A.C.I.T., Circle-12(2), Kolkata, Kolkata V. M/s Sarvottam Caps Ltd., Kolkata

ITA 2048/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1390 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A. NO. 2048/KOL/2016 ASSESSMENT YEAR: 2010-11 A.C.I.T. CIR 12(2), KOLKATA.................................................................APPELLANT AAYAKAR BHAWAN, 6 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 M/S. SARVOTTAM CAPS LTD..................................RESPONDENT 7, CAMAC STREET, AZIMGANJ HOUSE, KOLKATA 700 017 APPEARANCES BY: SHRI ARINDAM BHATTACHARJEE APPEARING ON BEHALF OF THE REVENUE. NONE APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : FEBRUARY 14, 2018 DATE OF PRONOUNCING THE ORDER : MARCH 09, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT (APPEALS) 15, KOLKATA DATED 11.08.2016 WHEREBY HE RESTRICTED THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A BY APPLYING RULE 8D(2)(III) AMOUNTING TO RS. 64,95,145/- TO RS. 22,12,570/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKING FINANCIAL COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 13.10.2010 DECLARING A TOTAL INCOME OF RS. 5,81,77,716/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS. 2,39,63,159/- AND LONG TERM CAPITAL GAIN OF RS. 1,36,03,296/-/- RECEIVED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT FROM TAX. NO DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO 2 I.T.A. NO. 2048/KOL/2016 ASSESSMENT YEAR: 2010-11 SARVOTTAM CAPS LTD. THE SAID EXEMPT INCOME, HOWEVER, WAS OFFERED BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SECTION 14A. THE A.O., THEREFORE, APPLIED RULE 8D AND MADE A DISALLOWANCE, IN ADDITION TO DIRECT EXPENSES ON ACCOUNT OF INDIRECT EXPENSES TO THE EXTENT OF RS. 64,95,145/- AS PER RULE 8D(2)(III) BEING 0.5% OF THE AVERAGE INVESTMENT. 3. THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE OF RS. 64,95,145/- MADE BY THE A.O. AS PER RULE 8D(2)(III) TO RS. 22,12,570/- AFTER TAKING INTO ACCOUNT ONLY THOSE INVESTMENTS WHICH HAD ACTUALLY EARNED DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE IS, THEREFORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE ARGUMENTS OF THE LEARNED DR AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LEARNED DR, THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS REI AGRO LTD. (GA NO. 3022 OF 2013) WHEREIN IT WAS HELD THAT WHILE COMPUTING DISALLOWANCE TO BE MADE UNDER SECTION 14A BY APPLYING RULE 8D(2)(III), ONLY THOSE INVESTMENT WHICH ACTUALLY EARNED EXEMPT INCOME SHOULD BE TAKEN INTO ACCOUNT AND NOT THE ENTIRE 3 I.T.A. NO. 2048/KOL/2016 ASSESSMENT YEAR: 2010-11 SARVOTTAM CAPS LTD. INVESTMENT. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A BY APPLYING RULE 8D(2)(III) AND DISMISS THIS APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09/03/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. SARVOTTAM CAPS LTD., 7, CAMAC STREET, AZIMGANJ HOUSE, KOLKATA 700 017. 2. ACIT, CIR 12(2), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 6 TH FLOOR, KOLKATA 700 069 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA