Exim Scrips Dealers Pvt. Ltd., , Kolkata V. ITO, Ward - 5(3) , Kolkata

ITA 11/KOL/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6369 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 03-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT, KZ] I.T.A. NO. 11/KOL/2019 ASSESSMENT YEAR: 2015-16 EXIM SCRIPS DEALERS PVT. LTD............................................................APPELLANT 412, MUKTI CHAMBERS, 4 TH FLOOR, 4, CLIVE ROW, KOLKATA 700 001. [PAN: AAACE 6906 E] ITO, WARD 5(3) KOLKATA...............................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI GIRISH SHARMA, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI SANJIT KUMAR DAS, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MAY 07, 2019 DATE OF PRONOUNCING THE ORDER : MAY 07, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 2, KOLKATA DATED 03.12.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS. 3,54,638/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF INCOME TAX RULES 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKING FINANCIAL COMPANY WHICH IS ENGAGED IN THE BUSINESS OF INVESTMENT IN LOANS AND ADVANCES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2015 DECLARING A TOTAL INCOME OF RS. 28,30,083/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS. 34,28,861/- RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. IN THE COMPUTATION OF TOTAL INCOME, DISALLOWANCE OF RS. 3,53,488/- WAS MADE BY THE ASSESSEE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE SAID EXEMPT INCOME AS REQUIRED BY SECTION 14A. IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 2 I.T.A. NO. 11/KOL/2019 ASSESSMENT YEAR: 2015-16 EXIM SCRIPS DEALERS PVT. LTD. 28.04.2017, THE AO WORKED OUT THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME AT RS. 10,68,904/- BY APPLYING RULE 8D AND KEEPING IN VIEW THAT THE TOTAL EXPENSES ACTUALLY INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WERE ONLY TO THE TUNE OF RS. 7,08,126/-, HE MADE A FURTHER DISALLOWANCE U/S 14A TO THE EXTENT OF RS. 3,54,638/- (7,08,126 3,53,488). ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO U/S 14A READ WITH RULE 8D. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHEN CERTAIN DISALLOWANCE U/S 14A WAS OFFERED BY THE ASSESSEE SUO MOTO IN THE COMPUTATION OF THE TOTAL INCOME, THE AO CANNOT RECOMPUTE THE DISALLOWANCE U/S 14A BY APPLYING RULE 8D UNLESS HE IS DISSATISFIED, HAVING REGARD TO THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT DISALLOWANCE OFFERED BY THE ASSESSEE U/S 14A IS NOT CORRECT. A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE AO FOR THE YEAR UNDER CONSIDERATION SHOWS THAT NO SUCH DISSATISFACTION OF THE AO IS DISCERNIBLE FROM ANY OBSERVATION/FINDING RECORDED BY THE AO AND EVEN THE LEARNED DR HAS NOT BEEN ABLE TO DISPUTE THIS POSITION. IT IS ALSO OBSERVED THAT A SIMILAR DISALLOWANCE U/S 14A READ WITH RULE 8D WAS MADE BY THE AO IN ASSESSEES OWN CASE FOR AY 2011-12 WITHOUT RECORDING ANY DISSATISFACTION REGARDING THE CORRECTNESS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE U/S 14A SUO MOTO AND SUCH DISALLOWANCE MADE BY THE AO BY APPLYING RULE 8D WAS DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 04.11.2016 PASSED IN ITA NO. 675/KOL/2016 HOLDING THAT THE DISALLOWANCE MADE BY THE AO 3 I.T.A. NO. 11/KOL/2019 ASSESSMENT YEAR: 2015-16 EXIM SCRIPS DEALERS PVT. LTD. U/S 14A BY APPLYING RULE 8D WITHOUT EXAMINING THE CORRECTNESS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE AND RECORDING HIS DISSATISFACTION ABOUT SUCH CORRECTNESS WAS NOT PERMISSIBLE UNDER LAW. RESPECTFULLY FOLLOWING THE DECISION OF THE DIVISION BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2011-12 AND HAVING REGARD TO THE FACTS OF THE CASE, I HOLD THAT THE DISALLOWANCE OF RS. 3,54,638/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 14A APPLYING RULE 8D IS NOT SUSTAINABLE. I ACCORDINGLY DELETE THE SAID DISALLOWANCE AND ALLOW THIS APPEAL OF THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MAY, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 07/05/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. EXIM SCRIPS DEALERS PVT. LTD., 412, MUKTI CHAMBERS, 4 TH FLOOR, 4, CLIVE ROW, KOLKATA 700 001. 2. ITO, WARD-5(3), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA