ACIT, Central Circle - 3(3), Kolkata, Kolkata V. M/s. Cygnus Investment & Finance P. Ltd., Kolkata

ITA 2286/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1587 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NO. 2286/KOL/2017 ASSESSMENT YEAR: 2012-13 A.C.I.T, CIR 3(3) KOLKATA.....................................................................................APPELLANT AAYAKAR BHAWAN POORVA, E.M. BY PASS, 4 TH FLOOR, 110, SHANTIPALLY, KOLKATA 700107 M/S. CYGNUS INVESTMENT & FINANCE PVT. LTD. ..RESPONDENT CYGNUS HOUSE, 51, PANCHANNA GRAM, KOLKATA 700 039 [PAN : AAACN 8468 L] C.O. NO. 3/KOL/2018 (ARISING OUT OF ITA NO. 2286/KOL/2017) ASSESSMENT YEAR: 2012-13 M/S. CYGNUS INVESTMENT & FINANCE PVT. LTD. ..CROSS-OBJECTOR CYGNUS HOUSE, 51, PANCHANNA GRAM, KOLKATA 700 039 [PAN : AAACN 8468 L] A.C.I.T, CIR 3(3) KOLKATA.......................................................................................APPELLANT AAYAKAR BHAWAN POORVA, E.M. BY PASS, 4 TH FLOOR, 110, SHANTIPALLY, KOLKATA 700107 APPEARANCES BY: SHRI SANJOY MUKHERJEE, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE SHRI SUNIL SURANA, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 29, 2018 DATE OF PRONOUNCING THE ORDER : JANUARY 31, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT (A) 16, KOLKATA DATED 07.09.2017 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CROSS-OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 3/KOL/2018. 2 I.T.A. NO. 2286/KOL/2017 & C.O. NO. 3/KOL/2018 CYGNUS INVESTMENT & FINANCE PVT. LTD. 2. THE SOLITARY COMMON ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE AND THE CROSS-OBJECTION OF THE ASSESSEE RELATES TO THE DISALLOWANCE UNDER SECTION 14A R/W RULE 8D AND THE SAME IS RAISED BY WAY OF THE FOLLOWING GROUNDS: GROUNDS RAISED IN THE REVENUES APPEAL 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW TO HOLD THAT DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WILL NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR BY IGNORING THE PROVISION OF RULE 8D THAT PROVIDES FOR COMPUTATION OF EXPENDITURE IN RESPECT OF NOT ONLY THOSE INVESTMENTS, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME BUT ALSO THOSE INVESTMENTS, INCOME FROM WHICH SHALL NOT FORM PART OF TOTAL INCOME. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN DECIDING THAT DISALLOWANCE U/S 14A READ WITH RULE 8D CANNOT BE MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE WITHOUT CONSIDERING THE CBDTS CIRCULAR NO. 5/2014 DATED 11.02.2014. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE ISSUE IN DISPUTE IS IN THE LINE WITH THE DECISION OF THE ITAT KOLKATA BENCHES IN THE CASE OF REI AGRO LTD. VS CIT IN ITA NO. 1331/KOL/2011 ORDER DATED 19.06.2013 WHICH HAS BEEN SUBSEQUENTLY APPROVED BY THE HONBLE DELHI HIGH COURT, CALCUTTA WHEREIN SUCH ISSUES WERE NOT EVEN CONSIDERED AND ADJUDICATED BY THE HONBLE HIGH COURT IN ITS ORDER DATED APRIL 09, 2014. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 38,50,262/- U/S 14A READ WITH RULE 8D BY INTERPRETING THESE PROVISIONS. 5. THAT THE REVENUE RESERVES THEIR RIGHTS TO SUBSTANTIATE, MODIFY, DELETE, SUPPLEMENT AND / OR ALTER THE GROUNDS AT THE TIME OF HEARING. GROUNDS RAISED IN ASSESSEES CROSS-OBJECTION 1. FOR THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE U/S 14A WHEN NO SATISFACTION AS REQUIRED UNDER THE LAW WAS RECORDED THAT 3 I.T.A. NO. 2286/KOL/2017 & C.O. NO. 3/KOL/2018 CYGNUS INVESTMENT & FINANCE PVT. LTD. ANY EXPENSES HAVE BEEN INCURRED SO AS TO ATTRACT THE PROVISIONS OF SECTION 14A. 2. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION. 3. THE ASSESSEE IN THE PRESENT CASES IS AN INVESTMENT AND FINANCE COMPANY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 25.09.2012 DECLARING A TOTAL INCOME OF RS. 8,53,920/-. AS NOTED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAD MADE INVESTMENT OF RS. 17.37 CRORES IN SHARES. ACCORDING TO THE A.O., SINCE THE DIVIDEND INCOME FROM THE SAID INVESTMENT IN SHARES WAS EXEMPT FROM TAX, THE EXPENDITURE INCURRED IN RELATION THERETO WAS LIABLE TO BE DISALLOWED IN ACCORDANCE WITH SECTION 14A OF THE ACT. HE ACCORDINGLY WORKED OUT SUCH EXPENDITURE BY APPLYING RULE 8D AT RS. 38,50,262/- AND MADE A DISALLOWANCE TO THAT EXTENT UNDER SECTION 14A IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 28.03.2015. 4. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) AND KEEPING IN VIEW THE FACT THAT THE ASSESSEE COMPANY HAD NOT EARNED ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A OF THE ACT. FOR THIS CONCLUSION, THE LD. CIT(A) DERIVED SUPPORT FROM THE DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. VS CIT IN ITA NO. 1331/KOL/2011. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL WHILE THE ASSESSEE COMPANY HAS ALSO FILED ITS CROSS-OBJECTION. 4 I.T.A. NO. 2286/KOL/2017 & C.O. NO. 3/KOL/2018 CYGNUS INVESTMENT & FINANCE PVT. LTD. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ISSUE INVOLVED IN THE PRESENT CASE RELATING TO THE DISALLOWANCE UNDER SECTION 14A IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT 378 ITR 33 WHEREIN IT WAS HELD THAT THE ASSESSEE HAVING NOT EARNED ANY EXEMPT INCOME IN THE RELEVANT YEAR, NO DISALLOWANCE COULD BE MADE UNDER SECTION 14A OF THE ACT. RESPECTFULLY FOLLOWING THE SAID DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A AND DISMISS GROUND NO 1 OF THE REVENUES APPEAL. 6. AS A RESULT OF OUR DECISION RENDERED ON GROUND NO 1 OF THE REVENUES APPEAL CONFIRMING THE ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A.O. UNDER SECTION 14A, OTHER GROUNDS RAISED IN THE REVENUES APPEAL AS WELL AS THE SOLITARY GROUND RAISED IN THE ASSESSEES CROSS-OBJECTION HAVE BECOME INFRUCTUOUS. THE SAME ARE ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS- OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 31/01/2018 BISWAJIT, SR. PS 5 I.T.A. NO. 2286/KOL/2017 & C.O. NO. 3/KOL/2018 CYGNUS INVESTMENT & FINANCE PVT. LTD. COPY OF ORDER FORWARDED TO: 1. M/S. CYGNUS INVESTMENT & FINANCE LTD., CYGNUS HOUSE, 51, PANCHANNA GRAM, KOLKATA 700 039. 2. ACIT, CIRCLE 3(3), AAYAKAR BHAWAN POORVA, E.M. BY PASS, 110, SHANTIPALLY, 4 TH FLOOR, KOLKATA 700 107. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA