DCIT, CC-XXII, Kolkata, Kolkata V. Raj Kumar Poddar, Kolkata

ITA 141/KOL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7543 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R MONDAL
• Assessee Lawyers: A K TIBREWAL A R
• Section: 14A

Judgement Text

, C , , IN THE INCOME TAX APPELLATE TRIBUNAL: C BENCH: KOLKATA ( ) . . , , . . . . !' # !' # !' # !' # , , ) [BEFORE SRI S.V. MEHROTRA, A.M. & SHRI N. VIJAYA K UMARAN, J.M.] $ $ $ $ / I.T.A NO. 141/KOL/2010 ASSESSMENT YEAR : 2000-2001 DEPUTY COMMISSIONER OF INCOME TAX, -V S.- RAJ KUMAR PODDAR, KOLKATA CENTRAL CIRCLE-XXII, KOLKATA (PAN : AFNPP 49 77 M) ( %& /APPELLANT ) ( '(%& / RESPONDENT ) FOR THE APPELLANT : SHRI K.R. MONDAL, D .R. FOR THE RESPONDEN T : SHRI A.K. TIBREWAL, A.R # ) * + # ) * + # ) * + # ) * + /DATE OF HEARING : 09.01.2012 ,- * + ,- * + ,- * + ,- * + /DATE OF PRONOUNCEMENT : 09.01.2012 . / ORDER PER SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER/ . . , :- THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XXX, KOLKATA DATED 02.09.2009 FOR THE ASS ESSMENT YEAR 2000-01. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR CARRYING ON THE BUSINESS OF SHARE DEALING AND HIS INCOME CONSIS TED OF INCOME FROM SHARE DEALING, BROKERAGE, INTEREST AND DIVIDEND. THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAD EARNED DIVIDEND OF RS.9,000/-. INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, HE DISALLOWED RS.10,48,650/- BEING 15% OF INVESTMENT IN SHARES AG GREGATING TO RS.69,91,000/-. BEFORE LD. CIT(APPEALS), THE ASSESSEE FURNISHED COMPUTATION OF DISALLOWANCE OF INTEREST AS PER RULE 8D FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER SECTI ON 14A AND LD. CIT(APPEALS) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS REGARDING DI SALLOWANCE OF INTEREST RELATABLE TO INVESTMENT IN SHARES, ARRIVED AT THE DISALLOWANCE O F INTEREST UNDER SECTION 14A AT RS.12,474/-. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE PRESENT APPEAL IS FOR ASSESSMENT YEAR 2000-01 AND, THEREFORE, IN VIEW OF THE ITA NO. 141/KOL./2010 2 DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F GODREJ BOYCEE MFG. CO. LTD. VS.- DCIT [2010] 328 ITR 81 (BOM.), RULE 8D WAS NOT APPL ICABLE. IN SUCH CIRCUMSTANCES, NORMALLY THE DISALLOWANCE IS TO BE RESTRICTED TO 1% OF THE D IVIDEND INCOME AS IS CONSISTENTLY BEEN HELD BY TRIBUNAL IN VARIOUS DECISIONS INCLUDING THE DECI SION IN THE CASE OF UNIVERSAL CABLES LIMITED VS.- DCIT IN ITA NO. 954/KOL./2010, WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE UNDER SUCH CIRCUMSTANCES IS TO BE RESTRICTED TO 1% OF THE DIVI DEND INCOME. THE RELEVANT PART OF THE DECISION READS AS UNDER :- 7. AFTER HEARING RIVAL CONTENTIONS AND GOING THRO UGH FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSE E EARNED A SUM OF RS.5,31,095/- AS DIVIDEND INCOME AND CLAIMED THAT I T DID NOT HAVE INCURRED ANY EXPENSE FOR EARNING SUCH DIVIDEND INCOME. THE L OWER AUTHORITIES FOLLOWING THE DECISION OF SPECIAL BENCH, ITAT IN TH E CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. (SUPRA) DISALLOWED THE SUM OF RS.15,01,665/- ON ESTIMATE BASIS AS INADMISSIBLE DEDUCTION FROM BUSIN ESS INCOME U/S. 14A OF THE ACT R.W. R 8D OF THE I. T. RULES. WE FIND THAT THE PRINCIPLE LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CEE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.) AT PAGES 138 & 139 VI DE SUB PARAS (V) TO (VII) ARE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, SHAL L APPLY WITH EFFECT FROM THE ASSESSMENT YEAR 2008-09; (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09, WHE N RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORC E THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE , THE ASSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE ASSESSING OFFICER MUST AD OPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPP ORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D; (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002- 03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSI NG OFFICER SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCU RRED ANY EXPENDITURE (DIRECT OR INDIRECT) IN RELATION TO DIV IDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASONABLE BASIS FOR EFFECTING TH E APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO T HE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MAT ERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E ITA NO. 141/KOL./2010 3 IN VIEW OF FACTS OF THIS CASE AND THE PRINCIPLE LAI D DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LT D. (SUPRA), THAT RULE 8D IS APPLICABLE FOR AND FROM ASSESSMENT YEAR 2008-09 AND PRIOR TO THAT THE ASSESSING OFFICER CAN MAKE ESTIMATE IN THE GIVEN FA CTS AND CIRCUMSTANCES. HENCE, WE RESTRICT THE DISALLOWANCE TO 1% OF DIVIDE ND INCOME AND DIRECT THE ASSESSING OFFICER TO CALCULATE THE EXPENDITURE ON T HAT BASIS. THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. SIMILAR VIEW HAD ALSO TAKEN IN THE DECISION DATED 19.08.2010 OF THIS TRIBUNAL IN ITA NO. 859/KOL/2010 IN THE CASE OF M/S. CIVIL ENGINEERS EN TERPRISES (P) LTD. VS.- DCIT. THE RELEVANT PORTION OF THE ORDER READS AS UNDER :- 3. AT THE TIME OF HEARING BEFORE US, THE LD. COUN SEL FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT THE ASSESSEE HAD RECEIVED DI VIDEND INCOME OF RS.18,00,000/- FROM A SINGLE COMPANY AND FOR EARNIN G THIS DIVIDEND THE ASSESSEE COMPANY HAD NOT INVESTED OR EXPENDED ANY A MOUNT DURING THE YEAR. THE INVESTMENT AMOUNT ON WHICH DIVIDEND WAS RECEIVE D IS COMING FROM EARLIER YEARS. THE AO WITHOUT CONSIDERING THE ASSESEES SUB MISSION ESTIMATED MANAGEMENT EXPENSES OF RS.2,46,937/- U/S. 14A OF TH E I. T. ACT,1961. THE LD. CIT(A) ALSO NOT JUSTIFIED IN CONFIRMING THIS ACTION OF THE AO IN THIS REGARD WITHOUT CONSIDERING THE ASSESSEES SUBMISSION THAT THE ASSESSEE RECEIVED THE DIVIDEND INCOME FROM A SINGLE COMPANY ONLY AND FOR EARNING THIS AMOUNT IT HAD NOT EXPENDED ANY AMOUNT TOWARDS MANAGEMENT EXPE NSES. HE ALSO RELIED ON THE FOLLOWING JUDGMENTS : I) JUBILIANT ENPRO LTD. VS. CIT (2007) 12 SOT 194 ( DEL) AND II) CIT VS. EICHER LTD. (2007) 160 TAXMAN 80 (MAG). HE LASTLY URGED BEFORE THE BENCH TO SET ASIDE THE O RDERS OF THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE OF RS.2,46,937/-. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 5. HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL. WE FIND THA T THE ASSESSEE EARNED DIVIDEND INCOME OF RS.18,00,000/-. THE ASSESSEE DID NOT FILE ANY EVIDENCE IN RESPECT OF ANY EXPENDITURE INCURRED BY HIM TO EARN THE SAID DIVIDEND INCOME BEFORE THE LOWER AUTHORITIES AND ALSO BEFORE THE TR IBUNAL. IN VIEW OF THE ABOVE, AND THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN MA NY OTHER CASES ALSO A SUM OF RS.18,000/- I.E. @ 1% OF THE DIVIDEND INCOME IS TREATED AS EXPENSES RELATED TO DIVIDEND INCOME. THEREFORE, THE DISALLOWANCE COM ES TO RS.18,000/-. THIS GROUND OF THE ASSESSEE IS, THEREFORE, PARTLY ALLOWE D. HOWEVER, IN THE PRESENT CASE, ASSESSEE HAS HIMSELF ACCEPTED THE DISALLOWANCE UNDER SECTION 14A AT RS.12,474/-, WHICH IS MORE THAN 1% OF THE DI VIDEND INCOME. THEREFORE, NO FURTHER DISALLOWANCE IS CALLED FOR. ITA NO. 141/KOL./2010 4 4. IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS) AND UPHOLD THE SAME AND REJECT THE GRO UNDS OF APPEAL TAKEN BY THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. / 0 / 0 / 0 / 0 ! 1 ! 1 ! 1 ! 1 /' /' /' /' 2 2 2 2 ' ' ' ' 34 3434 34 ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2012. SD/- SD/- [N. VIJAYA KUMARAN / . . . . !' # !' # !' # !' # ] [S.V. MEHROTRA/ ( . . )] JUDICIAL MEMBER/ ACCOUNTANT MEMBER/ DATED : 09/ 01/ 2012 COPY OF THE ORDER FORWARDED TO: 1. RAJ KUMAR PODDAR, 18, RABINDRA SARANI, KOLKATA-1. 2 DCIT, CENTRAL CIRCLE-XXII, KOLKATA, 18, RABINDRA SA RANI, PODDAR COURT, 5 TH FLOOR, KOLKATA-1 3. CIT(APPEALS)- ,KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.