M/s. HSBC SECURITIES & CAPITAL MARKETS (I) P. LTD., MUMBAI v. DCIT. Rg. - 4(1), MUMBAI

ITA 3186/MUM/2008 | 2004-2005
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 318619914 RSA 2008
Assessee PAN AAACJ1395E
Bench Mumbai
Appeal Number ITA 3186/MUM/2008
Duration Of Justice 2 year(s) 10 month(s) 10 day(s)
Appellant M/s. HSBC SECURITIES & CAPITAL MARKETS (I) P. LTD., MUMBAI
Respondent DCIT. Rg. - 4(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 18-03-2011
Date Of Final Hearing 10-03-2011
Next Hearing Date 10-03-2011
Assessment Year 2004-2005
Appeal Filed On 08-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI BEFORE SHRI R V EASWAR PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER I T A NO: 3186/MUM/2008 (ASSESSMENT YEAR: 2004-05) M/S HSBC SECURITIES AND CAPITAL MARKETS APPELLANT (INDIA) PRIVATE LIMITED MUMBAI (PAN: AAACJ1395E) VS DEPUTY COMMISSIONER OF INCOME TAX RESPONDENT RANGE 4(1) MUMBAI APPELLANT BY: SHRI YOGESH THAR RESPONDENT BY: SHRI R S SRIVASTAV O R D E R R V EASWAR PRESIDENT: THE ASSESSEE IN THIS APPEAL IS A PRIVATE LIMITED C OMPANY ENGAGED IN STOCK BROKING INVESTMENT BANKING AND TR ADING IN SECURITIES. THE APPEAL RELATES TO THE ASSESSMENT Y EAR 2004-05 AND ARISES OUT OF THE ASSESSMENT ORDER DATED 28 TH DECEMBER 2006 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. THE FIRST GROUND IS AGAINST THE DISALLOWANCE OF THE EXPENSES OF ` 20 22 077/- UNDER SECTION 14A BY TREATING THE EXPEN SES AS HAVING BEEN INCURRED IN RELATION TO THE EARNING OF TAX FREE DIVIDEND. THE ASSESSEE DECLARED DIVIDEND INCOME OF ` 4 04 41 530/-. IT WAS EXEMPT FROM TAX ABOUT WHICH THERE IS NO DISPUTE. A CCORDING TO THE ITA NO: 3186/MUM/2008 2 ASSESSING OFFICER SECTION 14A WAS APPLICABLE. HE A PPLIED THE SECTION AND DISALLOWED 5% OF THE DIVIDEND INCOME AS EXPENSES FALLING UNDER THE ABOVE SECTION. THE ONLY ARGUMENT ADVANCED BEFORE US ON BEHALF OF THE ASSESSEE IS THAT THE DIV IDEND AMOUNTING TO ` 3.30 CRORES CAME FROM A SINGLE COMPANY BY NAME HSBC PRIMARY DEALERSHIP (INDIA) PRIVATE LIMITED WHICH W AS A GROUP COMPANY AND TO ATTRIBUTE 5% OF THE DIVIDEND AS EXPE NSES INCURRED IN RELATION TO THE SAME WAS ARBITRARY AND TOO HIGH. IT WAS SUBMITTED THAT THE ENTIRE DIVIDEND WAS RECEIVED UNDER A SINGL E DIVIDEND WARRANT AND NO EXTRA EXPENDITURE HAD TO BE INCURRED BY THE ASSESSEE. RELIANCE WAS PLACED ON THE ORDER OF THE L BENCH OF THE TRIBUNAL MUMBAI IN ITA NO: 3684/MUM/2005 DATED 2 9 TH OCTOBER 2010 FOR THE ASSESSMENT YEAR 2001-02. ON A CAREFU L CONSIDERATION OF THE MATTER IN THE LIGHT OF THE ORDER CITED ABOVE WE FIND FORCE IN THE SAME. IT IS NOT IN DISPUTE THAT ` 3.30 CRORES WAS RECEIVED AS DIVIDEND FROM THE GROUP COMPANY OUT OF THE TOTAL DIVIDEND OF ` 4.04 CRORES. TO ATTRIBUTE 5% OF THE DIVIDEND INCOM E FROM THE SAID COMPANY AS EXPENSES INCURRED IN RELATION TO THE DIV IDEND INCOME IN OUR OPINION IS TOO HIGH AND UNREALISTIC. IN THE OR DER CITED ABOVE THE TRIBUNAL HAS NOTED THAT DIVIDENDS ARE PASSIVE INCOM E AND THAT NOW A DAYS THEY ARE RECEIVED THROUGH ECS CLEARANCE WITH OUT ANY EXTRA EFFORT ON THE PART OF THE SHAREHOLDER. ON THIS BAS IS THE TRIBUNAL HAD ESTIMATED A VERY NOMINAL EXPENDITURE OF ` 25 000/- OUT OF THE EXPENDITURE OF ` 6 74 003/- ESTIMATED BY THE ASSESSING OFFICER IN THAT CASE AS EXPENDITURE DISALLOWABLE UNDER SECTION 14A OF THE ACT. THE TRIBUNAL HAS ALSO TAKEN NOTE OF THE JUDGMENT OF THE HONBLE ITA NO: 3186/MUM/2008 3 BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE M FG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) WHERE IT HAS BEEN HELD THAT WHILE INVOKING SECTION 14A THE INCOME TAX AUTHORIT IES HAVE TO BE REASONABLE. WE ARE THEREFORE OF THE VIEW THAT A DI SALLOWANCE OF ` 2 00 000/- WOULD MEET THE REQUIREMENTS OF THE CASE. WE ACCORDINGLY REDUCE THE DISALLOWANCE FROM ` 20 22 077/- TO ` 2 00 000/- AND ALLOW THE GROUND IN PART. 3. GROUND NOS: 2 AND 3 CAN BE DEALT WITH TOGETHER. GROUND NO:2 IS WITH REGARD TO THE BAD DEBTS OF ` 2 22 192/- WRITTEN OFF BY THE ASSESSEE. THE AMOUNT REPRESENTS FEE AND BROKERAGE DUE TO THE ASSESSEE. SO FAR AS THIS GROUND IS CONCERNED THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2003- 04 IN ITA NOS: 134 & 107/MUM/2007 & CO NO: 93/MUM/ 2007 DATED 15 TH JANUARY 2009 IS IN FAVOUR OF THE ASSESSEE. RESPE CTFULLY FOLLOWING THE SAME WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF THE BAD DEBTS. SO FAR AS GROUND NO:3 IS CONCERNED IT RELATES TO THE DISALLOWANCE OF OUT-OF-POCKET EXPENS ES OF ` 10 47 643/- WRITTEN OFF BY THE ASSESSEE. IT APPEAR S THAT THE ASSESSEE CLAIMED THIS AMOUNT AS A BAD DEBT BEFORE T HE ASSESSING OFFICER WHO DISALLOWED THE SAME BECAUSE THE CONDIT IONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2) WERE NOT SATISFI ED. ON APPEAL THE CIT(A) HAS ALLOWED THE CLAIM AS A BUSINESS LOSS UND ER SECTION 28 OF THE ACT. THE LEARNED REPRESENTATIVE FOR THE ASSESS EE FAIRLY STATED THAT THE ASSESSEE IS NOT REALLY AGGRIEVED BECAUSE T HE CLAIM HAS BEEN ALLOWED BY THE CIT(A) THOUGH NOT AS BAD DEBT BUT AS ITA NO: 3186/MUM/2008 4 BUSINESS LOSS. IN THIS VIEW OF THE MATTER THE GROU ND IS DISMISSED AS INFRUCTUOUS. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH 2011. SD/- SD/- (PRAMOD KUMAR) (R V EASWAR) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 18 TH MARCH 2011 SALDANHA COPY TO: 1. M/S HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PRIVATE LIMITED 6 TH FLOOR 52/60 MAHATMA GANDHI ROAD FORT MUMBAI 400 001 2. DCIT RANGE 4(1) MUMBAI 3. CIT-4 MUMBAI 4. CIT(A)-IV MUMBAI 5. DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI