ACIT, Circle-10(2), Kolkata, Kolkata V. M/s Sudha Apparels Ltd., Kolkata

ITA 2125/KOL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3819 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 04-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Earning of tax free income; Rule 8D
• Section: 2(22)(e); 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER) I.T.A. NO. 2125/KOL/2016 ASSESSMENT YEAR: 2011-12 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-10(2), KOLKATA.............APPELLANT VS. M/S. SUDHA APPARELS LTD.....................RESPONDENT 2/5, SARAT BOSE ROAD FLAT NO. 8A KOLKATA 700 020 [PAN : AAHCS 6369 J] APPEARANCES BY: SHRI SUNIL SURANA, FCA, APPEARED ON BEHALF OF THE ASSESSEE. DR.P. K. SRIHARI, JCIT, SR. D/R APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 23 RD , 2019 DATE OF PRONOUNCING THE ORDER : AUGUST 14 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 18, (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 30/08/2016, FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS OF TRADING, FINANCE & INVESTMENT. THE TWO GROUNDS THAT ARISES FOR OUR ADJUDICATION IN THIS REVENUE APPEAL IS DELETION OF DISALLOWANCE U/S 14A OF THE ACT, BY THE LD. CIT(A) AS WELL AS THE DELETION OF ADDITION MADE U/S 2(22)(E) OF THE ACT. 3. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 4. GROUND NO. 1, READS AS FOLLOWS:- 1) WHETHER THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.76,34,498/- MADE U/S 14A AS IT HAS BEEN CLARIFIED VIDE CIRCULAR NO. 5/2014 THAT ALL THE INVESTMENTS WOULD HAVE TO BE CONSIDERED FOR COMPUTING DISALLOWANCE AS PER THE PROVISIONS OF SUB-RULE(2) OF RULE 8D, EVEN IF NO EXEMPT INCOME HAD BEEN EARNED FROM SUCH INVESTMENTS. 2 I.T.A. NO. 2125/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S. SUDHA APPARELS LTD. 4.1. THIS GROUND IS MISCONCEIVED AS THE LD. CIT(A) HAS NOT GRANTED RELIEF TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE RELIEF HAS BEEN GRANTED ON THE GROUND THAT:- A) INTEREST BEARING FUNDS HAVE NOT BEEN INVESTED OR UTILISED FOR MAKING INVESTMENT IN SHARES AND HENCE INTEREST EXPENSES ON BORROWED FUND IS NOT RELATABLE TO EARNING OF EXEMPT INCOME. THUS, THE DISALLOWANCE OF INTEREST U/S 14A OF THE ACT, IS DELETED. B) THE ASSESSEE HAS DISALLOWED ALL THE DIRECT EXPENSES RELATABLE TO THE INVESTMENTS SUO MOTO U/S 14A OF THE ACT AND THAT THE SAME IS REASONABLE. C) THE ASSESSING OFFICER WAS NOT ABLE TO POINT OUT ANY OMISSION IN THIS REGARD. D) THUS, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO PROVIDE COGENT REASON FOR INVOKING RULE 8D OF THE INCOME TAX RULES, 1962 (RULES). 5. BEFORE US THE LD. D/R COULD NOT CONTROVERT THIS FACTUAL FINDINGS OF THE LD. FIRST APPELLATE AUTHORITY. HE ARGUED THAT THE ASSESSING OFFICER HAS RECORDED THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AND THAT THIS IS RECORDING OF SATISFACTION. IN OUR VIEW, THE MULTIPLE REASONS GIVEN BY THE LD. CIT(A) COULD NOT BE CONTROVERTED WITH FACTS AND HENCE THE ORDER OF THE LD. CIT(A) HAS TO BE UPHELD. HENCE GROUND NO. 1 OF THE REVENUE IS DISMISSED. 6. GROUND NO. 2 IS ON THE DISALLOWANCE OF ADDITION U/S 2(22)(E) OF THE ACT. THE ASSESSEE DEMONSTRATED BEFORE US THAT THE ACCOUNT IN QUESTION WITH M/S. JINDAL PIPES LTD., A SISTER CONCERN, WAS A CURRENT ACCOUNT AND EXCEPT FOR THE PERIOD 3 RD DECEMBER, 2010 TO 7 TH DECEMBER, 2010, IT WAS THE ASSESSEE WHICH HAD ADVANCED MONEY TO M/S. JINDAL PIPES LTD. HE RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GAYATRI CHAKRABORTY (2018) 407 ITR 0730 (CAL-HC) , FOR THE PROPOSITION THAT NO ADDITION CAN BE MADE U/S 2(22)(E) OF THE ACT, WHEN THE TRANSACTIONS WERE IN THE NATURE OF MUTUAL RUNNING OR CURRENT ACCOUNT, AS THEY DO NOT CONSTITUTE LOAN. HE FURTHER ARGUED THAT THESE WERE INTER CORPORATE DEPOSITS (ICDS) AND HENCE DO NOT ATTRACT SECTION 2(22)(E) OF THE ACT, AS HELD BY THE LD. CIT(A).WE, ON THE EXAMINATION FACTS UPHOLD THE FINDING OF THE LD. CIT(A). THE LD. D/R, COULD NOT CONTROVERT THE CLAIM OF THE ASSESSEE THAT THE ACCOUNT IN QUESTION IS A CURRENT ACCOUNT. 3 I.T.A. NO. 2125/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S. SUDHA APPARELS LTD. 7. THUS, WE HAVE NOT HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) IN THIS REGARD WHICH AT PAGE 5 OF HIS ORDER. HENCE, WE DISMISS GROUND NO. 2 OF THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE 14 TH DAY OF AUGUST, 2019. SD/- SD/- [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14.08.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. M/S. SUDHA APPARELS LTD 2/5, SARAT BOSE ROAD FLAT NO. 8A KOLKATA 700 020 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-10(2), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES