DCIT, Circle-10(1), Kolkata, Kolkata V. M/s Anjana Projects Pvt. Ltd., Kolkata

ITA 1570/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1189 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 03-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Assessee Lawyers: ARINDAM BHATTACJERHEE RE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1570 / KOL / 2016 ASSESSMENT YEAR :2010-11 DCIT, CIRCLE-10(1), AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 V/S . M/S ANJANA PROJECTS PVT. LTD., 13, MAHENDRA ROAD, BHOWANIPURE, KOLKATA-25 [ PAN NO.AAECA 4280 H ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ARINDAM BHATTACJERHEE, ADDL. CIT-DR /BY RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE /DATE OF HEARING 06-02-2018 /DATE OF PRONOUNCEMENT 28-03-2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 19.05.2016. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-10(1), KOLKAT A U/S 263/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED NIL FOR ASSESSMENT YEAR 2010-11. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS:- 1. WHETHER THE LD. CIT(A) WAS CORRECT IN GIVING FR ESH DIRECTION TO THE AO TO SEGREGATE THE OPENING AND CLOSING INVESTMENT WHICH ACTUALLY YIELDED EXEMPT INCOME AND TO RECOMPUTED THE DISALLO WANCE MADE U/S. 14A READ WITH RULE 8D(2)(III)? 2. WHETHER THE LD. CIT(A) WAS CORRECT IN NOT APPREC IATING THE FACT THAT RULE 8D(2)(III) DOES NOT ACTUALLY MAKE ANY DISTINCT ION INTO THE INVESTMENTS WHETHER THEY ACTUALLY YIELDED EXEMPT IN COME OR NOT? ITA NO.1570/KOL/2016 A.Y. 2010-1 1 DCIT CIR-10(1), KOL. VS. M/S ANJANA PR OJECTS PVT. LTD. PAGE 2 3. WHETHER THE LD. CIT(A) WAS CORRECT IN GIVING FRE SH DIRECTION TO THE AO. DESPITE THE FACT THAT THE CONSTITUTIONAL VALIDI TY OF RULE 8D HAS BEEN UPHELD BY BOMBAY HIGH COURT GODREJ & BOYCE MFG. CO. LIMITED VS. CIT [2010] 328 ITR 81 (BOM)(HC)? 4. THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODI FY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. SHRI ARINDAM BHATTACHERJEE, LD. DEPARTMENTAL REPRES ENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI SUBASH AGARWAL, LD. ADVO CATE APPEARED ON BEHALF OF ASSESSEE. 2. INTER-CONNECTED ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE U/S 14A OF THE ACT R.W.S 8D(2)(III) OF THE INCOME T AX RULE, 1962 ON THE BASIS OF INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN IND IVIDUAL AND ENGAGED IN BUSINESS OF INVESTMENT AND FINANCE. THE ASSESSEE DU RING THE YEAR HAS EARNED DIVIDEND INCOME OF 24,62,121/- AND LONG TERM CAPITAL GAINS ON SHARES S UBJECT TO SECURITY TRANSACTION TAX (STT FOR SHORT) OF 32,27,428/- WHICH WAS CLAIMED EXEMPTED FROM INCOME TAX. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, AO INVOKED THE PROVISIONS OF RULE 8D(2)(III) OF THE IT RULES 1962 AND MADE THE DISALLOWANCE OF 7,04,931/- ON ACCOUNT OF ADMINISTRATIVE EXPENSE. T HE DISALLOWANCE MADE BY THE AO WAS ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO DIRECTED THE AO TO MAKE THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE IT RULES, 1962 AFTER CONSIDERING THE INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME DURING THE YEAR. AGGRIEVED BY THE ABOVE FINDING OF THE LD. CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US LD. DR RELIED ON THE ORDER OF AO. THE LD. AR ON THE OTHER HAND RELIED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SETTLED PROPOS ITION OF LAW THAT FOR MAKING THE DISALLOWANCE IN RESPECT OF ADMINISTRATIVE EXPEN SE UNDER RULE 8D(2)(III) OF ITA NO.1570/KOL/2016 A.Y. 2010-1 1 DCIT CIR-10(1), KOL. VS. M/S ANJANA PR OJECTS PVT. LTD. PAGE 3 IT RULES, THE INVESTMENT WHICH HAVE GIVEN RISE TO T HE DIVIDEND INCOME DURING THE YEAR CAN ONLY BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE UNDER RULE 8D(2)(III) OF IT RULES. IN HOLDING SO WE FIND GUIDA NCE & SUPPORT FROM THE ORDER OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. V . DY. CIT [2013] 35 TAXMANN.COM 404/144 ITD 141 (KOL.) WHICH WAS ALSO AFFIRMED BY THE HON'BLE CALCUTTA HIGH COURT VIDE ORDER DATED 09 .04.2014 IN GA NO. 3581 OF 2013, WHEREIN IT WAS HELD THAT THE DISALLOWANCE AS PER RULE 8D SHALL BE MADE BY TAKING INTO CONSIDERATION ONLY THOSE SHARES , WHICH HAVE YIELDED DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION. TH EREFORE WE DIRECT THE AO TO MAKE THE DISALLOWANCE UNDER RULE 8D AFTER CONSID ERING THE INVESTMENTS WHICH HAVE YIELDED THE DIVIDEND INCOME DURING THE Y EAR. THUS WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). WE HOLD ACCOR DINGLY. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 28/ 02/2018 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP #- 28 / 03 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-10(1), AAYAKAR BHAWAN, 3 RD FL, P-7,CHOWRINGHEE S. KOL-69 2. /RESPONDENT-M/S ANJANA PROJECTS PVT.LTD.,13, MAHEND RA RD, BHOWANIPURE, KOL-25 3. / 0 / CONCERNED CIT KOLKATA 4. 0- / CIT (A) KOLKATA 5. 3 66/, /, / DR, ITAT, KOLKATA 6. 9 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO /,