I.T.O Wd - 4(1),kolkata, Kolkata V. M/s Raima Project, Kolkata

ITA 1318/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4991 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1318/KOL/ 2013 ASSESSMENT YEAR: 2009-2010 INCOME TAX OFFICER,................................ ................................APPELLANT WARD-4(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 0069 -VS.- M/S. RAJMA PROJECTS PVT. LIMITED................... .......................RESPONDENT 21E, B.R.B. BASU ROAD, 3 RD FLOOR, KOLKATA-700 001 [PAN : AABCR 1995 F] & C.O. NO. 88/KOL/2013 (IN I.T.A. NO. 1318/KOL/ 2013) ASSESSMENT YEAR: 2009-2010 M/S. RAJMA PROJECTS PVT. LIMITED, ................. ..............CROSS OBJECTOR 21E, B.R.B. BASU ROAD, 3 RD FLOOR, KOLKATA-700 001 [PAN : AABCR 1995 F] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-4(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 0069 APPEARANCES BY: SHRI SUDIPTA GUHA, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI SUNIL SURANA, FCA, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : FEBRUARY 10, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 04, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOLKATA DA TED 28.02.2013 AND I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 2 OF 6 THE SAME IS BEING DISPOSED OF ALONG WITH CROSS OBJE CTION FILED BY THE ASSESSEE BEING C.O. NO. 88/KOL/2013. 2. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITIO N OF RS.57.68 LAKHS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. 3. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKIN G FINANCE COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CO NSIDERATION WAS FILED BY IT ON 19.09.2009 DECLARING TOTAL INCOME OF RS.28 ,11,100/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.13,28,290/- WAS CLAIM ED TO BE EXEMPT BY THE ASSESSEE AND A DISALLOWANCE OF RS.5.76 LAKHS WA S OFFERED ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF THE SAID EXEMPT INCOME AS REQUIRED BY THE PROVISIONS OF SECTION 14A . THE ASSESSING OFFICER, HOWEVER, APPLIED RULE 8D OF THE INCOME TAX RULES AND WORKED OUT THE DISALLOWANCE TO BE MADE UNDER SECTION 14A A T RS.91,28,456/-. SINCE THE TOTAL EXPENDITURE INCURRED BY THE ASSESSE E WAS ONLY RS.63,44,119/-, THE ASSESSING OFFICER FINALLY MADE A DISALLOWANCE TO THAT EXTENT THEREBY MAKING ADDITION OF RS.57.68 LAKHS. 4. THE ADDITION MADE BY THE ASSESSING OFFICER BY WA Y OF A FURTHER DISALLOWANCE MADE UNDER SECTION 14A WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND AF TER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED THE SAID ADDIT ION FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.2 OF HIS IMPUGNED ORDER:- 4.2. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT. FROM THE FACTS I T IS EVIDENT THAT THE APPELLANT WAS MAINLY ENGAGED IN SH ARE TRADING BUSINESS. AS PER PROFIT & LOSS ACCOUNT, TOT AL EXPENSES INCURRED EXCLUSIVE OF INTEREST WAS RS. 4.35 LAKHS A ND INTEREST PAID WAS RS.59.08 LAKHS. THE ASSESSEE HIMSELF DISAL LOWED I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 3 OF 6 RS.5.76 LACS U/S 14A WHILE SUBMITTING THE RETURN. T HEREFORE THE APPLICABILITY OF SECTION 14A READ WITH RULE 8D IS NOT IN DISPUTE. HOWEVER THE A.O. HAS APPLIED ALL THE PROVI SIONS OF RULE 8D(I)(II)AND (III) MECHANICALLY. THE A.O. HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE LOANS FUNDS WERE USED IN INVESTMENT IN THE MUTUAL FUNDS SECURITIES. THERE WAS INVESTMENT OF RS.17.95 CRORES MAINLY CONSISTING OF RS.17.87 CRORES IN THE MUTUAL FUNDS. NO DISALLOWANCE OUT OF INTEREST WAS MADE UPTO A.Y. 2008-09 WHICH SHOWS THAT TILL TH AT YEAR IT IS ACCEPTED THAT THE INVESTMENT HAVE COME OUT OF SH ARE CAPITAL AND RESERVES. THE SHARE CAPITAL, RESERVE AND SURPLU S OF THE ASSESSEE WERE RS.18.97 CRORES WHICH WAS MORE THAN T HE AMOUNT OF INVESTMENT IN MUTUAL FUNDS AND SECURITIES . THE A.O. HAS NOT BROUGHT ON RECORD ANY FACTS TO SUGGEST THAT LOAN FUNDS WERE USED FOR INVESTMENT IN SHARES AND SECURITIES. THERE WAS NO FINDING THAT ANY EXPENDITURE WAS DIRECTLY RELATE D TO THE EARNING OF THE EXEMPTED INCOME. THEREFORE THE PROVI SION OR RULE 8D(2)(I) WERE NOT APPLICABLE. IT IS ALSO NOT T HE CASE OF THE A.O. THAT MIXED FUNDS WERE USED FOR INVESTMENT IN M UTUAL FUNDS AND SECURITIES. AS FOUND EARLIER TILL A.Y. 20 08-09 NO SUCH DISALLOWANCE WAS MADE AND DURING THE YEAR NO LOAN F UNDS HAVE BEEN USED FOR INVESTMENT IN SHARES AND MUTUAL FUNDS. THE APPELLANTS CASE IS SUPPORTED BY JUDGEMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF MUNJAL SALES CORPORATI ON REPORTED IN 298 ITR PAGE 298, MUMBAI HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER CO. REPORTED IN 313 ITR PAGE 340 AND MUMBAI BENCH OF THE ITAT IN THE DECISION RE PORTED IN 130 TTJ PAGE 31. THEREFORE THE PROVISIONS OF RULE 8 D(2)(II) WERE ALSO NOT APPLICABLE. IN MY CONSIDERED OPINION THE ASSESSEE HAS DULY DISALLOWED RS.5,76,737/- U/S 14A AND NO FURTHER DISALLOWANCE WAS CALLED FOR UNLESS IT WAS S HOWN THAT THE SAID DISALLOWANCE BY THE ASSESSEE WAS NOT IN CO NFORMITY WITH THE PROVISIONS OF THE I.T ACT. IT IS WORTH NOT ING THAT THE EXPENSE DISALLOWED BY THE ASSESSEE ON PROPORTIONATE BASIS WERE MORE THAN THE EXPENSES (EXCLUSIVE OF INTEREST) CLAIMED IN THE PROFIT &, LOSS ACCOUNT SINCE NO EVIDENCE HAS BE EN BROUGHT ON RECORD THAT THE INVESTMENTS HAVE COME OUT OF THE LOANS TAKEN BY THE ASSESSEE. IN VIEW OF THE ABOVE THERE I S NO NECESSITY TO DEAL WITH THE CALCULATION MISTAKE MADE BY THE A.O. WHILE TAKING OUT THE AVERAGE ASSETS. THE ADDIT ION MADE BY THE A.O. IS DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 4 OF 6 5. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. S TRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE RE VENUES CASE ON THE ISSUE UNDER CONSIDERATION, WHILE THE LD. COUNSEL FO R THE ASSESSEE STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(APPEALS ) AND ALSO RELIED ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF REI AGRO LIMITED VS.- DCIT REPORTED IN 144 ITD 141, WH ICH IS AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT IN ITAT NO. 161 OF 2013 DATED 23.12.2013. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT IN THE COMPUTATION OF TOTAL INCOME, DISALLOWANCE OF RS.5.7 6 LAKHS WAS OFFERED BY THE ASSESSEE UNDER SECTION 14A OF THE ACT ON ACCOUN T OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF EXEMPT DIVID END INCOME AND THERE WAS NO REASON GIVEN BY THE ASSESSING OFFICER, HAVIN G REGARD TO THE ACCOUNTS OF THE ASSESSEE, TO SHOW HIS DISSATISFACTI ON WITH THE CORRECTNESS OF QUANTUM OF EXPENDITURE DISALLOWED BY THE ASSEESS EE UNDER SECTION 14A. IN THE CASE OF REI AGRO LIMITED (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, IT WAS HELD BY THE COORDINATE BENCH O F THIS TRIBUNAL THAT WHERE THE ASSESSEE MAKES A CLAIM THAT ONLY A PARTIC ULAR AMOUNT IS TO BE DISALLOWED UNDER SECTION 14A AND IF THE ASSESSING O FFICER PROPOSES TO INVOKE SECTION 14A, HE HAS TO RECORD THE SATISFACTI ON AS TO HOW THE CLAIM OF THE ASSESSEE IS NOT CORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. IT WAS ALSO HELD THAT IF THERE IS NO SATI SFACTION RECORDED BY THE ASSESSING OFFICER, NO DISALLOWANCE COULD BE MADE BY HIM BY INVOKING THE PROVISIONS OF SECTION 14A. KEEPING IN VIEW THIS DEC ISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LIMI TED (SUPRA), WHICH HAS BEEN AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT, W E HOLD THAT IN THE ABSENCE OF REQUISITE SATISFACTION RECORDED BY THE A SSESSING OFFICER SHOWING HOW THE DISALLOWANCE OFFERED BY THE ASSESSE E UNDER SECTION 14A WAS NOT CORRECT HAVING REGARD TO ITS BOOKS OF ACCOU NT, IT WAS NOT PERMISSIBLE TO THE ASSESSING OFFICER IN LAW TO INVO KE SECTION 14A AND I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 5 OF 6 MAKE A FURTHER DISALLOWANCE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A ALTHOUGH ON DIFFERENT GRO UNDS AND DISMISS THIS APPEAL OF THE REVENUE. 7. IN THE CROSS OBJECTION, THE ASSESSEE HAS MERELY SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(APPEALS), WHEREBY HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A. SINCE WE HAVE ALREADY UPHELD THE ORDER OF THE LD. CIT(APPEAL S) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE WHILE DISMISSING THE APPEAL OF THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME IN FRUCTUOUS AND THE SAME IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 04, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF MARCH, 2016 COPIES TO : (1) INCOME TAX OFFICER, WARD-4(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 0069 (2) M/S. RAJMA PROJECTS PVT. LIMITED, 21E, B.R.B. BASU ROAD, 3 RD FLOOR, KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOLKA TA (4) COMMISSIONER OF INCOME TAX, KOLKATA I.T.A. NO. 1318/KOL./2013 ASSESSMENT YEAR: 2009-2010 & C.O. NO. 88/KOL/2013 (ARISING OUT OF ITA NO. 1318/KOL/2013) ASSESSMENT YEAR : 2009-2010 PAGE 6 OF 6 (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.