IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "A", MUMBAI
BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER
AND SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No. 2915 /MUM/2013
(Assessment Year : 2009-10)
Anil Nanavati (HUF),
7th Floor, Nanavati Mahalaya,
18, Homi Modi Street, Fort,
Mumbai 400 023.
PAN: AABHA 5410R ... Appellant
Vs.
The Income Tax Officer 12(1)(4),
Mumbai 400 013 .... Respondent
Appellant by : Shri Shekhar Gupta
Respondent by : Shri Premand J.
Date of hearing : 23/07/2015
Date of pronouncement : 09/09/2015
ORDER
PER G.S. PANNU,AM:
The captioned appeal by the assessee is directed against the
order of the CIT(A)-23, Mumbai dated 04/02/2013 pertaining to the
assessment year 2009-10, which in-turn has arisen from an order
passed by the Assessing Officer dated 09/12/2011 under section
143(3) of the Income Tax Act, 1961 ( in short `the Act').
2. In this appeal, the only issue relates to the disallowance of
Rs.4,74,965/- made by the income tax authorities by invoking the
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ITA No. 2915 /MUM/2013
(Assessment Year : 2009-10)
provisions of section 14A of the Act on the ground that the aforesaid
amount of expenditure was incurred in relation to exempt income.
3. Before us, Ld. Representative for the assessee has not assailed
the applicability of Rule 8D of the Income Tax Rules, 1962( in short `the
Rules') for computing the disallowance under section 14A of the Act.
The only dispute is with regard to the manner in which the disallowance
under section 14A of the Act has been computed.
4. The appellant is a HUF, which is deriving income from
investments in shares/mutual funds, as also by way of dividends, which
are exempt from tax. The Ld. Representative for the assessee explained
that the income derived from investments from mutual funds/shares is
by way of own investments as also investments made through Portfolio
Management Services (PMS). The Assessing Officer applied the
provision of clause (iii) of Rule 8D(2) of the Rules and by applying the
rate of 0.5% on the average value of investments of Rs.44,32,21,368/-
the disallowance was computed at Rs.22,16,107/-, but the same was
restricted to Rs.4,74,965/- being the extent of expenses claimed. The
Ld. Representative for the assessee referred to the Computation of
income which enumerates the details of capital gains declared during
the year. The Ld. Representative for the assessee pointed out that so far
as the short term capital gain earned either by way of own investments
or through PMS are concerned, the same are taxable and, therefore,
the corresponding expenditure cannot be disallowed in terms of
section 14A of the Act. It was also pointed out that so far as the
expenses paid to the PMS Manager is concerned, the same are direct
expenses incurred and, therefore, are to be governed by clause (i) of
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ITA No. 2915 /MUM/2013
(Assessment Year : 2009-10)
Rule 8D(2) of the Rules and the Assessing Officer is incorrect in applying
clause(iii) of Rule 8D(2) of the Rules. It has been further pointed out
that such expenses, which relate to the long term capital gain can alone
be disallowed because such income is exempt from tax. In this context,
the Ld. Representative for the assessee referred to the computation of
income to point out that only an amount of Rs.1,10,585/- paid as PMS
Manager fee relatable to the long term capital gain exempt from tax,
can alone be subject to disallowance under section 14A of the Act. The
balance of expense is in relation to the short term capital gain, which is
chargeable to tax and, therefore, provisions of section 14A of the Act
are not attracted.
5. The aforesaid pleas raised by the assessee are emerging from the
material on record, namely, the computation of total income and no
infirmity in the factual matrix was asserted by the Ld. Departmental
Representative appearing for the Revenue.
6. In this background, we, therefore, hold that out of the
disallowance of Rs.4,74,965/- determined by the income tax authorities,
only an amount of Rs.1,10,585/- is disallowable and the balance is
directed to be deleted. Thus, on this aspect assessee succeeds.
7. Apart from the aforesaid, the appellant has raised an additional
Ground of appeal, which was hitherto not raised before lower
authorities:-
"The learned assessing officer has erred in law and on the facts of the case in
not carrying forward long term capital loss of Rs.47,15,814/-."
8. In this context, Ld. Representative for the assessee pointed out
that in the return of income assessee had claimed that long term
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ITA No. 2915 /MUM/2013
(Assessment Year : 2009-10)
capital loss of Rs.47,15,814/- relating to the assessment year under
consideration was liable to be carried forward and set off against the
taxable income of the future years as the prescribed Securities
Transaction Tax(STT) was paid. The said claim of the assessee was
denied by the Assessing Officer by applying the ratio of judgement of
the Hon'ble Supreme Court in the case of CIT vs. Harprasad & Company
Pvt. Ltd., 99 ITR 118 (SC). The Ld. Representative for the assessee
contended that thereafter the Mumbai Tribunal in the case of Raptakos
Brett & Co. Ltd. vs. DCIT, ITA No.3317/Mum/2009 & 1692/Mum/2010 ,
A.Y. 2007-08 dt. 10/6/2015 has upheld the plea that the long term
capital loss was available to be set off against long term capital gain in
accordance with section 70(3) of the Act. The Ld. Representative for
the assessee pointed out that the said decision has been rendered by
the Tribunal after duly considering the ratio of the judgment of the
Hon'ble Supreme Court in the case of CIT vs. Harprasad & Company
Pvt. Ltd.(supra). In this background, the Ld. Representative for the
assessee submitted that the Additional ground of appeal now sought
to be raised be admitted in as much as the same is a pure question of
law and is indeed supported by a recent decision of the Mumbai
Tribunal in the case of Raptakos Brett & Co. Ltd. dt.10/6/2015(supra).
9. The Ld. Departmental Representative appearing for the Revenue
pointed out that the aforesaid Ground, though decided by the Assessing
Officer against the assessee, was not raised before the CIT(A).
10. Having considered the rival stands, in our view, the Additional
Ground of appeal now sought to be raised by the assessee involves a
point of law and the relevant facts being available on record, the same
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(Assessment Year : 2009-10)
deserves to be admitted for adjudication following the ratio of the
judgement of the Hon'ble Supreme Court in the case of National
Thermal Power Company Ltd. vs. CIT, 229 ITR 383(SC). We hold so.
Since the aforesaid issue was not adjudicated by CIT(A), the Ld.
Representative for the assessee submitted that the same be remanded
back to the file of CIT(A) for adjudication on merits. In the background
of the aforesaid plea, we deem it fit and proper to admit the aforesaid
Additional Ground of appeal and remand the same back to the file of
CIT(A) for adjudication as per law. Thus, on this aspect, assessee partly
succeeds.
11. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 09/09/2015.
Sd/- Sd/-
(SANJAY GARG) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai,Dated 09/09/2015
Copy of the Order forwarded to :
1. The Appellant ,
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai
Vm, Sr. PS
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