ITO,Ward-40(1), Kolkata, Kolkata V. Smt Gita Devi Modi, Kolkata

ITA 1327/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75060 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 09-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2012
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: RAJESH KR JAIN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1327/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-40(1), KOLKATA. VS. SMT. G ITA DEVI MODI (PAN: AIWPM4874G) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 13.02.2014 DATE OF PRONOUNCEMENT: 13.02.2014 FOR THE APPELLANT: SHRI P. K. CHAKRABORTY, JCIT, SR . DR FOR THE RESPONDENT: SHRI RAJESH KR. JAIN $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIX, KOLKATA IN APPEAL NO. 63/CIT(A)-X1X/ADDL.CIT,RANGE-40,KOL/11-12 DATED 18 .11.2011. ASSESSMENT WAS FRAMED BY ADDL.CIT, RANGE-40, KOLKATA U/S. 143(3) OF THE INCO ME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 31.12.2008. 2. THE SOLE ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE AT 1% OF EXEMPTED INCOME U/S. 14A OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACT TO RESTRICT THE DISALLOWANCE U/S. 14A @ 1% OF DIVIDEND INCOME INSTEAD OF DISALLOWANCE OF RS.18,85,317/-. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE RELEVANT ASSESSMENT YEAR INVOLVED IS 2006-07 AND HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT [2010] 328 ITR 81 (BOM.), HELD THAT RULE 8D OF THE RULES AS INSERTED BY THE I. T ( FIFTH AMENDMENT) RULES, 2008 W.E.F. 24.3.2008 IS PROSPECTIVE AND NOT RETROSPECTIVE. THE CIT(A) RESTRICTED THE DISALLOWANCE AT 1% OF THE EXEMPTED INCOME U/S. 14A OF THE ACT BY OBSERVIN G AS UNDER: (7) I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. IT IS OBSERVED THAT DURING YEAR UNDER CONSIDERATION THE APPELLANT HAS EARNED DIVIDEND INCOME OF RS.15,89,250/-. THE AO COMPUTED THE DISAL LOWANCE U/S.14A BY APPLYING PROVISIONS OF RULE 8D AND MADE DISALLOWANCE OF RS.1 8,85,317/-. IT IS OBSERVED THAT THE DISALLOWANCE MADE BY THE AO WAS MORE THAN THE TOTAL EXPENSES DEBITED BY THE APPELLANT TO THE PROFIT AND LOSS ACCOUNT. IN THE COURSE OF AP PELLATE PROCEEDINGS THE APPELLANT 2 ITA NO.1327/K/2012 SMT. GITA DEVI MODI , AY:2006-07 SUBMITTED DETAILS OF LOANS TAKEN AND UTILIZATION TH EREOF. THE COPY OF BANK STATEMENT WAS ALSO FURNISHED BEFORE ME. IT IS OBSERVED THAT THE E NTIRE AMOUNT OF LOAN TAKEN BY THE APPELLANT WAS UTILIZED BY HER FOR THE PURPOSE OF BU SINESS ACTIVITIES IN DERIVATIVE TRANSACTIONS FROM WHERE SUBSTANTIAL INCOME OF RS.2, 16,29,246/-VAS EARNED AND DECLARED UNDER THE HEAD INCOME FROM BUSINESS. HENCE, THE P AYMENT OF NTEREST IS ALLOWABLE AS DEDUCTION U/S.36(I)(III) OF THE ACT. THE APPELLANT WAS ALSO ASKED TO SUBMIT YEAR WISE DETAILS OF INVESTMENT MADE IN THE SHARES. ON VERIFI CATIONS IT IS OBSERVED THAT IN THE YEAR UNDER APPEAL THE APPELLANT HAS MADE INVESTMENT IN S HARES OF TISCO LTD AND THE ENTIRE AMOUNT OF INVESTMENT WAS MADE OUT OF THE PROFIT EAR NED FROM DERIVATIVE TRANSACTIONS. I FIND FORCE IN THE SUBMISSION OF THE APPELLANT THAT NO DISALLOWANCE U/S.14A COULD BE MADE BY APPLYING PROVISIONS OF RULE 8D IN THE YEAR UNDER APPEAL BECAUSE THE PROVISIONS OF RULE 8D ARE PROSPECTIVE N NATURE. IN VIEW OF ABOV E IT IS TO BE HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S.14A READ WITH RULE 8D AT RS.18,85,317/-. HOWEVER, I AM NOT INCLINED TO AGREE THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO EXEMPT INCOME. THE HONBLE ITAT, KOLKATA IN THE CASE OF DCIT VS STRASSENBURG PHARMACEUTICAL IN ITA NO.1131/KOL/2009 AND IN THE C ASE OF NEELACHAL NATURAL RESOURCES PVT. LTD IN ITA NO,1806/KOL/2009 HAS HELD THAT THE DISALLOWANCE U/S.14A SHOULD BE RESTRCTED TO THE XTENT OF 1% OF THE DIV IDEND INCOME. RESPECTFULLY FOLLOWING THE DECISON OF THE HONBLE ITAT, KOL, I DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S.14A @ 1% OF DIVIDEND INCOME. THE GROUND NO.2 IS PARTLY AL LOWED. THE EXEMPTED INCOME I.E. DIVIDEND INCOME IS TO THE EXTENT OF RS.15,89,250/- AND CIT(A) HAS DIRECTED THE AO TO RESTRICT THE DISALLOWANCE AT 1% OF THE EXEMPTED INCOME. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 4. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 5. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- ITO, WARD-40(1), KOLKATA. 2 ./,- / RESPONDENT SMT. GITA DEVI MODI, P-27, CIT ROAD, SCHEME-VIM, KOL-54. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .