Crawford Plantation Pvt Ltd., Kolkata V. ITO, Ward-7(4), Kolkata, Kolkata

ITA 1538/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4233 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 25-07-2016
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: N O N E
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 ITA NO.1538/KOL/2016 CRAWFORD PLANTATION PVT. LTD, AY 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 1538/KOL/2016 ASSESSMENT YEAR: 2012-13 CRAWFORD PLANTATION PVT. LTD. VS. INCOME-TAX OFFI CER, WARD-7(4), KOLKATA. (PAN: AABCC0331Q) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.11.2016 DATE OF PRONOUNCEMENT: 30.11.2016 FOR THE APPELLANT: N O N E FOR THE RESPONDENT: MD. GHAYAS UDDIN, JCIT, SR . DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-3, KOLKATA VIDE APPEAL NO. 2117/CIT(A)-3/W-7(4)/14-15/KOL DATED 25.05.2016. AS SESSMENT WAS FRAMED BY ITO, WD- 7(4), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2012-13 VIDE HIS ORDER DATED 24.02.2015. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF A SSESSEE IS AS TO WHETHER THE DISALLOWANCE U/S. 14A OF THE ACT COULD EXCEED THE E XEMPT INCOME DERIVED BY THE ASSESSEE. 2.1. THE BRIEF FACTS OF THIS ADDITION IS THAT THE AO OBSERVED THAT THE ASSESSEE HAD SUBSTANTIAL AMOUNT INVESTED IN SHARES AND ASSESSEE WAS ALSO IN RECEIPT OF DIVIDEND INCOME OF RS.102/-. THE AO INVOKED THE PROVISIONS OF RULE 8D OF THE I. T. RULES AND MADE DISALLOWANCE U/S. 14A OF THE ACT TO THE TUNE OF RS .9,15,508/-. IN FIRST APPEAL, THE LD. CIT(A) BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. VS. DCIT REPORTED IN 35 TAXMAN.COM 404 DIRECTED THE AO TO CALCULATE .5% OF AVERAGE VALUE OF 2 ITA NO.1538/KOL/2016 CRAWFORD PLANTATION PVT. LTD, AY 2012-13 INVESTMENT THAT YIELDED DIVIDEND INCOME TO BE CONSI DERED FOR DISALLOWANCE U/S. 14A OF THE ACT. 2.2. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPU TED DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III) AT THE RATE O F 0.50% OF AVERAGE VALUE OF ONLY THOSE INVESTMENTS THAT YIELDED EXEMPTED INCOME , WITHOUT GIVING A DIRECTION THAT SUCH DISALLOWANCE OF EXPENDITURE CAN NOT EXCEED THE AMOUNT OF EXEMPT INCOME I.E. RS.102/-. 2.3. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD. DR VEHEMENTLY ARGUED THAT DISALLOWANCE IS TO BE RESTRICTED AT 0.5% OF AVERAGE VALUE OF INVESTMENT YIELDING DIVIDEND INCOME AND THERE IS NO PROVISION IN THE ACT WHICH S AYS THAT THE DISALLOWANCE SHOULD NOT EXCEED EXEMPT INCOME. IN SUPPORT OF THIS, HE PLACE D RELIANCE ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF SANCHAYITA MERCANTILE ( P) LTD. VS. ACIT (2008) 25 SOT 57 (MUM). 2.4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THRO UGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS STATED HEREINABOVE REMAINED UNDISP UTED AND HENCE, THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT T HE PROVISIONS OF SECTION 14A OF THE ACT ARE VERY CLEAR IN CONSIDERING EXPENDITURE WHICH WERE IN CURRED FOR EARNING ANY INCOME WHICH DO NOT FORM PART OF TOTAL INCOME. SO GOING BY THE PLA IN LANGUAGE OF THE SECTION IT COULD BE SAFELY CONCLUDED THAT THE LEGISLATURE INTENDED ONLY TO DISALLOW THE EXPENDITURE THAT WERE INCURRED FOR EARNING EXEMPT INCOME. THE LEGISLATUR E NEVER INTENDED TO DISALLOW THE EXPENDITURE WHICH IS MORE THAN THE EXEMPT INCOME DE RIVED BY THE ASSESSEE. WE ALSO DRAW SUPPORT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT REPORTED IN (2015) 372 ITR 694 WH EREIN IT HAS BEEN HELD THAT THE 3 ITA NO.1538/KOL/2016 CRAWFORD PLANTATION PVT. LTD, AY 2012-13 DISALLOWANCE U/S. 14A OF THE ACT CANNOT EXCEED THE EXEMPT INCOME. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S. 14A OF THE ACT TO RS.102/- AND ALLOW THE GROUND OF APPEAL RAISED BY T HE ASSESSEE. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.11.201 6 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :30TH NOVEMBER, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT CRAWFORD PLANTATION PVT. LTD., 39, SHAK ESPEARE SARANI, PREMLATA BLDG, 3 RD FLOOR, KOLKATA-700 017. 2 RESPONDENT ITO, WARD-7(4), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .