Income Tax Appellate Tribunal - Mumbai
Bharat Jayantilal Patel, Mumbai vs Department Of Income Tax on 16 October, 2014
आयकर अपील य अ धकरण "B" यायपीठ मब
ंु ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI N.K. BILLAIYA, AM AND SHRI VIVEK VARMA, JM
आयकर अपील सं./I.T.A. No.8025/ Mum/2010
( नधारण वष / Assessment Year : 2007-08
Shri Bharat Jayantilal बनाम/ DCIT, Range 4(1),
Patel, Mumbai.
Vs.
3-3A Churchgate House,
V.N. Road, Fort,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAAPP 6652 R
(अपीलाथ /Appellant) .. ( यथ / Respondent)
आयकर अपील सं./I.T.A. No.8104/ Mum/2010
( नधारण वष / Assessment Year : 2007-08
DCIT, Range 4(1), बनाम/ Shri Bharat Jayantilal
6 t h floor, Room No. 640, Patel,
Vs.
Aayakar Bhavan, 3-3A Churchgate House,
Mumbai- 20. V.N. Road, Fort,
Mumbai - 400 001.
थायी ले खा सं . /PAN : AAAPP 6652 R
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Appellant by Dr. K. Shivram &
Shri Neelam C. Jadhav
Department by Shri Love Kumar
ु वाई क तार ख / Date of Hearing
सन : 16-10-2014
घोषणा क तार ख /Date of Pronouncement : 16-10-2014
[
आदे श / O R D E R
PER N.K. BILLAIYA, A.M. :
एन. के. बलै या, लेखा सद य These cross appeals by the assessee and the Revenue are directed against the order of ld. CIT(A) -8, Mumbai dated 27-09-2010 pertaining to 2 ITA 8025/M/10 & ITA 8104/M/10 A.Y. 2007-08. Both these appeals were heard together and disposed of by this common order for the sake of convenience.
2. The first grievance in both these appeals relate to the disallowance u/s 14A of the Income Tax Act, 1961.
3. During the course of the assessment proceedings, the A.O. noticed that the assessee has earned dividend income of Rs. 1,18,89,579/- which is claimed as exempt. The A.O. further noticed that the assessee has not allocated any expenses for earning exempt income. The assessee was asked to explain. The assessee replied that he is a share broker whose income constitutes from composite business activity, therefore, no specific expenditure has been incurred in earning the dividend income and, hence, no expenditure is required to be allocated against the dividend income. The explanation of the assessee was not accepted by the A.O. who proceeded to compute the disallowance u/s 14A read with Rule 8-D of the Income Tax Rules, 1962. The disallowance was computed at Rs. 52,59,744/-. Before the ld. CIT(A), it was strongly contended that Rule 8-D is not applicable for the year under consideration. The ld. CIT(A) accepted this contention of the assessee that the applicability of Rule 8-D is prospective and is applicable from A.Y. 2008-09. At the same time, the ld. CIT(A) observed that as per the ratio of Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 ITR 81 (Bom) reasonable expenses have to be disallowed. The ld. CIT(A) gave a formula which is :
Total expenditure (direct & indirect) x value of transaction in share yielding exempt income Value of total transactions in share The assessee and Revenue are aggrieved by this findings of the ld. CIT(A).
4. We have carefully perused the orders of the authorities below. It is the settled position of law that Rule 8-D is applicable from A.Y. 2008-09 and therefore not applicable for the year under consideration. However, at the 3 ITA 8025/M/10 & ITA 8104/M/10 same time a reasonable expenditure has to be disallowed. The ld. CIT(A) has given a formula for the allocation of expenditure of the earning of exempt income which is incorrect in the eye of law. We, therefore, set aside the findings of the ld. CIT(A) and restore the matter back to the file of the A.O. The A.O. is directed to disallow a reasonable expenditure on the facts of the case.
5. In the result, ground 1 of both the appeals is treated as allowed for statistical purpose.
6. The only other ground in Revenue's appeal relates to the deletion of addition of Rs. 2,56,287/- being payment made to stock exchange as technical fee.
7. The A.O. noticed that the assessee has debited its P&L account by stock exchange of Rs. 2,56,287/- which mainly includes BSE membership, turnover charges and other charges of stock exchange. The A.O. found that the assessee has not deducted tax at source. The assessee was asked to explain why the amount of expenses should not be disallowed u/s 40(a)(ia) of the Act. It was explained that these charges are paid to BSE for membership fee, turnover charges and various client services provided during the year. It was contended that these charges do not come under the purview of section 194J of the Act. Reliance was placed on the decision of the Tribunal in the case of Kotak Securities Limited vs. ACIT reported in (2008) 25 SOT 440 (Mum). The A.O. disallowed the same holding that the said decision of the Tribunal has not been accepted by the Department. The ld. CIT(A) deleted the addition holding that the issue is squarely covered by the decision of the Tribunal (supra).
8. We have carefully perused the orders of the authorities below. The only reason for making the disallowance by the A.O. is that the Department has 4 ITA 8025/M/10 & ITA 8104/M/10 not accepted the decision of the Tribunal. In our considered opinion, this cannot be a reason for making the disallowance. We find that the charges paid by the assessee to the BSE do not come under the purview of "technical fees" and hence provisions of section 194 J of the Act are not applicable. We therefore decline to interfere with the findings of the ld. CIT(A).
9. In the result, appeal by the assessee is treated as allowed for statistical purpose and appeal by the Revenue is partly allowed for statistical purpose.
Order pronounced in the open court on 16th October, 2014. आदे श क घोषणा खल ु े यायालय म दनांकः 16-10-2014 को क गई ।
Sd/- sd/-
(VIVEK VARMA) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated - 16-10-2014.
[
व. न.स./ R.K., Sr. PS
..0आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT)A)-8, Mumbai
4. आयकर आयु त / CIT - 4, Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai B Bench
6. गाड फाईल / Guard file.
ु ार/ BY ORDER,
आदे शानस
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai