M/s. Rajma Holdings Pvt. Ltd., , Kolkata V. DCIT, Circle - 4, Kolkata , Kolkata

ITA 2279/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1096 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: S M SURANA
• Keywords: Earning of tax free income; Speculation loss
• Section: 143(3); 14A

Judgement Text

ITA NO. 2279/KOL/2017 A.Y. 2011-2012 M/S. RAJMA HOLDINGS PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2279/KOL/2017 ASSESSMENT YEAR: 2011-2012 M/S. RAJMA HOLDINGS PVT. LIMITED,.................. ....................APPELLANT 21E, B.R.B. BASU ROAD, 3 RD FLOOR, KOLKATA-700 001 [PAN: AABCR 2536 G] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ................RESPONDENT CIRCLE-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI S.M SURANA, ADVOCATE, FOR THE APPELLANT SHRI C.J. SINGH, SR. D.R. , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : NOVEMBER 22, 2018 DATE OF PRONOUNCING THE ORDER : NOVEMBER 30, 2018 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA DAT ED 04.10.2017. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL IS GENERAL IN NATURE, WHICH DOES NOT CALL FOR ANY SPECIFIC ADJUDI CATION. 3. THE COMMON ISSUE INVOLVED IN GROUNDS NO 2 & 3 RE LATES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF ASSESSEES CLAIM FOR LOS S IN SHARE TRADING ITA NO. 2279/KOL/2017 A.Y. 2011-2012 M/S. RAJMA HOLDINGS PVT. LIMITED 2 AMOUNTING TO RS.57,22,133/- BY TREATING THE SAME AS SPECULATION LOSS BY APPLYING EXPLANATION TO SECTION 73. 4. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKIN G FINANCE COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CO NSIDERATION WAS FILED BY IT ON 21.09.2011 DECLARING A LOSS OF RS.98,20,85 1/-. THE ASSESSEE- COMPANY WAS ENGAGED IN TRADING IN SHARES AND SECURI TIES AND A LOSS OF RS.57,22,133/- INCURRED IN THE SAID ACTIVITY WAS CL AIMED BY IT AS A BUSINESS LOSS. IN THE ASSESSMENT COMPLETED UNDER SE CTION 143(3) VIDE AN ORDER DATED 23.01.2014, THE ASSESSING OFFICER INVOK ED EXPLANATION TO SECTION 73 AND TREATED THE SAME AS SPECULATION LOSS . ON APPEAL, THE LD. CIT(APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFI CER ON THIS ISSUE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS RELIED, INTER ALIA, ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MIDDLETON INVESTMENT & TRADING CO. LIMITED (ITA NO. 196 OF 1999 DATED 15.01.2014) TO CONTEND THAT THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION EARNED FROM LONG-TERM CAPITAL G AIN, DIVIDEND, ETC. BEING MORE THAN THE LOSS COMPUTED IN THE SHARE TRAD ING, THE EXPLANATION TO SECTION 73 IS NOT APPLICABLE. HE HAS ALSO PREPAR ED AND FURNISHED A WORKING TO SUPPORT AND SUBSTANTIATE THE CASE OF THE ASSESSEE ON THIS ISSUE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO VERIFY THE SAID WORKING AND ALLOW THE CLAIM OF THE ASSESSEE FOR LOS S IN SHARE TRADING AS NORMAL BUSINESS LOSS BY FOLLOWING THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MIDDLETON INVESTMENT & TRADING CO. LIMITED (SUPRA). GROUNDS NO. 2 & 3 OF THE ASSES SEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED. 5. THE COMMON ISSUE INVOLVED IN GROUNDS NO. 4 TO 6 RELATES TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE ACT READ WITH RULE 8D AND SUSTAINED BY THE LD. CIT(APPE ALS). ITA NO. 2279/KOL/2017 A.Y. 2011-2012 M/S. RAJMA HOLDINGS PVT. LIMITED 3 6. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E-COMPANY HAD EARNED TAX-FREE INCOME IN THE FORM OF DIVIDEND, TAX FREE INTEREST ON BONDS, INTEREST ON LOANS AND LONG-TERM CAPITAL GAIN S. THE EXPENSES INCURRED IN RELATION TO THE EARNING OF THE SAID EXE MPT INCOME CLAIMED TO BE RS.2,84,341/- WERE DISALLOWED BY THE ASSESSEE SUO MOTU UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER APPLIED RULE 8D TO WORK OUT SUCH EXPENSES AT RS.9,30,198/- AND ENHANCED THE DISALLOW ANCE UNDER SECTION 14A TO THAT EXTENT. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A BY APPLYING RULE 8D(2)(I) AND (II) ON ACCOUNT OF DIREC T EXPENSES AND INTEREST. AS REGARDS THE BALANCE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY APPLYING RULE 8D(2)(III), HE DIRECTED TH E ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE BY TAKING INTO CONSIDER ATION ONLY THE INVESTMENT, WHICH ACTUALLY YIELDED DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. IT IS OBSERVED THAT THE DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE EARNING OF EXEMPT INCOME WAS OFFERED BY THE ASSESSE E SUO MOTU UNDER SECTION 14A TO THE EXTENT OF RS.2,84,341/-. THE ASS ESSING OFFICER, HOWEVER, WORKED OUT SUCH EXPENSES BY APPLYING RULE 8D AT RS.9,30,198/- AND MADE A DISALLOWANCE TO THAT EXTENT. AS SUBMITTE D BY THE LD. COUNSEL FOR THE ASSESSEE, NO DISSATISFACTION WHATSOEVER WAS RECORDED BY THE ASSESSING OFFICER AS REGARDS THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXPENSES DISALLOWED UNDER SECTION 14A HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE AND THIS POSITION CLEA RLY EVIDENT FROM THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER IS N OT DISPUTED EVEN BY THE LD. D.R. AS STIPULATED IN SUB-SECTION (2) OF SE CTION 14A, THE ASSESSING OFFICER HAS TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO THE EXEMPT INCOME BY APPLYING RULE 8D ONLY IF HE HAVING REGARD TO THE ITA NO. 2279/KOL/2017 A.Y. 2011-2012 M/S. RAJMA HOLDINGS PVT. LIMITED 4 ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH TH E CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E. THE CONDITION STIPULATED IN SECTION 14A(2) FOR APPLYING RULE 8D T HUS WAS NOT SATISFIED IN THE PRESENT CASE AND THIS BEING THE POSITION, WE HOLD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUST AINED BY THE LD. CIT(APPEALS) UNDER SECTION 14A BY APPLYING RULE 8D IS NOT MAINTAINABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELE TE THE SAME AND ALLOW GROUNDS NO. 4 TO 6 OF THE ASSESSESSS APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 30, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 30 TH DAY OF NOVEMBER, 2018 COPIES TO : (1) M/S. RAJMA HOLDINGS PVT. LIMITED, 21E, B.R.B. BASU ROAD, 3 RD FLOOR, KOLKATA-700 001 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKA TA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.