Ethio Plastics Pvt.Ltd.,, Baroda v. The Dy.CIT.,Circle-1(2),, Baroda

ITA 2699/AHD/2014 | 2007-2008
Pronouncement Date: 29-11-2017 | Result: Allowed

Appeal Details

RSA Number 269920514 RSA 2014
Assessee PAN AAACE4587D
Bench Ahmedabad
Appeal Number ITA 2699/AHD/2014
Duration Of Justice 3 year(s) 1 month(s) 21 day(s)
Appellant Ethio Plastics Pvt.Ltd.,, Baroda
Respondent The Dy.CIT.,Circle-1(2),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Assessee
Tags 2699-ahd-2014
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-11-2017
Assessment Year 2007-2008
Appeal Filed On 08-10-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD .. BEFORE SHRI S.S. GODARA JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER ./ I.T.A. NO.2699/AHD/2014 ( / ASSESSMENT YEAR : 2007-08) ETHIO PLASTICS PVT.LTD. 61 KUNJ SOCIETY ALKAPURI BARODA 390 007 / VS. THE DY.CIT CIRCLE-1(2) BARODA $ ./ ./ PAN/GIR NO. : AAACE 4587 D ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : MS.URVASHI SHODHAN AR ($'*) / RESPONDENT BY : SHRI ADITYA SHUKLA SR.DR + *- / DATE OF HEARING 09/11/2017 ./0*- / DATE OF PRONOUNCEMENT 29 / 11 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL FILED AT THE INSTANCE OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS )-I BARODA [CIT(A) IN SHORT] DATED 01/07/2014 IN THE MATTER OF ASSESSMENT ORDER UNDER S.143(3) OF THE INCOME TAX ACT 1961 (HEREINA FTER REFERRED TO AS 'THE ACT') DATED 08/12/2009 RELEVANT TO ASSESSMENT YEAR (AY) 2007-08. ITA NO. 2699/AH D/2014 ETHIO PLASTICS P LTD. VS. DCIT ASST.YEAR 2007-08 - 2 - 2. BY WAY OF ITS GROUNDS OF APPEAL THE ASSESSEE HAS AGITATED DISALLOWANCE OF RS.53 64 309/- MADE BY THE ASSESSIN G OFFICER (AO) BY INVOKING SECTION 14A R.W.S.RULE 8D OF THE INCOME TA X RULES 1962. 3. AGGRIEVED BY THE ORDER OF THE AO AS CONFIRMED B Y THE CIT(A) THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. 4. THE LD.AR FOR THE ASSESSEE AT THE OUTSET SUBMITT ED THAT THE ASSESSEE IS ENGAGED AS A DEALER OF SHARES AND SECUR ITIES. THE SHARES AND SECURITIES ARE ACCORDINGLY HELD AS BUSINESS INVENTO RIES FROM TIME TO TIME ON WHICH DIVIDEND ARE AT TIMES RECEIVED. THE ASS ESSEE HAS DECLARED EXEMPT INCOME OF RS.42 72 571/- RECEIVED BY WAY OF DIVIDEND ON SUCH INVENTORIES. THE LD.AR POINTED OUT THAT THE ASSESS EE IS PRIMARILY ENGAGED IN TRADING OF SHARES AND THEREFORE PREDOMIN ANT MOTIVE TOWARDS HOLDING THE INVENTORY IS ATTRIBUTABLE TO GENERATE P ROFITS FROM TRADING OF SHARES IN COURSE OF ITS BUSINESS. THE DIVIDEND REC EIVED ARE ONLY INCIDENTAL TO THE PRIMARY MOTIVE OF THE TRADING. THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE ARE ATTRIBUTAB LE TO THE TRADING ACTIVITIES AND CANNOT BE ARTIFICIALLY DISSECTED BY RESORTING TO SECTION 14A OF THE ACT. THE LD.AR ALSO PLACED RELIANCE UPON TH E DECISION OF COORDINATE BENCH OF TRIBUNAL IN ITS OWN CASE IN ITA NO.3033/AHD/2010 (AY 2006-07) ORDER DATED 12/12/2014 AND IN ITA NO.8 48/AHD/2012 (AY 2008-09) ORDER DATED 10/12/2012 WHERE THE DISALLOWA NCE MADE UNDER ITA NO. 2699/AH D/2014 ETHIO PLASTICS P LTD. VS. DCIT ASST.YEAR 2007-08 - 3 - S.14A R.W.RULE 8D OF THE I.T.RULES WAS DELETED IN S IMILAR CIRCUMSTANCES. THE LD.AR ALSO REFERRED TO A RECENT DECISION RENDER ED BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN PRINCIPAL COMMISSI ONER OF INCOME- TAX VS. STATE BANK OF PATIALA (2018) 391 ITR 218 ( P&H) ORDER DATED 30/06/2017 WHERE THE VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE WAS ENDORSED. 5. WE HAVE PERUSED THE CASE RECORDS AND CONSIDERED THE RIVAL SUBMISSIONS. THE SOLITARY ISSUE IN CONTROVERSY IS TOWARDS MAINTAINABILITY OF DISALLOWANCE OF SECTION 14A WHERE THE ASSESSEE H AS EARNED TAX-FREE DIVIDEND INCOME IN THE COURSE OF CARRYING ON BUSINE SS OF PURCHASE AND SALE OF SHARES AND SECURITIES AND WHERE SHARES AND SECURITIES IN QUESTION CONSTITUTED ASSESSEES STOCK IN TRADE. IT IS THE C ASE OF THE ASSESSEE THAT IT DID NOT HOLD SHARES AND SECURITIES WITH A VIEW TO E ARN TAX-FREE DIVIDEND INCOME BUT TRADED IN SUCH SHARES. THE DIVIDEND INC OME AROSE TO THE ASSESSEE ON INVENTORIES HELD FROM TIME TO TIME MERE LY AS AN INCIDENCE OF SUCH HOLDING AND THUS IN THE NATURE OF PASSIVE BENE FIT. IT IS THE CASE OF THE ASSESSEE THAT EXPENDITURE INCURRED IN RELATION TO INCOME (DIVIDEND) NOT INCLUDIBLE IN TOTAL INCOME CAN BE DISALLOWED ON LY IF IT IS INCURRED BY THE ASSESSEE IN RELATION TO INCOME EXEMPT FROM TAX. IT IS THE CASE OF THE ASSESSEE THAT EXPENDITURE HAVE BEEN INCURRED ON TRA DING ACTIVITIES IN SHARES AND SECURITIES PER SE THE INCOME FROM WHICH IS CHARGEABLE TO TAX. THE DIVIDEND INCOME INCIDENTALLY ALSO ARISING IS ON LY A BY-PRODUCT AND ITA NO. 2699/AH D/2014 ETHIO PLASTICS P LTD. VS. DCIT ASST.YEAR 2007-08 - 4 - EXPENDITURE INCURRED TOWARDS TRADING CANNOT BE SAID TO BE ATTRIBUTABLE TO SUCH TAX-FREE INCOME OF INCIDENTAL NATURE. 6. WE FIND THAT THE ISSUE IS NO LONGER RES INTEGRA . THE COORDINATE BENCH HAS EXAMINED THE ISSUE IN ASSESSEES OWN CASE IN AY 2006-07 & 2008-09 AND ADJUDICATED IN FAVOUR OF ASSESSEE. WE ALSO TAKE NOTE OF THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA) APPROVING THE VIEW OF THE TRIBUNAL. THEREFORE WITHOUT ELABORATING FURTHER WE RESPECTF ULLY FOLLOW THE JUDICIAL PRECEDENTS AVAILABLE ON THIS SCORE AND DIRECT THE A O TO DELETE THE DISALLOWANCE MADE UNDER S.14A OF THE ACT WITH RESP ECT TO SHARES AND SECURITIES HELD AS BUSINESS ASSETS. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 29/ 11 /2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 29/ 11 /2017 4..+ .+../ T.C. NAIR SR. PS ITA NO. 2699/AH D/2014 ETHIO PLASTICS P LTD. VS. DCIT ASST.YEAR 2007-08 - 5 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-I BARODA 5. 9:-+67 670 5 / DR ITAT AHMEDABAD 6. < / GUARD FILE. / BY ORDER (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION .. 29.11.17 (DICTATION-PAD 9- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.11.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.30.11.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER