M/S. Larigo Investment Pvt Ltd., Kolkata V. DCIT, CC-XXX, KOLKATA, Kolkata

ITA 2159/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9193 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 01-12-2014
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR CIT LD
• Assessee Lawyers: ASHOK KUMAR TULSYAN FCA LD
• Section: 14A

Judgement Text

1 ITA NO. 2159/K/14 M/S. LARIGO INVESTMENT P.LTD IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D B ENCH, KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2159/KOL/2014 A.Y 2009-10 M/S. LARIGO INVESTMENT PVT. LTD ................................... APPELLANT PAN: AAACL4319C 1 CROOKED LANE KOLKATA-700069. -VS- DEPUTY COMMISSIONER OF INCOME TAX.. RESPONDENT CC-XXX, KOLKATA AAYKAR BHAWAN POORVA 110 SHANTI PALLY KOLKATA-700 107. APPEARANCES BY: SHRI ASHOK KUMAR TULSYAN, FCA, LD. AR FOR THE ASSES SEE SHRI SAURABH KUMAR, ADDL. CIT, LD.DR FOR THE REVENU E DATE OF HEARING: 22-03-2017 DATE OF PRONOUNCEMENT: 2 4-03-2017 SHRI S.S. VISWANETHRA RAVI , JM: THIS APPEAL BY THE ASSESSEE IS AGAINST ORDER DT: 30 -09-2014 PASSED BY THE COMMISSIONER OF INCOME TAX-(APPEALS), CENTRAL-I II, KOLKATA FOR THE ASSESSMENT YEAR 2009-10. 2. AT THE OUTSET, THE LD.AR OF THE ASSESSEE SUBMITS THAT THERE WAS A MISTAKE CREPT IN THE GROUNDS OF APPEAL FILED ALONG WITH FORM NO.36 AND TO RECTIFY THE SAME SOUGHT PERMISSION TO FILE THE REVI SED GROUNDS OF APPEAL. WITH THE PERMISSION, ACCORDINGLY, THE LD.AR OF THE ASSES SEE FILED REVISED GROUNDS OF APPEAL AND THE SAME WAS TAKEN FOR ADJUDICATION. THE REFORE, THE ONLY QUESTION 2 ITA NO. 2159/K/14 M/S. LARIGO INVESTMENT P.LTD IS TO BE DECIDED AS TO WHETHER THE CIT-A ERRED IN C ONFIRMING THE ADDITION MADE ON ACCOUNT SEC. 14A R.W.R 8D OF THE IT RULES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD.AR ALSO SUBMITS THAT THE AO MADE D ISALLOWANCE UNDER RULE 8D(2)(III) OF RS.5,94,783/- @0.5% BASING ON THE AVE RAGE VALUE OF INVESTMENT FROM THE BALANCE SHEET ON FIRST DAY AND LAST DAY OF PREVIOUS YEAR. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE CIT-A WITHOUT CONSIDERING THE DECISION OF KOLKATA TRIBUNAL IN THE CASE OF REI AGRO CONFIRMED THE ORDER OF THE AO IN MAKING ADDITION. 3. BEFORE US THE LD.AR SUBMITS THAT THE ASSESSEE HA S EARNED ONLY RS.218/- AS DIVIDEND FROM CERTAIN INVESTMENTS. THE LD. AR A RGUED THAT THE ONLY INVESTMENT, WHICH HAS GIVEN RISE TO THE EXEMPT INCO ME SHOULD BE TAKEN INTO CONSIDERATION AND APPLICATION OF RULE 8D(2)(III) OF THE I T RULES IS BAD UNDER LAW AND PLACED RELIANCE ON THE ORDER OF KOLKATA TRI BUNAL IN THE CASE OF REI AGRO REPORTED IN 144 ITD 141(KOL). ON THE OTHER HAND, TH E LD. DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT-A. 4. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT EXCEPT OBSERVING THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME AND NOTHING WAS SHOWN BY THE AO IN HIS ORDER THAT T HE ASSESSEE EARNED INCOME AS DIVIDEND INCOME AND RESORTED TO APPLY THE METHOD AS PROVIDED UNDER RULE 8D(2)(III) AND COMPUTED THE EXPENSES BAS ING ON TOTAL AVERAGE INVESTMENT AS OPENING AND CLOSING BALANCE RESPECTIV ELY AND DISALLOWED THE IMPUGNED AMOUNT. THE CONTENTION OF THE ASSESSEE BEF ORE THE CIT-A AS WELL AS BEFORE US, WAS THAT THE ASSESSEE DERIVED DIVIDEN D INCOME OF RS.218/- FROM CERTAIN INVESTMENTS AND SUCH INVESTMENTS WERE MADE OUT OF ITS OWN FUNDS. IN THIS REGARD WE MAY REFER TO THE SAID DECI SION AS RELIED BY THE LD.AR IN THE CASE OF SUPRA, WHEREIN THE TRIBUNAL HELD THAT THE DIVIDEND EARNED OUT OF INVESTMENTS WOULD BECOME THE SUBJECT MATTER TO B E CONSIDERED FOR COMPUTING THE EXPENSES BY THE METHOD AS PROVIDED UN DER RULE 8D WHEN 3 ITA NO. 2159/K/14 M/S. LARIGO INVESTMENT P.LTD SUCH INVESTMENT YIELDS DIVIDEND INCOME. FOR BETTER UNDERSTANDING RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW:- 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-MA TTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. T HE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INTO CONSIDERATION THE INVESTMENT WHICH HAS GIVEN RISE TO THIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . UNDER THE CIRCUMSTANCES, THE COMPUTATION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RUL E 8D(2)(II), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE AO FOR RECOM PUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D (2)(I) AND (II) CAN BE MADE IN THIS CASE. 5. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DEC ISION OF THIS TRIBUNAL SUPRA, WE DIRECT THE LD. AO TO CONSIDER DISALLOWANC E IN TERMS OF RULE 8D(2)(III) OF THE I.T RULES BY CONSIDERING ONLY THO SE INVESTMENTS, WHICH HAD YIELDED DIVIDEND INCOME. IN VIEW OF OUR DISCUSSION , THE REVISED GROUND AS RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 24-0 3-2017 SD/- SD/- WASEEM AHMED S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 24 -03-2017 COPIES OF THE ORDER FORWARDED TO : (1) THE ASSESSEE: M/S. LARIGO INVESTMENT PVT. LTD 1 CROOKED LANE, KOLKATA-69. (2) THE DEPARTMENT: THE DCIT, CC-XXX, AAYKAR BHAWAN POORVA, 110 SHANTI PALLY, KOLKATA-107. (3) COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOLKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE **PP/SPS BY ORDER ASSISTA NT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA