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अिधकरण, ‘ए’ खंडपीठ आयकर अपीलीय अपीलीय अिधकरण खंडपीठ मुंबई मुंबई आयकर आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण खंडपीठ खंडपीठ मुंबई मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI “A”BENCH सव"ी राजे"", लेखा सद"य एवं पाथ"सारथी चौधरी,"याियक सद"य Before S/Sh. Rajendra,Accountant Member & Parthasarathy Choudhury,Judicial Member अपील सं/.ITA No.1244/Mum/2012,िनधा"रण वष"/Assessment Year-2008-09
Shri Ashok Kumar Damani ACIT Range-4(1) 1st Floor, Surya Mahal Bldg. Vs Aayakar Bhavan 5, Burjorji Bharucha Marg Mumbai-400 020. Fort Mumbai-400 023. PAN: AABPD 1845 K (अपीलाथ" /Appellant) (""यथ" / Respondent) िनधा"रती िनधा"रती ओर ओर सेसेसेसे/Assessee by : Shri Hiro Rai िनधा"रती िनधा"रती ओर ओर राज"व क" ओर से/ Revenue by : Shri S.P. Walimbe सुनवाई सुनवाई क" क" तारीख तारीख / Date of Hearing : 01-09-2015 सुनवाई सुनवाई क" क" तारीख तारीख घोषणा क" तारीख / Date of Pronouncement : 21-10-2015 आयकर आयकर अिधिनयम अिधिनयम,1961 क" क" धारा धारा 254(1)केकेकेके अ"तग" अ"तग"त आदेश आदेश आयकर आयकर अिधिनयम अिधिनयम क" क" धारा धारा अ"तग" अ"तग" आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद"य सद"य राजे"" राजे"" केकेकेके अनुसार अनुसार PER RAJENDRA, AM- लेखा लेखा लेखा सद"य सद"य राजे"" राजे"" अनुसार अनुसार Challenging the orders dt.07.12.2011of CIT(A)-9,Mumbai,the assessee has raised following grounds of appeal: “1.The ld. CIT(A) erred in partly confirming the action of ld. ACIT of disallowing a part of expense by attributing the same towards earning of exempt income.
Without prejudice to the above claim, the ld. Commissioner of Income tax(Appeals) erred in confirming the action of ld. ACIT of treating the figure of Stock in trade as investments for the purpose of calculation of disallowance u/s.14A.
The appellant reserves the right to add, to alter and to amplify the Grounds of Appeal.”
The assessee-an individual,engaged in the business of share broking activities,filed his return of income on 27.09.2008,disclosing total income at Rs.18,66,39,440/-/.The Assessing Office(AO) completed the assessment on 13/12/2010,u/s.143(3)of the Act,determining his income at Rs.
92 Crores. 2.Effective ground of appeal is about disallowance made u/s.14A of the Act.During the assessment proceedings,the AO found that the assessee had earned dividend income of Rs.84.97 lakhs,that same was claimed exempt u/s.10 of the Act,that the assessee had incurred any expenditure to earn such income.Referring to the provisions of section 14A r.w.Rule 8D of the Income tax Rules,1962 (Rules)the AO disallowed Rs.7,58,435/- and Rs.16,26,402/-under the heads interest expenditure and one half % of the total investment of the average of the value of investment respectively. Thus,total disallowance of Rs.23.84 lakhs was made by the AO. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA).Before him,it was argued that the investment were made in AY.2000-01out of own fund, that no loans were outstanding as on 31.03.2000,that borrowed funds were not used
ITA/1244/M/12-Ashok Kumar
for investment,that borrowed funds were used for margin money for business as share broker,that interest was not directly attributable to investment.After considering the submissions of the assessee and the assessment order,the FAA held that the assessee could not establish the nexus between the entire capital being invested in securities, that it was impossible to believe that out of the common hotch potch of funds the entire capital would have gone to investment in shares without a part of shares going to the business, that it was not categorical as to how much of the sum was invested in business.He referred to case of Dhapa & Sons (54 DTR 345) and Smt. Leena Ramachandran (45 DTR 372) and observed that the assessee had not given any details to work out the direct nexus of interest expenditure related to exempt income, that the case of the assessee was covered by sub section 3 of section 14A as well as sub section 2. Relying upon the decision of Daga Capital Management (26 SOT 603) he held that even if shares were held in stock- in- trade same were to be considered for the purpose of disallowance.Finally, he upheld the disallowance of Rs.23,84,837/- as worked out by the AO. 4.Before us the Authorised Representative (AR) stated that the AO had made the disallowance without recording any satisfaction, that majority of the shares formed part of the stock, that the average investment of the assessee was Rs.32.52 crores, that the disallowance calculated on the part of the investment would not be more than Rs.15,320/-.He relied upon the case of CCI Ltd. (206 Taxmann 563) and Smt. Leena Ramachandra (supra). Departmental Representative (DR) supported the order of the FAA. 5.We have considered the rival submissions and perused the material on record. We find that the AO had computed the disallowance considering the provisions of section 14A r.w. Rule 8D, that the assessee had submitted that shares held by it were part of stock-in-trade, that the assessee had not provided the detailed working before the AO or the FAA with regard to shares held as stock- in- trade/investment. We are of the opinion that disallowance u/s. 14A can be made only when the shares are held as investment and not as stock-in trade. As the issue has not been deliberated upon by the AO in absence of availability of details of shares held under both the categories, therefore, in the interest of justice we are remitting the matter to his file. He is directed to exclude the stock-in-trade while calculating the disallowance. The assessee is directed to file the detailed working of the stock in trade before the AO. Considering the peculiar facts and circumstances of the case effective ground of appeal is allowed in favour of assessee. As a result,appeal filed by the assessee stands partly allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील अंशतः मंजूर क" जाती है. Order pronounced in the open court on 21st October,2015. आदेश क" घोषणा खुले "यायालय म" "दनांक 21 अ"टूबर,2015 को क" गई । (पाथ"सारथी चौधरी / Parthasarathy Choudhury) (राजे"" / RAJENDRA) "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई/Mumbai,"दनांक/Date: 21.10.2015 व.िन.स.Jv.Sr.PS. 2
ITA/1244/M/12-Ashok Kumar
आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत 1.Appellant /अपीलाथ"
Respondent /""यथ" 3.The concerned CIT(A)/संब अपीलीय आयकर आयु#, 4.The concerned CIT /संब आयकर आयु# 5.DR A Bench, ITAT, Mumbai /िवभागीय "ितिनिध, ए खंडपीठ,आ.अ."याया.मुंबई 6.Guard File/गाड" फाईल स"यािपत "ित //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.