Laurel Securities Pvt. Ltd., Kolkata V. ITO, WD-6(2), KOLKATA, Kolkata

ITA 1469/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4413 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 03-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2015
• Court: TRIBUNAL
• Department Lawyers: DINBANDHU NASKAR
• Assessee Lawyers: GIRISH SHARMA
• Keywords: Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

I.T.A. NO. 1469/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1469/KOL/ 2015 ASSESSMENT YEAR: 2011-2012 LAUREL SECURITIES (P) LIMITED,..................... ...................APPELLANT 313, TODI CHAMBERS, 2, LAL BAZAR STREET, KOLKATA-700 001 [PAN: AAACL 4545 J] -VS.- INCOME TAX OFFICER,................................ ......................RESPONDENT WARD-6(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI GIRISH SHARMA, FCA, FOR THE ASSESSEE SHRI DINBANDHU NASKAR, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 05, 2016 DATE OF PRONOUNCING THE ORDER : OCTOBER 04, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DAT ED 10.11.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ISSUE RAISED IN GROUND NO. 1 OF THIS APPEAL RELATES TO THE DISALLOWANCE OF RS.27,80,423/- MADE BY THE ASSESSIN G OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULES , 1962. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF STOCK BROKER. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21.07.2011 DECLARI NG A LOSS OF RS.1,93,989/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS I.T.A. NO. 1469/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 2 OF 5 NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE A SUBSTANTIAL INVESTMENT IN THE SHARES OF OTHER COMPANIES. SINCE THE INCOME OF THE SAID SHARES IN THE FORM OF DIVIDEND WAS EXEMPT FROM TAX, THE ASSESSING OFFICER HELD THAT THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE SAID EXEMPT INCOME WERE LIABLE TO BE DISALLOWED UNDER SE CTION 14A. HE ACCORDINGLY WORKED OUT SUCH EXPENSES BY APPLYING RU LE 8D AT RS.27,80,423/- AND MADE A DISALLOWANCE UNDER SECTIO N 14A TO THAT EXTENT. 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U NDER SECTION 14A WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF ASSESSMENT PROCE EDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT A DISALLOWANCE OF RS .71,226/- WAS OFFERED BY IT UNDER SECTION 14A OF THE ACT IN THE COMPUTATI ON OF INCOME, WHILE THE ASSESSING OFFICER COMPUTED SUCH DISALLOWANCE AT RS. 28,51,649/- BY APPLYING RULE 8D OF INCOME TAX RULES, 1962. IT WAS CONTENDED THAT THERE WAS, HOWEVER, NO SATISFACTION RECORDING BY THE ASSE SSING OFFICER WITH REFERENCE TO THE ACCOUNTS OF THE ASSESSEE THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SECTION 14A WAS NOT CORRECT OR I T WAS WRONG. RELYING ON THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR A.Y. 2009-10 (ITA NO. 1849/KOL/2012), IT WAS CONTENDED BY THE ASSESSEE TH AT THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE DISALLOWANCE UND ER SECTION 14A BY APPLYING RULE 8D WITHOUT RECORDING SUCH SATISFACTIO N WAS NOT SUSTAINABLE. THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEP TABLE BY THE LD. CIT(APPEALS). ACCORDING TO HIM, ALTHOUGH HIS SATISF ACTION WAS NOT SPECIFICALLY RECORDED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER, SUCH DISSATISFACTION WAS DISCERNABLE FROM THE OBSER VATIONS MADE BY HIM IN HIS ORDER. HE ALSO HELD THAT THE DISALLOWANCE OF FERED BY THE ASSESSEE UNDER SECTION 14A IN THE COMPUTATION OF TOTAL INCOM E EVEN OTHERWISE WAS NOT CORRECT IN THE FACTS AND CIRCUMSTANCES OF ITS C ASE. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE ON THIS ISS UE AND PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER UNDER SECTION 14A BY APPLYING RULE 8D. I.T.A. NO. 1469/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 3 OF 5 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THIS ISSUE RELATING TO THE DISALLOWANCE MADE UNDER SECTION 14A BY APPLYING RULE 8D AS INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEA L IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL RENDERED IN ASSESSEES OWN CASE FOR AY 2009-10 VIDE ITS ORDER D ATED 24.07.2014 PASSED IN ITA NO. 1849/KOL/2012, WHEREIN A SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. C IT(APPEALS) UNDER SECTION 14A BY APPLYING RULE 8D WAS DELETED BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4 OF ITS O RDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT IN THIS CASE THE ASSESSEE WHILE COMPUTING THE TAXABLE INCOME HAS DISALLOWED A SUM OF RS.3,39,802/- U/S 14A OF THE I. T. ACT. THE AO DID NOT AGREE WITH THE ASSESSEE BUT WITHOUT RECORDING HIS SATISFACTION WITH REFERENCE TO THE AC COUNTS OF THE ASSESSEE AND HOW HE IS NOT SATISFIED WITH TH E CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENDITURE IN RELATION TO THE DIVIDEND INCOME APPL IED RULE 8D OF IT RULES AND COMPUTED THE DISALLOWANCE I N ACCORDANCE WITH RULE 8D. SECTION 14A(2) REQUIRES TH E AO TO GIVE A FINDING IN RESPECT OF ITS NON SATISFACTIO N FOR INCORRECT CLAIM OF THE ASSESSEE WITH REFERENCE TO T HE BOOKS OF ACCOUNT. THE AO IN OUR OPINION, CANNOT DIR ECTLY APPLY RULE 8D. FOR ARRIVING AT BY THE ABOVE DECISION, THE TRIBUNAL ALSO RELIED ON THE ORDER DATED 08.03.2013 OF ITS PANAJI BENCH IN THE C ASE OF SESA GOA LIMITED VS.- JCIT PASSED IN ITA NOS. 72 & 85/PNJ/2012, WHE REIN A SIMILAR DISALLOWANCE MADE UNDER SECTION 14A BY APPLYING RUL E 8D WAS HELD TO BE NOT SUSTAINABLE BY THE TRIBUNAL IN THE ABSENCE OF D ISSATISFACTION RECORDED BY THE ASSESSING OFFICER REGARDING THE CORRECTNESS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SECTION 14A AFTER TAK ING INTO CONSIDERATION ALL THE RELEVANT PROVISIONS OF THE ACT AS WELL AS T HE VARIOUS JUDICIAL PRONOUNCEMENTS. THE ISSUE INVOLVED IN THE PRESENT A PPEAL THUS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN THE CASE OF SESA GOA LIMITED (SUPRA) AS WELL AS IN ASSE SSEES OWN CASE FOR AY 2009-10 AND RESPECTFULLY FOLLOWING THE SAME, I DELE TE THE DISALLOWANCE I.T.A. NO. 1469/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 4 OF 5 MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 14A BY APPLYING RULE 8D. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2 RE LATING TO THE DISALLOWANCE OF RS.75,027/- AND RS.20,791/- OUT OF MOTOR CAR DEPRECIATION AND MOTOR CAR EXPENSES BEING 10% OF TH E TOTAL EXPENSES CLAIMED BY THE ASSESESE UNDER THESE TWO HEADS, IT I S OBSERVED THAT THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THESE TWO HE ADS WERE FOUND TO BE NOT FULLY VERIFIABLE BY THE ASSESSING OFFICER. HE A LSO HELD THAT IN THE ABSENCE OF PROPER RECORD MAINTAINED BY THE ASSESSEE , THE ELEMENT OF PERSONAL USE BY THE DIRECTORS OF THE ASSESSEE-COMPA NY COULD NOT BE RULED OUT. ACCORDINGLY, HE MADE A DISALLOWANCE OF 10% OUT OF THESE EXPENSES, WHICH THE LD. CIT(APPEALS) CONFIRMED. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE ME HAS CONTE NDED THAT NO DISALLOWANCE ON ACCOUNT OF PERSONAL USE BY THE DIRE CTORS COULD BE MADE IN THE CASE OF A COMPANY, IT IS OBSERVED THAT THE D ISALLOWANCE OUT OF MOTOR CAR DEPRECIATION AND MOTOR CAR EXPENSES WAS M ADE BY THE ASSESSING OFFICER ALSO FOR UNVERIFIABLE ELEMENT INV OLVED IN THESE EXPENSES. SINCE THE SAID DISALLOWANCE MADE TO THE E XTENT OF 10% TO THE RESPECTIVE EXPENSES FOR SUCH UNVERIFIABLE ELEMENT I S QUITE FAIR AND REASONABLE, I FIND NO JUSTIFIABLE REASON TO INTERFE RE WITH THE ORDER OF THE LD. CIT(APPEALS) CONFIRMING THE SAID DISALLOWANCE M ADE BY THE ASSESSING OFFICER. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 04, 2 016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF OCTOBER, 2016 I.T.A. NO. 1469/KOL./2015 ASSESSMENT YEAR: 2011-2012 PAGE 5 OF 5 COPIES TO : (1) LAUREL SECURITIES (P) LIMITED, 313, TODI CHAMBERS, 2, LAL BAZAR STREET, KOLKATA-700 001 (2) INCOME TAX OFFICER, WARD-6(2), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX(APPEALS)-2, KOLKAT A; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.