SHAILESH L. BHATIA, MUMBAI V. DCIT 2(1), MUMBAI

ITA 6909/MUM/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3425 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Keywords: Business expenditure; Transactions in derivatives
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 6909/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) MR. SAILESH L. BHATIA 2 ND FLOOR, SHIPPING HOUSE, 24/26, KUMTHA STREET, BALLARD ESTATE, MUMBAI-400 038. / VS. DY. COMMISSIONER OF INCOME TAX- 2(1), MUMBAI ROOM NO.561, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. ./ ./PAN/GIR NO. AABPB 3277F ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NEHA PARANJPE / RESPONDENT BY : SHRI J. SARAVANAN / DATE OF HEARING : 17/12/2015 !'# / DATE OF PRONOUNCEMENT : 21/01/2016 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.08.2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI (HER EINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2008-09.THE ASSESSEE H AS RAISED FOLLOWING GROUNDS OF APPEAL: 2 ITA NO.6909/MUM/2012 MR. SAILESH L. BHATIA VS.DY. CIT 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-4, MUM BAI [HEREINAFTER REFERRED TO AS 'LD. CIT(A)'] ERRED IN PASSING THE O RDER DATED 29.08.2012 UPHOLDING THE ASSESSMENT ORDER DATED 24.12.2010 PAS SED UNDER SECTION 143(3) OF THE ACT, WITHOUT APPRECIATING THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT STRONGLY OBJECTS TO THE FOLLOWING ADDITIONS/ DISALLOWANCES MADE BY THE LD. CIT(A) : SR.NO. PARTICULARS AMOUNT (R) A DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D 64,73,612 B DISALLOWANCE OF BUSINESS EXPENSES 40,69,622 C DISALLOWANCE OF STT PAID 10,79,251 D DISALLOWANCE OF INTEREST 12,48,565 E ADDITION OF NOTIONAL LOSS IN F&O TRANSACTIONS 13, 89,808 A. DISALLOWANCE U/S 14A READ WITH RULE 8D RS. 64, 73,612/- 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF T HE LD. A. O. IN DISALLOWING AN AMOUNT OF RS. 64,73,612/- INVOKING THE PROVISION S OF SECTION 14A R.W. RULE 8D. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE RULE 8D CAN BE INVOKED ONLY AFTER HE IS SATISFIED THAT SUB SECTION (1) TO SECTION 14A IS NOT APPLICABLE. HENCE, DISALLOWANCE OF RS. 64,73,612/- IS NOT AT ALL JUSTI FIED AND THE SAME MAY BE DELETED 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APPEL LANT HAS NEITHER INCURRED NOR CLAIMED ANY EXPENDITURE FOR EARNING THE EXEMPT INCO ME. HENCE, DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D IS NOT AT ALL JUSTIF IED AND THE SAME MAY BE DELETED. 3 ITA NO.6909/MUM/2012 MR. SAILESH L. BHATIA VS.DY. CIT B. DISALLOWANCE OF BUSINESS EXPENSES - R40,69,622/- 5. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E LD. A. O. IN DISALLOWING BUSINESS EXPENSES AMOUNTING TO R40,69,622/ - WITHOU T APPRECIATING THE FACTS THAT THE EXPENSES HAVE BEEN INCURRED IN COURSE OF H IS BUSINESS ACTIVITY OF SHARE TRADING. HENCE, DISALLOWANCE OF BUSINESS EXPENSES I S NOT JUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) FAIL ED TO APPRECIATE THAT THE INCOME FROM SHARE ACTIVITY IS OFFERED UNDER THE HEA D OF 'INCOME FROM CAPITAL GAINS' AND HENCE, THE BUSINESS EXPENSES BE ALLOWED AGAINST SHORT TERM CAPITAL GAIN. HENCE, THE DISALLOWANCE OF BUSINESS EXPENSES IS NOT AT ALL JUSTIFIED AND THE SAME MAY BE DELETED. C. DISALLOWANCE OF STT PAID - RI0,79,251/- 7. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E LD. A. O. IN DISALLOWING STT PAID AMOUNTING TO R1O,79,251/ - WITHOUT APPRECI ATING THE FACT THAT THE STT PAID RELATED TO SHARE TRADING ACTIVITY. HENCE, THE DISALLOWANCE OF STT PAID IS NOT AT 'ALL JUSTIFIED AND THE SAME MAY BE DELETE D. D. DISALLOWANCE OF INTEREST - RI2,48,565 /- 8. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E LD. A.O. IN MAKING DISALLOWANCE OF INTEREST AMOUNTING TO R12,48,565/- WITHOUT APPRECIATING THAT THE INTEREST EXPENDITURES HAVE BEEN INCURRED IN THE F&O BUSINESS ACTIVITY AND ARE DULY SUPPORTED BY DOCUMENTARY EVIDENCES. HENCE, THE DISALLOWANCE OF INTEREST IS NOT AT ALL JUSTIFIED AND THE SAME MAY B E DELETED. E. ADDITION OF NOTIONAL LOSS IN F&O TRANSACTIONS - R13,89,808/- 9. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. IN MAKING AN ADDITION OF R13,89,808/- TREATING THE SAME AS NOTIO NAL LOSS WITHOUT APPRECIATING THE FACTS THAT IN F&O TRADING, THE GAI NS OR LOSSES ARE RECORDED ON 4 ITA NO.6909/MUM/2012 MR. SAILESH L. BHATIA VS.DY. CIT DAILY BASIS. THUS, THE GAINS OR LOSSES ARE NOT NOTI ONAL BUT ACTUALLY ON A REALIZATION BASIS. HENCE, AN ADDITION MADE BY A.O. TREATING THE LOSS IN F&O TRANSACTIONS AS NOTIONAL IS NOT AT ALL JUSTIFIABLE AND THE SAME MAY BE DELETED. 2. THE LD. COUNSEL OF THE ASSESSEE FILED A LETTER D ATED 17 TH DECEMBER, 2015 BEFORE US REQUESTING THAT THE ASSESSEE MAY KINDLY BE ALLOW ED TO WITHDRAW THE APPEAL FILED IN ITA NO. 6909/M/2012 TO WHICH LD. DR DID NOT HAVE AN Y OBJECTION. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE APPLICATION OF THE LD. AR OF THE ASSESS EE DATED 17/12/2015, APPEAL BY THE ASSESSEE IN ITA NO. 6909/M/2012 FOR ASSESSMENT YEAR : 2008-09 IS ALLOWED TO BE WITHDRAWN. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST JANUARY , 2016 SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED :21.01.2016 PS. ASHWINI GAJAKOSH 5 ITA NO.6909/MUM/2012 MR. SAILESH L. BHATIA VS.DY. CIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI