Shri Somil Narang,, Indore v. The ACIT, Indore

ITA 149/IND/2010 | 2006-2007
Pronouncement Date: 30-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 14922714 RSA 2010
Assessee PAN ACGPN2822B
Bench Indore
Appeal Number ITA 149/IND/2010
Duration Of Justice 1 year(s) 8 month(s) 6 day(s)
Appellant Shri Somil Narang,, Indore
Respondent The ACIT, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-11-2011
Date Of Final Hearing 20-12-2010
Next Hearing Date 20-12-2010
Assessment Year 2006-2007
Appeal Filed On 24-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARM A A.M. PAN NO. :ACGPN2822B I.T.A.NO.149/IND/2010 A.Y. : 2006-07 SHRI SOMIL NARANG ACIT 89 JAORA COMPOUND VS 1(2) RANGE 1 INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI PRAKASH JAIN C. A. RESPONDENT BY : SHRI ARUN DEWAN SR. DR DATE OF HEARING : 19.09.2011 DATE OF PRONOUNCEMENT : 30.11.2011 O R D E R PER R. C. SHARMA A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I DATED 2.12.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUNDS TAKEN BY THE ASSESSEE IN THIS APPEAL READ A S UNDER :- -: 2: - 2 1) THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW AS WELL AS ON THE FACTS. IT IS BASED ON INCORRECT INTERPRETATION OF LAW AND THE FACTS HAVE ALSO BEEN INCORRECTLY CONSTRUED. 2.1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN UPHOLDING THE AO ACTI ON IN RESPECT OF DISALLOWING EXPENSES OF RS. 53 63 126/- U/S 14A AND BY APPLYING PROVISIONS OF RULE 8-D OF THE INCOME TAX RULES WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSION MADE BEFORE HIM. WITHOUT PREJUDICE TO THE ABOVE 2.2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT DURING THE YEAR ASSESSEE EARNED TAX FREE INCOME BEING DIVIDEND OF ONLY RS. 7 88 252/- THUS IN ANY CASE AMOUNT OF DISALLOWANCE COULD NOT BE EXCEED THE TAX FREE INCOME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE -: 3: - 3 AND SALE OF SHARES WHEREIN HE DECLARED JOBBING PROF IT OF RS. 5.45 LAKHS IN ADDITION TO PROFIT OF RS. 50.33 LAKHS ON COMMODITY TRADING. ASSESSEE WAS ALSO IN RECEIPT OF DIVIDEND INCOME OF RS. 7.89 LACS. THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF EXPENSES INCURRED FOR EARNING EXEMPT INC OME SINCE THE SAME WAS NOT ALLOWABLE AS PER SECTION 14A. THE AO COMPUTED THE AMOUNT OF INTEREST DISALLOWABLE AT RS. 53.63 LAKHS AS PER RULE 8D. AGAINST THIS ORDER THE ASSES SEE APPROACHED TO THE CIT(A). THE CIT(A) OBSERVED THAT SIMILAR ISSUE WAS INVOLVED IN THE CASE OF SHRI NARENDRA NAR ANG MEMBER OF THIS GROUP WHICH WAS ALSO REPRESENTED BY SAME A.R. WHO HAS REPRESENTED APPEAL UNDER CONSIDERATION . BY STATING THAT FACTS IN THE CASE OF NARENDRA NARANG W AS SIMILAR HE CONFIRMED THE ACTION OF AO FOR DISALLOWANCE OF I NTEREST AND ASSESSEE IS NOW BEFORE US. 4. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATI VE THAT AO HAS COMPUTED DISALLOWANCE OF INTEREST AS PE R RULE 8D WHICH IS EFFECTIVE ONLY FROM ASSESSMENT YEAR 2008-0 9 AS PER THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GO DREJ BOYCE MFG. COMPANY LIMITED 328 ITR 81 WHEREAS RELEVANT -: 4: - 4 ASSESSMENT YEAR UNDER CONSIDERATION IS 2006-07 THE REFORE THE AO WAS NOT JUSTIFIED IN APPLYING RULE 6D RETROS PECTIVELY. HE FURTHER CONTENDED THAT INTEREST WAS MAINLY INCURRED FOR EARNING THE INCOME ON SHARE AND COMMODITY TRADING A ND RENTAL INCOME FROM GODOWN AT LOHA MANDI INDORE. TH E LD. AUTHORIZED REPRESENTATIVE ALSO PLACED ON RECORD THE ORDER OF I.T.A.T. IN THE CASE OF NARENDRA NARANG WHEREIN UN DER THE SIMILAR FACTS AND CIRCUMSTANCES DISALLOWANCE OF IN TEREST EXPENDITURE WAS RESTRICTED TO THE EXEMPT INCOME EAR NED BY THE ASSESSEE. 5. ON THE OTHER HAND THE LD. SENIOR D.R. RELIED ON TH E ORDERS OF LOWER AUTHORITIES AND CONTENDED THAT SINC E THE ASSESSEE HAS EARNED TAX FREE INCOME INTEREST EXPEN DITURE INCURRED IS LIABLE TO BE DISALLOWED U/S 14A READ WI TH RULE 8-D OF THE INCOME-TAX ACT 1961. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEE WAS HAVING INCOME FRO M TRADING IN SHARES AND SECURITIES WHEREIN HE HAS DECLARED NE T PROFIT OF RS. 5.45 LAKHS AS WELL AS INCOME FROM TRADING OF CO MMODITY -: 5: - 5 AMOUNTING TO RS. 5.33 LAKHS. BOTH OF THESE PROFITS ARE LIABLE TO TAX. HOWEVER IN ADDITION TO IT THE ASSESSEE HAS ALSO EARNED DIVIDEND INCOME OF RS. 7 88 252/- WHICH IS EXEMPT F ROM TAX. UNDER THE SIMILAR FACTS AND CIRCUMSTANCES THE I.T. A.T. INDORE BENCH IN THE CASE OF NARENDRA NARANG IN I.T.A.NO. 55/IND/2010 FOR THE ASSESSMENT YEAR 2006-07 VIDE OR DER DATED 22ND JUNE 2011 HELD AS UNDER :- 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FIND THAT THE ASSESSEE WAS CARRYING ON BUSINESS OF PURCHASE AND SALE OF SHARES AND HAS EARNED BUSINESS PROFIT OF RS. 18.01 LACS WHICH IS LIABLE TO TAX UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT. THE PROVISIONS OF SECTION 14A OF THE ACT FOR DISALLOWANCE OF ANY EXPENDITURE IS APPLICABLE WHEN THE ASSESSEE HAS INCURRED EXPENDITURE FOR EARNING EXEMPTED INCOME MEANING THEREBY IF ANY EXPENDITURE HAS BEEN INCURRED FOR GIVING RISE TO INCOME WHICH IS NOT LIABLE TO TAX THE SAME CANNOT BE ALLOWED WHILE COMPUTING THE -: 6: - 6 PROFIT OUT OF SUCH TRANSACTIONS. HOWEVER IN THE INSTANT CASE BEFORE US THE ASSESSEE HAS CARRIED ON THE BUSINESS OF PURCHASE AND SALE OF SHARES WHEREIN PROFIT OF RS. 18.01 LACS HAS BEEN EARNED WHICH IS LIABLE TO TAX AND THE SAME IS NOT EXEMPT FROM TAXATION. UNDER THESE FACTS AND CIRCUMSTANCES NO DISALLOWANCE OF EXPENDITURE IS WARRANTED U/S 14A OF THE ACT INSOFAR AS THERE IS NO OBSERVATION OF THE AO TO THE EFFECT THAT THE ASSESSEE HAS INVESTED ANY INTEREST BEARING FUND IN ACQUIRING THE SHARES ON WHICH THE ASSESSEE HAS EARNED DIVIDEND INCOME. EVEN IN RESPECT OF DIVIDEND INCOME WHICH IS NOT LIABLE TO TAX THE DISALLOWANCE OF INTEREST EXPENDITURE CAN BE MADE IF THE ASSESSEE HAS INVESTED INTEREST BEARING FUNDS FOR EARNING DIVIDEND INCOME OTHERWISE NO DISALLOWANCE IS WARRANTED. 11. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES IN DISALLOWING INTEREST EXPENDITURE OF RS. 13.17 LACS. 12. IN THE RESULT GROUND NO.3 OF THE APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. -: 7: - 7 7. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF COORDINATE BENCH AS STATED ABOVE FACTS OF WHICH AR E PARI MATERIA WITH THE CASE OF THE ASSESSEE UNDER CONSIDE RATION. RESPECTFULLY FOLLOWING THE PROPOSITION AS LAID DOWN BY COORDINATE BENCH IN OTHER GROUP MEMBERS OF THE ASSE SSEE WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE INTEREST TO THE EXTENT OF EXEMPT INCOME OF RS. 7 88 252/- EARNED BY ASSESS EE UNDER THE HEAD DIVIDEND INCOME. WE DIRECT ACCORDINGLY. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH NOVEMBER 2011. CPU* 303