Appeal details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 1549 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-02-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
SMC
Assessment Year
2008-2009
Appeal Filed On
31-07-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A NO. 1750/KOL/20 17 ASSESSMENT YEAR : 2008-0 9 DCIT, CIRCLE-5(1), KOLKATA -VS- M/S SUBH SHANTI SERVICES LTD. [PAN: AAGCS 9381 R] (APPELLANT) (RESPONDENT) C.O. NO. 116/KOL/2017 (ARISING OUT OF I.T.A NO. 1750/KOL/ 2017) ASSESSMENT YEAR : 2008-0 9 M/S SUBH SHANTI SERVICES LTD. -VS- DCIT, CIRCLE-5( 1), KOLKATA [PAN: AAGCS 9381 R] (CROSS OBJECTOR) (RESP ONDENT) FOR THE DEPARTMENT : SHRI SALLONG YADE N, ADDL. CIT FOR THE ASSESSEE : SHRI SUBASH AGARWAL, A DVOCATE DATE OF HEARING : 05.02.2018 DATE OF PRONOUNCEMENT : 14.02.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION B Y THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS)-2, KOLKATA [IN SHORT THE LD CIT(A)] IN APPEAL NO.1016/CIT(A)-2/14-15 DATED 16.0 5.2017 AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-5, KOLKATA [ IN SHORT TH E LD AO] UNDER SECTION 143(3) OF THE 2 ITA NO.1750/KOL/2017& C.O. NO. 116/KOL/2017 M/S SUBH SHANTI SERVICE LTD. A.YR.2008-09 2 INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 08 .12.2010 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN GRANTING RELIEF OF RS. 1,24,76,183/- D ISALLOWED U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULES, IN THE FACTS AND CIRCUMSTANC ES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A NON-BANKING FINANCE COMPANY AND HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2008-09 ON 29.09. 2008 DECLARING TOTAL INCOME OF RS. NIL. THE ASSESSEE DID NOT EARN ANY DIVIDEND INCOME OR CLAIMED ANY EXEMPT INCOME. ACCORDINGLY, THE ASSESSEE HAD NOT CO MPUTED ANY DISALLOWANCE U/S 14A OF THE ACT WHILE FILING THE RETURN OF INCOME. THE L D. AO DIRECTLY ADOPTED RULE 8D AND MADE DISALLOWANCE UNDER SECOND AND THIRD LIMB THERE ON AND COMPUTED THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS. 1,24,76,1 83/-. THE LD. CIT(A) BY PLACING RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF CHEM INVEST LTD. VS. CIT REPORTED IN 378 ITR 33 AMONG OTHER HIGH COU RT DECISIONS HELD THAT SINCE NO EXEMPT INCOME HAS BEEN RECEIVED BY THE ASSESSEE, TH E PROVISIONS OF SECTION 14A OF THE ACT COULD NOT BE INVOKED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF OF RS. 1,24,76,183/- DISALLOWED U/ S 14A OF THE ACT READ WITH RULE 8D(1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. ADMITTEDLY, THE ASSESSEE HAD NOT DERIVED ANY INCOME ON ITS INVESTMENTS OR HAD CLAIMED ANY EXEMPT INCOME IN THE RETURN OF INCOME. HENCE, THE PROVISION OF SECTION 14A OF THE ACT CANN OT BE MADE APPLICABLE IN THE INSTANT CASE. ACCORDINGLY, WE FIND THAT THE LD. CIT(A) HAD RIGHTLY PLACED RELIANCE ON THE 3 ITA NO.1750/KOL/2017& C.O. NO. 116/KOL/2017 M/S SUBH SHANTI SERVICE LTD. A.YR.2008-09 3 DECISION OF HONBLE DELHI HIGH COURT (SUPRA) AND DE LETED THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS. 1,24,76,183/-. ACC ORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 5. THE NEXT GROUND OF THE REVENUE RELATES TO DISALL OWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULE IN THE SUM OF RS. 1,24,76,183/- WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT. THE DECISION RENDERED BY US I N THE GROUND NO. 1 WITH REGARD TO DISALLOWANCE U/S 14A OF THE ACT UNDER THE NORMAL P ROVISIONS OF THE ACT WOULD HOLD WITH EQUAL FORCE AS FAR AS COMPUTATION OF BOOK PROF ITS U/S 115JB OF THE ACT ALSO, IN VIEW OF THE FACT THAT THE ASSESSEE HAD NOT DERIVED ANY E XEMPT INCOME AND HENCE THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE MADE APPLICABLE. ACCORDINGLY, WE HOLD THAT THE LD. CIT(A) HAD RIGHTLY DELETED THE SAME AN D HENCE, GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. NOW LET US COME TO CROSS OBJECTION FILED BY THE AS SESSEE. 6. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE LD. AO IN INCREASING THE BOOK PROFIT OF THE ASSESSEE U/S 115JB BY A SUM OF RS. 1,15,31,041/- R EPRESENTING INTEREST INCOME NOT CREDITED TO PROFIT AND LOSS ACCOUNT, IN THE FACTS A ND CIRCUMSTANCES OF THE CASE. 7. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A NON-BANKING FINANCE COMPANY AND IS MANDATED TO FOLLOW THE PRUDENTIAL NORMS OF RESER VE BANK OF INDIA(RBI) WITH REGARD TO INCOME RECOGNITION AND CLASSIFICATION OF ASSETS AND CONSEQUENTIAL PROVISIONING THEREON. IN COMPLIANCE WITH THE SAID PRUDENTIAL NOR MS ISSUED BY RBI, THE ASSESSEE HAD NOT CREDITED THE INTEREST INCOME OF RS. 1,15,31,041 /- IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2008. THE ASSESSEE PLEADED THA T THOUGH THIS INTEREST INCOME OF RS. 1,15,31,041/- WAS NOT CREDITED IN THE PROFIT AND LO SS ACCOUNT, THE SAME WAS DULY OFFERED 4 ITA NO.1750/KOL/2017& C.O. NO. 116/KOL/2017 M/S SUBH SHANTI SERVICE LTD. A.YR.2008-09 4 TO TAX UNDER THE NORMAL PROVISION OF THE ACT WHILE COMPUTING THE TOTAL INCOME. HOWEVER, WITH REGARD TO COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT, SINCE THE SAID INTEREST INCOME WAS NOT CREDITED TO PROFIT AND LOSS ACCOUNT, THE SAME CANNOT BE BROUGHT TO TAX U/S 115JB OF THE ACT, IN VIEW OF THE FACT TH AT THE SAID PROFIT AND LOSS ACCOUNT TOGETHER WITH THE BALANCE SHEET AND NOTES THEREON W ERE DULY APPROVED BY THE SHAREHOLDERS OF THE ASSESSEE COMPANY IN ITS GENERAL BODY MEETING AND THAT THE LD. AO DOES NOT HAVE ANY POWER TO TINKER WITH THE SAME EXC EPT IN RESPECT OF ITEMS PROVIDED IN EXPLANATION 1 TO 115JB OF THE ACT. THE ASSESSEE IN SUPPORT OF THIS CONTENTION PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF APOLLO TYRES LTD. VS. CIT REPORTED IN 255 ITR 273. THE ASSESSEE ALSO PLAC ED RELIANCE ON THE DECISION OF THE CO-ORDINATE BENCH OF DELHI TRIBUNAL IN THE CASE OF DCIT VS. DUNE LEASING & FINANCE LTD. REPORTED IN 126 ITD 255 IN SUPPORT OF THE AFOR ESAID CONTENTIONS. THE LD. AO HOWEVER DID NOT AGREE TO THE CONTENTIONS OF THE ASS ESSEE AND WITHOUT GIVING ANY REASON PROCEEDED TO MAKE AN ADDITION OF RS. 1,15,31,041/- TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THIS ACTION OF THE LD. AO WAS UPH ELD BY THE LD. CIT(A) WITHOUT ANY REASON. AGGRIEVED, THE ASSESSEE HAS PREFERRED CROSS OBJECTION BEFORE US ON THE FOLLOWING GROUNDS: 1. FOR THAT THE LD. CIT(A)-2 WAS NOT JUSTIFIED IN C ONFIRMING THE ORDER OF THE ASSESSING OFFICER (AO) IN INCREASING THE BOOK PROFI T OF THE APPELLANT BY A SUM OF RS.1,15,31,041/- BEING INTEREST INCOME NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT IN ACCORDANCE WITH THE RBI GUIDELINES ISSUED FOR NB FCS. 2. FOR THAT THE LD. CIT(A)-2 ERRED IN CONFIRMING TH E ORDER OF THE AO IN RE- DETERMINING THE BOOK PROFIT OF THE APPELLANT BY ADD ING THE SUM OF RS. 1,15,31,041/- BEING INTEREST INCOME NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, WHICH IS CONTRARY TO THE PROVISIONS OF SECTION 115J B OF THE ACT AND AS PER THE JUDICIAL PRECEDENT LAID DOWN BY THE APEX COURT. 3. FOR THAT THE APPELLANT CRAVES LEAVE TO AD, DELET E, AMEND OR MODIFY ANY GROUND BEFORE OR AT THE TIME OF HEARING OF THE APPEAL PROC EEDING. 5 ITA NO.1750/KOL/2017& C.O. NO. 116/KOL/2017 M/S SUBH SHANTI SERVICE LTD. A.YR.2008-09 5 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FACT ST ATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED HEREIN FOR TH E SAKE OF BREVITY. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS A NON-BANKING FINANCE COMPANY AND IS ACCORDINGLY MANDATED TO FOLLOW THE PRUDENTIAL NORMS PRESCRIBED BY RESERVE B ANK OF INDIA WITH REGARD TO INCOME RECOGNITION, CLASSIFICATION OF ASSETS AND PROVISION ING REQUIREMENTS THEREON IN ITS BOOKS OF ACCOUNTS. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD MADE INCOME RECOGNITION IN ITS BOOKS OF ACCOUNTS IN ACCORDANCE WITH PRUDENTIAL NOR MS ISSUED BY RBI. ACCORDINGLY, THE ASSESSEE WAS JUSTIFIED IN NOT CREDITING INTEREST IN COME OF RS. 1,15,31,041/- IN THE PROFIT AND LOSS ACCOUNT. THE HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT REPORTED IN 255 ITR 273 HAD HELD THAT ONCE THE ACCO UNTS OF THE ASSESSEE ARE APPROVED BY THE SHAREHOLDERS IN THE GENERAL BODY MEETING AND NO QUERY LATER ON HAS BEEN RAISED BY THE REGISTRAR OF COMPANIES THEREON, THE LD. AO IS N OT EMPOWERED TO TINKER WITH THE SAME UNLESS OTHERWISE SPECIFIED IN ITEMS IN EXPLANA TION 1 TO 115JB OF THE ACT. ADMITTEDLY, THE ADDITION OF INTEREST INCOME OF RS. 1,15,31,041/- TO THE BOOK PROFIT DOES NOT FALL IN ANY OF THE CLAUSES MENTIONED IN EXPLANA TION 1 TO 115JB OF THE ACT. WE ALSO FIND THAT THE CO-ORDINATE BENCH OF DELHI TRIBUNAL I N THE CASE OF DCIT VS. DUNE LEASING & FINANCE LTD. REPORTED IN 126 ITD 255 HAD HELD AS UNDER: 5. GROUND NO. 2 IS AGAINST THE FINDING OF THE LOWE R AUTHORITIES THAT THE INTEREST INCOME OF RS. 1,19,07,474, NOT CREDITED TO THE ACCOUNTS, C OULD BE ADDED TO THE BOOK PROFIT U/S 115JB. THIS GROUND IS SIMILAR TO GROUND NO. 2 IN TH E APPEAL OF THE REVENUE. THE FACTS ARE THAT THE AFORESAID INTEREST WAS NOT CREDITED IN THE BOOKS OF ACCOUNTS, BUT OFFERED FOR TAXATION WHILE COMPUTING THE INCOME. THE CASE OF TH E LEARNED COUNSEL WAS THAT IF INTEREST LIABILITY NOT DEBITED TO THE ACCOUNTS COUL D NOT BE ALLOWED U/S 115JB, THEN, THIS INTEREST INCOME, WHICH IS NOT CREDITED TO THE ACCOU NTS, CAN ALSO NOT BE ADDED TO THE BOOK PROFIT UNDER S. 115JB. THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WERE ALSO SIMILAR TO THE ARGUMENTS TAKEN IN RESPECT OF C OMPUTATION OF INCOME UNDER NORMAL PROVISION AS WELL AS UNDER S. 115JB. WE HAVE ALREA DY HELD THAT THE AO DOES NOT HAVE ANY POWER TO REOPEN THE ACCOUNTS FOR THIS PURPOSE, WHICH HAS BEEN FILED AFTER DUE PROCESS BEFORE THE ROC AND TO WHICH HE HAS NOT TAK EN ANY OBJECTION. FOLLOWING OUR FINDING ON THAT GROUND OF THE REVENUE, IT IS HELD T HAT THE INTEREST INCOME OF RS. 1,19,07,474/- COULD NOT HAVE BEEN ADDED TO THE BOOK PROFIT UNDER S. 115JB. THUS, THIS GROUND IS ALLOWED. 6 ITA NO.1750/KOL/2017& C.O. NO. 116/KOL/2017 M/S SUBH SHANTI SERVICE LTD. A.YR.2008-09 6 IN VIEW OF THE AFORESAID FACT AND RESPECTFULLY FOLL OWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE REVENUE HAD GROS SLY ERRED IN ADDING THE INTEREST INCOME OF RS. 1,15,31,041/- TO THE BOOK PROFITS U/S 115JB OF THE ACT. ACCORDINGLY, GROUNDS RAISED IN THE CROSS OBJECTION OF THE ASSESS EE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14.02.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BALAGA NESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 14.02.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-5(1), KOLKATA, P-7, CHOWRINGHEE SQU ARE, KOLKATA-700069. 2. M/S SUBH SHANTI SERVICES LTD., 31, NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA-700001. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S
