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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI B.R.BASKARAN, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the appeal against the order of Commissioner of Income Tax (Appeals)-34, Mumbai [hereinafter referred to as the “CIT(A)”] dated 29.07.2011 relevant to the assessment year 2008-09. The Revenue has also filed the appeal against Commissioner of Income Tax (Appeals)-34 dated 08.11.2013 relevant to the assessment year 2009-10. Since the parties are the same and the matter of controversy is also the same therefore these appeals are clubbed together and to be adjudicated together for the sake of convenience.
ITA NO. 6168/M/11:-
2. Firstly, we took the appeal No.6168/M/11 for adjudication. In the said appeal the assessee has taken the following grounds:-
1. On the facts and in law, the learned CIT(A) had erred in confirming the disallowances of Rs.10,48,632/-u/s. 14A read with Rule 8D(2)(ii). Under the facts and circumstances of the matter, he ought to have deleted the addition of Rs.10,48,632/- .
2. On facts and in law, the learned CIT(A) had erred in confirming the disallowance of Rs.1,42,130/- u/s. 14A read with Rule 8D(2)(iii). Under the facts and circumstances of the matter, he ought to have been deleted the addition of Rs.1,42,130/-.
& ITA 340/M/14 A.Y. 2008-09 & 2009-10
3. On facts and in law, the learned CIT(A) had failed to appreciate that Rule 8D is not applicable to the case of the appellant. Under the facts and circumstances of the matter, he ought to have held so.
4. On facts and in law, the learned CIT(A) had erred in confirming the disallowance of Rs.11,90,762/- u/s. 14A of the I.T. Act, 1961. Under the facts and circumstances of the matter, he ought not to have confirmed the said disallowance of Rs.11,90,762/-.”
3. The assessee is a firm. The e-return of income disclosing total income of Rs.5,51,72,227/- was filed for A.Y.2008-09 on 09.09.2008. Subsequently, copy of return of income was filed along with Profit and Loss Account, Balance Sheet and tax audit report u/s. 44AB of the Income Tax Act, 1961( in short “the Act”). The case was selected for scrutiny. Statutory notices under section 143(2) were issued on 23.09.2009 and thereafter notice 142(1) of the Act along with questionnaires were issued and served upon the assessee. Since the assessee has shown dividend (exempt) income of Rs.12,77,518/-, therefore, the assessee was asked about disallowance of expenditure incurred to earn the exempt income u/s 14A of the Act. On receipt of the department query the assessee filed the reply dated 03.11.2010 and took the plea that all the shares have been held as stock in trade and therefore there would not be any disallowance u/s. 14A of the Act. Thereafter, the Assessing Officer, considering the matter and in view of the case of Daga Capital Management Pvt. Ltd. reported in 117 & ITA 340/M/14 A.Y. 2008-09 & 2009-10 ITD 169 disallowed the expenditure to the tune of Rs.11,90,762/- u/s. 14A of the Act and accordingly assessed the income. Feeling aggrieved by the order of Assessing Officer the assessee filed the appeal before CIT(A) who confirm the order of Assessing Officer. Aggrieved by the order of CIT(A) the assessee is before us.
4. We have heard the arguments advanced by the learned representative of the parties and perused the record carefully. The learned representative of the assessee has argued that the assessee’s shares shown as stock in trade and such stock in trade could not be taken into account while computing the disallowance under Rule 8D of the Act. The learned representative of the assessee has argued that this case is fully covered by the order dated 14.09.2012 passed in case of DCIT Range 9(2) Vs. M/s. India Advantage Securities Ltd., Income Tax Appellate Tribunal Mumbai bench wherein the CIT(A) deleted the disallowance u/s. 14A of the Act computed by the Assessing Officer in relation to the stock in trade. On the other hand the learned representative of the Department strongly relied upon the order of CIT(A) in question. Keeping in view of the arguments advanced by the representative of the parties and perused the record carefully it came into the notice that the only matter of controversy is that whether the shares which has been shown as stock in trade in the books of accounts could not be taken into account while computing the expenditure to earn the exempt income u/s 14A read with Rule & ITA 340/M/14 A.Y. 2008-09 & 2009-10 8D of the Act or not. The assessee has also place reliance on the judgement passed by the Hon’ble High Court of Karnataka in the case of CCL Ltd. Vs. JCIT (250 CTR 291). On the basis of said judgement co-ordinate bench of Mumbai in case DCIT Range 9(2) Vs. M/s. India Advantage Securities Ltd.,(Supra) dated 14.09.2012 has also held that the expenditure incurred in relation to the stock in trade is not liable to be computed u/s. 14A of the Act. We notice that the decision was rendered in the case of M/s. India Advantage Securities Ltd in respect of interest expenditure only. In respect of administrative expenses the decision of learned CIT(A) in making addition was impliedly confirmed. In view of the said circumstances and by following order of co-ordinate bench in case of DCIT Range 9(2) Vs. M/s. India Advantage Securities Ltd.,(Supra) dated 14.09.2012, we are of the view that the stock in trade is not required to be accounted for calculating the disallowance of interest u/s. 14A of the Act. In respect of administrative expenses, we direct the AO to compute the same at 10% dividend income and disallowed the same u/s. 14A of the Act. In result the appeal of the assessee is hereby partly allowed accordingly.
ITA NO. 340/M/14:-
5. Now coming to the appeal No.340/M/14 relevant to the assessment year 2009-10. We notice that the tax effect involved in & ITA 340/M/14 A.Y. 2008-09 & 2009-10 this appeal on the disputed issues is less than Rs.10 lakhs. For the sake of convenience, we tabulate below the relevant details:-
S.No. Name of assessee Amount in Penalty deleted or dispute(for reduced by Ld quantum appeal) CIT(A) In Rs. in Rs. 1 M/s. Mudra Securities 11,46,923/- -- (For A.Y.2009-10)
We notice that the revenue is contesting the decision of Ld CIT(A) in granting relief to the extent stated above and hence the tax effect involved on the above said disputed amounts works out to less than Rs.10 lakhs. Recently the CBDT has issued a circular No.21/2015 dated 10.12.2015 prescribing new monetary limits for preferring appeals against the orders passed by Ld CIT(A) before the Tribunal. The relevant portion of the circular cited above reads as under:
“F No 279/Misc. 142/2007-ITJ (Pt) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes Circular No. 21/2015 New Delhi the 10th December, 2015
Sub :Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court - measures for reducing litigation – Reg & ITA 340/M/14 A.Y. 2008-09 & 2009-10
Reference is invited to Board's instruction No 5/2014 dated 10.07.2014 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Appellate Tribunal and High Courts and SLP before the Supreme Court were specified.
In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal and High Courts and SLP before the Supreme Court keeping in view the monetary limits and conditions specified below.
Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:
S No Appeals in Income-tax matters Monetary Limit (in Rs) 1 Before Appellate Tribunal 10,00,000/- 2 Before High Court 20,00,000/- 3 Before Supreme Court 25,00,000/-
It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.
For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as "disputed issues"). However the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.
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6……… & ITA 340/M/14 A.Y. 2008-09 & 2009-10
7. …… 8. ……. 9. …..
This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.” 11. …..” It can be noticed that the CBDT has further clarified that this new circular/instruction shall apply retrospectively, i.e., even to the pending appeals. It is also stated that the quantum of penalty deleted or reduced shall be considered for determining the monetary limits.
It is well settled proposition that the circulars issued by the CBDT are binding on the Income Tax Authorities. For this proposition, one may gainfully refer to the decisions rendered by the Hon’ble Supreme Court in the case of Azadi Bachao Andolan (2003)(177 Taxation 775) and Pradip J Mehta Vs. CIT (2008)(300 ITR 231). Hence, the latest circular issued by the CBDT (referred supra) is binding on the income tax authorities. Accordingly, we find merit in the submissions of Ld A.R that this appeal is not maintainable, since tax effect involved in this appeal is less than Rs.10 lakhs. Accordingly, we dismiss the appeal filed by the revenue. & ITA 340/M/14 A.Y. 2008-09 & 2009-10
Accordingly, Assessee’s appeal A.Y. 2008-09 is partly allowed and Revenue’s appeal for A.Y.2009-10 is dismissed.
Order pronounced in the open court on 5th February, 2016