Punjab Produce Holdings Ltd, Kolkata V. D.C.I.T., Circle - 5(1),kolkata, Kolkata

ITA 2057/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1301 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 15-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE
• Assessee Lawyers: AKKAL DUDHUWALA
• Keywords: Earning of tax free income
• Section: 14A; 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NO. 2057/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. PUNJAB PRODUCE HOLDINGS LTD.....................................................APPELLANT BIRLA BUILDING, 4 TH FLOOR, 9/1, R.N. MUKHERJEE ROAD, KOLKATA 700 001 [PAN: AABCM 7053 M] DCIT CIR 5(1),...................RESPONDENT AAYAKAR BHAWAN, 8 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 APPEARANCES BY: SHRI AKKAL DUDHUWALA, AR APPEARING ON BEHALF OF THE ASSESSEE. SHRI PINAKI MUKHERJEE, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : FEBRUARY 22, 2018 DATE OF PRONOUNCING THE ORDER : MARCH 21, 2018 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS) 2, KOLKATA DATED 01.06.2017 AND THE SOLITARY ISSUE RAISED THEREIN AS PRESSED AND ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE THE TRIBUNAL RELATES TO THE DISALLOWANCE UNDER SECTION 14A MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKING FINANCE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF GRANTING OF LOANS AND ADVANCES AND DEALING AND INVESTING IN SHARES. THE RETURN OF INCOME 2 I.T.A. NO. 2057/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. PUNJAB PRODUCE HOLDINGS LTD. FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.09.2009 DECLARING A TOTAL INCOME AT NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE DIVIDEND INCOME EARNED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION WAS 91.73% OF ITS TOTAL INCOME. HE ALSO NOTED THAT THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE WAS RS. 45,26,761/- SINCE THE DIVIDEND INCOME WAS CLAIMED TO BE EXEMPT FROM TAX, THE ASSESSING OFFICER WORKED OUT THE EXPENDITURE INCURRED IN RELATION TO THE EARNING OF THE EXEMPT INCOME AT RS. 41,52,398/- BEING 91.73% OF RS. 45,26,761/- AND MADE A DISALLOWANCE TO THAT EXTENT UNDER SECTION 14A WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT. HE ALSO ADDED THE SAID AMOUNT TO THE PROFIT AS SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT TO COMPUTE ITS BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3. THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS BOOK PROFIT UNDER SECTION 115JB OF THE ACT 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 MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DIRECTED THE A.O. TO RE-COMPUTE THE DISALLOWANCE UNDER SECTION 14A BY APPLYING RULE 8D AFTER TAKING INTO ACCOUNT ONLY THAT INVESTMENT IN SHARES WHICH HAD YIELDED DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. FOR THIS CONCLUSION, HE RELIED ON THE DECISION OF THE ITAT IN THE CASE OF REI AGRO LTD. VS DCIT 144 ITD 141 (KOL). AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3 I.T.A. NO. 2057/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. PUNJAB PRODUCE HOLDINGS LTD. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, A DISALLOWANCE OF RS. 5,44,958/- WAS OFFERED BY THE ASSESSEE IN ITS COMPUTATION OF TOTAL INCOME ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOME AS REQUIRED BY SECTION 14A. HE HAS CONTENDED THAT THE A.O., HOWEVER, PROCEEDED TO MAKE HIGHER DISALLOWANCE UNDER SECTION 14A WITHOUT RECORDING ANY DISSATISFACTION ABOUT THE CORRECTNESS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SECTION 14A. BY RELYING ON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. CHENGMARI TEA CO. LTD. VS DCIT RENDERED VIDE ITS ORDER DATED 02.02.2018 IN ITA NO. 1433/KOL/2016, HE CONTENDED THAT IN THE ABSENCE OF ANY SATISFACTION RECORDED BY THE A.O. DISPUTING THE CORRECTNESS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE UNDER SECTION 14A HAVING REGARD TO THE ACCOUNT OF THE ASSESSEE, THE HIGHER DISALLOWANCE MADE BY THE A.O. WAS NOT SUSTAINABLE AND THE LD. CIT(A) IS NOT JUSTIFIED TO SUSTAIN THE SAME EVEN PARTLY. I FIND MERIT IN THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. AS HELD BY THE DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. CHENGMARI TEA CO. LTD. (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WHERE THE ASSESSEE MAKES A CLAIM THAT ONLY THE PARTICULAR AMOUNT IS TO BE DISALLOWED UNDER SECTION 14A AND THE A.O. PROPOSES TO MAKE HIGHER DISALLOWANCE BY INVOKING SECTION 14A, HE HAS TO RECORD A SATISFACTION ABOUT THE INCORRECTNESS OF THE AMOUNT DISALLOWED BY THE ASSESSEE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUCH SATISFACTION IS A REQUISITE CONDITION FOR MAKING HIGHER DISALLOWANCE BY INVOKING SECTION 14A AND IN THE ABSENCE OF SUCH SATISFACTION, ANY DISALLOWANCE 4 I.T.A. NO. 2057/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. PUNJAB PRODUCE HOLDINGS LTD. MADE BY THE A.O. BY INVOKING SECTION 14A MORE THAN WHAT IS MADE BY THE ASSESSEE IS NOT SUSTAINABLE. I ACCORDINGLY MODIFY THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A TO RS. 5,44,958/- WHILE COMPUTING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OF THE ACT. 5. AS REGARDS THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE UNDER SECTION 14A WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE COMPANY UNDER SECTION 115JB WHICH IS SUSTAINED PARTLY BY THE LD. CIT(A), THE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT PROVISIONS OF SECTION 14A AND RULE 8D ARE NOT APPLICABLE WHILE COMPUTING THE BOOK PROFIT OF ASSESSEE COMPANY UNDER SECTION 115JB OF THE ACT AS HELD IN THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE DECISIONS OF THIS TRIBUNAL. AS HELD IN THE SAID JUDICIAL PRONOUNCEMENTS, THE AMOUNT OF EXPENDITURE RELATABLE TO ANY INCOME WHICH IS EXEMPT UNDER SECTION 10 THAT IS REQUIRED TO BE ADDED AS PER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB IS REQUIRED TO BE WORKED OUT BY THE A.O. SEPARATELY INDEPENDENT OF PROVISIONS OF SECTION 14A OF RULE 8D. I, THEREFORE, RESTORE TO THIS ISSUE TO THE FILE OF THE A.O. FOR RE- COMPUTING SUCH ADDITION TO BE MADE WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE COMPANY UNDER SECTION 115JB OF THE ACT. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IF THE AMOUNT OF SUCH ADDITION WORKED OUT BY THE A.O. EXCEEDS THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) UNDER SECTION 14A, THE A.O. SHALL RESTRICT THE SAID ADDITION TO THE EXTENT OF THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A). 5 I.T.A. NO. 2057/KOL/2017 ASSESSMENT YEAR: 2009-10 M/S. PUNJAB PRODUCE HOLDINGS LTD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 21/03/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. PUNJAB PRODUCE HOLDINGS LTD., BIRLA BUILDING, 4 TH FLOOR, 9/1, R.N. MUKHERJEE ROAD, KOLKATA 700 001. 2. DCIT CIR 5(1), AAYAKAR BHAWAN, 8 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA