TIL Limited, Kolkata V. D.C.I.T Cir - 1,kolkata, Kolkata

ITA 1673/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4620 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL JCITSRDR
• Assessee Lawyers: SAURABH KEDIA; SHASHANK KASAT ACA
• Keywords: Business expenditure; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1673 / KOL / 2013 ASSESSMENT YEAR :2006-07 TIL LTD., 1, TARATOLLA ROAD, GARDEN REACH, KOLKATA-700 024 [ PAN NO.AABCT 0704 G ] V/S . DCIT, CIRCLE-1, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SAURABH KEDIA & SHRI SHASHANK KASAT, ACA /BY RESPONDENT SHRI RAJAT KUMAR KUREEL, JCIT-SR-DR /DATE OF HEARING 09-05-2016 /DATE OF PRONOUNCEMENT 05-07-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, KOLKATA DATED 28.02.2 013. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-1, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 29.12.2008 FOR ASSESSMENT YEAR 2006-07. SHRI SAURABH KEDIA & SHRI SHASHANK KASAT, LD. AUTHO RIZED REPRESENTATIVES APPEARED ON BEHALF OF ASSESSEE AND SHRI RAJAT KUMAR ITA NO.1673/KOL/2013 A.Y.2006-07 TIL LTD. V. DCIT CIR-1, KOL. PAGE 2 KUREEL, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. SOLITARY ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY DISALLOWING PROPORTIONATE BUSINESS EXPENDITURE OF 2,47,370/- U/S 14A OF THE ACT READ WITH RULE 8D(III) OF THE IT RULES, 1962 (FOR S HORT THE RULE). 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE MANUFACTURE BUSINESS FOR SALE OF MOBILE CRANES, FORK LIT TRUCKS AND GENERATOR SETS AND ALSO ENGAGED IN TRADING OF EARTHMOVING MACHINERIES AND SPARE PARTS. DURING THE YEAR, ASSESSEE HAS ERNED INCOME OF 7,940/- IN THE FORM OF DIVIDEND AND ALSO INCURRED LONG TERM CAPITAL GAINS (LTCG FOR SHORT) LOSS AMOUN TING TO 1,42,92,609/-. THE AO OBSERVED THAT THE AFORESAID I NCOME / LOSS DO NOT FORM OF TOTAL INCOME OF ASSESSEE AND THE ASSESSEE H AS NOT DISALLOWED ANY EXPENDITURE IN RESPECT OF SUCH LOSS / INCOME IN THE COMPUTATION OF ITS TOTAL INCOME BY VIRTUE OF THE PROVISIONS OF SECTION 14A OF THE ACT. ALTHOUGH THERE WAS A ROLE OF MANAGEMENT IN THE INVE STMENT MADE FROM WHICH THE AFORESAID INCOME / LOSS WAS HAPPENED. ACC ORDINGLY THE AO HAS APPLIED RULE 8D OF THE RULE AND DISALLOWED A SU M OF 2,47,370/- IN TERMS OF PROVISION OF SEC. 14A OF THE ACT R.W.S 8D( III) OF THE RULE AND WHICH WAS ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO HAS CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDE R:- 3.3 IN THE CASE OF CIT VS DHANALAKSHMY BANK LTD . (SUPRA), THE HON'BLE KERALA HIGH COURT HAS HELD THAT IF SEPARATE ACCOUNTS ARE NOT MAINTAINED FOR TAXABLE AND NON-TAXABLE ITEMS OF INCOME, THEN DISALLOWANCES AS PER RULE 8D ARE TO BE MADE. THE ON US IS ON THE ASSESSEE TO PROVE THAT THE INVESTMENTS FOR EARNING EXEMPT INCOME ITA NO.1673/KOL/2013 A.Y.2006-07 TIL LTD. V. DCIT CIR-1, KOL. PAGE 3 HAS BEEN MADE OUT OF OWN FUNDS. IN THE CASE OF DHAN UKA & SONS (SUPRA), THE HON'BLE CALCUTTA HIGH COURT HAS HELD T HAT THE ONUS IS ON THE ASSESSEE TO PROVE THAT OWN FUND HAS BEEN UTI LIZED FOR EARNING EXEMPT INCOME. IN THE CASE OF ACIT VS CHAMP ION COMMERCIAL CO. LTD. [2012] 26 TAXMANN.COM 342 (KOL) , THE HON'BLE ITAT KOLKATA HAS HELD THAT IN A SITUATION I N WHICH THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED ON EARNING DIVIDEND, THE PROVISION OF SECTION 14A(2) READ WITH RULE 8D CAN BE INVOKED. IN THE CASE OF SOUTHERN PETRO CHEMICAL IND USTRIES VS. DCIT 93 TTJ (MAD.) 161, THE HON'BLE ITAT CHENNAI HA S HELD THAT THE INVESTMENT DECISIONS ARE STRATEGIC DECISIONS IN WHICH TOP MANAGEMENT IS INVOLVED AND THEREFORE, PROPORTIONATE MANAGEMENT EXPENSES ARE REQUIRED TO BE DEDUCTED WHILE COMPUTIN G THE DIVIDEND INCOME FOR THE PURPOSE OF EXEMPTION U/S. 1 0(33). CONSIDERING THE FACTS OF THE CASE, I AM OF THE OPIN ION THAT THE AO HAS CORRECTLY APPLIED THE PROVISION OF SECTION 14A READ WITH RULE 8D IN THE INSTANT CASE. ACCORDINGLY, THE DISALLOWAN CE OF RS.2,47,370/- U/S.14A READ WITH RULE 8D IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. AT THE OUTSET, WE OBSERVE THAT THE ISSUE IS SQUA RELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE J UDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S R.R.SEN 7 BROTHERS P. LTD. IN GA NO.3019 OF 2012 IN ITT NO. 243 OF 2012 DATED 04.01.2013 HAD HELD AS UNDER:- THE ASSESSEE DID NOT SHOW ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF EARNING THE MONEY WHICH IS EXEMPTED UNDER INCOME TAX. THE TRIBUNAL HAS COMPUTED EXPENDITURE A T 1% OF SUCH DIVIDEND INCOME, WHICH, ACCORDING TO THEM, IS THE T HUMB RULE APPLIED CONSISTENTLY. WE FIND NO REASON TO INTERFER E. THE APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENT, WE D IRECT THE ASSESSING OFFICER TO DISALLOW 1% OF DIVIDEND INCOME UNDER THI S ISSUE AND ITA NO.1673/KOL/2013 A.Y.2006-07 TIL LTD. V. DCIT CIR-1, KOL. PAGE 4 ACCORDINGLY, GROUNDS RAISED BY ASSESSEE ARE SET ASI DE TO THE FILE OF AO TO MAKE ADDITION AS DIRECTED ABOVE. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED SUBJEC T TO DIRECTIONS CONTAINED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT 05 /07/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 05 / 07 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-TIL LTD., 1, TARATOLLA ROAD, GARDEN REAC H, KOLKATA-24 2. /RESPONDENT-DCIT, CIR1, AAYAKAR BHAWAN, P-7, CHOWRI NGHEE SQ., KOL-69 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,