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TMI Blog2016 (3) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member For the Revenue : Shri Satya Pal Kumar (D.R.). For the Assessee : None. ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 915/Mum/2013, is directed against the order dated 05-11-2011 passed by the learned Commissioner of Income Tax (Appeals)- 32, Mumbai (Hereinafter called the CIT(A) ), the appellate proceedings before the CIT(A) arose from the assessment order dated 28.12.2011 passed by the learned assessing officer (Hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961(Hereinafter called the Act ), for the assessment year 2009-10. 2. At the time of hearing before us, none appeared on behalf of the assessee Therefore, we proceed to dispose of the appeal after hearing the ld. D.R. 3. The grounds raised by the Revenue in the memo of appeal filed with the Tribunal read as under:- 1. On the facts in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance made by the Assessing Officer u/s.14A. 2. On the facts in the circumstances of the case and in law, the Ld.CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the other in respect of his personal assets. The business set was submitted before the AO. The assessee submitted that the business transactions are separate from the personal set. However, as both the books of accounts relate to the same person, a consolidated Balance Sheet had to be prepared so as to fill in the return of income with the Revenue filed for the relevant year reflecting both business activities and personal transactions as the return form (ITR-4) does not have separate demarcation for such circumstances. The assessee submitted that most of the investments which are non-taxable are made through the personal set and thus most of the tax-free income is in the personal set. As regards disallowance of expenses u/s. 14A of the Act, in relation to the exempt income shown in personal set it is submitted that none of the expenditure has been claimed in the return of income filed with the Revenue as business expenditure except that the expenditure on Rates and Taxes has been claimed as a deduction from Income from House property. Thus in nutshell, no expense has been claimed in respect of personal set. The assessee further submitted that investments have been made out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which is chargeable to tax and that no loans from any banks has been availed by the assessee. The assessee relied on the following judgments:- (i) Mumbai-Tribunal order in the case of Godrej Industries Ltd v. DCIT (ITA No. 1090/Mum/09). (ii) Hon'ble Punjab Haryana High Court judgment in the case of CIT v. Hero Cycles 323 ITR 158 (PH). (iii) Reliance Utilities Power Ltd (ITA No 1398 of 2008) order dated 09.01.2009. (iv) Hon'ble Kerela High Court in the case of CIT v. Smt.Leena Ramachandran 2010 TIOL 541 HC Kerala IT (ITA No.1784 of 2009). (v) Yatish Trading Co. P Ltd, Vs ACIT 1(3), ITAT (Mumbai) order dated 10.11.2010. (vi) Vidyut Investments Ltd 10-S0T -0284. The A.O. after considering the submission of the assessee, rejected the claim of assessee by following the decision of his predecessor for the assessment year 2008-09 whereby disallowance of ₹ 1,19,68,218/- u/s. 14A of the Act was made for the assessment year 2008-09 and on further appeal before the CIT(A) by the assessee, the CIT(A) restricted the disallowance made by the AO u/s. 14A to ₹ 24,64,871/-. The decision of the CIT(A) was not accepted by the Revenue and appeal to the Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes Nature of transactions Personal investments Share/securities trading Shares held as Investments Stock-in-trade Funding of assets Own sources Profits + Loan Expenditure claimed No Yes Whether dividend main source of income Yes No, incidental in respect of shares held as stock-intrade. The assessee submitted that since both the books of account relate to the same person, a consolidated balance sheet had to be prepared so as to fill in the return of income with the Revenue for the relevant year reflecting both business activities and personal transactions as the return form does not have separate demarcation for such circumstances. The assessee submitted that he has offered the following exempt income in the return of income filed with the Revenue:- Exempt income Total Personal set Business set Dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of imagination, it can be contended that the assessee incurred an interest of ₹ 1,78,05,981/- to earn an exempt income of only ₹ 14,95,160/-. The assessee submitted that the assessee is in the business of share trading and the intention of taking loan is to do share trading and not to earn dividend and this dividend income earned is only incidental to the trading activity of shares carried on by the assessee. The assessee has earned dividend in this set only on account of shares which were purchased and sold and were held as stock-in-trade at the beginning and close of the previous year, income from which has already been shown as part of total taxable income. The assessee relied on the decision of Hon ble Karnataka High Court in the case of CCI Ltd. v. JCIT [206 Taxman 563], decision in the case of Vidyut Investments Limited 10-SOT-0284, decision of Hon ble Kerala High Court in the case of CIT v. Smt. Leena Ramachandran, 2010 TIOL 541 HC Kerala (ITA No. 1784 of 2009) and also decision of Mumbai-Tribunal in the case of Yatish Trading Co. Pvt. Limited v. ACIT vide orders dated 10.11.2010. The assessee submitted that the CIT(A) in his order dated 22nd July, 2011 for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance sheet which yield exempt income. The interest has been paid by the assessee to brokers through whom the assessee has purchased/sold the shares for trading and interest has been paid to brokers on the outstanding balances from time to time on account of shares held as stock-in-trade only. In the personal balance sheet, the assessee is having taxable income earning investments as well as tax free earning investments. In the personal books, the expenditure claimed by the assessee is only some de-mat charges and bank commission, rates and taxes etc. and there were no borrowed funds appearing in the personal balance sheet which was disallowed by the assessee in computation of income while filing return of income with the Revenue. The CIT(A) held that the Hon ble Karnatka High Court in the case of CCI Ltd. (supra) and Hon ble Kerala High Court in the case of Leena Ramchandran (supra) held that disallowance u/s 14A in respect of dividend received on shares held as stock-in-trade cannot be made and these decisions have over-ruled the Special Bench of the Mumbai- Tribunal decision in the case of Daga Capital Management (P) Ltd(supra). The CIT(A) held that recently the Mumbai Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al investment as well as dividend income from trading in shares. It also received tax free interest from relief bonds. The assessee has claimed that it had made separate accounts including separate bank accounts and balance sheets for personal investments and trading activities in which expenses relating to these two activities have been shown separately. CIT(A) has given a clear finding that the assessee had made separate accounts and balance sheets for the two activities. Nothing has been produced before us to controvert the finding of the CIT(A). Therefore, the claim of the assessee that separate accounts including bank accounts and balance sheets had been maintained for the two activities has to be accepted. With regard to personal investment for which separate account has been maintained CIT(A) has given a clear finding that investments had been made from own funds. The investments in RBI relief bonds and LIC had been made in earlier years and since the assessee having vast experience in these matters was personally handling these investments, there were no expenses required. Similarly the shares which were of unlisted group companies held for the purpose of retaining control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i-tribunal and the Revenue is in appeal before the Hon ble jurisdictional High Court of Bombay. 10. We have heard the ld. D.R. We have observed that the Mumbai Tribunal in assessee s own case for the assessment year 2008-09 in ITA No. 6332/Mum/2011 vide orders dated 11-01-2013 set aside the order of CIT(A) and deleted the disallowance upheld by the CIT(A) in relation to trading in share. We have also noted that in the recent judgment of Hon ble High Court of Bombay in the case of HDFC Bank Ltd. v. DCIT vide Writ Petition No. 1753 of 2016 dated February, 25, 2016 [2016] 67 taxmann.com 42 (Bombay) has approved the proposition that no disallowance of expenditure can be made u/s 14A of the Act with respect to the shares held by tax payers as stock-intrade whereby the decision of the Mumbai Tribunal in India Advantage Securities Limited (2013) TaxPub (DT) 2301(Mum-Trib.) was confirmed by Hon ble Bombay High Court in ITA No. 1131/31 decided on 31-04-2014 ((2016) 380 ITR 0471 (Bom.) ) whereby Hon ble Bombay High Court held that no substantial question of law arise from the decision of Mumbai Tribunal in the case of India Advantage Securities Private Limited. Respectfully following the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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