DCITCIR 4(2), MUMBAI V. MITRA FIDELITY LTD, MUMBAI

ITA 7947/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3624 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA NO.7170/MUM/2010 ITA NO. 7947/MUM/2010 M/S TAPI ENERGY PROJECTS LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, AM AND DR. S.T.M. PAVAL AN, JM ./ I.T.A. NO. 7170 /MUM/2010 ( / / / / ASSESSMENT YEAR :2006-07 M/S TAPI ENERGY PROJECTS LTD. (IN RESPECT OF M/S MITRA FIDELITY LTD. AMALGAMATED WITH TAPI ENERGY PROJECTS LIMITED) 26, GOBIND MAHAL 86B, NETAJI SUBHASH ROAD, MARINE DRIVE, MUMBAI- 400 002. / VS. DEPUTY COMMISSIONER OF INCOME TAX-4(2), MUMBAI. ! '# ./ PAN : AAACW0521H ( !$ / / / / APPELLANT ) .. ( %&!$ / RESPONDENT ) & ./ I.T.A. NO. 7947 /MUM/2010 ( / / / / ASSESSMENT YEAR :2006-07 DEPUTY COMMISSIONER OF INCOME TAX-4(2), MUMBAI. / VS. M/S MITRA FIDELITY LTD. (AMALGAMATED WITH TAPI ENERGY PROJECTS LIMITED) 26, GOBIND MAHAL 86B, NETAJI SUBHASH ROAD, MARINE DRIVE, MUMBAI- 400 002. ! '# ./ PAN : AAACW0521H ( !$ / / / / APPELLANT) .. ( %&!$ / RESPONDENT ) ' ( ) ' / REVENUE BY : SHRI MOHIT JAIN %&!$ ( ) ' / ASSESSEE BY : SHRI. VIJAY MEHTA ( *# / // / DATE OF HEARING : 09.04.2013 +, ( *# / DATE OF PRONOUNCEMENT : 19.04.2013 ITA NO.7170/MUM/2010 ITA NO. 7947/MUM/2010 M/S TAPI ENERGY PROJECTS LTD. 2 -'. / O R D E R PER B. RAMAKOTAIAH, A.M . : THESE ARE CROSS APPEALS BY ASSESSEE AND REVENUE ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A MADE BY THE ASSESSING OFFICER AT RS.28,09,230 ON WHICH CIT(A) HAS GIVEN THE RELIEF. 2. BRIEFLY STATED ASSESSEE EARNED DIVIDEND INCOME OF RS. 3671830/- WHICH HAD BEEN CLAIMED AS EXEMPT BUT NO EXPENDITURE WAS CLAIMED AG AINST SUCH EXEMPT INCOME. THE ASSESSING OFFICER, IN VIEW OF RULE 8D HAD MADE AN A DDITION OF RS. 28,09,230/-. 3. THE CIT(A) DID NOT AGREE WITH THE DISALLOWANCE S HOWN BY THE AO, HOWEVER HE AFTER EXAMINING THE INCOMES AND BALANCE SHEET OF TH E ASSESSEE, DIRECTED THE AO TO DISALLOW THE EXPENDITURE ON THE BASIS OF TOTAL EXPE NDITURE IN THE RATIO OF VALUE OF TRANSACTION IN SHARES YIELDING EXEMPT INCOME BY VAL UE OF TOTAL TRANSACTIONS IN SHARES. THUS HE MODIFIED THE ORDER OF THE AO. THE CONSEQUEN TIAL ORDER IF ANY PASSED BY THE AO IS NOT PLACED ON RECORD. HOWEVER, ON SUCH DIRECTION BOTH ASSESSEE AND REVENUE ARE IN APPEAL. 4. REVENUE IN ITS APPEAL RAISED THE GROUND ONLY ON THE DECISION OF THE CIT(A), RELYING ON THE DECISION OF JURISDICTIONAL HIGH COUR T IN THE CASE OF M/S GODREJ AND BOYCE MANUFACTURING COMPANY LTD. SINCE CIT(A) FOLLOWED TH E DECISION OF THE JURISDICTIONAL HIGH COURT, WE SEE NO REASON TO CONSIDER REVENUE G ROUNDS. ACCORDINGLY GROUNDS RAISED BY THE REVENUE IN THEIR APPEAL ARE REJECTED AND THE APPEAL BY REVENUE IS DISMISSED. 5. WITH REFERENCE TO THE ASSESSEES APPEAL, IT WAS SUBMITTED THAT ASSESSEE HAS HELD SHARES AS TRADING SHARES AND HAS SHOWN THEM AS CURR ENT ASSETS, FURTHER ASSESSEE HAS OWN FUNDS FOR INVESTMENT IN SHARES, THEREFORE THE INTER EST CANNOT BE DISALLOWED. IT WAS FURTHER SUBMITTED THAT DIVIDEND EARNED OF RS.36,71,830/- WA S ONLY AN INVESTMENTS AND ALSO PART ITA NO.7170/MUM/2010 ITA NO. 7947/MUM/2010 M/S TAPI ENERGY PROJECTS LTD. 3 OF THE TRADING STOCK. IT WAS FURTHER STATED THAT ASSESSEE HAD INVESTMENT OF RS.94,00,000/- ONLY AND ASSESSEE COUNSEL HAD NO OBJECTION, IF HALF PERCENT OF THE ABOVE AMOUNT WAS DISALLOWED ON THE FACTS OF THE CASE. LD. COUNSEL RE LIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF M/S INTIME SPECTRUM SECURITIES LTD. IN ITA NO. 370 AND 1749, 4500 & 2766/MUM/11 DATED 22.06.2012 FOR THE PROPOSITION THAT WHEN THERE ARE OWN FUNDS AND SHARES ARE TRADING SHARES, THERE IS NO NEED FOR DIS ALLOWING ANY OTHER AMOUNT UNDER SECTION 14A. IT WAS FURTHER BROUGHT TO OUR NOTICE NOTICE TH AT IN THAT CASE ALSO CIT(A) GAVE SIMILAR DIRECTIONS LIKE IN THE ASSESSEES CASE, WHICH THE C OORDINATE BENCH HAS CONSIDERED AND MODIFIED. 6. WE HAVE CONSIDERED THE ISSUE. AT THE OUTSET WE A GREE WITH THE FINDINGS OF THE CIT(A) THAT RULE 8D DOES NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR, SO INVOKING SUCH RULE DOES NOT ARISE IN THIS YEAR. FURTHER IT IS AL SO NOTICED THAT ASSESSEE IS STATED TO BE INVOLVED IN TRADING OF SHARES. SCHEDULE E OF BALAN CE SHEET PLACED ON RECORD ABOUT STOCK OF SHARES AND SECURITIES INDICATE THAT ASSESSEE HA D ABOUT 1.10 CRORES OF DEBENTURES AND 5.38 CRORES OF UNQUOTED SHARES, TOTALLING ABOUT 6.48 CRORES. WE ARE UNABLE TO UNDERSTAND HOW ASSESSEE IS TRADING IN UNQUOTED SHARES AND WHY THESE ARE SHOWN AS CURRENT ASSETS. HOWEVER THESE ASPECTS ARE NOT MATERIAL FOR DECIDING THE ISSUE. FURTHER IT IS ALSO SUBMITTED THAT ASSESSEE HAD ONLY 94 LACS INVESTMENT OF WHICH HALF PERCENT CAN BE DISALLOWED AS EXPENDITURE RELATABLE TO SECTION 14A ON EXEMPT INCO ME. THIS CAN NOT BE ACCEPTED AS ASSESSEE HAS INVESTED IN UNQUOTED SHARES ALSO. MORE OVER, THE ASSESSMENT YEAR INVOLVED IS AY 2006-07. SO THE PRESCRIPTION OF 0.5% TOWARDS ADM INISTRATIVE EXPENDITURE UNDER RULE 8D DOES NOT APPLY. CONSEQUENTLY, AS ITAT IS FOLLOW ING CONSISTENTLY OF TREATING 2% OF THE DIVIDEND INCOME AS A REASONABLE AMOUNT TO BE CO NSIDERED AS EXPENDITURE FOR EARNING DIVIDEND INCOME, WE MODIFY THE DIRECTIONS OF THE C IT(A) AND DIRECT THE ASSESSING OFFICER TO CONSIDER 2% OF THE EXEMPT INCOME AS EXPE NDITURE INCURRED FOR EARNING DIVIDEND INCOME TO BE DISALLOWED U/S 14A. ITA NO.7170/MUM/2010 ITA NO. 7947/MUM/2010 M/S TAPI ENERGY PROJECTS LTD. 4 7 . IN THE CASE RELIED UPON BY THE LD. COUNSEL, IN-TIME SPECTRUM SECURITIES LTD (SUPRA), THE ITAT DID NOT CONSIDER ANY AMOUNT UNDER SECTION 14A, ON THE SET OF FACTS. WE ARE OF THE CONSIDERED OPINION THAT 2% OF THE DIVIDE ND INCOME SHOULD BE REASONABLE ENOUGH FOR CONSIDERING DISALLOWANCE UNDER SECTION 1 4A IN THIS CASE. ACCORDINGLY, GROUNDS ARE PARTLY ALLOWED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED AND REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.04.2013 . -'. ( +, # ' /-0 19.04.2013 , ( 1 SD/- SD/- ( DR. S.T.M. PAVALAN) ( B.RAMAKOTAIAH) - / JUDICIAL MEMBER '# - / ACCOUNTANT MEMBER MUMBAI ; /- DATED 19.04.2013 ... / ASHISH PS -'. ( %*CD E'D -'. ( %*CD E'D -'. ( %*CD E'D -'. ( %*CD E'D* ** */ COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. F ( ) / THE CIT(A)-8, MUMBAI 4. F / CIT 3, MUMBAI 5. DH1 %* , , / DR, ITAT, MUMBAI B 6. 1 J K / GUARD FILE. -'. -'. -'. -'. / BY ORDER, &D* %* //TRUE COPY// L LL L/ // /M ' M ' M ' M ' ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI