DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Micro Management Ltd, Kolkata

ITA 1399/KOL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62100 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: S M SURANA
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , !' !' !' !' /AND #! $'# #! $'# #! $'# #! $'# , ) [BEFORE SHRI PRAMOD KUMAR, AM & SHRI MAHAVIR SINGH, JM] '% '% '% '% / I.T.A NO. 1399/KOL/2011 $&' !() $&' !() $&' !() $&' !()/ // / ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. MICRO MANAGEMENT LTD. CIRCLE-4, KOLKATA. (PAN: AABCM 8245 K) (+, /APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT: SHRI NIRAJ KUMAR FOR THE RESPONDENT: SHRI S. M. SURANA DATE OF HEARING: 21.05.2012 DATE OF PRONOUNCEMENT: 21.05.2012 . / ORDER IMMEDIATELY UPON CONCLUSION OF HEARING OF THIS APPE AL ON 21 ST MAY, 2012, THE BENCH PASSED THE FOLLOWING ORDER: 21 ST MAY, 2012 FOR THE REASONS TO BE SET OUT IN THE DETAILED ORDER, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY. IN ACCORDANCE WITH THE ABOVE, THE REASONED ORDER IS NOW SET OUT AS FOLLOWS: PER MAHAVIR SINGH, JM ( #! $'# #! $'# #! $'# #! $'#, , , , ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-IV, KOLKATA IN APPEAL NO. 37/CIT(A)-IV/10-11 DATED 03.05.2011. ASSESSMENT WAS FRAMED BY ADDL. CIT, RANGE-4, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 30.12. 2010. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AG AINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF DISALLOWANCE OF E XPENSES AGAINST EXEMPT INCOME BY APPLYING SECTION 14A OF THE ACT R.W.R. 8D OF I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). FOR THIS, REVENUE HAS RAISED FOLLOWING GR OUND NO.1: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF RS.54,73,997/- MADE BY THE AO U/S. 14A SINCE IT IS CLEAR IN THE ACT THAT EXPENSES RELATING TO EXEMPTED INCOME SHOULD BE DISA LLOWED U/S. 14A APPLYING RULE-8D. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE, BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGE D IN THE BUSINESS OF SHARE DEALING HAVING TURNOVER OF RS.616,95,68,760/-. THE ASSESSEE COMPA NY DURING THE COURSE OF ITS SHARE TRADING 2 ITA 1399/K/2011 MICRO MANAGEMENT LTD. A.Y. 08-09 BUSINESS EARNED DIVIDEND INCOME OF RS.69,70,085/- W HICH IS EXEMPT. THE AO IN VIEW OF THE EXEMPT INCOME NOTED THAT THE ASSESSEE DID NOT DISAL LOW ANY EXPENDITURE U/S. 14A OF THE ACT AND FOLLOWING THE DECISION OF ITO VS. DAGA CAPITAL MANA GEMENT PVT. LTD. (2009) 312 ITR (AT) 1 (MUM,S.B.) APPLIED RULE 8D AND MADE DISALLOWANCE ON ACCOUNT OF DEMAT CHARGES EXPENDITURE, INTEREST AND AVERAGE TOTAL INVESTMENT AT RS.54,73,9 97/-. BEFORE CIT(A), ASSESSEE CONTENDED THAT IT WOULD BE ENTITLED FOR DEDUCTION OF INTEREST U/S. 36(1)(III) OF THE ACT ON BORROWED FUNDS WHICH WERE UTILIZED FOR ACQUISITION OF SHARES AND S HARES WERE HELD AS STOCK IN TRADE WHICH ARISES FROM TRADING IN SHARES. CIT(A) IN VIEW OF ABOVE A ND FOLLOWING THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. SMT. LEENA RAMACH ANDRAN, ITA NO.1784 OF 2009 DATED 14.06.2010 ALLOWED THE APPEAL OF ASSESSEE. AGGRIEV ED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE FIND THAT THE AO HAS NOT ATTRIBUTED ANY EXPEN DITURE WHICH IS ATTRIBUTABLE TO DIVIDEND INCOME. WHEN NO EXPENDITURE IS INCURRED BY ASSESSE E IN EARNING DIVIDEND INCOME NO NOTIONAL EXPENDITURE COULD BE DEDUCTED FROM THE SAID INCOME. HERE, IT IS NOT THE CASE OF ASSESSEE RETAINING ANY SHARE SO AS TO DERIVE BENEFIT OF DIVI DEND WHICH WERE PURCHASED AND SOLD AND INCOME DERIVED THERE FROM IS OFFERED TO TAX AS BUSI NESS INCOME. EVEN OTHERWISE FOR INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES, THE AO HAS TO RECORD A SATISFACTION ABOUT THE INCORRECTNESS OF THE CLAIM O F EXPENDITURE MADE BY ASSESSEE OR ON THE CLAIM MADE BY ASSESSEE THAT EXPENDITURE HAS BEEN IN CURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUC H PREVIOUS YEAR. IN THAT EVENTUALITY HE MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE RULES. THERE IS NO WHISPER IN THE ORDER OF THE AO ABOUT CO RRECTNESS OF THE BOOKS OF ACCOUNT OF ASSESSEE OR THE CLAIM OF EXPENDITURE IS NOT CORRECT OR THE SAME IS IN RELATION TO EXEMPT INCOME. IN THE ABSENCE OF SUCH FINDING, THE AO CANNOT MAKE ANY DISALLOWANCE. HENCE, WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION WITH THE ABOV E REASONING. THIS ISSUE OF REVENUES APPEAL IS DISMISSED, 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN ALLOWING THE CREDIT OF STT U/S. 88E OF THE ACT. FOR THIS, REVE NUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT IN THE FACTS, CIRCUMSTANCES AS WELL AS UND ER THE LAW, LD. CIT(A)-XVI, KOL ERRED IN PLACING RELIANCE ON THE DECISION IN THE CASE OF MA DDI VENKATARAMAN & CO. (P) LTD. VS. CIT (1998) 229 ITR 534, 539-40 (SC), WHICH IS DISTINGU ISHABLE WITH AND DIFFERENT FROM THE FACTS OF THE INSTANT CASE UNDER APPEAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THERE IS A FINDING BY THE AO THAT THE ASSESSEE HAS NOT SHOWN COMPUTATION OF MAT AS PER SECTION 115JB OF THE ACT IN ITS RETURN OF IN COME OR IN THE STATEMENT OF COMPUTATION OF INCOME FILED ALONG WITH RETURN. ACCORDINGLY, HE HA S NOT ALLOWED THE CREDIT OF STT PAID U/S. 3 ITA 1399/K/2011 MICRO MANAGEMENT LTD. A.Y. 08-09 88E OF THE ACT. CIT(A) NOTED THAT THERE IS NO DISP UTE THAT THE BOOK PROFIT AROSE FROM SHARE TRADING BUSINESS AND THE BOOK PROFIT SO DETERMINED IS ELIGIBLE FOR THE CREDIT U/S. 88E OF THE ACT ON STT PAYMENT. WE FIND THAT THIS ISSUE IS NOW COV ERED BY THE DECISION OF BANGALORE BENCH IN THE CASE OF M/S. HORIZON CAPITAL LTD. VS. ITO IN IT A NO.592(BNG)/10 FOR AY 2005-06 DATED 16.07.2010, WHEREIN THE ITAT HAS HELD AS UNDER: 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ONLY DISPUTE IS WHETHER THE REBATE OF STT PAID BY T HE ASSESSEE IS ALLOWABLE FROM THE INCOME TAX COMPUTED AGAINST THE TOTAL INCOME COMPUTED UNDER SE CTION 115JB OF THE INCOME TAX ACT, 1961. THE TERM TOTAL INCOME HAS BEEN DEFINED UNDER THE INCOME TAX ACT, 1961 AS THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MA NNER LAID DOWN IN THIS ACT. SECTION 5 OF THE INCOME TAX ACT, 1961 DEFINES THE SCOPE OF THE TOTAL INCOME OF A RESIDENT OR A NON-RESIDENT PERSON. THE TOTAL INCOME OF THE ASSESSEE HAS TO BE COMPUTED UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT, 1961 AND IN THE CASE OF A COMPANY IT CAN B E ARRIVED AT BOTH UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT AND UNDER THE DEEMING PROVISI ON UNDER SECTION 115JB OF THE ACT. IT HAS BEEN PROVIDED THAT WHERE THE INCOME TAX PAYABLE BY THE A SSESSEE ON THE TOTAL INCOME COMPUTED UNDER REGULAR PROVISIONS OF THE ACT IS LESS THAN 7 1/2% OF THE BOOK PROFIT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT, THE HIGHER OF THE TAX I.E. THE B OOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX PAYABLE BY THE ASSESSEE SHA LL BE THE AMOUNT OF INCOME TAX AT THE SPECIFIED RATE. WHEN WE LOOK AT THE PROVISIONS OF SECTION 87 OF THE INCOME TAX ACT, 1961, WE FIND THAT THE REBATE IS TO BE GRANTED FROM THE AMOUNT OF INCOME T AX CHARGEABLE ON THE TOTAL INCOME OF THE ASSESSEE. THE INCOME TAX IS COMPUTED AFTER ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE AND SECTION 87 OF THE INCOME TAX ACT, 1961 DOES NOT DIFFERENTIA TE BETWEEN THE TOTAL INCOME COMPUTED UNDER THE REGULAR PROVISIONS OF THE ACT OR UNDER SECTION 115J B OF THE INCOME TAX ACT, 1961. EVEN THOUGH THE SUB SECTION (1) OF SECTION 115JB STARTS WITH THE NO N-ABSTANTE CLAUSE, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WE F IND THAT IT IS ONLY FOR THE COMPUTATION OF THE TOTA L INCOME AND THE SUB SECTION (5) OF SECTION 115JB PRO VIDES FOR A SAVING CLAUSE THAT THE REST OF THE PROVISIONS OF THE INCOME TAX ACT RELATING TO DEDUCT IONS, REBATE, ETC THE OTHER PROVISIONS OF THE INCOME TAX ACT SHALL APPLY. THEREFORE IT IS CLEAR T HAT THE PROVISION OF SECTIONS 87 AND 88A TO 88E ALSO APPLY AFTER THE TOTAL INCOME IS COMPUTED UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961 AND SINCE THE ASSESSEES TOTAL INCOME INCLUDES THE INCO ME FROM THE TAXABLE SECURITIES TRANSACTIONS, THE ASSESSEE IS ENTITLED TO A DEDUCTION OF THE AMOUNT E QUAL TO THE STT PAID BY HIM IN RESPECT OF THE TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF BUSINESS DURING THE PREVIOUS YEAR. THE ASSESSEES APPEAL IS THUS ALLOWED AND THE ASSES SING OFFICER IS DIRECTED TO GIVE REBATE UNDER SECTION 88E FOR THE STT PAID BY THE ASSESSEE. SINCE THE ISSUE IS COVERED BY THE DECISION CITED SU PRA, RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE CLAIM OF ASSESSEE. THIS GROUND OF REVENU ES APPEAL IS ALSO DISMISSED. 7. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 8. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- , #! #! #! #! $'# $'# $'# $'# , (PRAMOD KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED: 21 ST MAY, 2012 !01 $&23 $4! JD.(SR.P.S.) 4 ITA 1399/K/2011 MICRO MANAGEMENT LTD. A.Y. 08-09 . 5 $$ 6(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT DCIT, CIRCLE-4, KOLKATA. 2 -+, / RESPONDENT, M/S. MICRO MANAGEMENT LTD., 32, EZRA STREET, KOL-700 001 3 . $.& ( )/ THE CIT(A), KOLKATA 4. $.& / CIT, KOLKATA 5 . !>$? $& / DR, KOLKATA BENCHES, KOLKATA - $/ TRUE COPY, .&/ BY ORDER, # '3 /ASSTT. REGISTRAR .