DCIT, Circle - 3(1), , Kolkata V. M/s. The Peerless General Finance & Investment Company Limited, Kolkata

ITA 2519/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0464 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-03-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 03-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAM BILASH MEENA SH
• Keywords: Rule of consistency; Earning of tax free income; Tax effect; TDS; Rule 8D; Set aside
• Section: 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA [BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI ABY T. VARKEY, JUDICIAL MEMBER] I.T.A. NO. 2519/KOL/2018 ASSESSMENT YEAR: 2012-13 DCIT, CIRCLE-3(1), KOLKATA.. APPELLANT VS. M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD................................ RESPONDENT [PAN: AABCT 3043 L] C.O. NO. 2/KOL/2019 ALONG WITH I.T.A. NO. 2519/KOL/2018 ASSESSMENT YEAR: 2012-13 M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD.....................................APPELLANT [PAN: AABCT 3043 L] VS. DCIT, CIRCLE-3(1), KOLKATA...RESPONDENT APPEARANCES BY: SH. RAM BILASH MEENA, CIT(DR), APPEARED ON BEHALF OF THE REVENUE. SH. S.K. TULSIYAN, ADV. & PUJA SOMANI, C.A., APPEARED ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : MARCH 5 TH , 2020 DATE OF PRONOUNCING THE ORDER : JUNE 18 TH , 2020 ORDER PER J. SUDHAKAR REDDY, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-19, KOLKATA [CIT(A) FOR SHORT] DATED 07.08.2018 U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) FOR AY 2012-13. 2. THE CROSS OBJECTION IS FILED BY THE ASSESSEE. 3. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD AND CASE LAWS CITED, WE HOLD AS FOLLOWS. 2 I.T.A. NO. 2519/KOL/2018 C.O. NO. 2/KOL/2019 ASSESSMENT YEAR: 2012-13 M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. 4. WE FIRST TAKE UP THE REVENUE APPEAL. GROUND NUMBER 1, 2 AND 3 PERTAIN TO THE ISSUE OF QUANTIFICATION OF DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D OF I.T. RULE. 5. THE LD. CIT(A) AT PAGE 9 PARA 5 OF HIS ORDER HAS DISCUSSED THE ISSUE. REGARDING DISALLOWANCE UNDER RULE 8D(2)(I) OF THE I.T. RULE R.W.S. 14A OF THE ACT, THE LD. CIT(A) RESTRICTED THE SAME TO 50% OF RS. 49,923/- DISALLOWED BY THE AO ON THE GROUND THAT EXPENDITURE ON MAINTENANCE OF DEMAT ACCOUNT IS NECESSARY FOR HOLDING SHARES AND OTHER SECURITIES AND IS ALLOWABLE AS AN EXPENSE. WE FIND NO INFIRMITY IN THE SAME. THUS, WE DISMISS GROUND NUMBER 1 OF THE REVENUE. 6. ON DISALLOWANCE UNDER RULE 8D(2)(II), THE LD. CIT(A) APPLIED THE PROPOSITION OF LAW LAID DOWN FOR THE AY 2008-09 AND AY 2009-10 ON THE SAME ISSUE BY ITAT AND DELETED THE DISALLOWANCE. THE GROUND FOR DELETION WAS THAT, THE ASSESSEE HAD INTEREST FREE OWN FUNDS, WHICH WAS UTILISED FOR INVESTMENT IN SHARES AND MUTUAL FUNDS. IT WAS SUBMITTED THAT AS ON 31.03.2012 THE ASSESSEE HAD INTEREST FREE OWN FUNDS AMOUNTING TO RS. 1410.37 CRORES AS AGAINST AVERAGE INVESTMENT OF ABOUT RS. 113.99 CRORES ONLY IN SHARES AND MUTUAL FUNDS WHICH GENERATED EXEMPT INCOME. THE DECISION OF THE LD. CIT(A) IS IN LINE WITH THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BANK LTD. REPORTED IN [2014] 366 ITR 505 (BOMBAY). 7. AS THE DELETION OF THE DISALLOWANCE WAS CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEE'S OWN CASE, ON SIMILAR FACTS FOR THE EARLIER ASSESSMENT YEAR, WE SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). WE UPHOLD THE SAME AND DISMISS THIS GROUND OF REVENUE. 8. UNDER RULE 8D(2)(III), THE LD. CIT(A) DIRECTED THE AO TO RE-COMPUTE THE DISALLOWANCE BY TAKING INTO CONSIDERATION ONLY THOSE SHARES AND MUTUAL FUNDS WHICH HAVE YIELDED INCOME FROM DIVIDENDS. THIS DECISION IS IN LINE WITH THE PROPOSITIONS OF LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. REI AGRO LIMITED ( ITAT NO. 220 OF 2013 DATED 09.04.2014 ) AND THE JUDGEMENT OF THE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF CHEMINVEST LIMITED VS. ITO IN 121 ITD 318 . THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 9. GROUND NO. 4 IS AGAINST THE DELETION OF DISALLOWANCE MADE U/S 40(A)(IA). 3 I.T.A. NO. 2519/KOL/2018 C.O. NO. 2/KOL/2019 ASSESSMENT YEAR: 2012-13 M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. 10. THE LD. CIT(A) DELETED THE DISALLOWANCE BY HOLDING THAT, THE ASSESSEE HAD NO LEGAL OBJECTION TO DEDUCT TAX AT SOURCE, FOR THE REASON THAT, THE AMOUNT PAID WAS ONLY FOR REIMBURSEMENT OF EXPENSES AND NOT PAYMENT OF PROFESSIONAL FEES. THESE PAYMENTS ARE TO M/S. MERIDIAN ADVERTISING PRIVATE LIMITED OF RS. 4,92,656/- AND TO M/S. MUKUND M. CHITALE & CO. OF RS. 94,061/- AND TO M/S. N. KEJRIWAL & CO. OF RS. 1,16,128/-. 11. THE LD. DR COULD NOT CONTROVERT THE FACTUAL FINDING OF THE LD. CIT(A). HENCE, THIS FINDING OF THE LD. CIT(A) IS UPHELD. 12. REGARDING THE AMOUNT PAID ON ACCOUNT OF RENT TO MANJUSHREE PYNE, RATHINDRANATH PYNE AND RAJAT KUMAR PYNE, THE LD. CIT(A) HELD THAT, THE PAYMENT TO EACH ONE OF THEM WAS LESS THAN 1,80,000/- P.A. AND HENCE NO TDS WAS DEDUCTIBLE. THUS, THE DISALLOWANCE WAS DIRECTED TO BE DELETED. SIMILARLY, RENT PAID TO RAMKRISHNA MISSION OF RS. 3 LAKHS WAS ALSO DIRECTED TO BE DELETED AS THE CBDT VIDE CIRCULAR NO. 3 OF 2002 DATED 28.06.2002 EXEMPTED RAMKRISHNA MISSION FROM BEING SUBJECT TO TAX DEDUCTION AT SOURCE. SIMILARLY, RENT PAID TO SRI JATINBHAI JOSHI IS LESS THAN 1,80,000/- AND HENCE THE LD. CIT(A) HELD THAT NO TAX TO BE DEDUCTED AT SOURCE. UNDER THESE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS GROUND NUMBER 4 OF THE REVENUE. 13. GROUND NUMBER FIVE IS GENERAL IN NATURE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. 15. NOW WE COME TO C.O. NO. 2/KOL/2019. 16. THE SOLE GROUND OF THE CROSS OBJECTION IS DISALLOWANCE OF PRIOR PERIOD EXPENSES. THE CASE OF THE ASSESSEE IS THAT THESE EXPENDITURES PERTAIN TO TELEPHONE AND ELECTRICITY BILL PAYMENTS WHICH WERE RECEIVED BY THE ASSESSEE IN APRIL AND WAS PAID THEM. THE AO DISALLOWED THE SAME AS IT PERTAINS TO EARLIER YEARS. THE ASSESSEE'S CONTENTION IS THAT, THE LIABILITY CRYSTALLIZED AND WAS DISCHARGED DURING THE YEAR AND THAT THE COMPANY AS A MATTER OF ACCOUNTING POLICY, HAS BEEN CONSISTENTLY CLAIMING SUCH EXPENDITURE IN QUESTION ONLY IN THE YEAR OF PAYMENT. THE RELIANCE WAS PLACED ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. [2013] 38 TAXMANN.COM 100/219 TAXMAN 379/358 ITR 295 . 4 I.T.A. NO. 2519/KOL/2018 C.O. NO. 2/KOL/2019 ASSESSMENT YEAR: 2012-13 M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. 17. WE FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF EXCEL INDUSTRIES LTD HELD AS FOLLOWS: 32. THIRDLY, THE REAL QUESTION CONCERNING US IS THE YEAR IN WHICH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN THE SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. 18. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THIS CASE LAWS TO THE FACTS OF THE CASE, WE SET ASIDE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTION TO VERIFY AS TO WHETHER THE ASSESSEE IS CONSISTENTLY CLAIMING SUCH EXPENDITURE IN THE YEAR IN WHICH THE BILLS ARE RECEIVED AND PAID AS, CLAIMED BY THE ASSESSEE. IF THIS IS SO, ON THE PRINCIPLE OF CONSISTENCY, WE DIRECT THE AO SHELL ALLOW THE SAME. 19. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS BEING PRONOUNCED AFTER NINETY (90) DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKDOWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, I RELY UPON THE DECISION OF THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. JSW LIMITED IN ITA NO. 6264/MUM/2018 & 6103/MUM/2018, ASSESSMENT YEAR 2013-14, ORDER DATED 14TH MAY, 2020. 20. IN THE RESULT, THIS CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. KOLKATA, THE 18 TH JUNE, 2020. SD/- SD/- [ABY T. VARKEY] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18.06.2020 BIDHAN 5 I.T.A. NO. 2519/KOL/2018 C.O. NO. 2/KOL/2019 ASSESSMENT YEAR: 2012-13 M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-3(1), KOLKATA 2. M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD., 03, ESPLANADE EAST, KOLKATA-700 069. 3. CIT(A)-19, KOLKATA. (SENT THROUGH E-MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES