M/S DHARAMPAL PREMCHAND LTD.,DELHI vs. DCIT, NEW DELHI

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ITA 2205/DEL/2016Status: DisposedITAT Delhi30 November 2017AY 2012-135 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order regarding the speculation loss, stating it was covered by a jurisdictional High Court decision. However, for the Section 14A disallowance, the Tribunal followed its own prior ruling in the assessee's favor, deleting the addition.

What were the facts?

The assessee appealed against the CIT(A)'s order confirming the AO's action of treating future trading loss as speculation loss and disallowing expenses under Section 14A. The assessee conceded the first ground based on a High Court ruling but wished to keep it alive. For the second ground, the assessee relied on a previous ITAT decision in its own case.

What were the issues?

Whether future trading loss is speculation loss and whether expenses related to dividend income are disallowable under Section 14A when the assessee is a dealer in shares.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI

Hearing: 23.11.2017Pronounced: 30.11.2017

ORDER

Per N. K. Saini, AM:

1.

This is an appeal by the assessee against the order dated 29.02.2016 of ld. CIT(A)-30, New Delhi.

2.

Following grounds have been raised in this appeal: “1. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax ( Appeals) -30, New Delhi ( CIT (A) for short) erred in confirming the action of the Dy. Commissioner of Income Tax, Central Circle-29, New Delhi (AO for short) in holding that the loss of Rs.3,48,57,989/- incurred in future trading is speculation loss. 2.1 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the AO in disallowing a sum of Rs. 1,03,87,691/- u/s 14A of the Income 2 Dharampal Premchand Ltd. Tax Act,1961 (Act for short) against dividend income of Rs. 43,79,337/-. 2.2 That without prejudice to the generality of grounds of appeal no 2.1 above, the disallowance of Rs.1,03,87,691/- is arbitrary and highly excessive.

3. That the appellant craves liberty to add, alter, vary or amend any ground of appeal.

3. As regards to Ground No. 1, the ld. Counsel for the assessee at the very outset sated that this issue is against the assessee as per the ratio laid down by the Hon’ble Delhi High Court in the case of CIT Vs DLF Commercial Developers Ltd. (ITA 94/2014) which has been followed by the ld. CIT(A). However, this legal issue is pending for decision before the Hon’ble Supreme Court of India and the assessee therefore wants to keep this issue alive.

4. In his rival submissions, the ld. DR supported the order of the ld. CIT(A).

5. After considering the submissions of both the parties, we are of the view that since the issue is covered by the order of the Hon’ble Jurisdictional High Court against the assessee in the case of CIT Vs DLF Commercial Developers Ltd. (supra). We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A).

3 Dharampal Premchand Ltd. 6. As regards to the issue agitated in Ground Nos. 2.1 & 2.2, the ld. Counsel for the assessee submitted that this issue is squarely covered by the decision of the ITAT Delhi Bench ‘B’, New Delhi in for the assessment year 2008-09 in assessee’s own case (copy of the said order was furnished which is placed on record).

7. The ld. DR although supported the orders of the authorities below but could not controvert the aforesaid contention of the ld. Counsel for the assessee.

8.

We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the assessee’s appeal in assessment year 2008-09 in wherein the issue has been decided in favour of the assessee. The relevant findings have been given in paras 6 to 9 of the order dated 09.05.2014 which read as under: “6. We have heard the parties and have perused the material on record. As per the record, during the year, the assessee company earned dividend income of Rs.29,83,855/-. This was claimed as exempt u/s 10 (38) of the Act. The AO held that the assessee had not invested in shares for earning dividend, but that it was a dealer in shares. However, the AO made a disallowance of Rs.17,20,850/- representing expenditure against the said dividend income.

4 Dharampal Premchand Ltd.

7.

Undoubtedly, the assessee had not accounted for any expense concerning the dividend of Rs.29,83,855/-. The AO applied the provisions of Section 14A of the Act read with Rule 8D of the Rules. The issue is as to whether these provisions are applicable to an assessee, who has been admitted to be a dealer in shares, as has been done by the AO in the present case.

8. In ‘CCI Ltd.’ (supra), the Hon’ble Karnataka High Court has held that if the assessee is a dealer of the shares and securities, it cannot be said that the purchases of the shares and holding of shares made by it were for the purpose of earning of dividend income; and that hence, the expenditure incurred in acquiring these shares cannot be disallowed u/s 14A of the IT Act. There also, like in the present case, it was the admitted position that the assessee was a dealer in shares and securities. ‘CCI Ltd.’ (supra) was followed by the Ahmedabad Bench of the Tribunal in ‘Hina Nitin Parikh’ (supra).

9.

No decision contrary to the aforesaid case laws has been cited before us on behalf of the department. Therefore, respectfully following ‘CCI Ltd.’ (supra) and ‘Hina Nitin Parikh’ (supra), the grievance of the assessee by way of Ground No.2 is accepted.”

9. In the present case also, the income of the assessee is treated as business income of the assessee who is dealer in shares and security. Therefore, the facts for the year under consideration are similar to the facts involved in the assessment year 2008-09. So, respectfully following the 5 Dharampal Premchand Ltd. aforesaid referred to order dated 09.05.2014 in ITA No. 2458/Del/2013. The impugned addition made by the AO and sustained by the ld. CIT(A) is deleted.

10.

In the result, the appeal of the assessee is partly allowed. (Order Pronounced in the Court on 30/11/2017)

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