DCIT CC 39, MUMBAI V. SHREE DURGA CAPITAL LTD, MUMBAI

ITA 7405/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100507 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M KESHKAMAT
• Assessee Lawyers: ANUJ KISHNADWALA
• Keywords: Earning of tax free income
• Section: 2; 143(3); 14A

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH . . , , , BEFORE S/SH. A.D. JAIN,JUDICIAL MEMBER & RAJ ENDRA,ACCOUNTANT MEMBER /. ITA NO.7405/MUM/2011, / ASSESSMENT YEAR - 2008 - 09 DY. CIT (OSD), CENTRAL CIRCLE - 39 ROOM NO.32(1), GROUND FLOOR ASSESSEE YAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. VS SHREE DURGA CAPITAL LTD. 402,403 V YAPAR BHAVAN, 49 P.D. MELLO ROAD, MUMBAI - 400 009. PAN: ASSESSEE ACS 9120 N ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI ANUJ KISHNADWALA - AR / REVENUE BY : SHRI S.M. KESHKAMAT - DR / DATE OF HEARING : 03 - 08 - 2015 / DATE OF PRONOUNCEMENT : 03 - 0 8 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.09.08.2011 OF CIT(A) - 41,MUMBAI THE ASSESSING OFFICE R(AO), HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO RE - COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 80 AFTER EXCLUDING THE INTEREST EXPENDITURE DEBITED TO PRO FIT AND LOSS ACCOUNT USED FOR TRADING IN SHARES BY THE ASSESSEE, RELYING ON THE DECISION OF THE HON'BLE ITAT IN THE THE CASE OF YAT I SH TRADING CO. PVT. LTD. V S. ACIT 129 IT D 237, EVEN IF SUC H SHARES YIELD INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME - TAX ACT, 1961. THE APPELLANT PRAYS THAT THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEAL) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES,FILED ITS RETURN ON 11.09.2008,DECLARING INCOME OF RS. ( - )61,00,054 / - .THE AO COMPLETED THE ASSESSMENT ON 29.10.2010,U/S. 143(3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSE AT ( - )17.67 LACS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETION OF DISALLOWANCE MADE U/S.14AOF THE ACT.DUR ING THE ASSESSMENT PROCEEDINGS ,T HE AO FOUND THAT THE ASSESSEE HAD EARNED D IVIDEND INCOME OF RS.3.37 LACS, THAT THE SAID INCOME DID NOT FORM PART OF TOTAL INCOME, THAT IT HAD NOT ATTRIBUTED ANY EXPENSES TOWARDS EARNING THE INCOME, THAT IT HAD CLAIMED RS.37,575/ - ON ACCOUNT OF DEMAT CHARGES, THAT RS.51.91 LACS AND RS.37.41 LACS WERE CLAIMED UNDER THE HEAD S D - MAT CHARGES AND OTHER EXPENSES RESPECTIVELY, THAT IT HAD ALSO SHOWN SPECULATION PROFIT OF RS.13.51 LACS. THE AO HELD THAT THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE TO SHOW THAT NO PORTION OF THE EXPENSES CLAIMED IN ITS P&L ACCOUNT WERE I N RELATION TO THE EXEMPT INCOME.A PPLYING THE PROVISIONS OF 7404/M/11 (08 - 09)DURGA CAPITAL 2 SECTION 14A AND RULE 8D OF THE INCOME - TAX,RULES,1962(RULES), THE AO DISALLOWED AN AMOUNT OF RS.43.32 LACS AND ADDED IT TO THE TOTAL INCOME OF THE ASSES SEE . 3. A GGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (F AA).BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE DID NOT HOLD ANY STOCK BY WAY OF INVESTMENT, AS EVIDENT FROM THE AUDITED BALANCE SHEET, THAT THE INVENTORY OF SHA RES WAS PART OF CURRENT ASSETS, THAT THE RULE 8D WAS APPLICABLE TO INVESTMENTS AND NOT TO STOCK IN TRADE. THE ASSESSEE RELIED UPON THE MATTER OF YATISH TRADING CO. PVT. LTD (129ITD327) .AFTER CONSIDERING THE SUBMISSION OF THE AS SESSEE AND THE ASSESSMENT ORDER, THE F AA HELD THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF YATISH TRADING CO. PVT. LTD. ( SUPRA ), THAT DISALLOWANCE U/S. 14A WAS NOT APPLICABLE ON THE INTEREST EXPENDITURE USED BY THE ASSESSEE FOR TRADING IN SHARES SHOWN AS STOCK IN TRADE IN THE BALANCE SHEET, THAT THE INTEREST ON BORROWED FUNDS USED IN TRADING ACTIVITY WAS ALLOWABLE EXPENDITURE U/S. 36(1)(III) OF THE ACT, THAT SAME COULD NOT BE TREATED AS AN EXPENDITURE FOR EARNING DIVIDEND INCOME.HE DIRECTED THE AO TO RECOMPUTED THE DISALLOWANCE. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO. THE AUTHORIESD REPRESENTATIVE(AR)STATED THAT THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT.WE FIND THAT T HE ONLY ISSUE TO BE DECIDED IN THE APPEAL BEFORE US IS AS TO WHETHER THE SHARES HELD BY AN ASSESSEE UNDER THE HEAD STOCK IN TRADE CAN BE CONSIDERED FOR MAKING DISALLOWANCE U/S.14A OF THE ACT R.W.RULE 8D OF RULES.IT WAS BROUGHT TO OUR NOTICE THAT THE ISSUE HAS BEEN CONCLUSIVE LY DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD.(INCOME TAX APPEAL NO.1131 OF 2013).WE FIND THAT IN THAT CASE THE HONBLE COURT HAS CLEARLY HELD THAT THE DISALLOWANCE IF ANY TO BE MADE U/S.14A AND RULE 8 D COULD ONLY BE MADE WITH REGARD TO INVESTMENTS AND NOT FOR THE SHARES HELD AS STOCK IN TRADE.IN THE CASE UNDER CONSIDERATION , THE F AA HAD FOLLOWED THE DECISION OF TRIBUNAL DELIVERED IN THE CASE OF YATISH TRADING CO.PVT.LTD.(SUPRA).THE VIEW TAKEN BY THE TRIB UNAL HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INDIA ADVANTAGE SECURITIES LTD. (SUPRA). RESPECTFULLY, FOLLOWING THE JUDGMENT OF THE HONBLE COURT WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. A S A RESULT,THE APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOU NCED IN THE OPEN COURT ON 3 RD ,AUGUST,2015. 3 , 2015 SD/ - SD/ - ( . . /A. D. JAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 03 . 08 . 2015 . . . JV . SR .PS. / COPY OF THE ORDER FORWARDED TO : 7404/M/11 (08 - 09)DURGA CAPITAL 3 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.