DCIT, Circle - 6 Kolkata, Kolkata V. M/s. All Bank Finance Ltd., Kolkata

ITA 234/KOL/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70412 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2011
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: B K GHOSH; P DEY
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ''# ''# ''# ''#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 234/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. ALL BA NK FINANCE LTD. CIRCLE-6, KOLKATA. (PAN: AACCA4014D) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING : 19.11.2013 DATE OF PRONOUNCEMENT: 21.11.2013 FOR THE APPELLANT: SHRI SAURABH KUMAR, SR. DR FOR THE RESPONDENT: S/SHRI B. K. GHOSH & P. DEY $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VI, KOLKATA IN APPEAL NO. 850/CIT(A)-VI/CIR-6/KOL/2009-10 DATED 29.11.2010. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6, KOLKATA U/S. 143(3) AND 115WE(3) OF THE I NCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE H IS ORDER DATED 24.12.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES. FOR THIS, R EVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-VI, KOLKATA HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.15,58,565/-. 3. BRIEFLY STATED FACTS ARE THAT THE AO HAS SIMPLY MADE DISALLOWANCE ON ACCOUNT OF PRIOR PERIOD EXPENSES ON THE BASIS OF ASSESSEES MAINTAIN ING BOOKS OF ACCOUNT ON MERCANTILE SYSTEM OF ACCOUNTING AND HE DISALLOWED AS UNDER: PRIOR PERIOD EXPENSE : THE ASSESSEE DEBITED PRIOR PERIOD EXPENSES OF RS.15,58,565/- AND IT IS DISALLOWED AS THE ASSESSEE MAINTAINS BOOKS OF ACCOUNTS IN MERCANTILE SYSTEM. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE HOLDING THAT THE ASSESSEE HAS ADOPTED NORMAL ACCOUNTING PRACTICE AND FURTHER EVEN IF THIS AMOUNT WAS CONSID ERED IN EARLIER YEAR I.E. FY 2005-06 RELEVANT TO AY 2006-07 AND IN THIS YEAR THIS AMOUNT WAS WRON GLY CREDITED AND HAS BECOME 2 ITA NO. 234/K/2011 ALL BANK FNANCE LTD., AY: 2007-08 IRRECOVERABLE AND, THEREFORE, THIS CAN ALSO BE TRE ATED AS BAD DEBT U/S. 36(1)(VI) OF THE ACT. HENCE, CIT(A) DELETED THE DISALLOWANCE. AGGRIEVED, NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS ARE THAT DURING FY 2005-06 RELEVANT TO AY 2006-07 ASSESSEE CREDITED INTEREST ON FIXED DEPOSIT TO ITS P & L ACCOUNT BY THE EXCESS AM OUNT OF RS.16,60,297/- AND THE SAME WAS OFFERED FOR TAXATION IN AY 2006-07. OUT OF THIS AM OUNT OF RS.16,60,297/- ASSESSEE OMITTED TO RECORD INTEREST ON FIXED DEPOSIT AMOUNTING TO RS.1, 01,372/- DURING FY 2005-06 RELEVANT TO AY 2006-07. ACCORDINGLY, NET AMOUNT OF RS.15,58,565/- WAS DEBITED TO THE P & L ACCOUNT FOR FY 2006-07 RELEVANT TO AY 2007-08 I.E. THE RELEVANT AS SESSMENT YEAR UNDER CONSIDERATION, UNDER THE HEAD PRIOR PERIOD ITEMS. THE ASSESSEES COUNSEL BEFORE US NOW CONCEDED THAT THERE IS NO DISPUTE THAT THE SUM OF RS.1,01,372/- HAS BEEN OMIT TED TO BE ACCOUNTED FOR IN THE FY 2005-06 RELEVANT TO AY 2006-07 SHOULD BE BROUGHT TO TAX. H E EXPLAINED THAT IN RESPECT OF INTEREST ON FIXED DEPOSIT CREDITED TO P&L ACCOUNT IN EXCESS AND OFFERED TO TAX IN EXCESS WAS ALREADY CHARGED TO TAX IN AY 2006-07 AND, THEREFORE, THE AM OUNT TO THE EXTENT OF RS.15,58,565/- DEBITED TO P&L ACCOUNT UNDER THE HEAD PRIOR PERIOD ITEMS SH OULD NOT BE DISALLOWED IN THE AY 2007- 08. WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED TH E ADDITION OF RS.50,58,565/-, IF THE ABOVE FACTS NARRATED BY ASSESSEES COUNSEL IS CORRECT, W HICH IS ON THE BASIS OF NORMAL ACCOUNTING STANDARDS ADOPTED BY ASSESSEE. BEFORE US, LD. COUNS EL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DETAILS OF EXCESS OF INTEREST ON FIXED DEPOSIT BOO KED AND TAXED IN AY 2006-07, WHICH IS ENCLOSED AT ASSESSEES PAPER BOOK PAGE 9, CLEARLY R EVEALED FACTS AND FIGURE IN THE RECONCILIATION STATEMENT. THIS RECONCILIATION STATEMENT WAS FILED BEFORE CIT(A) ALSO. AS, FROM THE APPARENT FACTS, IT IS CLEAR THAT THE AO SHOULD NOT HAVE MADE THE ADDITION OF THIS AMOUNT, HOWEVER, THIS RECONCILIATION WAS NEVER FILED BEFORE AO, HENCE, FO R THE SAKE OF VERIFICATION, WE SET ASIDE THIS ISSUE TO THE FILE OF AO AND THE AO WILL VERIFY THES E FACTS FROM RECORDS. IN CASE, THE AMOUNT HAS ALREADY BEEN DECLARED IN AY 2005-06 TO THE EXTENT O F RS.15,58,565/- THE DOUBLE ADDITION SHOULD NOT BE MADE. IN TERM OF THE ABOVE, THIS ISSUE IS R EMITTED BACK TO THE FILE OF AO. REVENUES ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS S RE GARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO U/S. 14A OF THE ACT. FOR T HIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A)-VI, KOLKATA HAS ERRED IN LAW IN DELETING THE DISALLOWANCE U/S. 14A OF RS.3,28,180/-. 6. BRIEFLY STATED FACTS ARE THAT THE AO IN HIS ASSE SSMENT ORDER MENTIONED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME AT RS.27,23,390/- AND LO NG TERM CAPITAL GAIN AT RS.39,29,030/- 3 ITA NO. 234/K/2011 ALL BANK FNANCE LTD., AY: 2007-08 WHICH IS CLAIMED AS EXEMPT INCOME. IN VIEW OF THE ABOVE, THE AO WANTED TO DISALLOW THE EXPENSES RELATING TO THIS INCOME BY INVOKING THE PR OVISIONS OF SECTION 14A READ WITH RULE 8D OF I. T. RULES, 1962. THE AO DISALLOWED THE SAME B Y RECORDING AS UNDER: DISALLOWANCE U/S. 14A: THE ASSESSEE DID NOT CLAIM DIVIDEND INCOME OF RS.27,23,390/- & LTCG AS EXEMPT INCOME RS.39,29,030 /-. BUT NO EXPENDITURE IS DISALLOWED U/S. 14A. THEREFORE RATIO OF ITO VS DAG A CAPITAL MARKET PVT. LTD. (2009) 312 ITR 1 (SB), MUMBAI IS APPLIED HERE TO DI SALLOW EXPENSES U/S. 14A OF I. TAX ACT, 1961 READ WITH RULE 8D. AS PER POINT NO. 3 OF RULE 8D OF INCOME TAX RULE, 1962 AN AMOUNT OF RS.3,28,180/- IS DISALLOWED AS EXPENSES RELATED TO EXEMPTED INCOME AND IS ADDED BACK TO THE INCOME U/S . 14A. 7. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A ), WHO AFTER CONSIDERING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.) NOTED THAT RULE 8D IS APPLICABLE W.E.F. AY 2008-09 ONWARDS AND NOT TO THE PRESENT AY 2007-08. HOWEVER, CIT(A) WAS OF THE VIEW THAT THE JURISDICTIONAL TRIBUNAL IS CONSISTENTLY TAKING A VIEW THAT 1% OF THE EXEMPT I NCOME BE TREATED AS ADMINISTRATIVE EXPENDITURE RELATED TO EXEMPT INCOME AND HENCE, HE RESTRICTED THE DISALLOWANCE AT 1% OF EXEMPT INCOME AND DELETED THE REST OF THE DISALLOWA NCE. AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE THIS TRIBUNAL. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) HAS RESTRICTED THE DISALLOW ANCE AT 1% OF THE EXEMPT INCOME AND NOW BEFORE US THE LD. SR. DR FAIRLY CONCEDED THAT THE T RIBUNAL IS CONSISTENTLY TAKING THIS VIEW. SINCE THE ISSUE IS SQUARELY COVERED, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 10. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013. SD/- SD/- . . . . ''# ''# ''# ''# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21ST NOVEMBER, 2013 12 '3' 4 JD.(SR.P.S.) 4 ITA NO. 234/K/2011 ALL BANK FNANCE LTD., AY: 2007-08 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-6, KOLKATA 2 ./,- / RESPONDENT M/S. ALL BANK FINANCE LTD., 15, MAHA RANA PRATAP SARANI, KOLKATA-700 001. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA. <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .