DCIT, Circle-6(2), Kolkata, Kolkata V. West Bengal Infrastructure Development Finance Corporation Ltd., Kolkata

ITA 2209/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1655 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2014
• Court: TRIBUNAL
• Department Lawyers: HAD EARNED DIVIDEND OF RS; THIRD LIMB OF RULE D OF RULES
• Assessee Lawyers: WHILE COMPLETING ASSESSMENT LD
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH- C) BEFORE SHRI N. V. VASUDEVAN JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER, I.T.A. NO. 2209/KOL/2014 ASSESSMENT YEARS: 2011-12 ORDER PER M. BALAGANESH, AM THIS IS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA (HEREINAFTER REFERRED TO AS THE LD. CIT(A)), PASSED UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DT. 04.09.2014, RELATING TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE U/S 14A OF THE ACT R.W. RULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER THE RULES), ONLY IN RESPECT OF THE INVESTMENTS WHICH YIELDED EXEMPT INCOME, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. DCIT, CIRCLE-6(2), KOLKATA -VS- WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINNCE CORPORATION LTD. [PAN : AAACW3432O ] (APPELLANT) (RESPONDENT) FOR THE ASSESSEE SHRI RAJARSHI CHATTERJEE (ON BEHALF OF ANAND SEH.), AR FOR THEREVENUE SHRI M.K. CHANDA, JCIT, SR. DR DATE OF HEARING 04.05.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO. 2209/KOL/2014 ASSESSMENT YEARS: 2011-12 WEST BENGAL DEVELOPMENT FINANCE CORPORATION LTD. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF NON-BANKING FINANCIAL COMPANY AND HAD EARNED DIVIDEND OF RS.1,46,349/- AND CLAIMED THE SAME AS EXEMPT IN THE RETURN OF INCOME. THE ASSESSEE VOLUNTARILY DISALLOWED THE SUM OF RS.33,32,576/- U/S 14A OF THE ACT IN THE RETURN OF INCOME. THE LD. AO APPLIED THE PROVISIONS OF RULE 8D OF THE RULES AND MADE DISALLOWANCE OF RS.16,77,61,893/- UNDER THE SECOND AND THIRD LIMB OF RULE 8D OF THE RULES AND REDUCED THE DISALLOWANCE ALREADY MADE BY THE ASSESSEE, WHILE COMPLETING THE ASSESSMENT. 4. THE LD. CIT(A) RESTRICTING THE DISALLOWANCE U/S14A R.W. RULE 8D OF THE RULES, ONLY RESPECT OF THOSE INVESTMENTS WHICH YIELDED DIVIDEND INCOME BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. REPORTED IN 144 ITD 141. 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED O FACTS AS WELL AS IN LAW IN HOLDING THAT COMPUTATION OF DISALLOWANCE OF RS.16,77,61,893/- U/S 14A READ WITH RULE 8D IS BECOME MANDATORY WITH EFFECT FROM THE A.Y. 2008-09 AND CBDTS CIRCULAR NO.5/2014 PROVIDES THAT FOR MAKING DISALLOWANCE U/S 14A RECEIPT OF EXEMPT INCOME IS NOT REQUIRED FOR ANY PARTICULAR PERIOD AND AS SUCH, CONSIDERING ONLY THOSE INVESTMENT WHICH YIELDED EXEMPT INCOME FOR COMPUTING DISALLOWANCE UNDER RULE 8D DOES NOT HOLD WATER. 6. WE FIND THAT THE ISSUE UNDER DISPUTE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. (SUPRA) , WHEREIN IT WAS HELD HAS UNDER:- 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-MATTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHICH 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 3 I.T.A. NO. 2209/KOL/2014 ASSESSMENT YEARS: 2011-12 WEST BENGAL DEVELOPMENT FINANCE CORPORATION LTD. DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE AO FOR RECOMPUTATION 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. 7. HENCE, RESPECTFULLY FOLLOWING THE SAID DECISION, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. ASSESSEE- WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LTD. MANGALAM BUILDING, BLOCK-A, 1 ST FLOOR, 24, HEMANTA BASU SARANI, KOLKTA-700001. 2.REVENUE DCIT, CIRCLE-6(2), KOLKATA. 3.CIT(A)- KOLKATA. 4.CIT , KOLKATA. 5.CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.