DCIT, Circle - 10(2), Kolkata, Kolkata V. M/s. Sudha Apparels Limited , Kolkata

ITA 1717/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5281 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 10-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: S M SURANA
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.1717/KOL/2018 ( / ASSESSMENT YEAR: 2012-13) DCIT, CIRCLE-10(2), KOLKATA VS. M/S SUDHA APPARELS LTD. FLAT NO. 8/A, SUKHSAGAR, 2/5, SARAT BOSE ROAD, KOLKATA-700020. ./ ./PAN/GIR NO.: AAHCS 6369 J (ASSESSEE) .. (REVENUE) ASSESSEE BY : SHRI RADHEY SHYAM, CIT DR RESPONDENT BY : SHRI S.M. SURANA, ADVOCATE / DATE OF HEARING : 13/03/2019 /DATE OF PRONOUNCEMENT : 24/05/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERT AINING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST AN ORDER PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA (IN SHORT THE LD. CIT(A)], WHICH IN TURN ARISES OUT OF ASSESSMENT ORDER PASSED BY THE ASSESSING OF FICER U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) DATED 31/03/2015. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS F OLLOWS: M/S SUDHA APPARELS LTD. ITA NO.1717/KOL/2018 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 2 1. THE LD. CIT(A) HAS ERRED IN HOLDING THAT FOR DIS ALLOWANCE UNDER RULE 8D(2)(II), ONLY THOSE INVESTMENTS HAVE TO BE TAKEN INTO ACCOUNT FROM WHICH EXEMPT INCOME HAS EARNED IGNORING THE FACT THAT THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH PARAMETERS LAID DOWN IN RU LE 8D(2)(III) & CBDT CIRCULAR NO. 5/2014, THERE IS AN AMBIGUITY THAT ALL THE INVESTMENTS FROM WHICH THE ASSESSEE COULD HAVE EARNED EXEMPT INCOME ARE REQUIRED TO BE CONSIDERED FOR COMPUTING DISALLOWANCE U/S 14A. 2. THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODI FY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS A NON- BANKING FINANCE COMPANY AND REGISTERED WITH RBI AND EARNED DIVIDEND INCOME OF R S. 1,39,11,149/-. IN RESPECT OF ITS EXEMPT DIVIDEND INCOME OF RS. 1,39,11,149/-, TH E COMPANY HAS SUO MOTO DISALLOWED A SUM OF RS. 15,72,777/- U/S 14A READ W ITH RULE 8D OF THE INCOME TAX RULES. HOWEVER, THE ASSESSING OFFICER WAS NOT S ATISFIED WITH THE QUANTUM OF DISALLOWANCE AND INVOKED RULE 8D AND COMPUTED TOTAL DISALLOWANCE OF RS. 3,05,17,081/-. AFTER CONSIDERING THE SUO-MOTO DISA LLOWANCE MADE BY THE ASSESSEE, ADDITIONAL DISALLOWANCE OF RS. 2,89,44,304/-(-3,05, 17,081 1,39,11,149) WAS MADE BY ASSESSING OFFICER AND ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS PARTLY ALLO WED THE APPEAL OF THE ASSESSEE. THE LD. CIT(A) DELETED THE ADDITION UNDER RULE 8D(2 )(II), AS THE OWN FUND OF THE ASSESSEE WAS FAR EXCEEDED ITS INVESTMENTS. FOR DISA LLOWANCE UNDER RULE 8D(2)(III) THE LD. CIT(A) DIRECTED ASSESSING OFFICER TO REWORK THE DISALLOWANCE TAKING INTO ACCOUNT ONLY DIVIDEND BEARING SECURITIES. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 6. THE LD. DR HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED M/S SUDHA APPARELS LTD. ITA NO.1717/KOL/2018 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 3 FOR THE SAKE OF BREVITY AND ON THE OTHER HAND THE L D. AR OF THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ISSUE UNDER CONSIDERATION RAISED B Y THE REVENUE IS NO LONGER RES INTEGRA. WE NOTE THAT SO FAR DISALLOWANCE UNDER RUL E 8D(2)(II) IS CONCERNED, THE ASSESSEE HAS SUBMITTED THAT IT HAS ITS OWN SUFFICIE NT FUNDS WHICH IS MORE THAN THE INVESTMENT MADE IN SHARES THEREFORE, THE DISALLOWAN CE UNDER RULE 8D(2)(II) IS NOT ATTRACTED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITT ED BEFORE US THE BALANCE SHEET OF THE ASSESSEE COMPANY WHEREIN WE FOUND THAT THE RESE RVE AND SURPLUS OF THE ASSESSEE COMPANY AS ON 31.03.2012 IS TO THE TUNE OF RS. 245,27,97,477/- WHICH IS MORE THAN THE INVESTMENTS OF RS. 79,44,16,454/- THE REFORE CONSIDERING THIS FACTUAL ASPECTS WE NOTE THAT THE DISALLOWANCE UNDER RULE 8D (2)(II) OF THE INCOME TAX RULES IS NOT JUSTIFIED AND FOR THAT WE RELY ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. IN 383 IT R 523 WHEREIN IT WAS HELD THAT IF THE ASSESSEE HAS OWN FUNDS THAT IS SHARE CA PITAL AND RESERVE WHICH EXCEEDS THE INVESTMENTS MADE BY THE ASSESSEE IN SHARE SECU RITIES, IT WOULD BE PRESUMED THAT THE INVESTMENTS IN TAX FREE SECURITY WAS MADE OUT OF ITS OWN TAX FREE FUND BY THE ASSESSEE, THEREFORE THE DISALLOWANCE UNDER RUL E 8D(2)(II) DOES NOT ARISE. THEREFORE WE NOTE THAT THE LD. CIT(A) HAS RIGHTLY D ELETED THE ADDITION UNDER RULE 8D(2)(II). 8. SO FAR THE DISALLOWANCE UNDER RULE 8D(2)(III) IS CONCERNED, WE NOTE THAT THE CO- ORDINATE BENCH OF ITAT, KOLKATA IN THE CASE OF REI AGRO LTD. 144 ITR 141 (KOL- TRIB) HAS HELD THAT IT IS ONLY THE INVESTMENTS WHI CH YIELDS DIVIDEND INCOME DURING THE PREVIOUS YEAR, THAT HAS TO BE CONSIDERED FOR T HE PURPOSE OF RULE 8D(2)(III) OF THE IT RULES. THE AFORESAID VIEW OF THE TRIBUNAL HA S BEEN AFFIRMED IN GA NO. 3581 OF 2013 IN THE APPEAL AGAINST THE ORDER OF TH E TRIBUNAL IN THE CASE OF REI AGRO LTD. (SUPRA). HENCE WE DO NOT FIND ANY INFIRMI TY IN THE ORDER PASSED BY THE M/S SUDHA APPARELS LTD. ITA NO.1717/KOL/2018 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 4 LD. CIT(A), THEREFORE, WE APPROVE THE ORDER PASSED BY THE LD. CIT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 24. 05.2019 SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 24/05/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-10(2), KOLKATA 2. M/S SUDHA APPARELS LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES