Commissioner Of Income Tax vs. Trapati Trading And Investment P.Ltd.

Income Tax Appeal No.19/2012 06.08.2014 Shri R.L. Jain, learned Senior Counsel with Ms. Veena Mandlik, learned counsel for the appellant / Revenue. Heard on the question of admission. This is an appeal under Section 260-A of the Income Tax Appeal, 1961 (for short, the Act) challenging the order dated 16.09.2011 passed by the Income Tax Appellate Tribunal, Bench Indore (for short, the Tribunal) in Income Tax Appeal No.287/IND/2008. Briefly stated, challenging the order passed by the Assessing Officer in respect of holding of the payment made to S.K. Mitra to be not for the business of the assessee and being not allowable under Section 37 of the Act, the assessee had filed an appeal before the Commissioner of Income Tax (Appeals). The CIT (Appeals) vide order dated 24.04.2008 deleted the addition by holding that there is no case of evasion of tax because S.K. Mitra was also liable to the same rate of tax as that of assessee, and that the payments made to him do not relate with the dividend income as his services were for multifarious and related to various activities of the respondent / assessee. The said order on being challenged before the Tribunal at the instance of the appellant / Revenue, the Tribunal dismissed the Revenue's appeal by observing thus: - “10. We have carefully considered the rival contentions and found that Shri S.K. Mitra is a professionally qualified person, who was appointed to inform the company about short term and 2 medium term investment opportunity. He also advised the company to crystallize short term to medium term strategy investment plan in equity, debt, mutual fund etc. The assessee has properly deducted tax at source on the professional fee so paid. In terms of the finding recorded by the learned CIT (A), the genuineness of the payment and business necessity of such payments is not in doubt. The only question remains for consideration is with regard to dis-allowance u/s 14A in view of the fact that part of the income earned out of his advise was exempt from taxation. We found that in the assessment year 2002-03, amount paid to Shri S.K. Mitra was disallowed and by considering the exempt income earned, relating to the advise rendered by Shri S.K. Mitra, the learned CIT (A) has restricted the dis-allowance to the extent of 10% and the Department has not filed further appeal against the order of CIT (A). Thus, the Department has duly accepted the order of CIT (A) for restricting the dis-allowance to the extent of 10% in the assessment year 2002-03. In view of these facts, we modify the order of CIT (A) for the assessment year 2001-02 and direct AO to restrict the dis-allowance to the extent of 10% of the payments made to Shri S.K. Mitra u/s 14A of the Income Tax Act, 1961.” Keeping in view the aforesaid finding recorded by the Tribunal, affirming the view taken by the CIT (Appeals), we are of the view that no case for interference in this appeal is made out. The appeal fails and is hereby dismissed. (Shantanu Kemkar)

(Mool Chand Garg) Judge

Judge Pithawe RC