ITO, WD-3(3), KOLKATA, Kolkata V. M/s Sri Sudhir Jain, Kolkata

ITA 1427/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1930 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 24-06-2014
• Court: TRIBUNAL
• Assessee Lawyers: LD AO US I T O WARD KOLKATA
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH - C) BEFORE SHRI N. V. VASUDEVAN JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER, I.T.A. NO. 1427/KOL/2014 ASSESSMENT YEAR 2009 - 10 ORDER PER M. BALAGANESH , AM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF COMMISSI ONER OF INCOME TAX (APPEALS) - I , KOLKATA, (HEREINAFTER REFERRED TO AS THE LD. CIT(A)), DATED 14.02.2014 , ARISING OUT THE ASSESSMENT ORDER OF THE ASSESSING OFFICER (H EREINAFTER REFERRED TO AS THE LD. AO), DT. 30.12.2011 , P ASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), RELATING TO ASSESSMENT YEAR (A.Y.) 20 09 - 10 . 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S.31,82,453/ - , MADE BY THE LD. AO U/S I.T.O. WARD - (3)(3), KOLKATA. [PAN]: AEUPJ6167K ] - VS - M/S SRI SUDHIR JAIN 13,B. B. GANGULY STREET, ROOM NO. - 205, KOLKATA - 12 (APPELLANT) (RESPONDENT) FOR THE APP ELLANT SHRI RAJAT KUMAR KUREEL, JCIT, SR. DR. FOR THE RESPONDENT NONE (AR) DATE OF HEARING 23.03.2017 DATE OF PRONOUNCEMENT 05.04.2017 2 I.T.A. NO. 1 4 27/KOL/2014 ASSESSMENT YEAR 2009 - 10 M/S SRI SUDHIR JAIN 14A R.W. RULE 8D OF THE INCOME TAX RULES,1962 (HEREINAFTER THE RULES) AND RESTRICTING THE DISALLOWANCE TO RS.50,280/ - IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO OBSERVED THAT THE ASSESSEE DURING THE FINANCIAL YEAR (F.Y.) 2008 - 09, HAD INCURRED LOSS IN BUSINESS, DEALING IN SHARES AND SECURITIES AND EARNED DIVIDEND INCOME FROM OTHER SOURCES. THE ASSESSEE ALSO EARNED DIVIDEND INCOME OF RS.20,42,437/ - , WHICH WAS CLAIME D AS EXEMPT. IN RESPONSE TO THE SHOW CAUSE NOTICE FOR APPLICABILITY OF SECTION 14A OF THE ACT, THE ASSESSEE REPLIED THAT HE HAD PAID INTEREST OF RS.23,06,615/ - , TO HIS SECURED CREDITORS, WHO HAD PROVIDED MARGIN FUNDING TO THE ASSESSEE AND THAT ALL THE BORR OWINGS FROM THE SECURED CREDITORS WERE USED BY THE ASSESSEE TO TRADE IN SHARES AND SECURITIES. IT WAS PLEADED THAT IN RESPECT OF INTEREST PAID TO UNSECURED LOAN CREDITORS TO THE TUNE OF RS.50,116/ - , THE SAME WAS ALSO UTILIZED FOR THE PURPOSE OF BUSINESS AN D NONE OF THE EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING DIVIDEND. HOWEVER, THE ASSE SSEE REMITTED, SUO MOTO, CONSIDERED A SUM OF RS.50,280/ - AS EXPENSES RELATED TO EARNING OF DIVIDEND INCOME AND THE SAME WAS OFFERED FOR DISALLOWANCE IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. AO, HOWEVER, APPLIED PROVISIONS OF RULE 8D OF THE RULES AND BY APPLYING THE SECOND AND THIRDS LIMB OF RULE 8D(2) OF THE RULES, HE MADE DISALLOWANCE OF RS.31,82,453/ - , U/S 14A OF THE ACT AND DETERMINED THE ASSESSED LOSS AT R S.17,51,73,745/ - AS AGAINST THE RETURNED LOSS OF RS.17,83,55,698/ - . THE LD. CIT(A) DELETED THE DISALLOWANCE U/S 14A OF THE ACT BY FOLLOWING THE CO - ORDINATE 3 I.T.A. NO. 1 4 27/KOL/2014 ASSESSMENT YEAR 2009 - 10 M/S SRI SUDHIR JAIN BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. VS. DCIT REPORTED IN ( 2013 ) 144 ITD 141 ( KOLKATA ) IN THE KOLKATA TRIBUNAL WHEREIN IT WAS HELD THAT DISALLOWANCE UNDER RULE 8D IS TO BE COMPUTED ONLY ON SHARES HELD AS INVESTMENTS ON WHICH EXEMPT DIVIDEND HAS BEEN EARNED. HE FURTHER HELD THAT SINCE THE ASSESSEE HAD ALREADY OFFERED SUO MOTO DISAL LOWANCE OF RS.50,280/ - , U/S 14A OF THE ACT, THE LD. AO IS ACCORDINGLY DIRECTED TO WORK OUT THE DISALLOWANCE UNDER RULE 8D AS PER ABOVE DIRECTIONS. HE FURTHER HELD THAT THE TOTAL DISALLOWANCE WOULD BE RESTRICTED TO THE AMOUNT OF RS.50,280/ - , IF THERE IS NO DISALLOWANCE UNDER RULE 8D, OVER AND ABOVE THIS AMOUNT. 4. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THE LD. CIT (APPEALS) I, KOLKATA WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.31,32,173/ - RELYING ONLY ON JUDICIAL RULINGS IN THE CASE OF REI AGRO LTD. VS DCLT (ITAT KOLKATA) AND RAINY INVESTMENT PVT LTD ( ITAT MUMBAI), BY OB SERVING THAT DISALLOWANCE U/R 8D IS TO BE COMPUTED ONLY ON SHARES HELD AS INVESTMENTS ON WHICH EXEMPT DIVIDEND INCOME HAS BEEN EARNED AND SHARES HELD AS STOCK IN TRADE, SHARE APPLICATION MONEY, ADVANCES ETC. ARE NOT TO BE CONSIDERED. 2. THE LD. CIT ( APPEALS) I, KOLK ATA WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.31,32,173 / - WHICH INCLUDED INTE REST DISALLOWED U/R 8D RELYING ONLY ON JUDICIAL RULINGS IN THE CASE OF CIT VS SMT LEENA RAMACHANDRAN. 4 I.T.A. NO. 1 4 27/KOL/2014 ASSESSMENT YEAR 2009 - 10 M/S SRI SUDHIR JAIN 3. THE LD. CIT (APPEALS) I, KOLKATA WAS NOT JUSTIFIED IN RESTRICTIN G THE DISALLOWANCE TO ONLY RS.50,280/ - OUT OF THE TOTAL DISALLOWANCE OF RS.31,82,453/ - WITHOUT CONSIDERING THE FACTS OF THE CASE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 4. THE LD. DR, VEHEMENTLY RELIED ON THE ORDER OF THE LD. AO. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAD PREFERRED ADJOURNMENT ON THE GROUND OF PREPARATION OF PAPER BOOK. SINCE THIS IS A COVERED MATTER, THE BEN CH PROCEEDED WITH THE HEARING AND TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. 5. WE HAVE HEARD THE LD. DR. WE FIND THAT THE ISSUE UNDER DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD . VS DCIT (SUPRA), IS RIGHTLY POINTED OUT BY THE LD. CIT(A). THE LD. CIT(A) ALSO PLACE RELIANCE ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. SMT. LEENA RAMACHANDRAN REPORTED IN 339 ITR 296 (KERALA), WHICH HELD THAT THE ASSESSEE W OULD BE ENTITLED FOR DEDUCTION OF INTEREST U/S 36(1)(III) OF THE ACT ON BORROWED FUNDS UTILIZED FOR THE ACQUISITION OF SHARES IF THOSE SHARES ARE HELD AS STOCK IN TRADE AND IF THE ASSESSEE IS ENGAGED IN TRADING OF SHARES. FACTS OF THE SAID CASE AND THE RAT IO LAID DOWN THEREON, IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CASE. IN VIEW OF THE CATEGORICAL FINDING RECORDED BY THE LD. CIT(A) BY FOLLOWING THE JUDICIAL PRECEDENTS STATED (SUPRA), WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE 5 I.T.A. NO. 1 4 27/KOL/2014 ASSESSMENT YEAR 2009 - 10 M/S SRI SUDHIR JAIN OR DER OF THE LD. CIT(A). ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 05.04.2017 SD/ - SD/ - [ N.V. VASUDEVAN ] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05.04.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/ASSESSEE I.T.O. WD 3(3), KOLKATA. 2. RESPONDENT 13, B.B. GANGULY STREET, ROOM NO. 205, KOLKATA - 12. 3. CIT(A) - KOLKATA. 4. CIT , KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES