DCIT, CIR-6, KOLKATA, Kolkata V. West Bengal Infrastructure Development Finance Corporation Ltd., Kolkata

ITA 296/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4406 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 21-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: J P KHAITAN SR; ANAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I.T.A. NO. 296/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 296/KOL/ 2014 ASSESSMENT YEAR: 2010-2011 DEPUTY COMMISSIONER OF INCOME TAX,................. ..............................APPELLANT CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORP ORATION LIMITED,........................................... ................................................... .RESPONDENT MAGNUM BUILDING, BLOCK-A, 24, HEMANTA BASU SARANI, KOLKATA-700 001 [PAN : AAACW 3432 D] APPEARANCES BY: SHRI SALLONG YADEN, ADDL. CIT, D.R., FOR THE DEPARTMENT SHRI J.P. KHAITAN, SR. COUNSEL AND SHRI ANANDA SEN, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : SEPTEMBER 21, 201 6 DATE OF PRONOUNCING THE ORDER : OCTOBER 04, 2016 O R D E R PER SHRI P.M. JAGTAP : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DA TED 29.11.2013 AND THE SOLITARY GROUND RAISED THEREIN READS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE CIT(A) ERRED IN HOLDING THAT FOR COMPUTING DISALLOWANCE U/S 8D(2)(III), ONLY INVESTMENT WHICH GIVEN RISE TO TAX FREE INCOME SHOULD BE TAKEN INTO CONSIDERATION, IGNORING THE LEGAL PROVISIONS OF RUL E 8D WHICH DEFINES THAT FOR CALCULATION OF DISALLOWANCE I.T.A. NO. 296/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 2 OF 4 UNDER RULE 8D, THE AVERAGE VALUE OF INVESTMENT, INC OME GENERATED FROM WHICH DOES NOT OF SHALL NOT FORM PAR T OF TOTAL INCOME TO BE TAKEN INTO ACCOUNT. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKIN G FINANCIAL CORPORATION. THE RETURN OF INCOME FOR THE YEAR UNDE R CONSIDERATION WAS FILED BY IT ON 09.10.2010 DECLARING TOTAL INCOME OF RS.69,83,55,790/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS.16,56,840/- EARNED BY THE ASSESSEE WAS CLAIMED TO BE EXEMPT FROM TAX. THE DISALLOWANCE OF RS.1,22,86,000/- WAS ALSO OFFERED BY THE ASSESSEE UNDER SECTION 14A ON ACCOUNT OF INTEREST EXPENDITURE INCURRED IN RELATION TO THE EARNING OF THE EXEMPT DIVIDEND INCOME. WHILE COMPUTING THE SAID DISALLOWANCE AS PE R RULE 8D OF THE INCOME TAX RULES, 1962, THE INVESTMENT MADE IN SHAR ES WHICH HAD YIELDED THE EXEMPT DIVIDEND INCOME ALONE WAS TAKEN INTO CON SIDERATION BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER, THE E NTIRE INVESTMENT MADE BY THE ASSESSEE IN SHARES, WHICH WAS CAPABLE OF EAR NING EXEMPT DIVIDEND INCOME WAS LIABLE TO BE TAKEN INTO CONSIDERATION WH ILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A AS PER RULE 8D. HE A CCORDINGLY RECOMPUTED THE DISALLOWANCE TO BE MADE UNDER SECTIO N 14A READ WITH RULE 8D ON ACCOUNT OF INTEREST AT RS.15,51,91,837/- . HE ALSO MADE A FURTHER DISALLOWANCE ON ACCOUNT OF OTHER EXPENSES A S PER RULE 8D(2)(III) ON THE SAME BASIS AT RS.1,18,50,188/-. ACCORDINGLY, THE TOTAL DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D WAS MADE BY THE ASSESSING OFFICER AT RS.16,70,42,025/- AS AGAINST RS.1,22,86,000/- OFFER ED BY THE ASSESSEE. 3. THE DISALLOWANCE UNDER SECTION 14A READ WITH RUL E 8D AS COMPUTED BY THE ASSESSING OFFICER WAS CHALLENGED BY THE ASSE SSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS), WHO HELD BY RELY ING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF REI AGRO LIMITED, KOLKA TA VS.- DCIT IN ITA NO. 1331/KOL/2011 REPORTED IN 144 ITD 141 (CALCUTTA) TH AT THE DISALLOWANCE UNDER SECTION 14A BY APPLYING RULE 8D HAS TO BE WOR KED OUT BY TAKING INTO CONSIDERATION NOT ALL THE INVESTMENTS BUT ONLY THOSE INVESTMENTS, WHICH HAVE GIVEN RISE TO EXEMPT INCOME DURING THE R ELEVANT YEAR. ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO R E-COMPUTE THE I.T.A. NO. 296/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 3 OF 4 DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2) BY TAKING INTO ACCOUNT ONLY THOSE INVESTMENTS WHICH HAD GIVEN RISE TO THE EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. AGGRIEV ED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THI S APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. D.R. HAS RELIED ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATI ON (2016) 45 ITR (TRIB.) 285, WHEREIN A SIMILAR ISSUE AS INVOLVED IN THE PRESENT CASE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, IT IS OBSERVED THAT THE DECISION RENDERED BY THE TRIBUNAL EARLIER IN THE CA SE OF REI AGRO LIMITED ON THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL IN THE CASE OF WEST BENGAL I NFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION. MOREOVER, THE FACT THAT THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBU NAL IN THE CASE OF REI AGRO LIMITED HAS ALREADY BEEN DISMISSED BY THE HON BLE CALCUTTA HIGH COURT WAS ALSO NOT BROUGHT TO THE NOTICE OF THE TRI BUNAL IN THE SAID CASE. IN THE CASE OF DCIT VS.- TEENLOK ADVISORY SERVICES (P) LIMITED REPORTED IN 159 ITD 991 (KOLKATA-TRIB.) DECIDED SUBSEQUENTLY ON 08.06.2016 , BOTH THESE ASPECTS, HOWEVER, WERE CLEARLY BROUGHT TO THE NOTICE OF THE TRIBUNAL AND TAKING NOTE OF THE SAME, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A AS PE R RULE 8D BY TAKING INTO CONSIDERATION ONLY THOSE SHARES, WHICH HAD YIE LDED DIVIDEND INCOME IN THE RELEVANT YEAR. IN OUR OPINION, THE ISSUE INV OLVED IN THIS APPEAL OF THE REVENUE THUS IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF REI AGRO LI MITED, WHICH HAS BEEN AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT AND FOL LOWED BY THE TRIBUNAL IN THE LATEST DECISION RENDERED IN THE CASE OF TEEN LOK ADVISORY SERVICES (P) LIMITED (SUPRA). RESPECTFULLY FOLLOWING THE SAM E, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DIRECTING TH E ASSESSING OFFICER TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A AS PER R ULE 8D(2) BY TAKING I.T.A. NO. 296/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 4 OF 4 INTO CONSIDERATION ONLY THOSE INVESTMENTS, WHICH HA VE GIVEN RISE TO TAX- FREE INCOME AND DISMISS THIS APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 04, 2 016. SD/- SD/- (K. NARASIMHA CHARY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 4 TH DAY OF OCTOBER, 2016 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LIMITED, MAGNUM BUILDING, BLOCK-A, 24, HEMANTA BASU SARANI, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-VI, 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.