The Scottish Assam (India) Limited, Kolkata V. DCIT, Circle-4(2), Kolkata, Kolkata

ITA 1751/KOL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0168 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 01-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: ANSUL AGRAWAL ACA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO. 1751/KOL/2016 THE SCOTTISH ASSAM (INDIA) LTD., AY 2011-12 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 1751/KOL/2016 ASSESSMENT YEAR: 2011-12 THE SCOTTISH ASSAM (INDIA) LTD. (PAN: AAACT9788P) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(2), KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 22.11.2018 DATE OF PRONOUNCEMENT 05.12.2018 FOR THE APPELLANT SHRI ANSUL AGRAWAL, ACA FOR THE RESPONDENT SHRI SAURABH KUMAR, ADDL. CIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-2, KOLKATA DATED 13.05.2016 FOR AY 2011-12. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST TH E ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE U/S. 14A OF THE INCOME-TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) OF RS.7,62,213/- READ WITH RULE 8D(III) OF THE I. T . RULES, 1962 (HEREINAFTER REFERRED AS THE RULES). 3. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE T HAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS.75,72,045/- AND CLAIMED IT AS EXEMPT I NCOME. THE ASSESSEE, ON ITS OWN, DISALLOWED AN AMOUNT OF RS.1,66,614/- AS EXPENSES A TTRIBUTABLE TO EARNING DIVIDEND INCOME. ACCORDING TO AO, SUCH A DISALLOWANCE WAS NOT COMPUT ED AS PER SEC. 14A OF THE ACT READ WITH RULE 8D OF THE RULES. HE, THEREFORE, DISALLOW ED EXPENDITURE UNDER RULE 8D(2)(III) OF THE RULES @ .5% OF AVERAGE VALUE OF INVESTMENTS OF RS.16,60,02,657/- I.E. RS.8,30,013/- 2 ITA NO. 1751/KOL/2016 THE SCOTTISH ASSAM (INDIA) LTD., AY 2011-12 AND ALSO THE DIRECT EXPENSE RELATED TO EXEMPT INCOM E AT RS.98,814/-. ACCORDINGLY, THE AO MADE THE TOTAL DISALLOWANCE AT RS.9,28,827/- AND A FTER DEDUCTING THE AMOUNT SUO-MOTTO DISALLOWED BY THE ASSESSEE AT RS.1,66,614/-, THUS T OTAL DISALLOWANCE COMES TO RS.7,62,213/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO UPHELD THE ACTION OF AO AND DISMISSED THE ASSESSEES GROUND OF APPEAL. AGG RIEVED, ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT ASSESSEE HAD EARNED DIVIDEN D INCOME OF RS.75,72,045/- AND CLAIMED IT AS EXEMPT INCOME. AND THE ASSESSEE, ON ITS OWN, DISALLOWED AN AMOUNT OF RS.1,66,614/- AS EXPENSES ATTRIBUTABLE TO EARNING DIVIDEND INCOME . HOWEVER, THE AO RESORTED TO COMPUTATION ENVISAGED UNDER RULE 8D AND DISALLOWED EXPENDITURE UNDER RULE 8D(2)(III) OF THE RULES @ .5% OF AVERAGE VALUE OF INVESTMENTS OF RS.16,60,02,657/- I.E. RS.8,30,013/- AND ALSO THE DIRECT EXPENSE RELATED TO EXEMPT INCOM E AT RS.98,814/-. ACCORDINGLY, THE AO MADE THE TOTAL DISALLOWANCE AT RS.9,28,827/- AND D EDUCTED THE AMOUNT ADDED BACK BY ASSESSEE AT RS.1,66,614/-, THEREFORE, TOTAL DISALLO WANCE COMES TO RS.7,62,213/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF AO. BEFORE US, THE LD AR RESTRICTED HIS CONTENTION TO COMPUTATION MADE BY AO UNDER RULE 8D(2)(III) AND DREW OUR ATTENTION TO THIS TRIBUNALS ORDER IN REI AGRO LTD. 144 ITD 141 IN WHICH THE TRI BUNAL HELD THAT WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(II) AND (III) ONLY INVES TMENTS WHICH GAVE RISE TO THE EXEMPTED INCOME SHOULD BE TAKEN INTO CONSIDERATION. WE NOTE THAT THIS ORDER OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE HIGH COURT BY ORDER DATE D 23.12.2013. WE NOTE THAT THE AO HAS NOT RESORTED TO RULE 8D(2)(II) AND HAS ONLY COM PUTED DISALLOWANCE UNDER RULE 8D(2)(III) AND 8D(2)(I). THEREFORE, FOLLOWING OUR DECISION IN REI AGRO LTD. (SUPRA), WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE AND WHI LE DOING SO I.E. UNDER RULE 8D(2)(II), HE HAS TO CONSIDER ONLY THE INVESTMENT WHICH YIELDE D EXEMPT INCOME DURING THE YEAR. WITH THE AFORESAID DIRECTION, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AS DIRECTED ABOVE. WE ORDER ACCORDINGLY. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 3 ITA NO. 1751/KOL/2016 THE SCOTTISH ASSAM (INDIA) LTD., AY 2011-12 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 05/12/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT THE SCOTTISH ASSAM (INDIA) LTD., 1, CRO OKED LANE, KOLKATA-700 069. 2 RESPONDENT DCIT, CIRCLE-4(2), KOLKATA. 3 4 5 CIT(A)-2, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY