ACIT, C.C. II, Kolkata, Kolkata V. M/s. Trade Combines, Kolkata

ITA 293/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9326 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2009
• Court: TRIBUNAL
• Department Lawyers: S S KUMAR LD
• Assessee Lawyers: A K TULSIYAN LD
• Keywords: Revenue expenditure
• Section: 143(3); 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () . . , , !' ..! , # , ,, , ) [BEFORE HONBLE SRI D.K.TYAGI, JM & HONBLE SRI C.D.RAO, AM] '$ / I.T.A NO. 293/KOL/2009 %&' !() / ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME-TAX,- VS- M/S. TRADE COMBINES CC-II, KOLKATA PAN: AABFT 8223D (+, /APPELLANT ) (-+,/ RESPONDENT ) +, / FOR THE APPELLANT : . / SHRI S.S. KUMAR, LD.DR -+, / FOR THE RESPONDENT : . / SHRI A.K TULSIYAN, LD.AR / / ORDER ..! , , , , # , ,, , SHRI C.D.RAO, ACCOUNTANT MEMBER . : THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DT. 17-11-2008 OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLKATA FOR THE AY 2005-06 . 2. IN THIS APPEAL THE REVENUE HAS TAKEN FOLLOWING G ROUNDS OF APPEAL:- 1) UNDER THE FACT AND CIRCUMSTANCES OF THE CASE, WH ERE THE DIVIDEND INCOME CONSTITUTES THE MAIN INCOME AND WHE RE 34% OF THE TOTAL FUND IS PARKED IN SHARES, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DIFFERENCE OF INTERES T BETWEEN THE INTEREST PAID AND INTEREST RECEIVED AMOUNTING TO RS . 9,00,655/- TREATING THE SAME FOR THE PURPOSE OF BUSINESS AND N OT RELATED TO DIVIDEND INCOME OF RS.22,90,568/- AND DISALLOWAB LE U/S 14A OF THE I. T. ACT, 1961. 2) UNDER THE FACT AND CIRCUMSTANCES OF THE CASE, WH ERE DIVIDEND INCOME OF RS.22,90,568/- CONSTITUTES THE M AIN INCOME OF THE ASSESSEE, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE EXPENSES DISALLOWED U/S 14A OF T HE I. T. ACT, 1961 TO 1% OF THE DIVIDEND INCOME IN PLACE OF 3% OF THE DIVIDEND INCOME TAKEN BY THE ASSESSING OFFICER. 3. BRIEF FACTS OF THESE ISSUES ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT U/S. 143(3) OF THE I.T.ACT61 THE ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS.9,00,655/- UNDER THE HEAD INTEREST AND 3% I.E . RS.68,717/- UNDER THE HEAD ADMINISTRATIVE EXPENSES U/S.14A BY OBSERVING AS U NDER:- ITA NO.293/KOL/2009-CDR 2 THE ASSESSEE FIRM WAS ASKED TO EXPLAIN WHY EXCESS INTEREST PAID ON THE BORROWED FUND AND ADMINISTRATIVE EXPENS ES ON ALE OF DIVIDEND INCOME OF PS. 22,9L569/- MAY NOT BE DIS ALLOWED U/S 14A. THE A/R OF THE ASSESSEE FIRM DID NOT SUBMI T ANY SATISFACTORY EXPLANATION. THEREFORE, RS, 9,00,655/ BEING THE EXCESS OF INTEREST PAID (RS. 30,88,395/) OVER INTE REST INCOME (RS. 21,87,740/-) IS RELATED TO INVESTMENT I N SHARES FOR PURPOSE OF EARNING DIVIDEND INCOME AND CONSEQUENTLY DISALLOWED U/S 14A OF THE 1.T.ACT, 1961 AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. FURTHER. 3% OF THE DI VIDEND INCOME IS DISALLOWED TOWARDS ADMINISTRATIVE EXPENSE S FOR EARNING OF DIVIDEND INCOME U/S 14A OF THE 1.T.ACT, 1961 WHICH COMES TO RS. 68,717/- (3% OF RS. 22,90,569/-) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE.. 4. ON APPEAL THE LD.CIT(A) HAS DELETED THE ADDITION OF RS. 9,00,655/- BY OBSERVING THAT THE LOANS BORROWED HAVE BEEN UTILIZE D ON REVENUE ACCOUNT AND NOT ON CAPITAL ACCOUNT. HENCE, THE INTEREST PAID ON LOANS BORROWED AND UTILIZED ON REVENUE ACCOUNT IN THE COURSE OF THE BUSINESS IS A REVENUE EXPENDITURE AND IS ALLOWABLE U/S.37(1) OF THE I.T.ACT,1961. 4.1 AS REGARDS THE ESTIMATED INCOME I.E. 3% DISALLO WANCE OF RS.68,717/- TOWARDS ADMINISTRATIVE EXPENSES, THE LD.CIT(A) RESTRICTED T HE SAME TO 1% BY OBSERVING THAT ON SIMILAR CIRCUMSTANCES THE JURISDICTIONAL ITAT, K OLKATA HAS CONSISTENTLY TAKEN A STAND THAT 1% OF THE DIVIDEND AMOUNT CAN BE TREATED AS EXPENDITURE INCURRED FOR EARNING DIVIDEND. 5. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING BEFORE US THE LD.DR APPEA RING ON BEHALF OF THE REVENUE RELIED ON THE ORDER OF THE AO. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE HAS RELIED ON THE ORDER OF THE LD.CIT(A) AND FURTHER CONTENDED THAT SINCE THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUND FOR INVESTMENT IN SHARES. THE ADHOC DISAL LOWANCE OF INTEREST IS NOT JUSTIFIABLE. THEREFORE, HE REQUESTED TO UPHOLD THE ORDER OF THE LD.CIT(A). 8. AFTER HEARING THE RIVAL SUBMISSIONS, ON CAREFUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT T HE LD.DR COULD NOT CONTRADICT THE ITA NO.293/KOL/2009-CDR 3 ABOVE FINDINGS OF THE LD.CIT(A), WE FIND NO INFIRMI TY IN THE ORDER OF THE LD.CIT(A) AND UPHOLD THE SAME. THE GROUNDS RAISED BY THE REV ENUE ARE LIABLE TO BE DISMISSED. 9. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. 0 / #1 2 1& 03 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 11-. 02-2011 SD/- SD/- (. . ), ( ..! ), # , (D.K.TYAGI), JUDICIAL MEMBER. ) ( C.D. RAO, ACCOUNTANT MEMBER) (#) DATE :11-02-2011 *PP / SR. PRIVATE SECRETARY : / 4 -%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1. (+, / APPELLANT ) : ACIT,CC-II, KOLKATA 18 RABINDRA SARANI, KOL-1. 2. ( -+,/ RESPONDENT) : M/S. TRADE COMBINES 16A, SHAKESPEARE SARANI, KOL-71. 3. %/& ()/ THE CIT(A) 4. %/& ()/ THE CIT 5. !9% -%& / DR, KOLKATA BENCH 6. GUARD FILE 5 -%/ TRUE COPY, /&1/ BY ORDER, . ': /ASSTT REGISTRAR