M/s Anushreya Investments Pvt. Ltd., Kolkata V. ITO, Ward-3(1), Kolkata, Kolkata

ITA 1126/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4711 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH JCITSRDR
• Assessee Lawyers: MIRAJ D SHAHA
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1126/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S ANUSHREYA INVESTMENTS PVT. LTD., 18,BRITISH INDIA STREET, 1 ST FLOOR, ROOM NO105, KOLKAA-69 [ PAN NO.AACCCA 3658 B ] / V/S . INCOME TAX OFFICER, WARD-3(1), P-7, CHOWRINGHEE SQUARE, KOLKTA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MIRAJ D SHAH,A FCA /BY RESPONDENT SHRI C.J SINGH, JCIT-SR-DR /DATE OF HEARING 29-01-2019 /DATE OF PRONOUNCEMENT 13-02-2019 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-9, KOLKATAS O RDER DATED 15.03.2017 PASSED IN CASE NO.213/CIT(A)-9/WD.3(1)/2016-17/KOL INVOLVI NG PROCEEDINGS 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GROUND SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION MAKING SEC. 14 R.W.S. RULE 8D DI SALLOWANCE OF 49,24,682/- COMPRISING OF DEMAT CHARGES, PROPORTIONATE INTEREST AND ADMINISTRATIVE EXPENDITURE OF 1,43,005/-, 43,53,951/- & 4,27,726/-; RESPECTIVELY. LEARNED COUNSELS FIRST ARGUMENT DURING THE COURSE OF HEARING IS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN ITA NO.1126/KOL/2017 ASSESSMENT YEAR 2012-13 M/S ANUSHREYA INVESTMENTS T PVT. LTD. VS ITO WD-3(1), KOL. PAGE 2 LAW AS WELL AS ON FACTS IN APPLYING THE ABOVE DISAL LOWANCE PROVISION IN CASE OF SHARES HELD AS STOCK-IN-LAW. WE FIND NO MERIT IN ASSESSEE S INSTANT ARGUMENT AS HON'BLE APEX COURTS RECENT DECISION IN MAXOPP INVESTMENT LT. VS . CIT (2018) 402 ITR 640 (SC) HAS SETTLED THE LAW THAT SEC. 14A R.W.S. RULE 8D DI SALLOWANCE APPLIES EVEN IN AN INSTANCE OF SHARES HELD AS STOCK-IN-TRADE. THE ASSE SSEE FAILS IN ITS FORMER ARGUMENT THEREFORE. 3. NEXT COMES EQUALLY SIGNIFICANT ASPECT OF COMPUTA TION OF THE IMPUGNED DISALLOWANCE IN CASE OF SHARE HELD AS STOCK-IN-TRAD E. THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN MARUTI TRADERS & INVESTORS VS. ACIT IN ITA NO.846/KOL/2017 DATED ON 28.11.2018 HOLDS THAT THE IMPUGNED DISALLO WANCE HAS TO BE COMPUTED IN CASE OF SHARES HELD AS STOCK-IN-TRADE IN THE FOLLOWING M ANNER:- MARUTI TRADERS & INVESTORS VS. ACIT-31, IN I.T.A. NO.846/KOL/2017, I.T.A. NO.637/KOL/2018. IN THIS THE LD ITAT HELD AS FOLLOW S:- 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OU TSET, WE FIND FROM THE AUDITED ACCOUNTS OF THE ASSESSEE, THAT THE SHA RES WERE HELD AS STOCK IN TRADE BY THE ASSESSEE AND NOT AS INVESTMENTS. HE NCE THE COMPUTATION MECHANISM PROVIDED IN RULE 8D OF THE RULES CANNOT B E APPLICABLE. WE FIND THAT THE LD AO THOUGH HAD NOT MENTIONED THAT T HE DISALLOWANCE HAS BEEN MADE IN ACCORDANCE WITH THIRD LIMB OF RULE 8D( 2) OF THE RULES EXPLICITLY IN IS ORDER, HOWEVER, RESTORED TO TAKE T HE COMPUTATION MECHANISM PROVIDED THEREIN AT 0.5% OF AVERAGE VALUE OF INVESTMENTS. WE HOLD THAT SINCE RULE 8D OF THE RULES CONTEMPLATE S CONSIDERATION OF AVERAGE VALUE OF INVESTMENTS ONLY AND NOT AS STOCK IN TRADE, THE SAME CANNOT BE ADOPTED IN THE FACTS OF THE INSTANT CASE, NOW IT IS WELL SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENTS REPORTED IN 402 ITR 640 (SC) THAT THE DISALLOWANCE U/S. 14A OF THE ACT IS TO BE MADE EVEN IF THE SHARES ARE HELD AS STOCK IN TRADE. SINCE RULE 8D CANNOT BE ADOPTED HEREIN, THE DISALLOWANCE SHOULD B E MADE BASED ON THE ACCOUNTS OF THE ASSESSEE. 2.3.1 WE FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF CITED SUPRA IN PARA 39 OF THE ORDER HAD ALSO OBSERVED THAT EVEN THOUGH THE DIVIDEND HAS BEEN EARNED AS AN INCIDENTAL ACTIVITY IN RESPEC T OF SHARES HELD AS STOCK IN TRADE, IT TRIGGERS THE APPLICABILITY OF SE CTION 14A OF THE ACT AD DEPENDING UPON THE FACTS OF EACH CASE, THE EXPENDIT URE INCURRED IN ACQUIRING THOSE SHARES AND MAINTAINING THOSE SHARES WOULD HAVE TO BE APPORTIONED BETWEEN TAXABLE AND EXEMPT INCOME. THE LD AR PLACED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF DCIT VS. S.G. INVESTMENTS & INDUSTRIES LTD REPORTED IN 89 ITD 44 (KOL) DATED 29.5.2003 WHEREIN THE LD ASSESSING O FFICER DETERMINED THE SUM OF 19,14,940/- OUT OF TOTAL INTEREST PAID OF 3,69,36,638/- AS INTEREST RELATABLE TO EARNING OF EXEMPTED DIVIDEND BY WORKING OUT THE ITA NO.1126/KOL/2017 ASSESSMENT YEAR 2012-13 M/S ANUSHREYA INVESTMENTS T PVT. LTD. VS ITO WD-3(1), KOL. PAGE 3 PERCENTAGE OF DIVIDEND VIS A VIS TOTAL TURNOVER DU RING THE YEAR. THE DIVIDEND EARNED IN THAT CASE WAS 41,38,924/- WHICH WORKED OUT TO 5.2% OF TOTAL EARNINGS AND ACCORDINGLY PROPORTIONATE INT EREST DEBITED IN PROFIT AND LOSS ACCOUNT AT THE SAME PERCENTAGE WAS DISALLO WED U/S. 14A OF THE ACT IN THAT CASE. THIS ACTION OF THE LD AO WAS UPHE LD BY THIS TRIBUNAL. THE LD AR BEFORE US STATED THAT THE NAME OF S.G. IN VESTMENTS & INDUSTRIES LTD GOT CHANGED TO ISG TRADERS LTD. WE F IND THAT THIS TRIBUNAL DECISION DATED 29.5.2003 HAD BEEN UPHELD BY THE HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LT VS. CIT I N ITA NO.264 OF 2003 DATED 22.9.2011. HENCE BY RESPECTFULLY FOLLOWING T HE SAID DECISION, WE HOLD THAT THE EXPENDITURE TO BE DISALL OWED U/S. 14A OF THE ACT IS TO BE WORKED OUT IN THE SIMILAR FASHION. 4. BOTH THE LEARNED REPRESENTATIVES ARE FAIR IN ENO UGH AT THIS STAGE THAT THE ASSESSING OFFICER NEEDS TO FINALIZE THE CONSEQUENTI AL DISALLOWANCE COMPUTATION AS PER LAW. WE THEREFORE RESTORE THIS COMPUTATION ISSUE BA CK O THE ASSESSING OFFICER TO BE FINALIZED AFTER AFFORDING ADEQUATE OPPORTUNITY OF H EARING TO THE ASSESSEE. 5. THIS ASSESSEES APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN OPEN COURT ON 13/02/2019 SD/- SD/- ( &) (( &) (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS ) - 13/02/2019 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S ANUSHREYA INVESTMENTS PVT. LTD., 18, BRITISH INDIA STREET 1 ST FLOOR, R.NO.105, KOLKATA-69 2. /RESPONDENT-ITO WD-3(1), P-7, CHOWRINGHEE SQUARE, K OLKATA-69 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . ((, , , /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ / ,,