ITO, Ward-10(2), Kolkata, Kolkata V. M/s Accord Capital Markets Limited, Kolkata

ITA 2076/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1342 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Assessee Lawyers: ARINDAM BHATTACHERJEE RE
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND DR.A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 2076 / KOL / 2016 ASSESSMENT YEAR :2010-11 INCOME TAX OFFICER, WARD-10(2), P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR,KOLKATA-69 V/S . M/S ACCORD CAPITAL MARKETS LTD., 13, MAHENDRA ROAD, KOLKATKA-26 [ PAN NO. AACCA 5695 G ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT-DR /BY RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE /DATE OF HEARING 07-03-2018 /DATE OF PRONOUNCEMENT 16-03-2018 / O R D E R PER DR. A.L. SAINI, ACCOUNTANTMEMBER: THIS CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINING TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST AN ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-18, KOLKATA, IN APPEALNO.452/CIT(A)-18/2010-11/WD-10(2)/KOL,DATED 04.08.2016, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 22.03.2013. 2.THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1) WHETHER THE LD. CIT(A) WAS CORRECT IN RESTRICTING IN THE ADDITION OF RS.14,53,513/- BEING THE AMOUNT OF EXEMPT ITA NO.2076/KOL/2016 A.Y. 2010-11 ITO WD-10(2) KOL. VS. M/S ACCORD CAPITAL MARKETS LTD. PAGE 2 INCOME FOR AN IDENTICAL AMOUNT WITHOUT APPLYING THE PROVISION OF RULE 8D READ WITH SECTION 14A OF THE IT ACT? 2) WHETHER THE LD. CIT(A) WAS CORRECT IN NOT FOLLOWING THE DECISION OF SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. (26 SOT 603) THAT PERMITTED INCLUSION OF STOCK IN TRADE IN THE VERGE VALUE OF INVESTMENT REQUIRED TO BE WORKED OUT UNDER RULE 8D? 3) THAT THE APPELLANT CRAVES TO ADD, DELETE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE SOLITARY GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THAT THE LD. CIT(A) WAS NOT CORRECT IN RESTRICTING THE ADDITION OF 14,53,513/-, BEING THE AMOUNT OF EXEMPT INCOME FOR AN IDENTICAL AMOUNT. 4. BRIEF FACTS APROPOS THIS ISSUE ARE THAT ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF SHARE BROKER AND DEALING IN SHARE & SECURITIES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSESSEE RECEIVED EXEMPT INCOME TO THE TUNE OF 14,53,513/-, DURING THE FINANCIAL YEAR 2009-10.THE AO NOTED THAT IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE CLAIMED DIFFERENT EXPENSE LIKE INTEREST AND OTHER EXPENSE WHICH MIGHT HAVE BEEN INCURRED DIRECTLY OR INDIRECTLY TO EARN EXEMPT INCOME. WHEN THE ASSESSEE WAS ASKED IN THIS REGARD, IT WAS STATED BY THE ASSESSEE THAT 6,40,372/- WAS DISALLOWED SUO-MOTU , AS REQUIRED U/S 14A R.W.S. RULE 8D OF THE IT RULES AND COMPUTATION WAS FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE WAS CARRYING ON SHARE TRADING BUSINESS IN THE COURSE OF WHICH SHARES WERE HELD AS TRADING STOCK, AND SUCH TRADING STOCK OF SHARES PRODUCED DIVIDEND INCOME WHICH IS EXEMPT INCOME U/S. 10(34) OF THE ACT. THE ASSESSING OFFICER NOTED THAT DISALLOWANCE MADE BY ASSESSEE IN RESPECT OF EXPENDITURE ITA NO.2076/KOL/2016 A.Y. 2010-11 ITO WD-10(2) KOL. VS. M/S ACCORD CAPITAL MARKETS LTD. PAGE 3 INCURRED AGAINST DIVIDEND INCOME WAS NOT AS PER REQUIREMENT OF SECTON14A R.W.S RULE 8D AND THEREFORE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE AS PER RULE 8D AND MADE ADDITION OF 1,35,05,609/-.OUT OF 1,35,05,609/- THE ASSESSEE HAS ALREADY DISALLOWED SUO MOTU THE AMOUNT OF 6,40,372/-. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE BALANCE AMOUNT OF 1,28,65,237/- (1,35,05,609 - 6,40,372). 5.ON APPEAL, LD. CIT(A) RESTRICTED THE ADDITION U/S. 14A AT 14,53,513/- HOLDING THAT THE DISALLOWANCE U/S. 14A CANNOT EXCEED THE AMOUNT OF DIVIDEND EARNED. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 6. THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WERE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY LD. CIT(A). THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT IT IS A SETTLED POSITION OF LAW THAT THE DISALLOWANCE U/S.14A R.W.S. RULE 8D CANNOT EXCEED THE DIVIDEND EARNED AND THEREFORE HE RELIED ON THE ORDER OF HON`BLE ITAT, MUMBAI IN THE CASE OF M/S DAGA GLOBAL CHEMICALS PVT. LTD. VS. ACIT IN ITA NO.5592/MUM/2012 DATED 01.01.2015, WHEREIN IT WAS HELD THAT DISALLOWANCE U/S.14A R.W.S. RULE 8D CANNOT EXCEED THE EXEMPT INCOME. 7.HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD WE NOTE THAT IN THE ASSESSEES CASE UNDER CONSIDERATION THE TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE IS AT 14,53,513/-. WE ALSO NOTE THAT ASSESSEE HAD DISALLOWED SUO ITA NO.2076/KOL/2016 A.Y. 2010-11 ITO WD-10(2) KOL. VS. M/S ACCORD CAPITAL MARKETS LTD. PAGE 4 MOTU U/S.14A R.W.S RULE 8D AT 6,40,372/-. WE NOTE THAT ASSESSING OFFICER DISALLOWED U/S. 14A R.W.S. RULE 8D(2)(II) AT 1,27,30,942/- AND UNDER RULE 8D (2) (III) AT 7,74,667/- AGGREGATING TO 1,35,05,609/-. THE ASSESSEE HAD RECEIVED DIVIDEND INCOME ONLY TO THE TUNE OF 14,53,513/-, THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE OF 1,35,05,609/- BY INVOKING THE PROVISION OF SECTION 14A R.W.S. RULE 8D UNDER THE FACTS AVAILABLE ON RECORD AND THE SETTLED POSITION OF LAW AS PER THE VARIOUS JUDGMENTS OF COORDINATE BENCH OF ITAT, CITED BY THE COUNSEL FOR THE ASSESSEE, WHICH CLEARLY ADVOCATE THAT DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D SHOULD NOT EXCEED THE EXEMPT INCOME. THEREFORE, THE MAXIMUM DISALLOWANCE, IF ANY, CAN BE MADE UP TO 14,53,513/-.HENCE THE MAXIMUM DISALLOWANCE U/S. 14A R.W.S. RULE 8D SHOULD BE RESTRICTED UP TO THE EXEMPT INCOME EARNED BY THE ASSESSEE AND FOR THAT WE RELY ON THE JUDGMENT OF COORDINATE BENCH OF MUMBAI IN THE CASE OF M/S DAGA GLOBAL CHEMICALS PVT. LTD.(SUPRA). THEREFORE, IN THE ASSESSEES CASE UNDER CONSIDERATION, THE TOTAL EXEMPT INCOME EARNED BY ASSESSEE IS AT 14,53,513/- OUT OF WHICH THE ASSESSEE HAS SUO MOTU DISALLOWED A SUM OF 6,40,373/. THEREFORE, THE BALANCE DISALLOWANCE OF 8,13,141/- IS TO BE UPHELD. THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY LD. CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND GROUND RAISED BY REVENUE ON THIS ISSUE IS DISMISSED. 8.IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 16/03/2018. SD/- SD/- (ABY. T. VARKEY) (DR. A.L. SAINI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *DKP, SR.P.S - 16 / 03 /201 8 KOLKATA ITA NO.2076/KOL/2016 A.Y. 2010-11 ITO WD-10(2) KOL. VS. M/S ACCORD CAPITAL MARKETS LTD. PAGE 5 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-INCOMETAXOFFICER,WRD-10(2),P-7,CHOWRINGHEESQ. 3 RD FL,KOL-69 2. /RESPONDENT-M/S ACCORD CAPITAL MARKETS LTD, 3 MAHENDRA ROAD, KOLKATA-26 3. / CONCERNED CIT KOLKATA 4. - / CIT (A) KOLKATA 5. , , / DR, ITAT, KOLKATA 6. [ / GUARD FILE. BY ORDER/ , SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO ,