DCIT, CC-4(2), Kolkata, Kolkata V. M/s/ Aryan Minning & Trading Corporation Ltd, Kolakta

ITA 1777/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9527 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 01-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K TULSIYAN
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A; 115JB; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.1777/KOL/2017 ( / ASSESSMENT YEAR: 2013-14) DCIT, CC-4(2), KOLKATA AAYAKAR BHAWAN, POORVA, 110, SHANTIPALLY, KOLKATA 700107. VS. M/S ARYAN MINNING& TRADING CORPORATION LTD. P-1, HIDE LANE, 8 TH FLOOR, KOLKATA 700 073. ./ ./PAN/GIR NO.: AADCA 7247 B (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI A. K. SINGH, CIT-DR RESPONDENT BY : SHRI A. K. TULSIYAN, FCA / DATE OF HEARING : 29/11/2018 /DATE OF PRONOUNCEMENT : 19/12/2018 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINI NG TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST AN ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-21, KOLKATA, IN APPEAL NO.257/DCIT,CC -4(2)/CIT(A)-21/2014-15 DATED 04.05.2017, WHICH IN TURN ARISES OUT OF AN AS SESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.04.2014 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS FOLL OWS: I. THAT ON THE FACT AND IN RESTRICTING THE DISALLO WANCE U/S 14A TO RS.5,10,242/- BY OBSERVING THAT SUCH DISALLOWANCE U/S 14A SHOULD BE IN RESPECT ONLY OF THAT PART OFINVESTMENT WHICH GIVES RISE TO EXEMPT INCOME DURI NG THE YEAR, WHEREAS CIRCULAR NO. 5/2014 DATED 11.02.2014 HAS AMPLY CLARIFIED THAT FO R INVOKING DISALLOWANCE U/S 14A , IT IS NOTMATERIAL THAT ASSESSEE SHOULD HAVE EARNED SUCH I NCOME DURING THE FINANCIAL YEAR UNDERCONSIDERATION. ITA NO.1777/KOL/2017 ASSESSMENT YEAR: 2013-14 M/S ARYANMINNING& TRADING CORPORATION LTD. P PP PA AA AG GG GE EE E | || | 2 22 2 II. THAT ON THE FACT AND IN DELETING THE ADDITION O F SUM OF RS. 95,77,250/- BEING THE AMOUNT OF DISALLOWANCE MADE U/S 14A TO THE BOOK PROFIT DET ERMINED U/S 115JB, WHEREASEXPLANATION (1)(F) BELOW SECTION 115JB(2) AM PLY CLARIFIES THE INTENT OF THE STATUTE THAT THEAMOUNT OF EXPENDITURE RELATABLE TO INCOME T O WHICH SECTION 10 [EXCEPT SEC. 10(28)], SECTION 11 AND SECTION 12 APPLIES SHOULD BE ADDED I N COMPUTATION OF BOOK PROFIT. III. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF T HE CASE, THE DEPARTMENT CRAVES TO ADDMORE GROUNDS OR ALTER ANY GROUND AT THE TIME OF APPEAL. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSESSEE COMPANY EARNE D DIVIDEND INCOME OF RS.24,935,645/-. THE ASSESSEE COMPANYASKED TO EXPLA IN WHY DISALLOWANCE OF EXPENSES WILL NOT BE MADE U/S 14A READ WITH RULE 8D ON THE EXEMPTINCOME. THE ASSESSEE HAS FAILED TO FURNISH SATISFACTORY SUBMISS IONS AS TO WHY DISALLOWANCE U/S 14A SHALL NOTBE MADE IN ACCORDANCE WITH RULE 8D OF THE LT RULES. THE AO NOTED THAT THE ASSESSEE HAS NOT CONSIDERED IN ITS ACCOUNT EXPENDITURE RELATABLE TO THE EARNING OF THE EXEMPT INCOME. THEREFORE, EXPENDITUR E RELATABLE TO THE EARNINGOF EXEMPT INCOME SHOULD DISALLOWED U/S.14A OF THE ACT IN ACCORDANCE WITH RULE 8D OF THE IT RULES AND AO THEREFORE, COMPUTED THE DISA LLOWANCE AS FOLLOWS: (A)AVERAGE INVESTMENT RS. 191,54,50,000/- (B) AVERAGE ASSET RS. 475,95,50,000/- (C)TOTAL INTEREST COST RS. NIL PROPORTIONATE INTEREST AC/B =RS.NIL % OF INVESTMENT RS.95,77,250/- DISALLOWANCE U/S 14A RS.95,77,250/- THEREFORE, AO MADE THE DISALLOWANCE TO THE TUNE OF RS. 95,77,250/-. 4. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE REVEN UE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE STAND TAKEN BY THE LD CIT(A). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARIL Y REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ITA NO.1777/KOL/2017 ASSESSMENT YEAR: 2013-14 M/S ARYANMINNING& TRADING CORPORATION LTD. P PP PA AA AG GG GE EE E | || | 3 33 3 5. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT MAIN GRI EVANCE OF THE REVENUE IS AGAINST DELETION OF DISALLOWANCE OF RS.95,77,250/- , WHICH WAS MADE BY THE AO UNDER RULE 8D(2)(III) READ WITH SECTION 14A OF THE I.T. ACT, 1961.THE AO HAS MADE CALCULATION UNDER RULE 8D READ WITH SECTION 14A OF THE I TACT, 1961 AND MADE DISALLOWANCE OF RS. 95,77,250/-. WE NOTE THAT COOR DINATE BENCH OF ITAT KOLKATA, IN THE CASE OF REI AGRO LTD. VS. DCIT 144 ITD 141 (KOL-TRIB), HAS HELD THAT IT IS ONLY THE INVESTMENTS WHICH YIELDS DIVIDE ND DURING THE PREVIOUS YEAR THAT HAS TO BE CONSIDERED WHILE ADOPTING THE AVERAGE VAL UE OF INVESTMENTS FOR THE PURPOSE OF RULE 8D(2)(II) & (III) OF THE RULES. TH E AFORESAID VIEW OF THE TRIBUNAL HAS SINCE BEEN AFFIRMED AS CORRECT BY THE HONBLE C ALCUTTA HIGH COURT IN G.A.NO.3581 OF 2013 IN THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL IN THE CASE OF REI AGRO LTD. (SUPRA). THEREFORE, WE NOTE THAT THE ONLY INVESTMENT WHICH HAS GIVEN RISE TO THE EXEMPTED INCOME WOULD BE TAKEN IN TO CONSIDERATION. THE ASSESSEE HAS FILED A CALCULATION BEFORE LD CIT(A), AS PER RU LE 8D READ WITH SECTION 14A, KEEPING IN VIEW THE RATIO DECIDED IN THE CASE OF RE I AGRO LTD (SUPRA) WHICH IS AS UNDER: SL. PARTICULARS OPENING BALANCE CLOSING BALANCE D IVIDEND RECEIVED 1 STANDARD CHARTERED BANK MONEY PLUS 42,47,234/- 2,42,311/- 48,39,392/- 2 STANDARD CHARTERED BANK 4,65,754/- 5,18,117/- 42, 93,163/- 3 RELIANCE MONEY MANAGER FUND - 198,623,445/- 80,05,458/- 4 RELIANCE MEDIUM TERM FUND - - 77,97,632/- TOTAL 47,12,988/- 199,383,873/- 249,35,645/- AVERAGE INVESTMENTS = (47,12,988 + 199,383,873)/2= RS.102,048,430/- DISALLOWANCE UNDER RULE 8D(III) = (0.5% OF AVG. INV ESTMENT) (0.5% OF RS.102,048,430) = RS.5,10,242/- WE NOTE THAT THE CALCULATION U/R 8D(2)(III) R.W.S. 14A, FOR THE INVESTMENTS MADE BY THE ASSESSEE COME TO RS.5,10,242/- WHICH HAS BEEN V ERIFIED BY THE LD CIT(A), WHO HAS CO-TERMINUS POWER AS THAT OF ASSESSING OFFICER. ACCORDINGLY, ADDITION ON THIS ITA NO.1777/KOL/2017 ASSESSMENT YEAR: 2013-14 M/S ARYANMINNING& TRADING CORPORATION LTD. P PP PA AA AG GG GE EE E | || | 4 44 4 GROUND IS RESTRICTED TO RS.5,10,242/- AND THE BALAN CE ADDITION OF RS.90,67,008/-( RS.95,77,250- RS.5,10,242) IS DIRECTED TO BE DELETE D. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND GROUND RAISED BY THE REVENUE IS DISMISSED. 6. WE NOTE THAT GROUND NO.2 RAISED BY THE REVENUE IS DIRECTED AGAINST ADDING A SUM OF RS.95,77,250/-, BEING THE AMOUNT OF DISALLOW ANCE MADE U/S 14A OF THE ACT, TO THE BOOK PROFIT OF THE ASSESSEE DETERMINED U/S 1 15JB OF THE ACT. AFTER GIVING OUR THOUGHTFUL CONSIDERATION TO THE SU BMISSION OF THE PARTIES AND PERUSING THE JUDICIAL DECISIONS RELIED UPON BY THE LD. AR, WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS NO LONGER RES INT EGRA.THE IMPORTANT AND RELEVANT THING TO NOTE HERE IS THAT FOR THE PURPOSE OF APPLI CABILITY OF SECTION 14A R.W.R. 8D THE COMPUTATION OF TOTAL INCOME HAS TO BE UNDER SOM E HEADS IN CHAPTER-IV OF THE ACT. SECTION 14A CLEARLY SAYS FOR THE PURPOSE OF C OMPUTING TOTAL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPE CT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT F ORM THE PART OF THE TOTAL INCOME UNDER THIS ACT. THE COMPUTATION OF TOTAL INCOME U/ S 115JB FALLS UNDER CHAPTER- XIIB OF THE ACT. THEREFORE, IT IS VERY CLEAR THAT A NY DISALLOWANCE/COMPUTATION FOR SECTION 14A R.W.R. 8D WILL NOT BE APPLICABLE FOR TH E PURPOSE OF CALCULATION OF INCOME U/S 115JB OF THE ACT. ACCORDINGLY, WE DISMIS S THE REVENUE`S APPEAL ON GROUND NO.2. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.12.2018 . SD/- ( S. S. GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 19/12/2018 ( RS, SR.PS ) ITA NO.1777/KOL/2017 ASSESSMENT YEAR: 2013-14 M/S ARYANMINNING& TRADING CORPORATION LTD. P PP PA AA AG GG GE EE E | || | 5 55 5 / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. /THE APPELLANT- DCIT, CC-4(2), KOLKATA 2. ! / THE RESPONDENT- M/S ARYAN MINNING& TRADING CORPORA TION LTD. 3. ' ( ) / THE CIT(A), 4. ' / CIT 5. #$% &&'( , '( , / DR, ITAT, KOLKATA 6. %)*+ / GUARD FILE. !# &