Deevee Commercials Ltd., Kolkata V. DCIT, C.C.-XIII, Kolkata, Kolkata

ITA 1484/KOL/2010

• Counselvise Citation: 148423514 RSA 2010
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 07-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2010
• Court: TRIBUNAL
• Department Lawyers: B R PURKAYASTHA
• Assessee Lawyers: RAJEEV KUMAR
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . . .. . , , , , , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER %& %& %& %& ' ' ' ' / ITA NOS . 1482, 1483 & 1484/KOL/2010 () *+/ ASSESSMENT YEARS : 2004-05, 2006-07 AND 2007-08 (-. / APPELLANT ) DEVEE COMMERCIALS LTD., KOLKATA (PAN: AABCD 5769 P) - ( - - VERSUS - . (01-./ RESPONDENT ) D.C.I.T., CENTRAL CIRCLE- XIII, KOLKATA -. 2 3 #/ FOR THE APPELLANT: SHRI RAJEEV KUMAR 01-. 2 3 #/ FOR THE RESPONDENT: SHRI B.R.PURKAYASTHA #4 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THE ABOVE THREE APPEALS ARE FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS DATED 23.06.2010 OF THE CIT(A)-CENTRAL-II, KOLKATA PERTAI NING TO A.YS. 2004-05, 2006-07 AND 2007-08 RESPECTIVELY. FOR THE SAKE OF CONVENIEN CE ALL THE APPEALS ARE HEARD AND DISPOSED OF BY A COMMON ORDER. 2. THE ONLY ISSUE INVOLVED IN ALL THESE APPEAL S ARE RELATING TO THE DISALLOWANCE OF EXPENDITURE U/S 14 A OF THE ACT BY INVOKING THE PRO VISIONS OF RULE 8D OF THE IT RULES. 3. THE BRIEF FACTS OF THE ISSUE ARE THAT WHILE DOING THE ASSESSMENT U/S 153A/143(3) THE AO HAS DISALLOWED AN AMOUNT OF RS.4,97,770/- U/ S 14A READ WITH RULE 8D FOR 2 A.YR. 2004-05. SIMILARLY HE DISALLOWED AN AMOUNT OF RS.19,12,018/- FOR A.YR. 2006- 07 AND RS.28,16,837/- FOR A.YR. 2007-08. 3.1. ON APPEAL THE LD. CIT(AO) HAS RESTRICTED T HE DISALLOWANCE OF RS.1,01,875/- FOR A.YR. 2004-05 BY OBSERVING THAT : THE TOTAL EXPENDITURE INCURRED FOR EARNING ALL KIN DS OF INCOME ITSELF IS ONLY RS.1,01,875/-. THEREFORE AT BEST IT MAY BE SAID THA T THE ENTIRE EXPENDITURE OF RS.1,01,875/- HAS BEEN INCURRED TO EARN ONLY THE EX EMPT INCOME BUT IT IS NOT POSSIBLE TO DISALLOW SUCH AMOUNT OF EXPENDITURE WHI CH AHS NOT BEEN CLAIMED BY THE APPELLANT IN THE P&L ACCOUNT. THE QUESTION OF D ISALLOWANCE U/1 14A BEING MORE THAN THE EXEMPT INCOME IS DIFFERENT FORM THE Q UESTION OF SUCH DISALLOWANCE BEING MORE THAN THE TOTAL CLAIM OF EXP ENDITURE ITSELF. THEREFORE I CONCLUDE THAT ASSESSING OFFICER COULD HAVE AT BEST DISALLOWED THE EXPENDITURE OF RS.1,01,875/- U/S 14A OF THE IT ACT READ WITH RU LE 8D OF THE I.T.RULES AND NOT RS.4,97,770/- AND THEREFORE DIRECT THE ASSESSIN G OFFICER TO REDUCE THE TOTAL INCOME OF APPELLANT ACCORDINGLY. 3.2. SIMILARLY HE RESTRICTED THE DISALLOWANCE O F RS.15,80,631/- FOR A.YR. 2006-07 AND RS.36,030/- FOR A.YR. 2007-08. 3.3. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEA L BEFORE US. 4. AT THE TIME OF HEARING, THE LD. COUNSEL BY R ELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE M FG. CO. LTD VS DCIT 328 ITR 81 (BOM) SUBMITTED THAT RULE 8D IS NOT APPLICABLE F OR A.YRS. 2004-05, 2006-07 AND 2007-08. THEREFORE, IN THIS CASE THE REVENUE HAS AP PLIED RULE 8D IN ORDER TO DISALLOW THE EXPENDITURE U/S 14A OF THE ACT. SINCE THIS TRIB UNAL HAS CONSISTENTLY TAKEN A VIEW THAT 1% OF THE DIVIDEND INCOME HAS TO BE DISALLOWED AS DISALLOWANCE U/S 14A OF THE IT ACT HE REQUESTED TO SET ASIDE THE ORDERS OF THE REV ENUE AUTHORITIES AND DIRECT THE AO TO LIMIT THE DISALLOWANCE TO 1% OF THE DIVIDEND INCOME . 5. ON THE OTHER HAND, THE LD. DR APPEARING O N BEHALF OF THE REVENUE CONTENDED THAT THOUGH RULE 8D IS NOT APPLICABLE FOR THESE A.Y RS. AT THE SAME TIME THE CONTENTION OF THE ASSESSEE THAT 1% OF THE DIVIDEND INCOME IS T O BE DISALLOWED AS DISALLOWANCE U/S 14A IS NOT ACCEPTABLE, SINCE THE ASSESSEE IS A NON- BANKING FINANCIAL COMPANY AND THE 3 ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRADIN G. THEREFORE, HE REQUESTED TO SET ASIDE THE MATTER TO THE FILE OF THE AO IN ORDER TO ASCERTAIN THE QUANTUM OF DISALLOWANCE DEPENDING UPON THE NATURE OF THE BUSINESS OF THE AS SESSEE. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD AND KEEPING IN VIEW OF THE DECI SION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. COMPANY LTD. (SUPRA) WE ARE OF THE VIEW THAT RULE 8D IS NOT APPLICABLE TO THE ASSESSMENT YE ARS INVOLVED UNDER THESE APPEALS. HOWEVER, THE AO WAS DUTY BOUND TO COMPUTE THE DISAL LOWANCE BY APPLYING A REASONABLE METHOD HAVING REGARD TO THE FACTS AND CI RCUMSTANCES OF THE CASE. THEREFORE, WE SET ASIDE THE ORDERS OF THE REVENUE A UTHORITIES ON THIS ISSUE AND REMIT BACK TO THE FILE OF THE AO TO RE-DECIDE THE DISALLO WANCE KEEPING IN VIEW OF THE FACT THAT WHETHER THE ASSESSEE IN QUESTION HAS INCURRED EXPENDITURE IN RELATION TO EARNING OF SUCH EXEMPTED DIVIDEND INCOME AND OF INCOME FROM MU TUAL FUNDS. IN OUR CONSIDERED OPINION, IN THE ASSESSEES CASE 1% OF THE DIVIDEND INCOME IS TO BE DISALLOWED AS DISALLOWANCE U/S 14A IS NOT APPLICABLE SINCE THE AS SESSEE IS A NON-BANKING FINANCIAL COMPANY AND THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE TRADING. HOWEVER, WE DIRECT THE AO THAT DISALLOWANCE U/S 14A OF THE ACT SHOULD NOT EXCEED THE EXEMPTED INCOME. WE ORDER ACCORDINGLY. 7. IN THE RESULT ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2011. SD/- SD/- . .. . . .. . , , , , B.R.MITTAL, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , ,, , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 07.06.2011. R.G.(.P.S.) 4 #4 2 0& 5#&*6- COPY OF THE ORDER FORWARDED TO: 1. DEEVEE COMMERCIALS LTD., 8, CAMAC STREET, SHANTI NI KETAN BLDG., KOLKATA- 700017. 2 THE D.C.I.T., CENTRAL CIRCLE-XIII, KOLKATA 3. THE CIT, 4. THE CIT(A)-CENTRAL-II, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 1& 0/ TRUE COPY, #4(;/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES