DCIT, New Delhi v. M/s Spade Financial Services Ltd., New Delhi

ITA 3271/DEL/2011 | 2008-2009
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 327120114 RSA 2011
Bench Delhi
Appeal Number ITA 3271/DEL/2011
Duration Of Justice 9 month(s) 13 day(s)
Appellant DCIT, New Delhi
Respondent M/s Spade Financial Services Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 30-03-2012
Date Of Final Hearing 15-03-2012
Next Hearing Date 15-03-2012
Assessment Year 2008-2009
Appeal Filed On 17-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SMT. DIVA SINGH JUDICIAL MEMBER AND SHRI A.N.PAHUJA ACCOUNTANT MEMBER ITA NO: 3271/DEL/2011 A.Y. : 2008-2009 DCIT CIRCLE 9(1) VS. M/S SPADE FINANCIAL SERVICES LTD. ROOM NO.163 C.R.BLDG. K-26 JANGPURA EXTENSION NEW DELHI NEW DELHI (APPELLANT) (RESPONDE NT) APPELLANT BY : SMT. S.MOHANTY D.R. RESPONDENT BY : SHRI R.K.KAPOOR C.A. O R D E R PER DIVA SINGH JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DT. 18.2.2011 OF CIT(A)-XII NEW DELHI PERTAINING TO A. Y. 2008-09 ON THE FOLLOWING GROUND. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AND MERIT OF THE CASE IN RESTRICTING THE DISALL OWANCE U/S 14A READ WITH RULE 8D OF RS.47 64 086/- TO RS.8 00 000/ -. 2. A PERUSAL OF THE RECORD SHOWS THAT THE ASSESSEE DECLARED AN INCOME OF RS.1 69 93 970/- AND ALSO CLAIMED THAT IT HAD EARNED DIVIDEND INCOME OF RS.4 05 57 128/-. THE A.O. REQUIRED THE ASSESSEE TO FILE DETAILS OF EXPENDITURE FOR EARNING THE DIVIDEND INC OME AND TO EXPLAIN AS TO WHY DISALLOWANCE NOT BE MADE U/S 14A AS PER RULE 8D. IN RESPONSE ITA 3271/DEL/11 PAGE 2 OF 5 SPADE FINANCIAL SERVICES LTD. A.Y. 2008-09 TO THE SAME IT WAS SUBMITTED ON BEHALF OF THE ASSES SEE THAT IT HAD INCURRED AN EXPENDITURE OF RS.5 67 577/- FOR EARNIN G THE DIVIDEND INCOME IN THE SHAPE OF STT DEMAT CHARGES AND LEGAL AND PROFESSIONAL CHARGES. NOT CONVINCED WITH THE EXPLANATION OFFERE D RELYING UPON THE JUDGEMENT OF DAGA CAPITAL MANAGEMENT PVT. LTD. THE A.O. MADE A DISALLOWANCE OF RS.47 64 086/-. AGGRIEVED BY THIS THE ASSESSEE CAME IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY CONTEND ING THAT THE DISALLOWANCE MADE BY THE A.O. WAS BAD IN LAW. IT W AS ALSO ARGUED THAT THE DISALLOWANCE MADE BY THE A.O. CANNOT BE MORE TH AN THE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT CONSIDERING THE EXPLANATION OF THE ASSESSEE IT WAS HELD THAT THOUGH RULE 8D IS APPLICA BLE IN THE YEAR UNDER CONSIDERATION FURTHER IT COULD NOT BE APPLIED IN S UCH A MANNER THAT THE DISALLOWANCE MADE UNDER THIS RULE WORKS OUT TO BE M ORE THAN WHAT IS DEBITED IN THE PROFIT AND LOSS A/C. BEING OF THE V IEW THAT THE A.O. AS PER THE SAID RULE WAS REQUIRED TO SEE WHETHER THE DISAL LOWANCE MADE BY THE ASSESSEE IS CORRECT OR NOT AND ONLY AFTER THAT IF H E IS CONVINCED THAT THE CLAIM MADE BY THE ASSESSEE IS INCORRECT ONLY THEN H E CAN APPLY THE PROVISION OF RULE 8D. CONSIDERING THE FACT THAT TH E ASSESSEE HAD DEBITED THE FOLLOWING EXPENSES IN ITS PROFIT AND LOSS ACCOU NT THE CIT(A) WORKED THE DISALLOWANCE AT RS.8 LAKHS IN THE FOLLOWING MAN NER. PAYMENT TO EMPLOYEES RS.12 000/- ADMN. & OTHER EXP. RS. 9 26 067/- FINANCIAL CHARGES RS. 5 000/- DEPRECIATION RS. 1 48 559/- T O T A L : RS. 1 0 91 629/- ITA 3271/DEL/11 PAGE 3 OF 5 SPADE FINANCIAL SERVICES LTD. A.Y. 2008-09 THE AGGREGATE OF THESE FOUR ITEMS COMES TO RS.10 91 266/-. THUS UTMOST THE DISALLOWANCE SHOUL D BE RESTRICTED TO RS.10 91 626/-. THE APPLICANT HAS HIMSELF MADE THE DISALLOWANCE OF RS.5 67 578/- BY INCLUDING THE STT D-MAT CHARGES AND LEGAL AND PROFESSIONAL CHARGES BUT HAS NOT APPORTIONED ANY PA RT OF THE INDIRECT EXPENSES WHICH HAVE BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT LIKE EMPLOYEES COST AND DEPRECIATION. IT IS EQUALLY TRUE THAT THE ENTIRE EXPENDITURE OF RS.10 91 626/- CANNOT BE ATTRIBUTED TOWARDS EARNING OF INCOME BECAUSE SOME EXPENDITURE HAS TO BE APPORTIONED FOR EARNING THE OTHER RECEIPT S SHOWN IN THE P&L ACCOUNT. THUS THE DISALLOWANCE HAS TO BE SOMEWHERE BETWEEN THE TOTAL EXPENDITURE DEBITED IN THE P&L A/C AMOUNTING TO RS.10 91 626/- AND RS.5 67 577/- SHOWN BY THE APPELLANT BECAUSE THE APPELLANT AHS NOT ATTRIBUTED ANY INDIRECT EXPEN SES TOWARDS EARNING OF DIVIDEND INCOME. THIS DISALLOWANCE UNDER RULE 14A IS ESTIMATED AT RS.8 LAKHS AS AGAINST RS.5 67 577/- MADE BY THE APPELLAN T AND AS AGAINST RS.47 64 086/- MADE BY THE A.O. THUS THE DISALLOWANCE UNDER RULE 14A IS RESTRICTED TO RS.8 LAKHS. 3. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL. LD.D.R. STATES THAT NO DOUBT THAT THE A.O. HAS APPL IED THE ORDER OF THE SPECIAL BENCH IN THE CASE OF DAGA CAPITAL MANAGEMEN T P.LTD. WHICH IS NO LONGER GOOD LAW. HOWEVER THE JUDGEMENT OF HONB LE MUMBAIU HIGH COURT IN THE CASE OF GODREJ & BOYCE LTD. FOR THE YE AR UNDER CONSIDERATION HELD THAT RULE 8D WAS APPLICABLE. ACCORDINGLY IT W AS SUBMITTED THAT THE ISSUE MAY BE RESTORED. LD.D.R. WAS REQUIRED TO ADD RESS THE FACTS AND REASONING TAKEN BY THE CIT(A) IN UPHOLDING THE DISA LLOWANCE OF RS.8 LAKHS IN REGARD TO WHICH SHE WAS UNABLE STATE ANYTH ING. ITA 3271/DEL/11 PAGE 4 OF 5 SPADE FINANCIAL SERVICES LTD. A.Y. 2008-09 4. LD.A.R. RELYING UPON THE ORDERS OF THE AUTHORITI ES BELOW CONTENDED THAT THE RECORD WOULD SHOW THAT THE ASSESSEE HAD RE TURNED A TAXABLE INCOME OF RS.1 69 93 970/- AND EXEMPT INCOME OF RS. 4 05 57 728/-. THE ASSESSEE HAD SHOWN IN REGARD TO THE TAXABLE INC OME ;AND EXPENDITURE OF RS.10 91 629/- AND IN REGARD TO THE EXEMPT INCOME RS.5 67 578/-. IN THE AFORESAID PECULIAR SITUATION RELYING UPON THE IMPUGNED ORDER IT WAS HIS SUBMISSION THAT THE CIT(A ) HAS ESTIMATED THE DISALLOWANCE AT RS.8 LAKHS AS SUCH ENTIRE EXPENDITU RE CLAIMED CANNOT BE SAID TO HAVE BEEN INCURRED FOR EARNING EXEMPT INCOM E. AS SUCH THE IMPUGNED ORDER DESERVES TO BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES O F THE CASE NO INFIRMITY HAS BEEN POINTED OUT BY THE LD.D.R. IN THE IMPUGNED ORDER. A PERUSAL OF THE SAME SHOWS THAT IT IS NOT DISPUTED THAT RULE 8D IS APPLICABLE HOWEVER ONLY ON CONSIDERING THE PECULIAR FACTS OF THE CASE THE CIT(A) HAS CONSIDERED IT APPROPRIATE TO ESTIMATE THE DISALLOWA NCE AT RS.8 LAKHS. BEING SATISFIED BY THE REASONING AND FINDING OF THE CIT(A) THE DEPARTMENTAL GROUND IS DISMISSED. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH MARCH 2012. SD/- SD/- (A.N.PAHUJA) (DIVA SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBE R DATED: 30TH MARCH 2012 *MANGA ITA 3271/DEL/11 PAGE 5 OF 5 SPADE FINANCIAL SERVICES LTD. A.Y. 2008-09 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR 6.GUARD FILE BY ORDER