ITO, Ward - 15(1), Kolkata , Kolkata V. M/s. Manish Company Pvt. Ltd., , Kolkata

ITA 2227/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2050 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Keywords: Earning of tax free income
• Section: 14A; 115JB; 10

Judgement Text

1 ITA NO. 2227/KOL/2017 MANISH COMPANY PVT. LTD., AY 2013-14 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 2227/KOL/2017 ASSESSMENT YEAR: 2013-14 INCOME-TAX OFFICER, WARD-15(1), KOL. VS. M/S. MANIS H COMPANY PVT. LTD. (PAN: AABCM8092J) APPELLANT RESPONDENT DATE OF HEARING 12.11.2018 DATE OF PRONOUNCEMENT 16.11.2018 FOR THE APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI AKKAL DUDHWEWALA, FCA ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-5, KOLKATA DATED 29.08.2017 FOR AY 2013-14. 2. THE SOLE GROUND OF APPEAL OF REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE AO APPLYING SEC. 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) READ WITH RU LE 8D OF THE INCOME-TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) 3. AT THE OUTSET ITSELF, THE LD. AR DREW OUR ATTENT ION TO THE FACT THAT THE ASSESSEE COMPANY DID NOT EARN ANY EXEMPT INCOME WHICH FACT H AS BEEN ACKNOWLEDGED BY THE AO IN PARA 3 OF THE ASSESSMENT ORDER WHEREIN THE AO IN HI S OWN WORDS HAS STATED THAT THERE WAS NO EXEMPT INCOME EARNED DURING THE FINANCIAL YEAR RELE VANT TO AY 2013-14. ACCORDING TO THE LD. COUNSEL, THE FACT THAT THE ASSESSEE HAS NOT E ARNED ANY EXEMPT INCOME HAS BEEN TAKEN 2 ITA NO. 2227/KOL/2017 MANISH COMPANY PVT. LTD., AY 2013-14 NOTE BY THE LD. CIT(A) AT PARA 4.10 WHEREIN THE LD . CIT(A) IN HIS OWN WORDS HAS HELD AS UNDER: AS DISCUSSED EARLIER, THE JURISDICTIONAL HIGH COU RTS AND ITAT HAD HELD THAT IN THE ABSENCE OF ANY DIVIDEND INCOME, SECTION 14A READ WITH RULE 8D WILL NOT COME TO PLAY. THE APPELLANT IN THE YEAR UNDER APPEAL, AS PER HIS BALANCE SHEET, DI D NOT EARN ANY DIVIDEND INCOME. 4. WE NOTE THAT THE AFORESAID FINDING OF F ACT OF THE LD. CIT(A) THAT THE ASSESSEE WAS NOT IN RECEIPT OF ANY EXEMPT INCOME HAS NOT BEEN NE ITHER CHALLENGED BY THE DEPARTMENT NOR THE LD. DR WAS ABLE TO POINT OUT FROM THE RECORDS T HAT THE ASSESSEE HAD IN FACT EARNED ANY EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION. SIN CE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME APPLYING THE LAW AS LAID BY THE HONB LE DELHI HIGH COURT IN CIT VS. CHEMINVEST LTD. (2015) 378 ITR 33 (DEL.) WHEREIN IT WAS HELD THAT WHEN THERE BEING NO EXEMPT INCOME EARNED BY THE ASSESSEE, NO DISALLOWAN CE U/S.14A READ WITH RULE 8D CAN BE APPLIED MECHANICALLY TO DISALLOW EXPENDITURE INCURR ED TO EARN EXEMPT INCOME. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. M/S. ASHIKA GL OBAL SECURITIES LTD. IN ITAT 100 OF 2014, GA 2122 OF 2014 DATED 11.06.2018 HAS APPROVED THE AFORESAID PROPOSITION OF LAW. IN SUCH A SCENARIO, WE ARE NOT INCLINED TO INTERFERE W ITH THE ACTION OF THE LD. CIT(A). 5. COMING TO THE ACTION OF THE LD. CIT(A) IN DELETI NG THE DISALLOWANCE MADE BY THE AO APPLYING CLAUSE (F) TO SEC. 115JB OF THE ACT. BRIEF FACTS OF THE CASE ARE THAT THE AO WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPUTED THE B OOK PROFIT U/S. 115JB OF THE ACT AS PER RETURN AT RS.25,85,049/- AND DISALLOWED U/S. 14A RS .1,15,35,418/- AND BOOK PROFIT WAS ASSESSED AT RS.1,41,20,467/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE SAME BY HOLDI NG AS UNDER: 4.12 IN VIEW OF THE DECISIONS AS FOREGOING, THE SU BMISSION OF THE APPELLANT AS REGARDS ADDITIONS OF THE DISALLOWANCE UNDER SECTION 14A RUL E WITH RULE 8D BECOMES INFRUCTUOUS AND IS OF ACADEMIC INTEREST. HOWEVER SINCE THE ISSUE HA VE BEEN RAISED, THE MATTERS REQUIRES ADJUDICATION. THE A.O IN THE ASSESSMENT ORDER HAD MADE ADJUSTMENT OF THE AMOUNT DISALLOWED UNDER SECTION 14A READ WITH RULE 8D AS PER CLAUSE (F) OF SECTION 115JB. THE LEARNED A/R IN HIS SUBMISSION HAD SUBMITTED THAT THIS ADDITION WAS ARB ITRARY AND AGAINST THE SPIRIT OF THE SECTION. AS PER HIS SUBMISSION- ' THERE IS NO ENABLING PROVISION IN EXPLANATION 1 T O SECTION 115JB FOR MAKING ANY ADJUSTMENT IN RESPECT OF EXPENDITURE DISALLOWED AS PER RULE 8D. IT IS SUBMITTED THAT 3 ITA NO. 2227/KOL/2017 MANISH COMPANY PVT. LTD., AY 2013-14 SECTION 115JB IS A DEEMING PROVISION AND CLAUSE (F) OF THE SAID SECTION REQUIRES ADJUSTMENT OF 'EXPENDITURE RELATABLE TO EXEMPT INCO ME'. THE AFORESAID EXPRESSION IS SIMILAR TO THE EXPRESSION USED IN SECTION 14A(L) OF THE I.T. ACT. BEING A DEEMING PROVISION, SECTION 115JB HAS TO BE STRICTLY CONSTRU ED. ACCORDINGLY, ONLY THE PROVISIONS OF SECTION 14A(1) CAN BE IMPORTED INTO CLAUSE (F) O F SECTION 115JB. THE SCOPE OF CLAUSE (F) CANNOT BE ENLARGED IN ORDER TO BRING WIT HIN ITS AMBIT THE PROVISIONS OF SUB- SECTION 2 & 3 OF SECTION 14A OF THE I. T. ACT.' 4.13 I HAVE CONSIDERED THE LEARNED A/R SUBMISSION AND RELEVANT JUDICIAL PRONOUNCEMENTS ON THE ISSUE. THE JURISDICTIONAL KOLKATA BENCH OF INCOME-TAX APPELLATE TRIBUNAL, IN THE CASE OF PRETORIA ENCLAVE LTD. VS. DCIT (ITA NO. 108 /OL/2012), HELD THAT DISALLOWANCE OF EXPENDITURE MADE U/S. 14A READ WITH RULE 8D WHILE C OMPUTING INCOME UNDER NORMAL PROVISIONS, COULD NOT BE ADDED BACK WHILE COMPUTING BOOK PROFIT U/S. 115JB. IN THE FOREGOING DECISION THE ITAT, KOLKATA HELD THAT PROV ISIONS OF SUB-SEC. (2) & (3) OF SEC. 14A CANNOT BE IMPORTED INTO CLAUSE (F) OF THE EXPLANATI ON TO SEC. 115JA OF THE ACT AND THEREFORE THE DISALLOWANCE AS PER RULE 8D CANNOT BE MADE IN C OMPUTING BOOK PROFIT U/S. 115JA OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE JU RISDICTIONAL ITAT, THE POINT OF VIEW OF THE APPELLANT IS CONCEDED. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT WHILE COMPUTING THE INCOME UNDER THE NORMAL PROVISION OF ACT, SEC. 14A DISALLOWANCE IS NOT ATTRACTED AS HELD BY US (SU PRA), SINCE THE ASSESSEE DID NOT EARN ANY EXEMPT INCOME. ACCORDING TO US, CLAUSE (F) OF EXPL ANATION 1 TO SEC. 115JB OF THE ACT IS NOT APPLICABLE BECAUSE CLAUSE (F) OF EXPLANATION 1 TO SEC. 115JB OF THE ACT RELATES TO ADDITION OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SEC . 10 (OTHER THAN SEC. 10(38) APPLY). HERE IN THIS CASE, THERE IS NO INCOME EXEMPT U/S. 10 [AD MITTEDLY IN THIS CASE INCOME IS NOT AS PER SEC. 10(38)], THEREFORE, THE QUESTION OF ADDING BAC K EXPENDITURE IN RELATION TO SUCH NON- EXISTING EXEMPT INCOME DOES NOT ARISE AND, THEREFOR E, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE LD. CIT(A) WHICH IS SO CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16/11/201 8 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16TH NOVEMBER, 2018 JD.(SR.P.S.) 4 ITA NO. 2227/KOL/2017 MANISH COMPANY PVT. LTD., AY 2013-14 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ITO, WARD-15(1), KOLKATA. 2 RESPONDENT M/S. MANISH COMPANY PVT. LTD., 130, CO TTON STREET, KOLKATA-700 007. 3 4 5 CIT(A)-5, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY