Prabha Mohta, Kolkata V. I.T.O.,Ward-35(1), Kolkata

ITA 2061/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1283 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 04-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J BHIDE
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ)] I.T.A. NO. 2061/KOL/2019 ASSESSMENT YEAR: 2013-14 PRABHA MOHTA.......................................................................................APPELLANT 2 ND FLOOR, CALCUTTA STOCK EXCHANGE BUILDING, ROOM NO. 2A, 7, LYONS RANGE, KOLKATA 700 001. [PAN: AGZPD 1136 B] VS ITO, WARD 35(1), KOLKATA................................RESPONDENT 110, SHANTIPALLY, 7 TH FLOOR, KOLKATA 700 107. APPEARANCES BY: SHRI P.J. BHIDE, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI BAIJNATH SINGH, JCIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : FEBRUARY 18, 2020 DATE OF PRONOUNCING THE ORDER : MAY 22, 2020 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 10, KOLKATA DATED 26.06.2019 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT R.W.R. 8D WHICH IS PARTLY SUSTAINED BY THE LD. CIT(A). 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO FILED HER RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27.09.2013 DECLARING A TOTAL INCOME OF RS. 6,88,260/-. IN THE SAID RETURN, THE DIVIDEND INCOME OF RS. 20,28,140/- RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE SAID EXEMPT INCOME HOWEVER WAS OFFERED BY THE ASSESSEE AS REQUIRED BY THE PROVISION OF SECTION 14A. THE AO, THEREFORE, APPLIED RULE 8D AND WORKED OUT THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME AT RS. 6,74,200/- AND SINCE THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE AS PER THE PROFIT AND LOSS ACCOUNT WERE RS. 6,07,313/- 2 I.T.A. NO. 2061/KOL/2019 ASSESSMENT YEAR: 2013-14 PRABHA MOHTA ONLY, HE MADE A DISALLOWANCE OF RS. 6,07,313/- U/S 14A OF THE ACT. ON APPEAL, THE CIT(A) SUSTAINED THE SAID DISALLOWANCE MADE BY THE AO U/S 14A. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS THE DISALLOWANCE MADE U/S 14A ON ACCOUNT OF INTEREST AS WORKED OUT AS PER RULE 8D(2)(II), THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE INVESTMENT IN SHARES WAS MADE BY THE ASSESSEE OUT OF HER OWN FUNDS AND IT IS OBSERVED THAT THIS POSITION WAS ACCEPTED BY THE AO AS WELL AS BY THE LD. CIT(A) AS MENTIONED SPECIFICALLY ON PAGE 6 OF THE IMPUGNED ORDER OF THE LD. CIT(A). THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST U/S 14A AS WORKED OUT BY APPLYING RULE 8D(2)(II) THUS IS NOT SUSTAINABLE AND I DIRECT THE AO TO DELETE THE SAME. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF OTHER EXPENSES U/S 14A R.W.R. 8D(2)(III), THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE SAME IS REQUIRED TO BE WORKED OUT BY TAKING INTO CONSIDERATION ONLY THE VALUE OF INVESTMENT IN SHARES WHICH ACTUALLY FETCHED THE EXEMPT DIVIDEND INCOME TO THE ASSESSEE AND NOT THE VALUE OF ENTIRE INVESTMENT AS DONE BY THE AO. SINCE THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS DULY SUPPORTED BY THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF REI AGRO LTD. GA NO. 3022 OF 2013 (ITAT NO. 161 OF 2013) JUDGEMENT DATED 23.12.2013, WE DIRECT THE AO TO RE-COMPUTE THE DISALLOWANCE TO BE MADE BY APPLYING RULE 8D(2)(III) TAKING INTO CONSIDERATION ONLY THE VALUE OF INVESTMENT IN SHARES WHICH ACTUALLY FETCHED EXEMPT DIVIDEND INCOME TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 3 I.T.A. NO. 2061/KOL/2019 ASSESSMENT YEAR: 2013-14 PRABHA MOHTA 4. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS BEING PRONOUNCED AFTER NINETY (90) DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKDOWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, I RELY UPON THE DECISION OF THE CO- ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. JSW LIMITED IN ITA NO. 6264/MUM/2018 & 6103/MUM/2018, ASSESSMENT YEAR 2013-14, ORDER DT. 14 TH MAY, 2020. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAY, 2020. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 22/05/2020 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. PRABHA MOHTA, 2 ND FLOOR, ROOM NO. 2A, CALCUTTA STOCK EXCHANGE BUILDING, 7, LYONS RANGE, KOLKATA 700 001. 2. ITO, WARD 35(1), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA