ACIT, Ludhiana V. Sh. Gaurav Munjal, Ludhiana

ITA 740/CHANDI/2012

• Counselvise Citation: 74021514 RSA 2012
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHASH AGGARWAL
• Assessee Lawyers: N K SAINI
• Keywords: Business income; Salary income; Earning of tax free income; Source of fund
• Section: 80C; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 740/CHD/2012 (ASSESSMENT YEAR : 2008-09) THE A.C.I.T., VS. SH.GAURAV MUNJAL, CIRCLE V, C/O M/S HERO CYCLES LTD., LUDHIANA. G.T. ROAD, HERO NAGAR, LUDHIANA. PAN: ABMPM8079N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 04.10.2012 DATE OF PRONOUNCEMENT : 31.10.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 25.05.2012 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 1. (A) THE LD. CIT(A)-II, LUDHIANA, ON FACTS AS WELL AS IN LAW, HAS ERRED IN DELETING THE DISALLOWANCE OF RS.12,79,001/- MADE BY THE A.O. U/S 14A OF THE INCOME TAX ACT, 1961. (B) THE LD. CIT(A)-II, LUDHIANA HAS FAILED TO APPRECIATE THAT THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF M/S DHNUKA & SONS VS. CIT (244 CTR 511) HAS ALSO HELD, IN PRINCIPLE, THAT WHERE THE ASSESSEE CARRIES ON THE BUSINESS OF SALE & PURCHASE OF SHARE AND ACCORDINGLY EARNS DIVIDEND INCOME AS ITS BUSINESS INCOME, EXPENSES ATTRIBUTABLE TO EARNINGS OF SUCH INCOME ARE LIABLE TO BE DISALLOWED U/S 14A OF I.T. ACT. 2 (C) THE LD. CIT(A)-II, LUDHIANA HAS FURTHER FAILED TO APPRECIATE THAT THE MANAGEMENT FEE AND OTHER CHARGES ARE DIRECTLY RELATED TO THE EARNING OF DIVIDEND AND FALL UNDER THE PROVISION OF SUB- CLAUSE(I) OF CLAUSE (2) OF RULE 8D OF THE I.T. RULES 1961. 3. THE REVENUE HAS RAISED VARIOUS GROUNDS OF APPEAL . HOWEVER, BEING CONFRONTED THE LEARNED D.R. FOR THE REVENUE FAIRLY ADMITTED THAT THE ASSESSEE HAD SHOWN INCOME FROM SALE OF PMS AS ITS B USINESS INCOME AND EXPENDITURE RELATABLE TO THE SAME IS ALLOWABLE. HO WEVER, DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS WARRANTED OUT OF D IVIDEND INCOME OF RS.65,283/-. THE LEARNED A.R. FOR THE ASSESSEE POI NTED OUT THAT IT WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHA RES THROUGH PMS AND THE EXPENDITURE DEBITED ON THIS ACCOUNT WAS ONLY ON ACCOUNT OF MANAGEMENT FEE PAID TO THE BROKERS AND AS SUCH THER E WAS NO MERIT IN MAKING ANY DISALLOWANCE UNDER SECTION 14A OF THE AC T. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DE CLARED TOTAL INCOME OF RS.36,56,846/- WHICH COMPRISED OF THE FOLLOWING SOURCES OF INCOME: PARTICULARS AMOUNT SALARY INCOME 1197533 INCOME FROM HOUSE PROPERTY 147000 BUSINESS INCOME 2386036 INCOME FROM OTHER SOURCES 26277 GROSS INCOME 3756846 LESS: DEDUCTIONS U/S 80C 100000 NET INCOME 3656846 5. THE INCOME FROM BUSINESS DECLARED BY THE ASSESSE E REPRESENTING THE PROFIT ACCRUED ON PMS TRANSACTIONS IS DETAILED AS UNDER: 3 PARTICULARS AMOUNT KOTAK SECURITIES 1641331 ICICI PRUDENTIAL 780748 STT {NOT CLA IMED) 34858 TOTAL 2456937 6. THE TOTAL DIVIDEND INCOME DECLARED BY THE ASSESS EE WAS RS.65,280/- AND PROFESSIONAL FEE OF RS.5618/- WAS R EDUCED FROM THE PMS INCOME. THE ASSESSEE THUS UNDER THE HEAD INCOME F ROM BUSINESS HAD DECLARED ONLY THE PROFIT FROM PMS TRANSACTIONS EXCL UDING THE DIVIDEND INCOME. THE ASSESSEE HAD CLAIMED TOTAL EXPENDITURE OF RS.12,79,001/- ON ACCOUNT OF MANAGEMENT FEE/NSDL CHARGES FROM THE PROFITS ACCRUED ON PMS TRANSACTIONS AND THE CORRESPONDING EXPENSES ARE DETAILED AS UNDER: PARTICULARS FMS SCHEME CODE INVESTMENTS TURNOVER DIVIDEND RECEIVED MANAGEMENT FEE/NSDL CHARGES M/S KOTAK SECURITIES LTD GNH46 SHARES MUTUAL FUNDS 13904530 15778840 3 998931 ICICI PRUDENTIAL ID- D100197 SHARES OF VARIOUS 35280 280070 MGT CO.LTD COMPANIES TOTAL 65283 1279001 7. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD MADE INVESTMENT FROM WHICH HE HAD EARNED EXEMPT INCOME A ND THUS THE EXPENDITURE INCURRED, WHICH IS ATTRIBUTABLE TO THE EARNING OF THE EXEMPT INCOME, WAS TO BE DISALLOWED AS PER RULE 8D R.W.S. 14A OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE COULD NOT CLAIM THE EXPENDITURE IN THE FORM OF MANAGEMENT FEE, NSDL CHA RGES AND STT PAID FOR PORTFOLIO MANAGEMENT SERVICE AND OTHER INVESTME NTS. THE ASSESSING OFFICER THUS DISALLOWED EXPENDITURE OF RS.12,79,001 /- AS INCOME OF THE 4 ASSESSEE. THE CIT (APPEALS) DELETED THE SAID ADDIT ION MADE BY THE ASSESSING OFFICER. 8. THE PERUSAL OF THE FACTS REFLECT THAT THE ASSESS EE HAD DECLARED THE PROFITS FROM PMS INVESTMENT AS ITS INCOME UNDER THE HEAD INCOME FROM BUSINESS AND ALSO CLAIMED EXPENDITURE RELATABLE TO SUCH EARNING OF THE BUSINESS INCOME. THE ONLY EXPENDITURE CLAIMED BY T HE ASSESSEE VIS--VIS ITS INCOME FROM BUSINESS WAS THE MANAGEMENT FEE AND NSDL CHARGES PAID TO THE PORTFOLIO MANAGEMENT SERVICE. NO DEDUC TION HAS BEEN CLAIMED ON ACCOUNT OF STT PAID. THE ASSESSEE HAS F URTHER NOT CLAIMED ANY EXPENDITURE UNDER ANY HEAD AGAINST THE SAID INC OME FROM BUSINESS. THE LEARNED D.R. FOR THE REVENUE HAS FAIRLY CONCEDE D THAT THE ASSESSEE IS ENTITLED TO THE EXPENDITURE RELATABLE TO THE EARNIN G OF THE BUSINESS INCOME. THE TOTAL DIVIDEND INCOME RECEIVED BY THE ASSESSEE DURING THE YEAR WAS RS.65,283/- ON ACCOUNT OF ITS INVESTMENT I N PMS PORTFOLIO. THE SAID DIVIDEND INCOME HAD BEEN CLAIMED AS EXEMPT IN THE HANDS OF THE ASSESSEE. IN ORDER TO COMPLY WITH THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE ACT WE DIRECT THE ASSESSING OFF ICER TO DISALLOW SUM OF RS.5000/- BEING EXPENDITURE RELATABLE TO THE EAR NING OF THE DIVIDEND INCOME. THE PRESENT DECISION IS APPLICABLE TO THE PECULIAR FACTS OF THE PRESENT CASE ONLY AND CANNOT BE TREATED AS A PRECED ENT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF OCTOBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5