M/s Gujrat NRE Coke Ltd, Kolkata V. Add.CIT,Range-12, Kolkata, Kolkata

ITA 1720/KOL/2012

• Counselvise Citation: 172023514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 22-11-2012
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY LD JCI
• Assessee Lawyers: RAVI TULSIYAN FCA LD
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH: KO LKATA ( ) , , BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI SHAMIM YAHYA, AM ITA NO. 1720/KOL/2012 A.Y 2006-07 M/S. GUJARAT NRE COKE LTD PAN: AABCG 6225H - - - VERSUS -. ADDL.C.I.T RANGE-12, KOLKATA ( / APPELLANT ) ( !' / RESPONDENT ) / FOR THE APPELLANT/DEPARTMENT /SHRI RAVI TULSIYAN, FCA, LD.AR !' / FOR THE RESPONDENT/ASSESSEE: / SHRI P.K. CHAKRABORTY, LD.JCIT /LD. SR.DR % & /DATE OF HEARING: 10-07-2014 % & /DATE OF PRONOUNCEMENT:16-07--2014 / ORDER , SRI SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), XII, KOLKATA DATED 09-07-2012 PERT AINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE A RBITRARY, ERRONEOUS, INVALID AND BAD IN LAW TO THE EXTENT TO WHICH THEY ARE TO THE PREJUDICE OF THE INTERESTS OF THE APPELLANT COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,74,427 /- OUT OF TRAVELLING EXPENSES ON THE ALLEGED GROUND OF NON-CONNECTION WITH BUSINESS WITHOUT TAKING INTO CONSIDERATION THAT THE FACT THAT THE P ERSONS CONCERNED WERE NOT SIMPLY RELATIVES OF THE DIRECTORS OF THE APPELLANT COMPANY, BUT WERE CLOSELY CONNECTED WITH ITS BUSINESS ACTIVITIES AND THAT THE TRAVELS HAD BEEN UNDERTAKEN BY THEM IN THE BUSINESS INTERESTS OF TH E APPELLANT COMPANY ONLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN SUSTAINING DISALLOWANCE U/S. 14A OF THE INCOME-TAX ACT, 1961, AT RS.28,37,062/- WITHOUT SHOWING ANY REASON AS TO WHY THE DISALLOWANCE OF RS. 8,34,488/- AS OFFERED BY THE APPELLANT COMPANY IN T HAT REGARD WAS INCORRECT. 3. APROPOS THE FIRST ISSUE REGARDING DISALLOWANCE OF TRAVELLING EXPENSES : ON THIS ISSUE THE AO NOTED THAT THE ASSESSEE HAS CLAIMED TRAVELLING EXPE NSES NOT ONLY FOR THE DIRECTORS, BUT ALSO THEIR FA MILY MEMBERS. THE AO HELD THAT THESE EXPENSES WERE NOT C ONNECTED WITH THE BUSINESS OF THE ASSESSEE. HENCE, AN AMOUNT OF RS.7,74,427/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 1720/KOL /12-C-AM M/S. GUJRAT NRE COKE LTD 2 4. BEFORE THE LD.CIT(A), THE ASSESSEE PLEADED THAT PERSONS, MRS. MONA JAGATRAMKA AND MRS. S.D JAGATRAMKA BOTH WERE ENGAGED IN THE BUSINESS AFFA IRS OF THE ASSESSEE COMPANY AND THEY HAD TRAVELLED FOR THE PURPOSE OF BUSINESS. HOWEVER, THE LD. CIT(A ) NOTED THAT THE ASSESSEES LD. COUNSEL COULD NOT BRING ANY MATERIAL ON RECORD TO PROVE THAT THE BO TH SAID LADIES WERE ENGAGED IN THE BUSINESS OF THE ASSESSEE COMPANY AND TRAVELLED FOR THE PURPOSE OF A SSESSEES BUSINESS. HENCE, THE LD.CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 5. AGAINST THE ABOVE ORDER OF THE LD.CIT(A), THE A SSESSEE HAS FILED APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. THE LD. COUNSEL OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. THE LD. COUNSEL OF THE ASSESSEE HAS AL SO SUBMITTED THAT THESE PERSONS HAVE NOW BECOME DIREC TORS OF THE ASSESSEE COMPANY. HOWEVER, HE COULD NOT PRODUCE ANY COGENT EVIDENCE TO PROVE THAT THE SAID LADIES/ RELATIVES WERE ENGAGED IN THE BUSINES S AFFAIRS OF THE ASSESSEE COMPANY AND TRAVELLED FOR T HE PURPOSE OF BUSINESS OF THE ASSESSEE. 6.1 UPON CAREFUL CONSIDERATION, WE FIND THAT NO COG ENT MATERIAL HAS BEEN PRODUCED BY THE ASSESSEE THAT THESE RELATIVES OF THE DIRECTORS OF THE ASSES SEE COMPANY TRAVELLED FOR THE PURPOSE OF ASSESSEE S BUSINESS. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) IN CONFIRMI NG THE ACTION OF THE AO. ACCORDINGLY, WE UPHOLD THE SA ME. THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 7. APROPOS THE 2 ND ISSUE I.E REGARDING DISALLOWANCE U/S. 14A OF THE I.T ACT 1961 . IN THIS CASE THE ASSESSEE COMPANY HAS EARNED DIVIDEND OF RS.3,67,1 5,523/- AND CLAIMED THE SAME AS EXEMPT. HOWEVER, THE ASSESSEE HAS ADDED BACK PROPORTIONATE MANAGEMENT EXPENSES ATTRIBUTABLE TO THE EARNING OF INCOME AT RS.8,34,488/-. HOWEVER, NO COMPUTATIO N OF THIS FIGURE WAS GIVEN. THE AO CALCULATED THE EXPENDITURE UNDER RULE 8D OF THE I.T RULES 1962 AND DISALLOWED RS.2,59,85,309/- U/S.14A OF ACT. 8. UPON THE ASSESSEES APPEAL, IN THIS REGARD THE L D.CIT(A) NOTED THAT SINCE THE ASSESSEES CASE BELONG TO AY 2006-07 FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD VS. DCIT REPORTED IN 3 28 ITR 81(BOM), THE RULE 8D IS NOT TO BE APPLIED FOR THIS ASSESSMENT YEAR. HOWEVER, THE LD.C IT(A) NOTED THAT IN MANY DECISIONS OF THE CALCUTTA TRIBUNAL [ITAT, KOLKATA], THE TRIBUNAL HAVE HELD TH AT 1% OF TOTAL EXEMPTED INCOME SHOULD BE TAKEN AS EXPENDITURE FOR EARNING THE EXEMPTED INCOME. HENCE , FOLLOWING THE DECISION OF THE ITAT, KOLKATA ON THIS ISSUE THE LD.CIT(A) HELD 1% OF THE EXEMPTED I NCOME I.E RS.36,71,550/- - RS.8,34,488 = RS.28,37,062/- IS TAKEN AS EXPENDITURE FOR EARNIN G THE EXEMPTED INCOME AND RESTRICTED THE ADDITION T O RS.28,37,062/-. ITA NO. 1720/KOL /12-C-AM M/S. GUJRAT NRE COKE LTD 3 9. AGAINST THE ABOVE, THE ASSESSEE IS IN APPEAL BEF ORE US. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. WE FIND THAT RULE 8D IS NOT APPLICABLE FOR THE CONCERNED ASSESSMENT YEAR I.E. 2006-07. L D. COUNSEL OF THE ASSESSEE HAS FAIRLY AGREED THAT T HE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE C ASE OF CIT, KOL IV, KOLKATA VS. M/S. RR SEN & BROTHERS (P) LTD REPORTED IN GA NO.3019 OF 2012 I.T .A.T NO. 243 OF 2012 DATED JANUARY 4, 2013 HAD UPHELD THE VIEW CONSISTENTLY HELD BY THE TRIBUNAL O F DISALLOWING AT 1% OF THE EXEMPT INCOME AS DISALLOWANCE U/S. 14A OF THE ACT. ACCORDINGLY, WHEN LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE U/S. 14A TO 1% OF EXEMPT INCOME, THE SAME CONTAINS NO IN FIRMITY. ACCORDINGLY, WE UPHOLD THE FINDING OF THE LD.CIT(A) ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ) THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 16 /0 7/2014 SD/- S D/- ( , ) ( , ) ( MAHAVIR SINGH, JUDICIAL MEMBER ) ( SHAMIM YAHYA, ACCOUNTANT MEMBER ) ( & & & & ) DATE 16 /07/2014 ** PRADIP SPS % !- .- / COPY OF THE ORDER FORWARDED TO: 1. /APPELLANT- M/S. GUJARAT NRE COKE LTD, BLOCK C, 5 TH FL, 22, CAMAC ST, KOL-16. 2 !' / RESPONDENT : THE ADDL. COMMISSIONER OF INCOME TAX , RANGE- 12, KOLKATA 3. / THE CIT, 4. ( )/ THE CIT(A), KOLKATA 5. ! / DR, KOLKATA BENCHES, KOLKATA '- ! / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR ITA NO. 1720/KOL /12-C-AM M/S. GUJRAT NRE COKE LTD 4