ACIT, Circle - 1(1), Kolkata V. M/s. Kilburn Engineering , Kolkata

ITA 2170/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1722 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Assessee Lawyers: S SINGHI
• Keywords: Rejection of books of accounts; Business expenditure; Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOLKATA BEFORE: SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER I.T.A NO.2170/KOL/2018 (ASSESSMENT YEAR 2013-14) ACIT, CIRCLE-1(1), KOLKATA APPELLANT VS M/S KILBURN ENGINEERING LTD. RESPONDENT [PAN:AABCK 3421 H] FOR THE APPELLANT : SHRI RADHEY SHYAM, CIT, DR FOR THE RESPONDENT : SHRI S. SINGHI, FCA DATE OF HEARING : 04.04.2019 DATE OF PRONOUNCEMENT : 14.06.2019 ORDER PER SHRI S.S. VISWANETHRA RAVI, JM: THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 04.07.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKATA FOR ASSESSMENT YEAR 2013-14. 2. GROUND NO.1 IS RELATING TO DELETION OF ADDITION MADE U/S 14A R.W.R. 8D(2) OF RULES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE EARNED DIVIDED INCOME OF RS.12,54,296/- AND DISALLOWED THE EXPENDITURE OF RS.10,09,652/- IN EARNING THE SAID DIVIDEND INCOME ON ITS OWN. THE ASSESSING OFFICER FURTHER ADDED RS.62,62,079/- UNDER RULE 8D(2)(II) AND RULE 8D(2)(III) OF THE RULES. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSEE INVESTED FROM ITS OWN FUNDS AND DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER RULE 8D(2)(II) IS TO BE DELETED. THE CIT(A) EXAMINED THE RECORD, ACCOUNTS OF THE ASSESSEE COMPANY AND DELETED THE SAID EXPENDITURE. IN RESPECT OF THE I.T.A NO.2170/KOL/2018 M/S KILBURN ENGINEERING LTD. 2 DISALLOWANCE UNDER RULE 8D(2)(III), THE CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS.11,54,825/- WHEREAS, IN OUR OPINION, IT IS REASONABLE TAKING INTO CONSIDERING THE INVESTMENTS WHICH YIELDED EXEMPT INCOME. THE RELEVANT PORTION OF CIT(A) IS REPRODUCED HEREINBELOW: FOR THIS PROPOSITION, RELIANCE WAS PALCED BY THE A/R ON DECISIONS IN THE CASE OF M/S. BALARAMPUR CHINI MILLS LTD. VS. DCIT IN ITA NO.504/K/2011 FOR ASSESSMENT YEAR 2008- 09 DATED 29.07.2011; AND BY THE HIGH COURT OF GURJARAT IN CASE OF CIT V. SUZLON ENERGY LTD. [2013] 215 TAXMAN 272/33 TAXMANN.COM 151. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE BOMBAY HIGH COURT IN THE CASES OF RELIANCE UTILITIES & POWER LTD. (313 ITR 340) & CIT VS. HDFC BANK (383 ITR 529), GUJARAT HIGH COURT IN THE CASE OF CIT VS. UTI BANK LTD (32 TAXMANN.COM 270) & PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LTD (388 ITR 81) AS WELL. RESPECTFULLY FOLLOWING THESE DECISIONS, IT IS HELD THAT THE A.O WAS NOT JUSTIFIED IN DISALLOWING INTEREST OF RS.61,16,906/- UNDER RULE 8D(2)(II) AND THE SAME IS DIRECTED TO BE DELETED. AS REGARDS THE DISALLOWANCE UNDER RULE 8D(2)(III), I FIND THAT THE ASSESSEE PER SE HAS NOT DENIED THAT SOME AMOUNT OF ADMINISTRATIVE EXPENSES WERE REQUIRED TO BE INCURRED IN RELATION TO EARNING ACCOUNTING & MANAGEMENT OF INVESTMENTS AND INCIDENTAL ACTIVITIES. THE ASSESSEE ON ITS OWN WAS UNABLE TO PROVIDE ANY LOGICAL BASIS FOR OFFERING DISALLOWANCE IN RELATION TO ADMINISTRATIVE EXPENSES. ONCE THE ASSESSEE ADMITS INCURRING OF SOME EXPENSE AND IS UNABLE TO PROVIDE LOGICAL AND COGENT BASIS FOR DISALLOWANCE THEN THE ONLY COURSE OPEN FOR THE A.O WAS TO MAKE THE DISALLOWANCE IN CONFORMITY WITH RULE 8D(2)(III) THOUGH IN APPELLANTS OPINION IT PRODUCED MANIFESTLY UNJUST RESULT. FOR THE REASONS SET OUT THEREFORE, THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE BY THE A.O UNDER RULE 8D(2)(III) OF RS.11,54,825/- AS MADE BY THE A.O IS UPHELD, HOWEVER, AFTER CONSIDERING THE VOLUNTARY DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS.10,09,652/- ALREADY MADE BY THE APPELLANT, THE DISALLOWANCE IS RESTRICTED TO RS.1,45,173/-. THE APPELLANT GETS RELIEF TO THE TUNE OF RS.61,16,905/-. THESE GROUNDS ARE PARTLY ALLOWED. 4. IN VIEW OF THE ABOVE DISCUSSIONS MADE IN THE AFOREMENTIONED PARAGRAPHS, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND IT IS JUSTIFIED. GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 5. GROUND NO.2 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND. 6. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.7,10,013/- FOR NOT DEPOSITING THE EMPLOYERS CONTRIBUTION BEFORE DUE DATE AS PER RELEVANT PROVISION. THE CIT(A) BY PLACING RELIANCE IN THE CASE OF CIT VS. M/S. VIJAY SHREE LIMITED IN ITA NO.245 OF 2011 OF HONBLE HIGH I.T.A NO.2170/KOL/2018 M/S KILBURN ENGINEERING LTD. 3 COURT OF CALCUTTA, DELETED THE ADDITION BY OBSERVING THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT MAINTAINABLE AS THE ASSESSEE DEPOSITED THE SAID CONTRIBUTION BEFORE DUE DATE OF FILING RETURN OF INCOME, THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREINBELOW: IT IS FOUND FROM MATERIAL ON RECORD THAT THE PAYMENTS RELATING TO EMPLOYEES CONTRIBUTION TO P.F AND ESI WERE MADE WELL WITHIN THE DUE DATES OF FILING OF RETURN OF THE RELEVANT ASSESSMENT YEAR U/S 139(1) OF THE ACT. IN VIEW THEREOF, IT IS FOUND THAT THE ISSUE IS COVERED BY THE RATIO OF THE CITED CASE LAWS AND RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT VS. M/S. VIJAY SHREE LIMITED(SUPRA), AND BIHAR STATE WAREHOUSING CORP. LTD. VS. DCIT, PATNA (SUPRA), WHEREIN IT WAS HELD THAT CONSIDERING THE PAYMENTS FOR PF CONTRIBUTIONS ARE MADE WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME. THEREFORE, I AM OF THE VIEW THAT THE A.O WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.31,71,081/- U/S 2(24)(X) R.W.S 36(1)(VA) OF THE I.T. ACT, 1961. ACCORDINGLY, THE A.O IS DIRECTED TO DELETE THE ADDITION OF RS.7,10,013/- MADE U/S 2(24)(X) R.W.S. 36(1)(VA). THUS, THIS GROUND IS ALLOWED. 7. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND IT IS JUSTIFIED. GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.3 IS RELATING TO DELETION OF DISALLOWANCE ON ACCOUNT OF FOREIGN TOUR ALLOWANCE AND FOREIGN TOUR EXPENSES. 9. IT IS NOTED FROM THE RECORD THAT ON PERUSAL OF THE DETAILS OF ACCOUNTS UNDER THE HEAD FOREIGN TOUR ALLOWANCE AND FOREIGN TOUR EXPENSES, THE ASSESSING OFFICER SHOW-CAUSED THE ASSESSEE TO PRODUCE RELEVANT DETAILS TO ASCERTAIN HOW THE FOREIGN EXCHANGE PURCHASED BY THE ASSESSEE WAS SPENT AND WHETHER SUCH EXPENSES CAN BE CONSIDERED AS BUSINESS EXPENSES OF THE ASSESSEE. FURTHER THE ASSESSING OFFICER HELD THAT THE ASSESSEE FAILED TO PROVIDE THE IDENTITY OF THE PERSON GOING ON FOREIGN TRAVEL. THE PURPOSES OF SUCH TRAVEL ARE NOT SUBSTANTIATED, THE GENUINENESS AND BUSINESS EXIGENCY OF SUCH FOREIGN TOUR. THEREFORE, IT IS CLEAR THAT THERE WAS NO EVIDENCE TO SHOW THE FOREIGN TOUR ALLOWANCE WAS INCURRED TOWARDS BUSINESS EXPENDITURE AND FOREIGN EXPENDITURE WAS INCURRED TOWARDS BUSINESS EXIGENCY BY I.T.A NO.2170/KOL/2018 M/S KILBURN ENGINEERING LTD. 4 IDENTIFYING THE PERSONS AND THE PURPOSE OF FOREIGN VISITS. THE CIT(A) DISCUSSED THE ISSUE AT PAGE NO.18 WHERE IT IS NOTED THAT THE CIT(A) DELETED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSING OFFICER FAILED TO GIVE ANY SPECIFIC FINDINGS OR REJECTION OF BOOKS OF ACCOUNTS AND THUS DISALLOWANCE MADE THEREON IS NOT IN ACCORDANCE WITH LAW. IN OUR OPINION, THE CIT(A) WITHOUT DECIDING THE ISSUE ON VERIFICATION OF EVIDENCES DELETED THE SAID DISALLOWANCE IS NOT MAINTAINABLE. THE ASSESSING OFFICER, AS DISCUSSED ABOVE, SOUGHT FOR DETAILS OF SUCH FOREIGN TOUR ALLOWANCE AND FOREIGN TOUR EXPENDITURE AND THE ASSESSEE FAILED IN PRODUCING THE EVIDENCES BEFORE THE TWO LOWER AUTHORITIES AS WELL AS BEFORE US. THE FACTS REMAIN ADMITTED THAT THERE WAS NO EVIDENCE BEFORE THE CIT(A) WHICH CLEARLY SHOWS THAT NO REFERENCE WHATSOEVER MADE BY HIM IN THE IMPUGNED ORDER REGARDING ANY SPECIFIC EVIDENCE SHOWING DETAILS OF FOREIGN TOUR ALLOWANCE AND IDENTITY AND PURPOSE OF VISITS RELATING TO FOREIGN TOUR EXPENDITURE. THEREFORE WHEN THERE IS NO EVIDENCE RELATING TO THE ISSUE ON HAND BEFORE ALL THE AUTHORITIES INCLUDING THIS TRIBUNAL, WE FIND THE IMPUGNED ORDER PASSED BY THE CIT(A) IS NOT JUSTIFIED AND IT IS SET ASIDE. THEREFORE, WE RESTORE THE ORDER OF ASSESSING OFFICER IN DISALLOWING THE EXPENSES UNDER THE HEAD FOREIGN TOUR ALLOWANCE AND FOREIGN TOUR EXPENSES OF RS.14,20,403/- AND RS.4,06,417/- RESPECTIVELY. THUS, GROUND NO.3 RAISED BY THE REVENUE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.06.2019. SD/- SD/- [DR. A. L. SAINI] [S.S. VISWANETHRA RAVI] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14.06.2019 PLACE : KOLKATA RS, SR.PS I.T.A NO.2170/KOL/2018 M/S KILBURN ENGINEERING LTD. 5 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ACIT, CIRCLE-1(1), KOLKATA. 2 RESPONDENT M/S KILBURN ENGINEERING, 4, MANGOE LANE, SURENDRA MOHAN GHOSHSARANI, KOL-1. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA //TRUE COPY// BY ORDER, ASSISTANT REGISTRAR, ITAT, KOLKATA