FOUR DIMENSIONS SECURITIES (I) LTD, MUMBAI V. ADDL CIT RG 4(1), MUMBAI

ITA 6935/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3445 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Section: 14A; 115JB; 88E

Judgement Text

ITA NO. ITA NO. ITA NO. ITA NO. 6935 6935 6935 6935/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 M/S FOUR DIMENSIONS SECURITIES (INDIA) LTD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 6935/MUM/2011 (ASSESSMENT YEAR 2008-09 ) ITA NO. 7355/MUM/2011 (ASSESSMENT YEAR 2008-09 ) ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 4(1), AAYKAR BHAVAN, MUMBAI 400 020. M/S FOUR DIMENSIONS SECURITIES ( INDIA) LTD. 209-210, ARCADIA BUILDING 195, NARIMAN POINT, MUMBAI-400021. PAN:- AAACF1734F APPELLANT RESPONDENT DATE OF HEARING: 12/6/2013 DATE OF PRONOUNCEMENT: 12/6/2013 O R D E R PER RAJENDRA SINGH THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 24.8.2011 OF CIT (A) FOR THE ASSESSMENT YEAR 200-8-09. THE DI SPUTES RAISED IN THESE APPEALS RELATE TO DISALLOWANCE OF EXPENSES U/S 14 A OF THE IT ACT AND ALLOWABILITY OF REBATE U/S 88E WHILE COMPUTING THE BOOK PROFIT U/S 115 JB. M/S FOUR DIMENSIONS SECURITIES ( INDIA) LTD. 209-210, ARCADIA BUILDING 195, NARIMAN POINT, MUMBAI-400021. PAN:- AAACF1734F ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 4(1), AAYKAR BHAVAN, MUMBAI 400 020. APPELLANT RESPONDENT DEPARTMENT BY. SHRI O.P MEENA ASSESSEE BY: SHRI VIJAY MEHTA ITA NO. ITA NO. ITA NO. ITA NO. 6935 6935 6935 6935/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 M/S FOUR DIMENSIONS SECURITIES (INDIA) LTD. PAGE 2 OF 5 2. WE FIRST TAKEN UP THE APPEAL OF THE ASSESSEE IN ITA NO. 6935/M/2011 . IN THIS APPEAL THE ONLY DISPUTE RAISED IS REGARDI NG DISALLOWANCE OF EXPENSES U/S 14A OF THE IT ACT. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BROKING IN SHARES AND SECURITIES, TRADI NG IN SHARES AND SECURITIES AS WELL AS MAKING INVESTMENTS. THE ASSES SEE HAD RECEIVED DIVIDEND INCOME OF RS. 1,03,80,734/- WHICH WAS EXEM PT FROM TAX. THE AO, THEREFORE MADE DISALLOWANCE OF EXPENSES U/S 14 A AGGREGATOMG TO RS. 57,81,298/- CONSISTING OF INTEREST DISALLOWANCE OF RS. 41,96,800/- AND OTHER EXPENSES OF RS. 15,84,498/- AS PER RULE 8D. 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT (A), THAT THE ASSESSEE HAD NOT INCURRED ANY EXPENSE S FOR EARNING THE DIVIDEND INCOME AND THEREFORE, NO DISALLOWANCE SHOU LD BE MADE. IT WAS ALSO SUBMITTED THAT OUT OF TOTAL DIVIDEND OF RS. 1, 03,80,734/- AN AMOUNT OF RS. 97,28,013/-, HAD BEEN RECEIVED FROM SHARES AND MUTUAL FUNDS UNITS HELD AS STOCK IN TRADE AND ONLY A SUM OF RS. 6,52,721/- HAD BEEN RECEIVED FROM SHARES HELD AS INVESTMENTS. THEREFORE , THE DISALLOWANCE COULD NOT BE MADE IN RELATION TO THE TRADING SHARES . CIT (A), HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED AND HELD THAT EX PENSES WERE REQUIRED TO BE DISALLOWED U/S 14 A IRRESPECTIVE OF THE FACT WHETHER DIVIDEND INCOME HAD BEEN RECEIVED FROM THE SHARE HELD AS INVESTMENT OR AS STOCK IN TRADE. HE, THEREFORE, CONFIRMED THE ORDER OF AO DISALLOWIN G THE EXPENSES., AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 2.2 BEFORE US, LEARNED AR FOR THE ASSESSEE SUBMITTE D THAT DISALLOWANCE OF EXPENSES IN RELATION TO DIVIDEND RECEIVED FROM T RADING SHARES CANNOT BE MADE IN VIEW OF THE THE JUDGMENT OF HONBLE HIGH CO URT OF KARNATAKA IN CASE OF CCI LTD. VS. JCIT DATED 28/2/2012 IN WHICH IT HAS BEEN HELD THAT NO DISALLOWANCE COULD BE MADE IN RELATION TO TRADIN G SHARES. THE SAID JUDGMENT IT WAS POINTED OUT WAS FOLLOWED BY THE MUM BAI BENCH OF TRIBUNAL IN CASE OF DCIT VS. M/S INDIA ADVANTAGE SE CURITIES LTD. IN ITA NO. 6711/MUM/2011. IT WAS ALSO SUBMITTED THAT THE A SSESSEE HAD ALSO RECEIVED INTEREST INCOME. THEREFORE, FOR THE PURPOS E OF DISALLOWANCE OF ITA NO. ITA NO. ITA NO. ITA NO. 6935 6935 6935 6935/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 M/S FOUR DIMENSIONS SECURITIES (INDIA) LTD. PAGE 3 OF 5 INTEREST ONLY THE NET INTEREST INCOME SHOULD HAVE B EEN CONSIDERED UNDER RULE 8D. RELIANCE FOR THE SAID PROPOSITION WAS PLAC ED ON THE JUDGMENT OF OF KOLKATA BENCH OF TRIBUNAL IN CASE OF DCIT VS. M/ S TRADE APARTMENT LTD., IN ITA NO. 1277/KOL/2011. THE LEARNED DR ON T HE OTHER HAND SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND PLACE D RELIANCE ON THE DECISION OF KOLKATA BENCH OF TRIBUNAL IN CASE OF GU LSHAN INVESTMENT CO. LTD. IN ITA 666/KOL/2012. 3. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF EXPENSES U/S 14 A OF THE IT ACT. THE ASSESSMENT INVOLVED IS ASSESSMENT Y EAR 2008-09 FROM WHICH RULE 8D, THE METHOD PRESCRIBED BY THE GOVERNM ENT FOR COMPUTATION OF DISALLOWANCE U/S 14A IS APPLICABLE O N WHICH THERE IS NO DISPUTE. THE ONLY DISPUTE RAISED BY THE LD. AR IS T HAT NO DISALLOWANCE COULD BE MADE IN RESPECT OF DIVIDEND INCOME RECEIVE D FROM TRADING SHARES. THE CLAIM OF THE ASSESSEE IS SUPPORTED BY T HE JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA CCI LTD. VS. JCIT (SUPRA). IN THE SAID CASE THE HONBLE HIGH COURT HELD THAT THE ASSESSEE HAD RETAI NED TRADING SHARES NOT WITH THE INTENTION OF EARNING DIVIDEND INCOME BUT F OR THE PURPOSE OF TRADING AND THE DIVIDEND INCOME WAS ONLY INCIDENTAL TO THE BUSINESS OF SALE OF SHARES. EARLIER THE SPECIAL BENCH OF TRIBUN AL IN CASE OF DAGA CAPITAL & MANAGEMENT PVT. LTD (119 TTJ 289) HAD HEL D THAT DISALLOWANCE OF EXPENSES EVEN IN RELATION TO THE DIVIDEND INCOME FROM TRADING SHARES IS REQUIRED TO BE MADE U/S 14A. BUT IN VIEW OF THE JUD GMENT OF HONBLE HIGH COURT OF KARNATAKA IN CASE OF CCI LTD. VS. JCIT (SU PRA) WHICH IS DIRECTLY ON THE ISSUE NO DISALLOWANCE IN OUR VIEW COULD BE M ADE. THE SAME VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF TRIBUNAL IN S EVERAL CASES INCLUDING THE CASE OF DCIT VS. M/S INDIA ADVANTAGE SECURITIES LTD. (SUPRA). WE, THEREFORE, HOLD THAT DISALLOWANCE OF E XPENSES IN RELATION TO TRADING IN SHARES CANNOT BE MADE. THE LEARNED AR FO R THE ASSESSEE HAS ALSO SUBMITTED THAT WHILE COMPUTING THE DISALLOWANC E UNDER RULE 8D OF INTEREST, ONLY THE NET INTEREST AFTER THE ADJUSTING THE INTEREST RECEIVED BY THE ASSESSEE HAS TO BE CONSIDERED AS HELD BY KOLKAT A BENCH OF TRIBUNAL IN CASE OF DCIT VS. TRADE APARTMENT LTD. (SUPRA). NO C ONTRARY DECISION OF ITA NO. ITA NO. ITA NO. ITA NO. 6935 6935 6935 6935/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 M/S FOUR DIMENSIONS SECURITIES (INDIA) LTD. PAGE 4 OF 5 ANY TRIBUNAL OR HONBLE COURT HAVE BEEN BROUGHT TO THE NOTICE BY THE LEARNED DR. WE, THEREFORE, HOLD THAT WHILE COMPUTIN G THE DISALLOWANCE OF INTEREST UNDER RULE 8D ONLY THE NET INTEREST WILL B E CONSIDERED AND THE EXPENSES INCURRED IN RELATION TO THE DIVIDEND RECEI VED FROM TRADING SHARES HAVE TO BE EXCLUDED. WE, THEREFORE, RESTORE THE ISS UE TO THE FILE OF AO FOR FRESH COMPUTATION AFTER NECESSARY EXAMINATION IN TH E LIGHT OF OBSERVATIONS MADE IN THIS ORDER AND AFTER ALLOWING OPPORTUNITY O F HEARING TO THE ASSESSEE. 4. THE APPEAL OF THE REVENUE IN ITA 7355/MUM/2011 . THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS ALL OWABILITY OF REBATE U/S 88E WHILE COMPUTING THE BOOK PROFIT U/S 115 JB. THE CLAIM OF THE ASSESSEE WAS REJECTED BY AO WHO OBSERVED THAT THE P ROVISIONS OF SECTION 88E APPLIED ONLY TO THE CASE WERE TOTAL INCOME OF T HE ASSESSEE INCLUDED IN COME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS O F BUSINESS AND PROFESSION ARISING FROM TAXABLE SECURITIES AND NOT TO THE DEEMING PROVISIONS OF SECION 115 JB. 4.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT (A) THAT THE ISSUE REGARDING ALLOWABILITY REBATE U/ S 88E WHILE COMPUTING THE BOOK PROFIT U/S 115 JB HAD BEEN DECIDED BY THE BANGALORE BENCH OF TRIBUNAL IN CASE HORIZON CAPITAL LTD VS.ITO IN ITA NO. 592/BNG/2010 FOR ASSESSMENT YEAR 2005-06 IN THE ORDER DATED 16.7.201 0. IT WAS, THEREFORE, URGED THAT THE FOLLOWNG THE DECISION OF THE TRIBUNA L, THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. CIT (A) AGREED WITH THE SUBMISSION OF ASSESSEE AND ALLOWED THE CLAIM, AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE TRIBUNAL. 4.2 BEFORE US LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THIS GROUND WAS COVERED BY THE DECISION O F BANGALORE BENCH OF TRIBUNAL IN CASE OF CIT VS. HORIZON CAPITAL LTD, WH ICH HAS BEEN UPHELD BY HONBLE HIGH COURT OF KARNATAKA IN THE SAME CASE AS REPORTED IN (245 CTR 601). THE LEARNED DR PLACED RELIANCE ON THE ORD ERS OF AO. ITA NO. ITA NO. ITA NO. ITA NO. 6935 6935 6935 6935/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 & 7355/MUM/2011 M/S FOUR DIMENSIONS SECURITIES (INDIA) LTD. PAGE 5 OF 5 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE RAISED BY THE REVENUE IS REGARDING ALLO WABILITY OF TREBATE U/S 88E WHILE COMPUTING TAX U/S 115 JB OF THE IT ACT. W E FIND THAT THE ISSUE IS COVERED BY THE DECISION OF BANGALORE BENCH OF TR IBUNAL IN CASE OF HORIZON CAPITAL LTD. (SUPRA), WHICH HAS BEEN UPHEL D BY HONBLE HIGH COURT OF KARNATAKA AS REPORTED IN (245 CTR 601). TH E HONBLE HIGH COURT HAVE HELD THAT REBATE U/S 88E IN RESPECT OF PAYMEN T OF STT HAS TO BE ALLOWED EVEN IF TOTAL INCOME IS ASSESSED U/S 115 JB . THERE IS NO CONTRARY JUDGMENT OF THE JURIDICTIONAL HIGH COURT OR THE APE X COURT BROUGHT TO OUR NTOICE. THEREFORE, RESPECTFULLY FOLLOWING THE SAID JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA IN CASE OF CIT VS. HORIZON CAPIT AL LTD (SUPRA), WE CONFIRM THE ORDER OF CIT (A) ALLOWING THE CLAIM OF THE ASSESSEE. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THAT BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 12-6-2 013 SD/- SD/- (SHRI SANJAY GARG ) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 12 TH JUNE, 2013. SK SR. P.S. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI