Eximpo Tea Limited , Kolkata V. ITO, Ward - 4(4), , Kolkata

ITA 1990/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0276 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 17-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHANKAR HALDER
• Assessee Lawyers: A N KESHARI
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.1990/KOL/2018 ( / ASSESSMENT YEAR: 2013-14) EXIMPO TEA LTD. 3-B, LAL BAZAR STREET, 2 ND FLOOR, KOLKATA-700001 VS. ITO, WARD-4(4), KOLKATA ./ ./PAN/GIR NO.: AAACE 6546 Q (ASSESSEE) .. (REVENUE) ASSESSEEBY : SHRI A. N. KESHARI, FCA RESPONDENT BY : SHRI SHANKAR HALDER, JCIT, SR. DR / DATE OF HEARING : 24/04/2019 /DATE OF PRONOUNCEMENT : 28/06/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERT AINING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-2, KOLKATA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 17/03/2016. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- 2, HAS ERRED ON FACTS AND IN LAW IN DISMISSING THE GROUNDS OF APPELLANT C OMPANY IN CONFIRMING THE ADDITION OF RS. 5,16,378/- MADE BY ITO, WARD-4( 4), KOLKATA BY APPLYING PROVISION OF SECTION 14A READ WITH RULE 8D , EVEN THOUGH NO SUCH ADDITIONS IS WARRANTED IN THE INSTANT CASE. 2.THAT THE ABOVE GROUNDS OF APPEAL WILL BE ARGUED I N DETAILS DURING THE COURSE OF HEARING AND THE APPELLANT CRAVES THE RIGH T TO PUT ADDITIONAL GROUND/S AND OR ALTER/AMEND/MODIFY PART OF THE ABOV E GROUND BEFORE OR AT THE TIME OF HEARING. EXIMPO TEA LTD. ITA NO.1990/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 3. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2013 DECLARING LOSS TO THE TUNE OF RS.11,06,4 29/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S 143(3) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS MADE INVESTMENT IN SHARES DURING THE FINANCIAL YEAR UNDER CONSIDERATIO N AND HAD EXEMPT INCOME WHICH IT CLAIMED AS EXEMPT U/S 10(34) OF THE ACT, BUT THE ASSESSEE COMPANY HAS NOT ATTRIBUTED ANY EXPENSE U/S 14A. THE ASSESSEE COMPA NY WAS ASKED TO EXPLAIN WHY THE DISALLOWANCES UNDER SECTION 14A SHALL NOT BE MA DE. THE ASSESSEE COMPANY DID NOT REPLY TO THE ASSESSING OFFICER, THEREFORE AO, A S PER CBDTS CIRCULARNO. 5/2014 DATED 11.02.2014, COMPUTED THE DISALLOWANCE U/S 14A READ WITH RULE 8D AS UNDER: HENCE AN AMOUNT OF RS.5,16,378/- (3,04,774 + 2,11,6 04),WAS DISALLOWED BY AO U/S 14A AND ADDED BACK TO THE TOTAL INCOME OF THE A SSESSEE. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD . CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. LD COUNSEL FOR THE ASSESSEEHAS SUBMITTED BEFORE US THAT WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D ON LY THE DIVIDEND BEARING SECURITIES SHOULD BE CONSIDERED. HOWEVER, THE AO FO R THE PURPOSE OF DISALLOWANCE UNDER RULE 8D (2) (II) AND RULE 8D(2)(III) HAS CONS IDERED ENTIRE SHARE AND SECURITIES WHICH INCLUDE THOSE SECURITIES WHICH DO NOT EARN DIVIDEND INCOME. EXIMPO TEA LTD. ITA NO.1990/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 HENCE, LD COUNSEL SUBMITTED THAT DISALLOWANCE MADE BY AO IS NOT AS PER THE PROVISIONS OF SECTION 14A R.W.R.8D OF THE RULES. 6. LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN O UR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT AS PER THE BALANCE SHEET SUBMITTED BY THE ASSESSEE,AS ON 31 ST MARCH,2013, THE TOTAL INVESTMENTS ARE TO THE TUNE O F RS. 4,23,20,772/- WHEREAS TOTAL OWN FUNDS RESERVE AND SURPLUS ARE NEGATIVE, T HAT IS AT RS. (-) 1,25,01,713/- (PB-8). HENCE, THERE IS NO ANY OWN SURPLUS FUNDS TO MAKE INVESTMENTS THEREFORE, DISALLOWANCE UNDER RULE 8D(2) (II) IS APPLICABLE TO THE ASSESSEE. BESIDES, DISALLOWANCE UNDER RULE 8D(2) (III) IS ALSO APPLICA BLE TO THE ASSESSEE. WE NOTE THAT COORDINATE BENCH OF ITAT KOLKATA IN TH E CASE OF REI AGRO LTD. VS. DCIT 144 ITD 141 (KOL-TRIB) HAS HELD THAT IT IS ONL Y THE INVESTMENTS WHICH YIELDS DIVIDEND DURING THE PREVIOUS YEAR THAT HAS TO BE CO NSIDERED WHILE ADOPTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF RUL E 8D(2)(II) & (III) OF THE RULES. THE AFORESAID VIEW OF THE TRIBUNAL HAS SINCE BEEN A FFIRMED AS CORRECT BY THE HONBLE CALCUTTA 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 DIRECT THE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(II) AND RULE 8D(2) (III) TAKING INTO ACCOUNT DIVIDEND BEARING SECURITIES. STATISTIC AL PURPOSES THE APPEAL OF THE ASSESSEE IS TREATED TO BE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 28.06.2019 SD/- ( A.T. VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 28/06/2019 ( SB, SR.PS ) EXIMPO TEA LTD. ITA NO.1990/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 COPY OF THE ORDER FORWARDED TO: 1. EXIMPO TEA LTD. 2. ITO, WARD-4(4), KOLKATA 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES