M/s. Puja Impex Pvt. Ltd., 161, Atlanta Premises Co. Op. Soc. Ltd., Nariman Point, Mumbai-400 021 Vs. The ITO, Range-3(2)(4), Aayakar Bhavan, Mumbai-400 020
January, 23rd 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
[^ ] , Û Û] ãá, ¢
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
./I.T.A. No. 4904/Mum/2012
./I.T.A. No. 2008/Mum/2013
( [ [ / Assessment Years : 2008-09 & 2009-10
M/s. Puja Impex Pvt. Ltd., / The ITO, Range-3(2)(4),
161, Atlanta Premises Co. Aayakar Bhavan,
Op. Soc. Ltd., Mumbai-400 020
. / . / PAN/GIR No. : AABCP 1659A
( /Appellant) .. (× / Respondent)
/ Appellant by: Shri Sunil Nahta
Shri Trushit Shah
× /Respondent by: Shri Akhilendra Yadav
/ Date of Hearing :20.01.2015
/Date of Pronouncement :22.01.2015
/ O R D E R
PER N.K. BILLAIYA, AM:
ITA No. 4904/M/2012 filed by the assessee is directed against the
order of the Ld. CIT(A)-4, Mumbai dt.21.5.2012 pertaining to A.Y.2008-
09 and ITA No.2008/M/13 is also an appeal by the assessee preferred
2 ITA No. 2008/M/2013
against the order of the Ld. CIT(A)-4 Mumbai dt. 3.1.2013 pertaining to
A.Y. 2009-10. As common issues are involved in both these appeals,
they were heard together and dispose of by this common order for the
sake of convenience and brevity.
ITA No. 4904/M/2012 A.Y. 2008-09
2. The assessee is trading in securities and also in the business of
advisory service, finance leasing and investment in securities. The return
for the year was selected for scrutiny assessment. During the course of
the scrutiny assessment proceedings, the Assessing Officer noticed that
the assessee has earned dividend income of Rs. 16,92,522/- and long
term capital gain of Rs. 85,74,072/-, both were claimed as exempt u/s.
10(34) and 10(38) of the Act respectively. The AO observed that the
assessee has disallowed demat charges of Rs. 49,269/- and securities
transaction charges of Rs. 2,03,107/- and Rs. 8,463/- being 0.5% of
dividend. The AO simply observed that the disallowance computed by
the assessee is not in accordance with Rule 8D. The AO proceeded by
computing the disallowance and computed the same at Rs.5,23,235/.
Since the assessee has already disallowed Rs. 2,60,839/-, the AO
proceeded by disallowing Rs. 2,62,396/-.
3. Aggrieved by this, the assessee carried the matter before the Ld.
CIT(A) but without any success.
4. Before us, the Ld. Counsel for the assessee stated that the assessee
itself had disallowed Rs. 2,60,839/- and the AO has not pointed out any
specific defect in the computation of the disallowance made by the
3 ITA No. 2008/M/2013
assessee, therefore, the disallowance made by the AO is against the
relevant provisions of the law.
6. The Ld. Departmental Representative supported the order of the
First appellate authority.
7. We have carefully perused the orders of the authorities below. It is
an undisputed fact that the assessee itself has offered 0.5% of dividend
income on account of other expenses. It is also an undisputed fact that
the AO has not pointed out any defect in the calculation made by the
assessee nor AO has recorded any dissatisfaction with the correctness of
the claim of the assessee in respect of such expenditure in relation to
income which does not form part of the total income. Considering all
these facts in the light of the provisions of Sec. 14A of the Act, we set
aside the findings of the Ld. CIT(A) and direct the AO to delete the
addition of Rs. 2,60,839/-. Ground No. 1 is accordingly allowed.
8. Ground No. 2(a) and 2(b) are consequential to our finding to
ground No.1, therefore, ground No. 2(a) and 2(b) are treated as allowed in
view of our findings given for ground No. 1.
9. Ground No. 3 relates to the addition of Rs. 2,03,107/- being
securities transaction tax to the book profit computed u/s. 115JB.
10. A perusal of the assessment order shows that the addition has been
made as per the explanation 1(f) of Sec. 115 JB of the Act. The said
provision shows that it refers the amount of expenditure relatable to any
income to which Sec. 10 other than the provisions contained in clause-38
thereof or section 11 or section 12 apply. In the case in hand the assessee
has claimed exemption u/s. 10(38) of the Act therefore the assessee is
4 ITA No. 2008/M/2013
covered by the exclusion provided in clause (f) to explanation-1 to Sec.
115JB of the Act. Therefore, we direct the AO to exclude Rs. 2,03,107/-
from the book profit. Ground No. 3 is accordingly allowed.
11. Ground No. 4 relates to the addition of Rs. 6,72,108/- wrongly
accounted in the books of account of the assessee being charged to book
profit u/s. 115JB.
12. Facts on record show that the assessee has inadvertently credited in
the P&L account as speculation gain amounting to Rs. 6,72,108/-. The
said mistake was realized during the assessment proceedings and the
assessee immediately filed revised computation of income vide letter dt.
3.12.2010. The AO did not accept the said revision as the claim was not
made in the return of income.
13. The Ld. CIT(A) allowed the relief to the assessee from the normal
computation of total income. However, the Ld. CIT(A) declined to give
relief for the purpose of book profit u/s. 115JB of the Act. It is not in
dispute that the assessee has made book entries of speculation gain which
it has not actually earned during the year. Since the speculation gains
were credited to the profit and loss account, it can be said that the profit
and loss account are not prepared in accordance with part-II of Schedule-
VI and for the purpose of Sec. 115JB. Every company has to prepare its
accounts in the manner provided in part-II and Part-III of Schedule-VI to
the Companies Act 1956. Since the assessee's profit and loss account is
not prepared in accordance with the relevant provisions of the Companies
Act, the notional profit shown by the assessee has to be reduced while
computing the book profit u/s. 115JB of the Act. Similar view has been
taken by the Tribunal in the case of M/s. Bombay Diamond Co. Ltd in
ITA No. 7488/M/07 wherein the Tribunal has held as under:
5 ITA No. 2008/M/2013
"The various other decisions relied on by the Ld. CIT(A) in
his order are also not applicable. In none of the case it has been
held that even where the accounts are not prepared in the manner
provided as per Part II and Part III of Schedule VI to the
Companies Act, 1956 the Assessing Officer has no power to go
beyond the book profit as per the audited accounts. In our opinion,
the AO cannot go beyond the book profits as per the audited
accounts provided they are prepared as per the manner provided
in Part II and Part III of Schedule VI to the Companies Act, 1956
and are adopted in the AGM. However, in the instant case,
admittedly the accounts are not prepared in the manner provided
in Part II and Part III of Schedule VI to the Companies Act, 1956
since the profit on sale of investments amounting to Rs.
10,38,13,765/- which is a material amount, has not been routed
through the profit and loss A/c. Therefore, the AO, in our opinion
has the power to re-work the book profit by recasting the accounts
in the manner provided as per Part II and Part III of Schedule VI
to the Companies Act, 1956. In this view of the matter, the order of
the CIT(A) on this issue is set aside and that of the AO is restored."
Respectfully following the decision of the Co ordinate Bench, we
direct the AO to re-work the Book Profit by excluding Rs. 6,72,108/-.
Ground No. 4 is accordingly allowed.
14. In the result, the appeal filed by the assessee for A.Y. 2008-09 is
ITA No. 2008/M/2013 A.Y. 2009-10
15. The only ground in this appeal relates to the disallowance of Rs.
5,29,673/- u/s. 14A of the Act.
16. Facts and issues are identical to the facts considered by us in ITA
No. 4904/M/2012 qua ground No. 1 of that appeal. Following our own
6 ITA No. 2008/M/2013
findings given in the said appeal, we direct the AO to delete the addition
made by him. This ground is accordingly allowed.
17. In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 22nd January, 2015
(JOGINDER SINGH ) (N.K. BILLAIYA)
Û /JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated : 22nd January, 2015
.../ RJ , Sr. PS
/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//
, / ITAT, Mumbai