DCIT, CIR-6(2), Kolkata V. West Bengal Infrastructure Development Finance Corporation Ltd., Kolkata

ITA 1509/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1836 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-10-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 21-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILASH MEENA
• Keywords: Earning of tax free income; Question of law; Rule 8D
• Section: 143(3); 14A; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH VIRTUAL COURT-A KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1509/KOL/2019 ASSESSMENT YEAR:2012-13 DY. COMMISSIONER OF INCOME TAX CIRCLE-6(2), AAYKAR BHAWAN, R.NO. 6/15, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 / V/S . M/S WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LTD. MANGALAM BUILDING, BLCOK-A, 1 ST FLOOR, 24, HEMANTA BASU SARANI, KOLKATA-700 001 [ PAN NO.AAACW 3432 D ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI RAM BILASH MEENA, CIT-DR /BY RESPONDENT NONE /DATE OF HEARING 08-10-2020 /DATE OF PRONOUNCEMENT 07-12-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATAS O RDER DATED 02.04.2019, PASSED IN CASE NO. 1274/CIT(A)-7/CIRCLE-6(2)/KOL/15-16 INV OLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. CASE CALLED TWICE. NONE APPEARS AT THE ASSESSEES B EHEST. WE ACCORDINGLY DISPOSE OF THIS APPEAL EX PARTE AFTER HEARING THE LEARNED CIT-DR. ITA NO.1509/KOL/2019 ASSESSMENT YEAR:201 2-13 DCIT, CIR-6(2), KOL. VS. M/S WEST BENGAL INFRAST RUCTURE DEVT. FINANCE CORPN. LTD. PAGE 2 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE CANVASS ED IN THE INSTANT LIS SEEKS TO REVERSE THE CIT(A)S APPELLATE ACTION DELETING SEC. 14A R.W.S. RULE 8D DISALLOWANCE OF 1,56,07,230/- MADE IN THE ASSESSMENT DATED 28.03.20 15 FRAMED U/S 143(3) OF THE ACT. LEARNED CIT-DR INVITED OUR ATTENTION TO THE CIT(A) S DETAILED DISCUSSION TO THIS EFFECT READING AS UNDER:- 4. GROUND NOS. 1 TO 5 THESE GROUNDS ARE INTERLINKED AND DIRECTED AGAINST THE ACTION OF THE AO IN MAKING A DISALLOWANCE OF 15,60,72,830/- U/S 14A R.W. RULE 80. THE AO OBSERVE D THAT THE ASSESSEE ITSELF HAD SUO MOTO DISALLOWED AN AMOUNT OF 31 ,86,969/- U/S 14A OF THE ACT WHICH WAS FOUND TO BE NOT CONVINCING AND TH EREFORE PROCEEDED TO APPLY THE PROVISIONS OF RULE 80 IN WORKING OUT THE DISALLOWAN CE U/S 14A OF THE ACT. AS PER THE SECOND AND THIRD LIMB OF RULE 80(2), THE DISALLOWAN CE WAS WORKED OUT TO AN AGGREGATE AMOUNT OF 15,92,59,799/-. SINCE THE APPELLANT HAD SUO MOTO MADE A DISALLOWANCE OF 31,86,969/- U/S 14A, THE BALANCE OF 15,60,72,8301- WAS ADDED BACK / FIND THAT THE AD HAD MECHANICALLY PROCEEDED TO APPLY THE PROVISIO NS OF RULE 8D WITHOUT RECORDING ANY TENABLE REASONS AS TO WHY ANY FURTHER DISALLOWA NCE U/S 14A WAS TO BE MADE WHEN THE APPELLANT ITSELF SUO MOTO MADE A DISALLOWANCE OF 31,86,969/- U/S 14A. THERE HAS TO BE A FINDING BY THE AO WITH COGENT MATERIAL EVID ENCE THAT THE CLAIM OF THE APPELLANT WAS WRONG, WHICH IS NOT THE CASE HERE. ON THE OTHER HAND IT IS THE CONTENTION OF THE AR OF THE APPELLANT THAT IN THE ABSENCE OF A NY EXEMPT DIVIDEND INCOME EARNED BY THE APPELLANT, THERE WAS NO QUESTION OF RESORTIN G TO SECTION 14A OF THE ACT. I FIND FROM THE AUDITED ACCOUNTS OF THE APPELLANT THAT THE RE WAS NO EXEMPT INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. THE ISSUE IS W ELL SETTLED BY VARIOUS JUDICIAL FORUMS THAT IN THE ABSENCE OF ANY EXEMPT INCOME, TH ERE COULD NOT BE ANY OCCASION FOR RESORTING TO RUE 8D R.W. SECTION 14A OF THE ACT. HO N'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS. CIT REPORTED IN 378 ITR 33 (DEL) HELD THAT _ NO DISALLOWANCE U/S 14A CAN BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. SECTION 14A OF INCOME TAX ACT, 1961 DOES NOT APPLY TO SHARES BOUGHT FOR STRATEGIC PURPOSES' . SIMILARLY, HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S HOLCIM INDIA PRIVATE LTD . HELD THAT ' EXPENDITURE COULD NOT BE DISALLOWED U/S 14A OF THE ACT IN ABSEN CE OF ANY EXEMPT INCOME EARNED DURING THE YEAR .' HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S SHIVAM MOTORS (P) LTD . HELD THAT ' HENCE IN ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT F OR DISALLOWANCE '. THE HON'BLE TRIBUNAL CHENNAI BENCH, IN THE CASE OF ACIT VS N. BHASKARAN IN ITA NO.1717/MDS/2013 HAS CATEGORICALLY HELD THAT THE CBDT CIRCULAR NO.5 /2014 DT. 11.2.14 IS NOT A GOOD LAW AND NO DISALLOWANCE CAN B E MADE IF THERE IS NO EXEMPT INCOME. IN THIS REGARD I ALSO RELY ON THE DECISION OF THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ASHIKA GLOBAL SECURITIES LTD. (GA NO. 2122 OF 2014) DATED 11.06.2018 WHEREIN THE HIGH COURT HELD THAT WHERE THE ASSESSE E HAS NOT DERIVED ANY EXEMPT INCOME FROM THE INVESTMENTS, THE N RULE 8D CANNOT BE APPLIED TO SUCH INVESTMENTS. THE RELEVANT EXTRACTS OF THE JUDG MENT ARE AS FOLLOWS: 'THIS IS ANOTHER USELESS APPEAL WITHOUT ANY SUBSTAN CE. IN COURSE OF ASSESSMENT, A SUM OF ABOUT RS. 99 LAKH DEBITED AS I NTEREST PAID ON UNSECURED LOANS ANOTHER SUM OF ABOUT RS. 9 LAKH ENGAGED THE A TTENTION OF THE OFFICER. THE ITA NO.1509/KOL/2019 ASSESSMENT YEAR:201 2-13 DCIT, CIR-6(2), KOL. VS. M/S WEST BENGAL INFRAST RUCTURE DEVT. FINANCE CORPN. LTD. PAGE 3 ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY THE INTEREST EXPENSE AND THE ADMINISTRATIVE EXPENSES SHOULD NOT BE DISAL LOWED IN VIEW OF SECTION 14A OF THE INCOME TAX ACT, 1961. THE ASSESSEE REPLI ED THAT SUCH INCOME WAS NOT EXEMPTED INCOME EARNED DURING THE YEAR AND THER E WAS NO QUESTION OF DISALLOWANCE UNDER RULE 8D OF THE INCOME TAX RULES, 1962 READ WITH SECTION 14A OF THE ACT. BOTH THE COMMISSIONER AND THE APPELLATE TRIBUNAL FO UND AS A MATTER OF FACT THAT THERE WAS NO EXEMPT INCOME FOR THE OPERATION O F THE RELEVANT RULE. IN THE LIGHT OF SUCH CONCURRENT FINDINGS AND, IN PARTICULA R, THE DEPARTMENT FAILING TO DEMONSTRATE ANY ERROR THEREIN, NO QUESTION OF LAW A RISES IN THIS MATTER.' 4.1. RESPECTFULLY FOLLOWING THE ABOVE BINDING JUDGM ENT OF THE HON'BLE HIGH COURT AND THE DECISION OF THE HON'BLE ITAT, KOLKATA IN A SIMILAR CASE, I AM OF THE CONSIDERED VIEW THAT SINCE IN THE FACTS OF THE PRES ENT CASE, NONE OF THE INVESTMENTS YIELDED DIVIDEND INCOME DURING THE YEAR, THE DISALL OWANCE OF 15,60,72,8301- MADE U/S 14A WAS UNJUSTIFIED. HOWEVER, SINCE THE APPELLA NT HAD SUO MOTO MADE A DISALLOWANCE OF 31 ,86,969/- U/S 14A, THE AO IS ACCORDINGLY DIRECTE D TO RESTRICT THE DISALLOWANCE U/S 14A TO 31 ,86,969/-. THE GROUNDS ARE ALLOWED ACCORDINGLY. IT IS EVIDENTLY CLEAR FROM A PERUSAL OF THE ABOVE E XTRACTED LOWER APPELLATE DISCUSSION THAT THE ASSESSEE HAS NOT DERIVED ANY EXEMPT INCOME IN THE IMPUGNED ASSESSMENT YEAR. HON'BLE JURISDICTIONAL HIGH COURT (SUPRA) HOLDS THA T SEC. 14A UNDER RULE 8D DISALLOWANCE DOES NOT GET ATTRACTED IN ABSENCE OF S UCH AN EXEMPT INCOME. WE THEREFORE UPHOLD THE CIT(A)S IMPUGNED ACTION REVER SING THE ASSESSMENT FINDINGS TO THIS EFFECT. THE REVENUE FAILS IN ITS SOLE SUBSTANT IVE GRIEVANCE. 3. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 07/12/2020 SD/- SD/ - (P.M.JAGTAP) (S.S.GODARA) ( !) (#$ ') VICE PRESIDENT JUDICIAL MEMBER *DKP-SR.PS ( - 07/12/2020 / KOLKATA ITA NO.1509/KOL/2019 ASSESSMENT YEAR:201 2-13 DCIT, CIR-6(2), KOL. VS. M/S WEST BENGAL INFRAST RUCTURE DEVT. FINANCE CORPN. LTD. PAGE 4 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-6(2), AAYAKAR BHAWAN, R.NO.6/1 5, 6 TH FLOOR, P-7 CHOWRINGHEE S QUARE, KOLKATA-700 069 2. /RESPONDENT-M/S WEST BENGAL INFRASTRUCTURE DEVELOPM ENT FINANCE CORPN. LTD., MANGALAM BUILDING, BLOCK-A, 1 ST FLOOR, 24, HEMANTA BASU SARANI, K OLKATA-700 001 3. + . / CONCERNED CIT 4. . - / CIT (A) 5. / $$+ , + / DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ +,