SCIL CAPITAL INDIA P.LTD ( FORMERLY KNOWN AS SCIL CAPITAL INDIA LTD), MUMBAI V. ASST CIT CIR 3(3), MUMBAI

ITA 7564/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0623 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 21-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: K K VED
• Keywords: Capital asset; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 7564/M/2012 ASSESSMENT YEAR: 2009 - 10 M/S. SCIL CAPITAL INDIA PVT. LTD., (FORMERLY KNOWN AS SCIL CAPIT AL INDIA LTD.), 21, MITTAL CHAMBERS, 228, NARIMAN POINT, MUMBAI 400 020 PAN: AAACS 8065 J VS. THE ASSISTANT COMM. OF INCOME - TAX, CIRCLE 3(3) MUMBAI, AAYAKAR BHAVAN, MAHARSHI K ARVE MARG , MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K.K. VED, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 17.03. 201 5 DATE OF PRONOUNCEMENT : 27.05. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APP EAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 13.08.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009 - 10 . THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1:0 RE.: DISALLOWANCE OF PORTFOLIO MANAGEMENT FEES OF RS. 1,82 , 433 / - WHILE COMPUTING SHORT TERM CAPITAL GAINS: 1 :1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF DISALLOWING THE PORTFOLIO MANAGEMENT FEE S OF RS. 1,82,433/ - WHILE COMPUTING THE SHORT TERM CAPITAL GAINS. 1: 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE PORTFOLIO MANAGEMENT FEES IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE SHORT TERM CAPITAL ASSETS WHICH HAS RESULTED IN SHORT TERM CAPITAL GAINS ITA NO.7564/M/2012 M/S. SCIL CAPITAL I NDIA PVT. LTD., (FORMERLY KNOWN AS SCIL CAPITAL INDIA LTD.) 2 AND HENCE NO DISALLOWANCE IS CALLED FOR WHILE COMPUTING THE SAID SHORT TERM CAPITAL GAINS AND THE STAND TAKEN BY THE ASSESSING OFFI CER IS ERRONEOUS AND THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 1: 3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE DISALLOWANCE SO MADE BY HIM AND TO RE - COMPUTE ITS TOTAL INCOME ACCORDINGLY. 2 : 0 RE.: ADDITIONAL DISALLOWANCE U/S. 14A: 2: 1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF MAKING A FURTHER DISALLOWANCE OF RS.4,73,669/ - U/ S. 14A BY APPLYING RULE 8D OF THE INCOME - TAX RULES, 1962 IN AN ERRONEOUS MANNER. 2: 2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT NO FURTHER DISALLOWANCE U/S. 14A OF THE INCOME - TAX ACT, 1961 WAS CALLED FOR AND THE STAND TAKEN BY THE ASSE SSING OFFICER IN THIS REGARD IS INCORRECT AND THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 2:3 THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE ADDITIONAL DISALLOWANCE MADE BY HIM AND TO RE - COMPUTE ITS T OTAL INCOME ACCORDINGLY. 3:0 RE.: GENERAL 3: 1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR OTHERWISE MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. GROUND NO.1 2. GROUND NO.1 IS REGARDING DISALLOWANCE OF PORTFOLIO MANAGEMENT FEES OF RS.1,82,433/ - . THE LD. A.R. OF THE ASSESSEE HAS BEEN FAIR ENOUGH TO STATE THAT THE GROUND NO.1 IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS. HE HAS FURTHER DRAWN OUR ATTENTION TO THE DECISION OF THE TRIBUNAL DATED 10.12.13 PASSED IN ITA NO.1337/M/2012 FOR ASSESSMENT YEAR 2007 - 08 IN THE OWN CASE OF THE ASSESSEE WHEREIN THE TRIBUNAL FOLLOWING THE V ARIOUS OTHER DECISIONS OF THE CO - ORDINATE BENCHES OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. ITA NO.7564/M/2012 M/S. SCIL CAPITAL I NDIA PVT. LTD., (FORMERLY KNOWN AS SCIL CAPITAL INDIA LTD.) 3 3. FOLLOWING THE ABOVE STATED DECISION, THE DISALLOWANCE ON THIS ISSUE HAS BEEN FURTHER CONFIRMED BY THE TRIBUNAL IN THE NEXT ASSESSMENT YEAR I.E. A.Y. 2008 - 09 VIDE ORDER DATED 20.08.2014 OF THIS TRIBUNAL PASSED IN I TA NO.4589/M/2012. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS , THIS ISSU E IS DECIDED AGAINST THE ASSESSEE. GROUND NO.2 4. GROUND NO.2 RELATES TO ADDITIONAL DISALLOWANCE OF RS. 4,7 3,669 / - UNDER SECTION 14A BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1962. 5. WE HAVE HEARD THE L D. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE ASSESSEE SUO - MOTO OFFERED THE DISALLOWANCE OF RS. 4,79,128 / - U/S 14A OF THE ACT IN RELATION TO EXEMPT INCOME. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO), HOWEVER, MADE THE DISALLOWANCE UNDER SECTION 14A INV OKING RULE 8D OF THE INCOME TAX RULES. IN APPEAL, THE L D. CIT(A) CONFIRMED THE DISALLOWANCE SO MADE BY THE AO OBSERVING THAT SINC E THE ASSESSMENT YEAR INVOLVED WAS A.Y. 200 9 - 1 0, SO THE DISALLOWANCE U/S 14A HAD TO BE WORKED OUT BY THE AO AS PER RULE 8D OF THE I.T. RULES. AGGR IEVED AGAINST THE ORDER OF THE L D. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. THE STAND OF THE ASSESSEE IS THAT THE AO DID NOT CONSIDER THE SUO - MOTO WORKING OF THE ASSESSEE OF THE DISALLOWANCE OF RS.4,79,128/ - AND STRAIGHTWA Y APPLIED RULE 8D WITHOUT RECORDING ANY DISSATISFACTION AGAINST THE SAID WORKING. 6. THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR I.E. A.Y. 2008 - 09 VIDE ORDER DATED ITA NO.7564/M/2012 M/S. SCIL CAPITAL I NDIA PVT. LTD., (FORMERLY KNOWN AS SCIL CAPITAL INDIA LTD.) 4 20.08.14 PASSED IN ITA NO. 4589/M/2012 WHEREIN THE TRIBUNAL , WHILE ADJUDICATING THE IDENTICAL ISSUE, HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR DECISION AFRESH OBSERVING AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81 , THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A(2) IS NOT ARBI TRARY OR UNREASONABLE AND ALSO NOT RETROSPECTIVE AND APPLIES FROM A.Y. 2008 - 09. IT HAS BEEN FURTHER HELD THAT UNDER SECTION 14A OF THE INCOME TAX ACT, RESORT CAN BE MADE TO RULE 8D OF THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATI ON TO EXEMPT INCOME, IF, THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUB SECTI ON (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPLY THE METHOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT SUCH EXPENDITURE IS CORRECT. THE SATISFACTION OF THE ASSESSING OFFICER MU ST BE ARRIVED AT ON AN OBJECTIVE BASIS. IN A SITUATION WHERE THE ACCOUNTS OF THE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSING OFFICER TO ARRIVE AT A SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, THERE WOULD BE NO WARRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. AN OBJECTIVE SATISFACTION CONTEMPLATES A NOTICE TO THE ASSESSEE, AN OPPORTUNITY TO THE ASSESSEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING HIS ACCOUNTS AND RECORDING OF REASONS BY THE ASSE SSING OFFICER IN THE EVENT THAT HE COMES TO THE CONCLUSION THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. 6. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS NOT FOLLOWED THE GUIDELINES OF OBJECTIVE SATISFACTION AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE (SUPRA) WHILE MAKING THE DISALLOWANCE . HE WITHOUT RECORDING ANY REASONING FOR HIS DISSATISFACTION WITH REGARD TO THE WORKING/CLAIM OF THE ASSESSEE, STRAIGHTWAY APPLIED RULE 8D AGAINST THE MANDAT E OF THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. THE LD. CIT(A) ALSO IGNORED THE MANDATE OF THE PROVISIONS OF SECTION 14 A, WHILE CONFIRMING THE DISALLOWANCE. 7. SO KEEPING IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE T HIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION THAT THE AO WILL GIVE OPPORTUNITY TO THE ASSESSEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING ITS ACCOUNTS AND THEN EXAMINE THE COMPUTATION/CALCULATION MADE IN THIS REGARD BY THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE AO WILL BE AT LIBERTY TO CALL FOR ANY RECORD/EVIDENCES OR STATEMENT ETC. FROM THE ASSESSEE AS MAY BE REQUIRED BY HIM FOR DECIDING THE ISSUE UNDER CONSIDERATION. AFTER GOING THROUGH THE DETAILS PROVIDED BY THE A SSESSEE, IF THE AO WILL BE SATISFIED WITH THE CLAIM/CALCULATION MADE BY THE ASSESSEE, THEN HE WILL ASSESS THE INCOME ACCORDINGLY. HOWEVER, IF THE AO DOES NOT AGREE WITH THE COMPUTATION MADE BY THE ASSESSEE AND IN THAT EVENT, HE WILL HAVE TO RECORD HIS DISS ATISFACTION WITH REASONING FOR THE SAME ITA NO.7564/M/2012 M/S. SCIL CAPITAL I NDIA PVT. LTD., (FORMERLY KNOWN AS SCIL CAPITAL INDIA LTD.) 5 BY WAY OF A SPEAKING ORDER, THEN HE WILL BE AT LIBERTY TO RESORT TO THE PROVISIONS OF RULE 8D. NEEDLESS TO SAY, THE ASSESSEE WILL CO - OPERATE AND PROMPTLY SUPPLY THE NECESSARY DETAILS ETC. TO THE AO FOR DECIDING THE I SSUE UNDER CONSIDERATION. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. SINCE THE FACTS AND ISSUE UNDER CONSIDERATION ARE IDENTICAL, HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASS ESSEE FOR THE EARLIER ASSESSMENT YEAR, THIS ISSUE IS RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME IN TERMS OF THE ORDER DATED 20.08.14 OF THIS TRIBUNAL (SUPRA). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.05. 2015 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.