D.C.I.T., Circle-4(2), Kolkata, Kolkata V. M/s MKJ Enterprises Ltd., Kolkata

ITA 2268/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1816 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI CIT LD
• Assessee Lawyers: RAVI TULSIYAN ACA LD
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 I.T.A NO 2268/KOL/2017 M/S. MKJ ENTERPRISES LTD IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOLKATA BEFORE: SHRI P. M. JAGTAP , ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO. 2268 /KOL/201 7 A.Y: 20 11 - 12 DEPUTY COMMISSIONER VS. M/S. MKJ ENTERPRISES LTD INCOME - TAX, CIR - 4(2) PAN:AABCM 7727L KOLKATA [APPELLANT] [RESPONDENT] FOR THE APPELLANT : SHRI P.K. SRIHARI, CIT, LD.DR FOR THE RESPONDENT : SH RI RAVI TULSIYAN, ACA, LD.AR DATE OF H EARING : 28 - 08 - 2018 DATE OF PRONOUNCEMENT : 22 - 1 1 - 201 8 ORDER SHRI S.S. VISWANETHRA RAVI , JM: TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DT. 28 - 08 - 2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS), 2 , KOLKATA FOR THE A.Y 20 11 - 12 . 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO U/S. 14A OF THE ACT IN CONTRAVENTION OF CIRCULAR NO. 05 OF 2014 ISSUED BY THE CBDT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LD. DR PLACED HIS RELIANCE IN THE CASE OF LALLY MOTORS INDIA (P) LTD REPORTED IN (2018) 93 TAXMAN.COM 39 (AMRITSAR - TRIB) AND ARGUED THAT THE DISALLOWANCE U/S. 14A OF THE COULD EVEN BE MADE WHEN THERE IS NO EXEMPT INCOME . 4. THE LD. AR SUBMITS THAT THE ASSESSE ON ITS OWN DISALLOWED A SUM OF RS.27,70,943/ - FOR THE PURPOSE OF SECTION 14A R.W.RULE 8D2(I) & (III) . NO INVESTMENT WAS MADE IN THE SHARES OF MUKUND ENGINEERS LTD DURING THE YEAR AND PART OF INTEREST COULD BE DISALLOWED UNDER RULE 8D(2)(II) OF THE IT RULES. THE AO COMPUTED 2 I.T.A NO 2268/KOL/2017 M/S. MKJ ENTERPRISES LTD THE DISALLOWANCE UNDER RULE 8D(2)(II) TAKING INTO ACCOUNT THE ENTIRE INTEREST EXPENDITURE. THE ASSESSE EARNED INTEREST OF RS.39,38,15 , 8 00 / - ON THE LOANS ADVANCES AND NET INTEREST EXPENDITURE FOR THE YEAR UNDER CONSIDERATION IS RS.19 , 94 , 78 , 874/ - . N ET OF INTEREST EXPENDITURE IS TO BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U /S. 14A IF N ETTING OFF INTEREST EARNED AGAINST INTEREST EXPENDITURE AND NO FURTHER INTEREST EXPENSE REMAINS AND NO DISALLOWANCE CAN BE MADE U/S. 14A O F THE ACT. THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A) AND PLEADED THE ORDER OF HONBLE AMRITSAR TRIBUNAL IN THE CASE OF LALLY MOTORS INDIA P.LTD SUPRA IS NOT APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE AND PLACED RELIANCE IN THE CA SE OF REI AGRO OF HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA. 5. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOTED FROM THE RECORD THAT THE ASSESSE E RECEIVED DIVIDEND INCOME OF RS.15000/ - FROM M/S. MUKUND ENGINEERS LTD. ACCORDING T O ASSESSE E , IT IS EXEMPT FROM TAX AND NO EXPENSES WERE INCURRED IN EARNING SAID EXEMPT INCOME EXCEPT INCURRING OF D - MAT CHARGES EXPENSES OF RS.2 , 232 / - , BUT, C ONSIDERING THE AVERAGE VALUE OF INVESTMENTS DISALLOWED ON ITS OWN RS.27 , 68 , 711 @ 0.5%. THAT NO INTEREST BEARING FUNDS WERE UTILIZED FOR EARNING SAID DIVIDEND INCOME. THEREFORE, IT IS CLEAR ACCORDING TO ASSESSE E THERE WAS NO AMOUNT OF EXPENDITURE BY WAY OF INTEREST INCURRED IN EARNING SAID DIVIDEND INCOME AND CONTENDED THAT NO DISALLOWANCE UNDER RULE 8D2 (II) IS MAINTAINABLE. THE CIT - A FOUND SATISFIED WITH REGARD AND BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF REI AGRO LTD, WHEREIN IT HELD THAT ONLY INVESTMENTS YIELDED EXEMPTED IS TO BE CONSIDERED FOR DISALLOWAN CE U/SEC. 14A OF THE ACT . IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY WITH ORDER OF CIT - A AND IT IS JUSTIFIED. GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 3 I.T.A NO 2268/KOL/2017 M/S. MKJ ENTERPRISES LTD 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 - 11 - 2018 SD/ - SD/ - P.M. JAGTAP S.S.VISWANETHRA RAVI ACCOUNT ANT MEMBER JUDICIAL MEMBER DATED 22 - 11 - 2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APP ELLANT / REVENUE : THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(2), 4 TH FLOOR, ROOM NO. 11B , AAYKAR BHAWAN,P - 7 CHOWRINGHEE SQUARE, KOLKATA - 69. 2 RESPONDENT / ASSESSEE: M/S. MKJ ENTERPRISE LTD SAGAR ESTATE, UNIT - 1, 3 RD FL., 2 CLIVE GHAT ST., KOLKATA - 1. 3. CIT, 4. CIT(A), KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA **PP/SPS TRUE C OPY BY ORDER ASSISTANT REGISTRAR ITAT KOLKATA