DCIT,Circle-1, Kolkata, Kolkata V. M/s Crishpark Vincom Ltd., Howrah

ITA 1450/KOL/2012

• Counselvise Citation: 145023514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2012
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA L
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

ITA NO. 1450/KOL/12-B-JM M/S. CRISHPARK VINCOM LTD- -B-JM 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA ( ) , , BEFORE HONBLE SRI MAHAVI R SINGH, JM & HONBLE SRI SHAMIM YAHYA, AM I.T.A NO. 1450/KOL/2012 / ASSESSMENT YEAR :2008-09 D.C.I.T, CIRCLE-1, KOLKATA VS. M/S. CRIS HPARK VINCOM LTD PAN: AABCCO201H ( $ /APPELLANT ) ( %&$ / RESPONDENT ) $ / FOR THE APPELLANT/ DEPARTMENT : / SHRI DAVID CHAWANGTHU, ACIT/ LD .SR. DR %&$ / FOR THE RESPONDENT/ ASSESSEE: / SHRI S.M SURANA, ADVOCATE, , LD.AR * + /DATE OF HEARING: 27-06-2014 * + /DATE OF PRONOUNCEMENT: 08/07/2014 / ORDER , SHRI MAHAVIR SINGH, JUDICIAL MEMBER: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A), KOLKATA IN APPEAL NO. 399/CIT(A)-1/C-1/2010-11 DATED 13-07-2012.. ASSESS MENT WAS FRAMED BY D.C.I.T, CIRCLE-1., KOLKATA FOR THE ASSESSMENT YEAR 2008-09 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 07-12-2010. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSES SEE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I.T RULES, 1962 FOR THE EXEMPTED INCOME. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND NO.1 : - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE ASSESSEE S CALCULATION OF THE DISALLOWANCES U/S. 14A OF THE IT ACT 1961 READ WITH THE RULE 8D, IGNORING COMPLETELY THE DETAILED CALCULATION MADE B Y THE AO TAKING ALL THE FIGURES INTEREST, TOTAL INTEREST, TOTAL ASSE TS, INVESTMENTS ETC FROM THE P & L ACCOUNT AND THE BALANCE SHEET OF THE ASSE SSEE COMPANY. ITA NO. 1450/KOL/12-B-JM M/S. CRISHPARK VINCOM LTD- -B-JM 2 3. BRIEF FACTS LEADING TO THE ISSUE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS CLAIMED EX EMPTION ON DIVIDEND INCOME, WHICH IS AT RS. 7,25,264, AND NO RELATABLE EXPENSES WERE ALL OCATED. ACCORDING TO THE AO, HE APPLIED THE PROVISIONS OF SECTION 14A OF THE ACT RE AD WITH RULE 8D AND COMPUTED THE TOTAL DISALLOWANCE AT RS.73,12,549/- BY OBSERVING AS UNDE R:- RS. I) DIRECT EXPENSES 9045/- D.P CHARGES AS CLAIMED BY THE COMPANY II) INTEREST ON UNSECURED LOANS A) INTEREST EXPENSES AS PER P & L A/C 8759444/- B) INVESTMENT (AVERAGE) RS.296326596 + RS.196750988 2 246538792/- C) TOTAL ASSET (AVERAGE) RS.201430456 + RS.390539968 2 295985212/- DISALLOWANCE= A*B/C = RS.8759444 X RS.24653879 2 295985212 7296117/- III) FOR OTHER EXPENSES THE FIGURE AS SHOWN BY THE ASSESSEE COMPANY IS ADOPTED EMPLOYEES COST RS.6740/- OTHER ADMINISTRATION RS. 647/- RS.73 87/- TOTAL DISALLOWANCE UNDER RULE 8D COMES TO RS.(9045+7296117+7387 ) 7312549/- 4. AGGRIEVED, THE REVENUE PREFERRED APPEAL BEFORE THE CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLO WANCE BY OBSERVING AS UNDER:- I HAVE OBSERVED THAT THE AO, WHILE APPLYING RULE 8D WORK OUT THE AMOUNT OF DISALLOWANCE U/S. 14A, HAS NOT EX HIBITED ANY CLINCHING REASON OR RECORDED ANY FINDING TO JUSTIFY HIS DISSATISFACTION AS TO THE CORRECTNESS OF CLAIM OF THE ASSESSEE COMP ANY IN RESPECT OF EXPENSES IN RELATION TO EXEMPT INCOME WORKED OUT BY IT WHICH IS PRE- CONDITION ENVISAGED UNDER SEC. 14(2) OF THE ACT OF JUMPING TO RULE 8D. I HAVE ALSO OBSERVED THAT THE ASSESSEE COMPANY HAS SHOWN A DETAILED BAIS TO CALCULATE THE AMOUNT OF DISALLOWAN CE U/S. 14A ON WHICH NO FAULT HAS BEEN POINTED OUT BY THE LD.AO IN HIS ORDER. A SIMPLE OBSERVATION THAT THE CALCULATION OF SUCH DIS ALLOWABLE AMOUNT IS ITA NO. 1450/KOL/12-B-JM M/S. CRISHPARK VINCOM LTD- -B-JM 3 NOT AS PER RULE 8D, CANNOT FORM A JUSTIFIABLE REA SON TO SHOW THE DISSATISFACTION IN ORDER TO JUSTIFY APPLICATION OF RULE 8D. BASED ON THE RATIO OF DECISIONS OF DELHI HIGH COU RT IN THE CASE OF MAXOPP INVESTMENT LIMITED V. CIT (2011) 203 ITR 364, I HOLD THAT THE AMOUNT OF DISALLOWANCE COMPUTED BY THE AO APPLYING RULE 8D IS WITHOUT PROPER LEGAL SUPPORT AND HENCE NOT SUSTA INABLE. THE TOTAL DISALLOWANCE US. 14A IS THEREFORE RESTRICTED TO RS. 7,25,264/- AS COMPUTED BY THE ASSESSEE COMPANY. AGGRIEVED, NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE COMPANY HAS DISCLOSED EXEMPTED INCOME ON ACCOUNT OF DIVIDEND AT RS. 9,83,174/- AND EXEMPTED LONG-TERM CAPITAL GAIN AT RS.9,43,637/-. THE ASSESSEE HAS ALSO COMPUTED THE DISALLOWANCE OF EXPENSES RELATABLE TO EXEMPTED INCOME AT RS. 7,25,264/- ITSELF AND DISALL OWED COMPUTATION OF INCOME. THE ASSESSEE HAD ALSO ENCLOSED A DETAILED CALCULATION SHEET FOR ARRIVING AT THE DISALLOWANCE OF SUM OF RS.7,25264 DURING THE COURSE OF HEARING. THE AO REJECTED THE ABOVE CALCULATION AND WRONGFULLY APPLIED THE RULE 8D OF T HE I.T RULES 1962 AND DETERMINED A TOTAL DISALLOWANCE OF RS.73,12,549/- WITHOUT SHOWI NG ANY REASON FOR HIS DISSATISFACTION AS REGARDS TO THE CORRECTNESS OF CLAIM OF EXPENDITU RE MADE BY THE ASSESSEE, WHICH IS PRE- CONDITION FOR APPLICATION OF RULE 8D OF THE I.T RUL ES 1962. THIS VIEW WAS TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S. MAXOPP INVESTMENT LTD VS. CIT REPORTED IN (2011) 203 TAXMAN 364 (DEL). WE FIND FROM THE CALCULATION MADE BY THE ASSESSEE AND DISALLOWANCES MADE, WHICH IS AS UNDER:- D.P CHARGES (100%) 9045/- INTEREST ( AS PER SEPARATE WORKING) 708832/- EMPLOYEES REMUNERATION (10%) 6740/- OTHER ADMISSIBLE EXPENSES (10%) PRINTING & STATIONERY 97/- TRAVELLING 550/- 647/- TOTAL DISALLOWANCE 725264/- FOR INTEREST DISALLOWANCE OF RS.7,08,832/- FOLLOWIN G CALCULATIONS WERE SHOWN:- (I) INTEREST RELATABLE TO LONG TERM CAPITAL GAINS 155575/- (II) INTEREST RELATABLE TO DIVIDEND INCOME 553257/- TOTAL 708832/- ITA NO. 1450/KOL/12-B-JM M/S. CRISHPARK VINCOM LTD- -B-JM 4 5.1 WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE CO-ORDINATE BENCH [ ITAT KOLKATA ] OF THIS TRIBUNAL IN THE CASE OF ACIT, CIR-10, KOLKATA VS. CHAMPION COMMERC IAL CO. LTD REPORTED IN (2012) 139 ITD 108 (KOL), WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HELD AS UNDER:- 6. LET US TAKE UP ASSESSEES GRIEVANCE FIRST, AS I T CHALLENGES THE VERY APPLICATION OF SECTION 14A TO THE FACTS OF THE CASE BEFORE US, BECAUSE THE ASSESSING OFFICER HAS NOT RECORDED A SP ECIFIC SATISFACTION TO THE EFFECT THAT CLAIM OF THE ASSESSEE, I.E NO E XPENDITURE IS INCURRED ON EARNING THE TAX EXEMPT DIVIDEND, IS INCORRECT. WE SEE NO SUBSTANCE IN THIS PLEA. WE FIND THAT SECTION 14A(2) PROVIDES THAT, THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE I NCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOT AL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRES CRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT AND SECTION 14A(3) PR OVIDES THAT (1) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS B EEN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. WHILE A LOT OF EMPHASIS IS PLACED BY THE LEARNED COUNSEL ON WORDINGS OF SECTION 14A(2) WHICH REFER TO THE NEED OF ASSESSING OFFICERS SATISFACTION TO THE EFFECT THA T THE CLAIM MADE BY THE ASSESSEE IS INCORRECT, IT SIMPLY OVERLOOKS THE PROV ISIONS OF SECTION 14A(3) WHICH STATE THAT A DISALLOWANCE UNDER SECTIO N 14A(2) CAN ALSO BE MADE IN A CASE IN WHICH ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE TAX EXEMPT INCOME. TH EREFORE, A PLAIN READING OF THE STATUTORY PROVISIONS OF SECTION 14A( 2) AND (3) SHOWS THAT WHEN ASSESSEE OFFERS A DISALLOWANCE UNDER SECT ION 14A, THE PROVISIONS OF SECTION 14A(2), READ WITH RULE 8D CA NNOT BE INVOKED UNLESS THE ASSESSING OFFICER IS SATISFIED ABOUT IN CORRECTNESS OF THE DISALLOWANCE SO OFFERED, BUT WHEN ASSESSEE DOES NOT OFFER ANY DISALLOWANCE UNDER SECTION 14A ON HIS OWN, THE PRO VISIONS OF SECTION 14A(2) READ WITH RULE 8D CAN BE INVOKED WITHOUT THE RE BEING ANY NEED TO EXPRESS SATISFACTION ABOUT INCORRECTNESS OF SUCH A CLAIM. THAT APART, AS LEARNED COMMISSIONER (DR) SHRI MAHAPATRA RIGHTLY POINTS OUT , WHEN ASSESSEE IS PAYING INTEREST ON BORROWINGS AND THE ASSESSEE IS NOT ABLE TO SHOW THAT INVESTMENT IN SHARES ARE OUT OF INTERNAL ACCRUALS OR NON INTEREST BEARING FUNDS, AND IN THE LIGHT OF BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DHANUKA & SONS V. CIT (20 11) 339 ITR ITA NO. 1450/KOL/12-B-JM M/S. CRISHPARK VINCOM LTD- -B-JM 5 319/201 TAXMAN 105/12 TAXMA 105/12 TAXMAN.COM 227 ( CAL)(MAG), DISALLOWANCE UNDER SECTION 14A CAN INDEED BE MADE. IN VIEW OF THE ABOVE, AS THE ISSUE IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE, THE ORDER OF THE LD.CIT(A) ON THIS ISSUE IS CONFIRMED. THIS GROUND OF REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AS STATED ABOVE. - + ORDER PRONOUNCED IN THE OPEN COURT ON 08/07/2014 SD/- SD/ - [ , ] [ , ] SHAMIM YAHYA, ACCOUNTANT MEMBER MA HAVIR SINGH, JUDICIAL MEMBER ( + ) DATED :8/7/2014 *PP 01 2 /SR.P.S. * %5 65 - COPY OF THE ORDER FORWARDED TO: 1. $ /APPELLANT- DCIT,CIR-1, AAYKAR BHAWAN, P- 7 CHOWRINGHEE SQ, AAYKAR BHAWAN, 7 TH FL., KOL-69 2 %&$ / RESPONDENT : M/S. CRISHPARK VINCOM LTD 251 (66) G .T ROAD. LILUAH, HOWRAH-711204. 3. / THE CIT, 4. ( )/ THE CIT(A), KOLKATA 5. % / DR, KOLKATA BENCHES, KOLKATA &5 % / TRUE COPY , / BY ORDER , /ASSTT. REGISTRAR