A.C.I.T., -35,Kolkata, Kolkata V. Smt Madhu Devi Saraf, Kolkata

ITA 2216/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1678 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADAV
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI N.V. VASUDEVAN, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 2216/KOL/20 14 ASSESSMENT YEAR : 2010-1 1 ACIT, CIRCLE-35, KOLKATA -VS- SMT. MADHU DEVI SA RAF, KOLKATA [PAN: ALIPS0989F] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SALLONG YADAV , ADDL. CIT DR FOR THE RESPONDENT : SHRI PARAS NATH KESHARI , AR DATE OF HEARING : 03.08.2017 DATE OF PRONOUNCEMENT : 16.08.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XX, KOLKATA [ IN SHORT THE LD CITA] IN APPEAL NO. 22/CIT(A)- XX/CIRCLE-35/2013-14/KOL DATED 09.09.2014 AGAINST THE ORDERS PASSED BY THE ACIT, CIRCLE-35, KOLKATA [ IN SHORT THE LD AO] UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 15.03.2013 FOR THE ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE ACT IN THE SUM OF RS. 39,73,576/- IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF INVESTMENT IN SHARES, DEBENTURES, GOVERNMENT SECURI TIES UNDER INVESTMENT PORTFOLIO, DEALING WITH SPECULATION/DERIVATIVES IN SHARES, FIN ANCING, COMMISSION AGENT AND MERCHANT AND HAD FILED ITS RETURN OF INCOME ON 30.1 0.2010 FOR THE ASSESSMENT YEAR 2010- 2 ITA NO.2216/KOL/2014 MADHU DEVI SARAF A.YR.2010-11 2 11 DECLARING TOTAL INCOME OF RS. 8,42,27,182/-. THE LD. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AD EARNED DIVIDEND INCOME OF RS. 1,69,73,044/- AND INTEREST FROM PPF OF RS. 4,77,417 /- AND CLAIMED THE SAME AS EXEMPT FROM TOTAL INCOME. ACCORDINGLY, THE LD. AO SOUGHT T O INVOKE THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE ASSESSEE SUBMITTED THAT IT HAD SUFFICIENT OWN FUNDS AND THAT THE BORROWED FUNDS WE RE USED ONLY FOR THE PURPOSE OF HER BUSINESS, AND NO PART OF THE BORROWED FUNDS WERE UT ILIZED FOR MAKING INVESTMENTS. ACCORDINGLY, NO DISALLOWANCE COULD BE MADE TOWARDS INVESTMENT IN TERMS OF RULE 8D(2)(II) OF THE RULES. WITH REGARD TO THE DISALLOW ANCE TO BE MADE UNDER THE THIRD LIMB OF RULE 8D(2), IT WAS SUBMITTED THAT THE ASSESSEE H AD DEBITED TOTAL SUM OF RS. 40,73,576/- AS COMMON EXPENSES IN HER PROFIT AND LO SS ACCOUNT AND FROM THAT, THE ASSESSEE HERSELF VOLUNTARILY HAD ALREADY DISALLOWED A SUM OF RS. 5 LACS ON AN ADHOC BASIS IN THE RETURN OF INCOME AND PRAYED FOR ACCEPT ANCE OF THE SAME. THE LD. AO HOWEVER DID NOT HEED TO THE CONTENTIONS OF THE ASSE SSEE AND PROCEEDED TO WORK OUT THE DISALLOWANCE UNDER SECOND AND THIRD LIMB OF RULE 8D AND ARRIVED AT THE FIGURE OF RS. 70,60,839/-. HOWEVER, SINCE, THE TOTAL EXPENSES DEB ITED IN THE PROFIT AND LOSS ACCOUNT TOWARDS GENERAL EXPENSES WERE ONLY 40,73, 576/-, HE GRANTED RELIEF TO THE EXTENT OF RS. 1 LAC. OUT OF THE SAME AND DISALLOWED A SUM OF RS. 39 ,73,576/- U/S 14A OF THE ACT IN THE ASSESSMENT. 4. THE LD. CIT(A) ON GOING THROUGH THE FINANCIALS O F THE ASSESSEE AND BY DULY APPRECIATING THE VARIOUS CASE LAWS IN THAT REGARD O BSERVED THAT THERE IS NO CASE FOR MAKING ANY DISALLOWANCE UNDER SECOND LIMB OF RULE 8 D(2) TOWARDS INTEREST AS SUFFICIENT OWN FUNDS WERE INDEED AVAILABLE WITH THE ASSESSEE. WITH REGARD TO THIRD LIMB , HE OBSERVED THAT THE ASSESSEE HERSELF VOLUNTARILY DIS ALLOWED A SUM OF RS. 5 LACS AND HENCE, NO FURTHER DISALLOWANCE IS CALLED FOR. AGGRIEVED, T HE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 3 ITA NO.2216/KOL/2014 MADHU DEVI SARAF A.YR.2010-11 3 (I) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE N ET RESULT OF INTEREST/EXPENDITURE WAS POSITIVE INCOME & FURTHER NO HEAD OF EXPENDITURE WAS ATTRIBUTABLE TO EARNING EXEMPT INCOME. (II) THE ORDER IS ERRONEOUS BECAUSE THE LD. CIT(A) HAS IGNORED THE FACT THAT THE ASSESSEE EARNED A DIVIDEND INCOME OF RS. 1,69,63,0 44/- & INTEREST OF RS. 4,77,417/- FROM PPF WHICH ARE EXEMPT INCOME. (III) THE LD. CIT(A) HAS IGNORED THE FACT THAT THE AO HAS RIGHTLY CALCULATED THE DISALLOWANCE U/S 14A READ WITH RULE 8D. SINCE, THE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT WAS RS. 40,73,576/-. THE AO RESTRICTED THE AMOUNT AT RS. 39,73,576/- ALLOWING AN ESTIMATED EXPENSE OF RS. 1 LAKH IN FAVOUR OF THE ASSESSEE. 5. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE LD. AO AND ARGUED WITH THE LD. CIT(A) OUGHT NOT TO HAVE AGREED TO THE INTEREST NET TING (POSITIVE INTEREST INCOME) AND DELETED THE DISALLOWANCE MADE UNDER SECOND LIMB OF RULE 8D(2). 6. WE HAVE HEARD THE RIVAL SUBMISSION AND WE FIND T HAT PRIMARY ARGUMENT ADVANCED BY THE LD. DR THAT NETTING PRINCIPLE OF INTEREST CONSI DERED BY THE LD. CIT(A) WOULD BECOME IRRELEVANT AS ADMITTEDLY THE ASSESSEE IN THE INSTANT CASE HAS GOT SUFFICIENT OWN FUNDS WHICH IS SEVERAL TIMES MORE THAN THE INVESTME NTS MADE BY HER. THESE DETAILS ARE VERY MUCH AVAILABLE IN THE ORDER OF THE LD. CIT(A) AND HAD NOT BEEN CONTROVERTED BY THE REVENUE BEFORE US. HENCE, WE HOLD THAT THE LD. CIT(A) HAD RIGHTLY DELETED THE DISALLOWANCE MADE U/S 14A READ WITH RULE 8D(2)(II) OF THE RULES. 7. WITH REGARD TO DISALLOWANCE MADE TOWARDS ADMINIS TRATIVE EXPENSES UNDER RULE 8D(2)(III), WE FIND THAT THE ASSESSEE ON HER OWN HA D DISALLOWED A SUM OF RS. 5 LACS IN THE RETURN OF INCOME OUT OF TOTAL ADMINISTRATIVE EX PENSES OF RS. 40,73,576/-. THE LD. AO HAD NOT GIVEN ANY SATISFACTION AS TO HOW THE SAI D DISALLOWANCE MADE BY THE ASSESSEE IS INCORRECT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IN TERMS OF SECTION 14A(2) READ WITH RULE 8D(1) OF THE RULES. IN OUR CO NSIDERED OPINION, WITHOUT DOING THE SAME, THE LD.AO CANNOT MECHANICALLY RESORT TO RULE 8D OF THE RULES AND IN THE INSTANT 4 ITA NO.2216/KOL/2014 MADHU DEVI SARAF A.YR.2010-11 4 CASE, THE DISALLOWANCE MADE BY THE ASSESSEE IN THE SUM OF RS. 5 LACS IS REASONABLE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE AND A CCORDINGLY, THE LD. CIT(A) HAD RIGHTLY DELETED THE FURTHER DISALLOWANCE MADE BY T HE LD. AO IN THIS REGARD. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. C IT(A) IN THIS REGARD. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 16.08.2017 SD/- SD/- [N.V. VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.08.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME T AX, CIRCLE-35, KOLKATA, AAYAKAR BHAWAN POORVA, 8 TH FLOOR, 110, SHANTI PALLI, KOLKATA-700107. 2. SMT. MADHU DEVI SARAF, 30B, LAL BAZAR STREET, FI RST FLOOR, KOLKATA-700001. 3..C.I.T.(A)-XX, KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S