JB Commercial Company Private Limited, Kolkata V. ITO, Ward 8(4), Kolkata, Kolkata

ITA 1044/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1172 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ZAFARUL HAQUE TANWEER ADD L
• Assessee Lawyers: S SINGH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA NO.1044/KOL/2017-JB COMMERCIAL COMPANY PRIVATE LIMITED A.Y.2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM] ITA NO.1044//KOL/2017 ASSESSMENT YEAR : 2012-13 JB COMMERCIAL COMPANY PRIVATE LIMITED. VERSUS- I.T.O., WARD-8(4) KOLKATA KOLKATA (PAN: AAACJ 6771 E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.SINGH, FCA FOR THE RESPONDENT: SHRI ZAFARUL HAQUE TANWEER, ADD L/ JCIT DATE OF HEARING : 13.09.2017. DATE OF PRONOUNCEMENT : 31.10.2017. ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-(A)-17, KOLKATA RELATING TO A.Y. 201 2-13. 2. IN THIS APPEAL THE ASSESSEE DISPUTES THE DISAL LOWANCE MADE U/S 14A R.W. RULE 8D(2) OF IT RULES, 1962. THE ASSESSEE HAS EARNED DI VIDEND INCOME OF RS.14,47,622/- DURING THE YEAR. HE DISALLOWED IN HIS RETURN OF INC OME AN AMOUNT OF RS.1,98,013/- U/S 14A OF THE INCOME TAX ACT, 1961 (ACT). THE AO REQUE STED THE ASSESSEE TO JUSTIFY THE CORRECTNESS OF THE CLAIM OF DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSEE CONFIRMED THAT IT HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUN T TO CALCULATE EXPENDITURE RELATABLE TO THE EXEMPT INCOME. THE AO DISALLOWED AN AMOUNT O F RS.23,17,673/- U/S 14A OF THE ACT. 3. ON APPEAL THE FIRST APPELLATE AUTHORITY HEL D AS FOLLOWS :- A)THERE IS NO DISPUTE ON THE DISALLOWANCE MADE UNDE R RULE 8D(2)(I) OF THE IT RULES. THE DISALLOWANCE MADE UNDER RULE 8D(2)(II) OF RS.17 ,11,025/- IS DELETED. NO SUBMISSIONS WERE MADE BY THE ASSESSEE ON THE DISALL OWANCE UNDER RULE 8D(2)(IIII) OF THE RULES. THE AO HAS DISALLOWED 0.5%OF THE TOTAL A VERAGE INVESTMENT OF ITA NO.1044/KOL/2017-JB COMMERCIAL COMPANY PRIVATE LIMITED A.Y.2012-13 2 RS.5,12,253/-. THIS DISALLOWANCE IS CONFIRMED. THE LD. CIT(A) CONFIRMED A TOTAL DISALLOWANCE OF RS.6,06,648/-. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS :- 1. FOR THAT THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) U/S 250 OF THE INCOME TAX ACT, 1961 ('THE ACT') CONFIRM ING DISALLOWANCE OF RS. 94,395/- UNDER RULE 8D(2)(I) AND RS. 5,12,253 UNDER RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 ('THE RULES') AGGREGATING TO RS. 6,06,648/-UNDER SECTION 14A OF THE ACT, IS DISPUTED, ARBITRARY AND BAD IN L AW. 2. A) FOR THAT THE COMMISSIONER OF INCOME TAX (APPE ALS) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT SUO MOTO DISALLOWED SECURIT IES TRANSACTION TAX OF RS. 24,875/- AND RS. 1,98,023/- BEING PART OF EXPENSES, AGGREGATING TO RS. 2,22,898/- U/S 14A OF THE ACT AND NO FURTHER DISALLOWANCE CAN BE MADE. B)FOR THAT THE DISALLOWANCE AS MADE UNDER RULE 8D(2 )(III) OF THE RULES IS BEYOND THE DISALLOWANCE PERMITTED UNDER SECTION 14A OF THE ACT AND NO SUCH DISALLOWANCE COULD BE MADE ON A NOTIONAL BASIS WHIC H IS NOT WITH REFERENCE TO ANY EXPENDITURE INCURRED WHETHER DIRECTLY OR INDIRE CTLY. C) FOR THAT IN NO CIRCUMSTANCES THE DISALLOWANCE OF RS. 6,06,648 UNDER SECTION 14A OF THE ACT CAN BE MADE ON NOTIONAL BASIS AGAINS T AGGREGATE TOTAL EXPENDITURE OF RS. 3,81,168/- INCURRED BY THE ASSESSEE. D) FOR THAT THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING SECURITIES TRANSACTION TAX OF RS. 24,875/- ONCE UNDER RULE 8D( 2)(I) AND THEREAFTER CONSIDERING THE SAME ONCE AGAIN WHILE .,CALCULATING INCOME FROM BUSINESS HAS RESULTED IN DOUBLE/EXCESSIVE DISALLOWANCE UNDER SEC TION 14A OF THE ACT. E) WITHOUT PREJUDICE TO ABOVE, THE ASSESSING OFFICE R FURTHER ERRED IN CONSIDERING TOTAL INVESTMENTS AS APPEARING IN THE BALANCE SHEET AS ON THE FIRST DAY AND ON THE LAST DAY OF THE PREVIOUS YEAR INSTEAD OF THE AVERAG E VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME W HILE CALCULATING DISALLOWANCE AS PER RULE 8D(2)(III) F) FOR THAT FURTHER AND IN ANY EVENT THE DISALLOWAN CE MADE BY ASSESSING OFFICER UNDER SECTION 14A OF THE ACT IS ARBITRARY AND EXCES SIVE. 3. FOR THAT THE APPELLANT CRAVES LEAVE TO AMEND, AD D OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE AT ANY TIME BEFORE THE FINAL HEARIN G OF THE APPEAL. 5. IN GROUND NO.2 (C) THE ASSESSEE CLAIMS THAT D ISALLOWANCES MADE UNDER RULE 8D(2)(III) OF IT RULES WAS ON NOTIONAL BASIS. HE F URTHER CLAIMS THAT THE TOTAL AGGREGATE ITA NO.1044/KOL/2017-JB COMMERCIAL COMPANY PRIVATE LIMITED A.Y.2012-13 3 EXPENDITURE INCURRED BY THE ASSESSEE WAS RS.3,81,16 8/- AND HENCE THE DISALLOWANCE OF RS..6,06,648/- IS BAD IN LAW AS IT IS OVER AND ABOV E THE AGGREGATE TOTAL EXPENDITURE. ON THIS ISSUE I IN PRINCIPLE AGREE WITH THE CONTENT ION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DISALLOWANCE U/S 14A OF THE ACT C ANNOT EXCEED THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE. THE CIT(A) HAS PLACED REL IANCE ON THE DECISION OF ITAT, KOLKATA IN THE CASE OF M/S. TRADE APARTMENT LTD IN ITA NO.1277/KOL/2011, AND HE DELETED THE DISALLOWANCE UNDER RULE 8D(2)(II) OF TH E IT RULES. THE SAME PRINCIPLE WILL APPLY IN THIS ISSUE ALSO. 6. THE CLAIM OF THE ASSESSEE THAT AGGREGATE TOTA L EXPENDITURE INCURRED BY IT WAS RS.31,81,168/- REQUIRES VERIFICATION. UNDER THE CIR CUMSTANCES I AM OF THE CONSIDERED OPINION THAT THE ISSUE OF DISALLOWANCE TO BE MADE U NDER RULE 8D(2)(III) OF THE IT RULES SHOULD BE RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION, IN ACCORDANCE WITH LAW. 7. THE ASSESSEE CLAIMS THAT SECURITY TRANSACTION TAX WAS CONSIDERED UNDER RULE 8D(2)(I) OF IT RULES AND THEREAFTER ONCE AGAIN WHIL E CALCULATING THE INCOME FROM BUSINESS RESULTING IN DOUBLE DISALLOWANCE. THE ISSU E MAY ALSO BE RE-EXAMINED BY THE AO AND I SET ASIDE THE ISSUE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 31.10.2017. SD/- [ J.SUDHAKAR REDDY ] ACCOUNTANT MEMBER DATED : 31.10.2017. [RG SR.PS] ITA NO.1044/KOL/2017-JB COMMERCIAL COMPANY PRIVATE LIMITED A.Y.2012-13 4 COPY OF THE ORDER FORWARDED TO: 1.JB COMMERCIAL COMPANY PRIVATE LIMITED, 3A, SHAKES PEARE SARANI, 5 TH FLOOR, KOLKATA-700071. 2. I.T.O., WARD-8(4), KOLKATA. 3. C.I.T.(A)- 17, KOLKATA 4. C.I.T-6, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES