J M FINANCIAL PRODUCTS LTD, MUMBAI V. ACIT CIR 6(3)(2), MUMBAI

MA 321/MUM/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 5832 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 15-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Rectification of order; Earning of tax free income; Rule 8D
• Section: 14A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER MA NO.321/M/2019 ASSESSMENT YEAR: 2012-13 (ARISING OUT OF ITA NO.781/M/2017) M/S. J.M. FINANCIAL PRODUCTS LIMITED, 7 TH FLOOR, CNERGY, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 025 PAN: AAACJ1236G VS. ACIT CIR 6(3)(2), ROOM NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) ITA NO.781/M/2017 ASSESSMENT YEAR: 2012-13 ACIT CIR 6(3)(2), ROOM NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. J.M. FINANCIAL PRODUCTS LIMITED, 7 TH FLOOR, CNERGY, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 025 PAN: AAACJ1236G (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVARAM, A.R. & SHRI SANJAY PARIKH, A.R. REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH, D.R . DATE OF HEARING : 19.07.2019 DATE OF PRONOUNCEMENT : 14.10.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: BY VIRTUE OF THIS MISCELLANEOUS APPLICATION, THE A SSESSEE SEEKS THE RECTIFICATION OF ORDER PASSED IN ITA NO.7 81/M/2017 A.Y. 2012-13 DATED 31.12.2018. MA NO.321/M/2019 & ITA NO.781/M/2017 M/S. J.M. FINANCIAL PRODUCTS LIMITED 2 2. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT TH E ORDER PASSED BY THE TRIBUNAL IN THE ABOVE APPEAL CONTAINE D SOME , PRIMA FACIE , APPARENT AND FACTUALLY MISTAKES NAMEL Y (I) THE PAN NUMBER OF THE ASSESSEE HAS BEEN MENTIONED AS AAACJ5 977A INSTEAD OF AAACJ1236G,(II) WRONG MENTIONING OF ASSE SSMENT YEAR AS 2011-12 INSTEAD OF AY 2012-13 AND (III) DI SMISSING THE REVENUES APPEAL BY GIVING THE WRONG FINDINGS THAT ISSUE IS ALREADY DECIDED IN A.Y. 2011-12 RESTORING THE SAME TO THE FILE OF THE AO TO DECIDE THE SAME IN THE LIGHT OF THE DECIS ION OF HONBLE SUPREME COURT WHEREAS IN FACT IN AY 2010-11 AND AY 2011-12 THE ISSUE HAVE BEEN DECIDED IN FAVOUR OF THE ASSES SEE. THE LD. A.R. SUBMITTED THAT THE ISSUE IS IN FACT COVERED BY THE DECISION IN ASSESSEES OWN CASES IN ITA NO.4061&4062/M/2015 A.Y. 2010-11 & OTHERS VIDE ORDER DATED 31.05.2017 & ITA NO. 3661/MUM/2016 AY 22011-12 ORDER DATED.31.05.2018 WH EREAS WHILE PASSING THE ORDER THE HONBLE BENCH HAS FOLLO WED THE DECISION OF THE BENCH IN ITA NO.4558/M/2016 A.Y. 2 011-12 TITLED AS ACIT VS. J.M. FINANCIAL SERVICES PVT. LTD A SISTER CONCERN ERRONEOUSLY. THE LD. A.R. THEREFORE PRAYED THAT SINCE THE SAID ISSUE IS FULLY COVERED BY THE DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASES AS ST ATED ABOVE AND ACCORDINGLY HAS TO BE DECIDED BY FOLLOWING THE SAID DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL. THE LD. A.R., THEREFORE, PRAYED THAT NECESSARY RECTIFICATION MAY BE CARRIED OUT TO THE ORDER DATED 31.12.2018. 3. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER PASSED BY THE TRIBUNAL BY OPPOSING THE CONTENTIONS OF THE LD AR OF THE ASSESSEE. MA NO.321/M/2019 & ITA NO.781/M/2017 M/S. J.M. FINANCIAL PRODUCTS LIMITED 3 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THE SAID ORDER DATED 31. 12.2018 IN ITA NO.781/M/2017 ON PAGE NO.17 OF THE ORDER, THE A SSESSMENT YEAR HAS BEEN WRONGLY MENTIONED AS 2011-12 INSTEAD OF 2012- 13 AND ALSO AN ERRONEOUS FINDING HAS BEEN GIVEN BY FOLLOWING THE DECISION IN THE ASSESSEES SISTER CONCERN CASE IN I TA NO.4558/M/2016 A.Y. 2011-12 INSTEAD OF FOLLOWING T HE DECISION IN ASSESSEE OWN CASES ON IDENTICAL ISSUE IN ITA NO .4061& 4062/M/2015 A.Y. 2010-11 VIDE ORDER DATED 31.05.201 5 AND ITA NO. 3661/MUM/2016 AY 22011-12 ORDER DATED.31.05 .2018. NOW WE FIND THAT SINCE THE APPARENT MISTAKES AS REF ERRED TO ABOVE HAVE APPEARED IN THE ORDER OF THE TRIBUNAL, THEREFORE, THE ORDER DATED 31.12.2018 IS REQUIRED TO BE RECALLED AND MODIFIED TO THE EXTENT OF REVENUE APPEAL IN THE ITA NO.781/M /2017 A.Y. 2012-13. ACCORDINGLY, ITA NO.781/M/2017 IS HEREBY RECALLED AND ADJUDICATED IN THE FOLLOWING PARAS. 5. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF DISALLOWANCE MADE BY THE AO UNDER SECTION 14A RE AD WITH RULE 8D OF RS.9,29,56,537/- AND ALSO HOLDING THAT D ISALLOWANCE OVER AND ABOVE THE SUO-MOTO DISALLOWANCE OF RS.22,8 3,240/- MADE BY THE ASSESSEE UNDER THE ABOVE SECTION IS NOT JUSTIFIED. 6. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT ASSESSE E IS HOLDING CURRENT ASSETS OF RS.18,65,54,000/- AND THE AO OBSERVED THAT ASSESSEE HAS MADE SUO-MOTO DISALLOWAN CE OF RS.22,83,240/- IN THE COMPUTATION OF INCOME UNDER S ECTION 14A OF THE ACT IN RESPECT OF EXEMPT INCOME. ACCORDING TO THE AO, THE SAID DISALLOWANCE WAS MADE ON ADHOC BASIS AND ACCOR DINGLY THE MA NO.321/M/2019 & ITA NO.781/M/2017 M/S. J.M. FINANCIAL PRODUCTS LIMITED 4 AO CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY TH E DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D SH OULD NOT BE REWORKED ON THIS ISSUE AND FINALLY THE AO CALCULATE D THE DISALLOWANCE OF RS.9,52,39,777/- COMPRISING RS.8,85 ,21,255/- UNDER RULE 8D2(II) AND RS.67,18,522/- UNDER RULE 8D 2(III). 7. WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.4061 & 406 2/M/2015 IN ASSESSEES OWN CASE A.Y. IN 2010-11 & OTHERS AN D ALSO IN ITA NO. 3661/MUM/2016 AY 22011-12 ORDER DATED.31.05.201 8 WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS B EEN DECIDED IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF TH E DECISION IN ITA NO. .4061 & 4062/M/2015(SUPRA)HELD AS UNDER: 9. AS REGARDS TO BOTH THE APPEAL OF ASSESSEE ON TH E ISSUE OF SATISFACTION, WE FIND THAT THIS ISSUE IS ALSO COVERED, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD.(SUPRA ), WHEREIN HONBLE BOMBAY HIGH COURT AS HELD AS UNDER: - . WHAT MERITS EMPHASIS IS THAT THE JURISDICTION OF TH E ASSESSING OFFICER TO DETERMINE THE EXPENDITURE INCURRED IN RELATION TO S UCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, IN ACCORDANCE WI TH THE PRESCRIBED METHOD, ARISES IF THE ASSESSING OFFICER IS NOT SATISFIED WI TH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE WHICH THE ASSESSEE CLAIMS TO HAVE INCURRED IN RELATION TO INCOME WHICH DOES NOT PART OF THE TOTAL INCOME. MOREOVER, THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARRIVED AT, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. HENCE, SUB- SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPLY THE MET HOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IS CORRECT. THE ASSESSING OFFICER MUST, IN THE FIRST INSTANCE, DETERMINE WHETHER THE CLAIM OF THE ASSESSEE IN THAT REGARD IS CORRECT AND THE DETERMINATION MUST BE MAD E HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. THE SATISFACTION OF THE A SSESSING OFFICER MUST BE ARRIVED AT ON AN OBJECTIVE BASIS. IT IS ONLY WHEN T HE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THAT THE LEGISLATURE DIRECTS HIM TO FOLLOW THE METHOD THAT MAY BE PRESCRIBED. IN A SITU ATION 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 OF THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THERE WOULD BE NO WA RRANT FOR TAKING RECOURSE TO THE METHOD PRESCRIBED BY THE RULES. FOR, IT IS O NLY IN THE EVENT OF THE MA NO.321/M/2019 & ITA NO.781/M/2017 M/S. J.M. FINANCIAL PRODUCTS LIMITED 5 ASSESSING OFFICER NOT BEING SO SATISFIED THAT RECOU RSE TO THE PRESCRIBED METHOD IS MANDATED BY LAW. SUB-SECTION (3) OF SECTI ON 14A PROVIDES FOR THE APPLICATION OF SUB-SECTION (2) ALSO TO A SITUATION WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN REL ATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T 10. IN THE PRESENT CASE ALSO THE ASSESSEE IN THE CA SE OF JM FINANCIAL INVESTMENT MANAGERS LTD. HAS MADE SUO MOTO DISALLOWANCE OF RS. 30,09,078/- ON ACCOUNT OF EMPLOYEES COMPENSATION COST, INTEREST COST AND SEC URITY TRANSACTIONS TAX. SIMILARLY, IN THE CASE OF JM FINANCIAL PRODUCTS LTD ., THE ASSESSEE EARNED EXEMPTED INCOME OF RS. 6,49,62,982/- ON A TOTAL INVESTMENT D URING THE YEAR AT RS. 414,26,11,058/-. THE ASSESSEE SUO MOTO DISALLOWED A SUM OF RS. 28,64,511/- ON ACCOUNT OF COMPENSATION COST OF EMPLOYEES AS WELL A S ADMINISTRATION COST. THE AO IN BOTH THE CASES HAS NOT REJECTED THE COMPUTATION OF DISALLOWANCE MADE BY ASSESSEE AND ONCE THE ASSESSEES DISALLOWANCE HELD TO BE INCORRECT, THE AO CANNOT INVOKE THE PROVISION OF RULE 8D OF THE RULES. ACCOR DINGLY, WE DELETE THE DISALLOWANCE AND ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE PRESENT CASE ALSO, THE ASSESSEE HAS RAISE D THE ISSUE OF NON RECORDING OF SATISFACTION BY THE AO AND THUS CHALLENGED THE ADDITION MADE BY THE AO U/S 14A R.W.R 8D. THE SAID IS IDENTICAL TO ONE AS DECIDED BY THE CO-ORDINATE BENC H OF THE TRIBUNAL IN ASSESSEE OWN CASES AS STATED ABOVE. ACC ORDINGLY WE ARE INCLINED TO DISMISS APPEAL OF THE REVENUE BY F OLLOWING THE DECISION OF THE COORDINATE BENCH AS STATED ABOVE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 10. IN THE RESULT, THE MISCELLANEOUS APPLICATION IS ALLOWED AND THE ORDER DATED 31.12.2017 STANDS MODIFIED TO THE E XTENT AS STATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2019. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.10.2019. * KISHORE, SR. P.S. MA NO.321/M/2019 & ITA NO.781/M/2017 M/S. J.M. FINANCIAL PRODUCTS LIMITED 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.