M/s. A.V. Enterprises, Kolkata V. ACIT, CIRCLE-34, KOLKATA, Kolkata

ITA 1919/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4400 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 03-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2014
• Court: TRIBUNAL
• Department Lawyers: DINBANDHU NASKAR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

I.T.A. NO. 1919/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1919/KOL/ 2014 ASSESSMENT YEAR: 2007-2008 M/S. A.V. ENTERPRISES,............................. ..............................APPELLANT 51, EZRA STREET, 2 ND FLOOR, KOLKATA-700 001 [PAN: AAIFA 5269 K] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..............RESPONDENT CIRCLE-34, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 APPEARANCES BY: SHRI MANISH TIWARI, FCA, FOR THE ASSESSEE SHRI DINBANDHU NASKAR, JCIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 03, 2016 DATE OF PRONOUNCING THE ORDER : OCTOBER 04, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 11.08.2014 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS.39,23,448/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION14A OF THE INCOME TAX ACT , 1961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 25.10.2 007 DECLARING A LOSS OF RS.15,28,670/-. IN THE ASSESSMENT ORIGINALLY COMPLE TED UNDER SECTION 143(3) VIDE AN ORDER DATED 11.12.2009, THE LOSS AS RETURNED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER. THE SAID ASSESSMENT, HOWEVER, WAS SUBSEQUENTLY SET ASIDE BY THE CONCERNE D LD. CIT BY I.T.A. NO. 1919/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 3 EXERCISING THE POWERS CONFERRED UPON HIM UNDER SECT ION 263 WITH A DIRECTION TO THE ASSESSING OFFICER TO DO THE SAME A FRESH. AS PER THE DIRECTION OF THE LD. CIT, PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 263 WERE INITIATED BY THE ASSESSING OFFICER . DURING THE COURSE OF SAID PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING O FFICER THAT THE INVESTMENT MADE BY THE ASSESSEE IN SHARES HELD AS S TOCK-IN-TRADE WAS CAPABLE OF EARNING EXEMPT INCOME EITHER IN THE FORM OF DIVIDEND OR LONG- TERM CAPITAL GAIN. HE ALSO NOTICED THAT SUBSTANTIAL INTEREST EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION WAS CLAIMED AS DEDUCTION. ACCORDING TO HIM, DISALLOWANC E UNDER SECTION 14A READ WITH RULE 8D, THEREFORE, WAS REQUIRED TO BE MA DE IN THE CASE OF THE ASSESSEE. IN THIS REGARD, IT WAS SUBMITTED BY THE A SSESSEE THAT RULE 8D INTRODUCED WITH EFFECT FROM 24.03.2008 HAD NO APPLI CATION TO THE YEAR UNDER CONSIDERATION. IT WAS ALSO SUBMITTED BY THE A SSESSEE THAT THERE BEING NO EXEMPT INCOME ACTUALLY EARNED BY IT DURING THE YEAR UNDER CONSIDERATION, THE DISALLOWANCE UNDER SECTION 14A W AS NOT WARRANTED. THESE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND AC CEPTABLE BY THE ASSESSING OFFICER AND RELYING ON THE DECISION OF TH E DELHI, SPECIAL BENCH OF ITAT IN THE CASE OF CHEMINVEST LIMITED VS.- ITO [121 ITD 318], HE HELD THAT DISALLOWANCE UNDER SECTION 14A WAS ATTRAC TED EVEN WHERE THERE WAS NO EXEMPT INCOME ACTUALLY EARNED BY THE ASSESSE E. HE, THEREFORE, PROCEEDED TO COMPUTE THE EXPENSES INCURRED BY THE A SSESSEE IN RELATION TO THE EARNING OF EXEMPT INCOME AT RS.39,23,448/- B Y APPLYING RULE 8D AND MADE DISALLOWANCE TO THAT EXTENT UNDER SECTION 14A. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MA DE BY THE ASSESSING OFFICER. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY S UBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, RULE 8D INTRODUCED WITH E FFECT FROM 24.03.2008 IS APPLICABLE ONLY FROM A.Y. 2008-09 AND THE SAME, THEREFORE, CANNOT BE APPLIED TO THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2007-08 TO COMPUTE THE DISALLOWANCE TO BE MADE UNDER SECTION 14A. MOREOVER , THE DECISION OF I.T.A. NO. 1919/KOL./2014 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 3 DELHI, SPECIAL BENCH OF ITAT IN THE CASE OF CHEMINV EST LIMITED (SUPRA) RELIED UPON BY THE ASSESSING OFFICER HAS BEEN SUBSE QUENTLY OVERRULED BY THE HONBLE DELHI HIGH COURT BY HOLDING THAT THE DI SALLOWANCE UNDER SECTION 14A CANNOT BE MADE WHERE THE ASSESSEE HAS N OT EARNED ANY INCOME, WHICH IS EXEMPT FROM TAX. IN THE PRESENT CA SE, NO INCOME EXEMPT FROM TAX WAS ACTUALLY EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND THIS BEING SO, I HOLD THAT THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A AND CONFIRMED B Y THE LD. CIT(APPEALS) IS NOT SUSTAINABLE. THE SAME IS, THERE FORE, DELETED ALLOWING THIS APPEAL FILED BY THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 04, 2 016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF OCTOBER, 2016 COPIES TO : (1) M/S. A.V. ENTERPRISES, 51, EZRA STREET, 2 ND FLOOR, KOLKATA-700 001 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-34, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 (3) COMMISSIONER OF INCOME TAX(APPEALS)-XX, KOLKA TA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.