 2014. 1 * ./0 2'3 25.08.2014 / * : SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 25 TH AUG. 2014. VM. 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. =() / THE CIT, MUMBAI. 4. = / CIT(A)-13, MUMBAI 5. ;@: (,' , , / DR, ITAT, MUMBAI 6. :A B / GUARD FILE. 1' 1' 1' 1' / BY ORDER, );, (, //TRUE COPY// C CC C/ // /D D D D (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI