ACIT, Circle-8(2), Kolkata, Kolkata V. M/s Wellside Infrastructure Pvt. Ltd., Kolkata

ITA 1680/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1231 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Keywords: Business income; Business expenditure; Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO.1680/KOL/2016 WELLSIDE INFRASTRUCTURE PVT. LTD., AY- 2011-12 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) BEFORE . . , /AND , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 1680/KOL/2016 ASSESSMENT YEAR: 2011-12 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-8(2), KOLKATA VS. M/S. WELLSIDE INFRASTRUCTURE PVT. LTD. (PAN: AACCC3853E) APPELLANT RESPONDENT DATE OF HEARING 04.01.2018 DATE OF PRONOUNCEMENT 23.03.2018 FOR THE APPELLANT SHRI ARINDAM BHATTACHARJEE, ADDL. CIT FOR THE RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF LD. CIT(A)-18, KOLKATA DATED 14.07.2016 FOR AY 2011-12. 2. THE FIRST GROUND OF REVENUES APPEAL IS AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO REMOVE RS.70,80,109/- FROM BUSINESS INCOME WHERE AS THE ASSESSEE HAD ALSO DEBITED RELATED EXPENSES IN P/L A/C WHILE THE AO HAS ALREADY ALLOWE D @ 30% U/S. 24 AND THIS LEADS TO DOUBLE DEDUCTION. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN THE B USINESS OF INFRASTRUCTURE I.E. PROVIDING UTILITIES AND MAINTENANCE FACILITIES. THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 17.09.2011 SHOWING TOTAL INCOME OF RS.65,83,310/-. THE ASSESSEE HAS GIVEN ON RENT A PROPERTY TO M/S. INOX LEISURE LTD. IT HAS ALSO ENTE RED INTO AN AGREEMENT WITH M/S. INOX LEISURE LTD. FOR UTILITIES AND MAINTENANCE FACILITY AND EARNED INCOME. THE ASSESSEE HAS SET UP AN INFRASTRUCTURE FOR FACILITATING MAINTENANCE S ERVICES TO INOX AND EXPENSES FOR MAINTAINING THIS INFRASTRUCTURE HAS BEEN DEBITED TO P&L ACCOUNT. AT THE TIME OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN LEASE RENTAL CHARGES OF 2 ITA NO.1680/KOL/2016 WELLSIDE INFRASTRUCTURE PVT. LTD., AY- 2011-12 RS.79,65,116/- AS HOUSE PROPERTY INCOME BUT UTILITY AND MAINTENANCE CHARGES OF RS.70,80,109/- WAS SHOWN AS BUSINESS INCOME. IN TH E ASSESSMENT PROCEEDINGS, THE AO HAS ASSESSED UTILITY AND MAINTENANCE CHARGES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER ALLOWING DEDUCTION @ 30% AS PER SEC. 24 OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND THE BALANCE AMOUNT OF RS.49,56,076/- HAS BEEN ASSESSED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE SUBMITTED THAT THE AO HAS NOT SUBTRACTED RS. 70,80, 109/- FROM THE HEAD BUSINESS INCOME BUT WENT AHEAD TO ADD RS.49,56,076/- AS INCOME FROM HOU SE PROPERTY, WHICH IS DOUBLE TAXATION. THE LD. CIT(A) WAS OF THE VIEW THAT IT IS A MISTAKE APPARENT FROM RECORD AND HE DIRECTED THE AO TO REMOVE RS.70,80,109/- FROM BUSINESS INCOME TO RECTIFY THE MISTAKE. THEREFORE, HE ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE. HEN CE, REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ACTION OF LD. CIT(A) IN DIR ECTING THE AO TO REDUCE RS.70,80,109/- BEING UTILITY CHARGES FROM THE HEAD BUSINESS INCOME , SINCE THE UTILITY CHARGES WERE SOUGHT TO BE TAXED AS INCOME FROM HOUSE PROPERTY IS JUSTIFIED . HOWEVER, THE BUSINESS EXPENDITURE RELATED TO SUCH UTILITY CHARGES CLAIMED BY THE ASSE SSEE AS DEDUCTION UNDER THE HEAD BUSINESS, SHOULD ALSO BE CORRESPONDINGLY DISALLOWED, IN VIEW OF THE FACT THAT THE ASSESSEE IS ANY WAY GOT STANDARD DEDUCTION OF 30% UNDER THE HEAD INCOM E FROM HOUSE PROPERTY WHICH ACTION OF AO HAS BEEN ACCEPTED BY THE ASSESSEE. BUT ON PE RUSAL OF THE DETAILS FROM THE P&L ACCOUNT, WE FIND THAT THERE ARE CERTAIN EXPENSES SU CH AS CORPORATION TAX WHICH WOULD BE ENTITLED FOR DEDUCTION AS A SEPARATE LINE ITEM UNDE R THE HEAD INCOME FROM HOUSE PROPERTY ITSELF. THE LD. AR PLACED RELIANCE ON THE JURISDIC TIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. GANGA PROPERTIES LTD. 199 ITR 94 (CAL) AND CIT VS. NEW SAVAN SUGAR & GUR REFINING LTD. (1990) 185 ITR 564 (CAL) TO JUSTIFY T HE CLAIM OF BUSINESS EXPENDITURE EVEN IF THERE IS NO CORRESPONDING BUSINESS INCOME INASMUCH AS CERTAIN ADMINISTRATIVE EXPENSES ARE BOUND TO BE INCURRED IRRESPECTIVE OF CARRYING ON O F BUSINESS ACTIVITY. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE D EEM IT FIT TO SET ASIDE THE ORDER OF LD. CIT(A) AND TO REMAND THIS ISSUE BACK TO THE FILE OF AO FOR DE NOVO ADJUDICATION AS PER THE AFORESAID OBSERVATION OF OURS AND IN ACCORDANCE TO LAW. THE ASSESSEE IS AT LIBERTY TO ADDUCE EVIDENCE TO SUBSTANTIATE ITS CLAIM IN ACCORDANCE TO LAW. 3 ITA NO.1680/KOL/2016 WELLSIDE INFRASTRUCTURE PVT. LTD., AY- 2011-12 5. THE SECOND GROUND OF REVENUES APPEAL IS AS UNDE R: 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE LD. CIT(A) WAS JUSTIFIED IN TAKING ONLY MUTUAL FUND INVESTMENT FOR THE PURPOSE OF CALCULATI ON OF RULE 8D(III), IN PLACE OF THE CALCULATION MADE BY AO BY TAKING AVERAGE VALUE OF INVESTMENT AS PER ACCOUNTS OF THE ASSESSEE. 6. BRIEF FACTS OF THE ISSUE AS OBSERVED BY THE AO A RE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.87,913/- FROM ITS INVESTMENT IN MUTUAL FUNDS. ACCORDING TO AO, THE FACILITIES AND SET UP OF THE COMPANY HAS ALSO BEEN USED TO MANAGE THE INVESTMENTS, THEREFORE A PART OF THE TOTAL EXPENSES HAS BEEN INCURRED AND UTILIZED FOR EARNING THE DIVIDEND INCOME. SO, THE AO BEING DISSATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE REJECTED ITS CLAIM THAT NO EXPENSES WAS INCURRED FO R EARNING EXEMPT DIVIDEND INCOME. THEREAFTER COMPUTED THE DISALLOWANCE AT RS.10,76,69 8/- AS EXPENSES INCURRED FOR EARNING EXEMPT INCOME U/S. 14A READ WITH RULE 8D OF THE RUL ES AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A), WHO DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO RS. 13,712/-. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE HAD EARNED DIVIDEN D INCOME OF RS.87,913/- FROM ITS INVESTMENT IN MUTUAL FUNDS AND CLAIMED BEFORE THE A O THAT THERE WAS NO EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME. NOT SATISF IED WITH THE REPLY OF THE ASSESSEE IN THIS RESPECT, THE AO DISALLOWED .5% OF THE TOTAL INVESTM ENT OF THE COMPANY AND THUS DISALLOWED RS.10,76,698/-. ON APPEAL, THE LD. CIT(A) RESTRICT ED THE DISALLOWANCE TO RS.13,712/- WHICH IS .5% OF THE ASSESSEES INVESTMENT IN MUTUAL FUNDS . WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN REI AGRO LTD. 144 ITD 141, HELD TH AT ONLY INVESTMENTS WHICH HAS GIVEN RISE TO EXEMPT INCOME SHOULD BE TAKEN INTO CONSIDE RATION. THIS ORDER HAS BEEN UPHELD BY THE HONBLE CALCUTTA HIGH COURT VIDE ORDER DATED 23 .12.2013 AND SPECIAL BENCH OF ITAT, DELHI IN ACIT VS. VINEET INVESTMENTS IN ITA NO. 502 /DEL/2012 DT. 16.06.2017. SINCE THE .5% OF MUTUAL FUND INVESTMENT HAS BEEN DISALLOWED A S PER THE ORDER OF LD. CIT(A) WHICH IS AS PER THE AFORESAID ORDERS OF SPECIAL BENCH DECISI ON OF TRIBUNAL AND HONBLE CALCUTTA HIGH 4 ITA NO.1680/KOL/2016 WELLSIDE INFRASTRUCTURE PVT. LTD., AY- 2011-12 COURT, WE ARE INCLINED TO UPHOLD THE ORDER OF LD. C IT(A) AND DISMISS THIS GROUND OF APPEAL OF REVENUE. 8. IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOW ED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.03.201 8 SD/- SD/- (WASEEM AHMED) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23RD MARCH, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT (TDS), CIRCLE-8(2), KOLKATA. 2 RESPONDENT M/S. WELLSIDE INFRASTRUCTURE PVT. LT D., C-301, DC-BLOCK, SECTOR-1, CITY CENTRE, SALT LAKE, KOLKATA-700 064. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY