Sri Ram Commercial Co ., Kolkata V. D.C.I.T Cir - 36,kolkata., Kolkata

ITA 310/KOL/2013

• Counselvise Citation: 31023514 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2013
• Court: TRIBUNAL
• Department Lawyers: SANJAY SR DR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: KOLKATA [BEFORE HON BLE SHRI B.P.JAIN, AM] I.T.A NO.310 /KOL/2013 ASSESSMENT YEAR: 2008 - 09 M/S. SRI RAM COMMERCIAL CO. VS A.C.I.T., CIRCLE - 36, KOLKATA . KOLKATA (APPELLANT) ( R ESPONDENT) (PAN: AAMFS 4086 Q) FOR THE APPELLANT : NONE FOR THE RESPONDENT : SHRI SANJAY, SR.DR, ADDL. C.I.T. DATE OF HEARING : 01.06 .2015. DATE OF PRONOUNCEMENT: 01.06 .2015. ORDER PER SHRI B.P.JAIN, AM : THIS APPEAL OF TH E ASSESSEE ARISES FROM THE ORDER OF LD.CIT(A) - XX , KOLKATA DATED 05.12.2012 FOR ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT THE LEARNED CIT(A) GROSSLY ERRED BOTH IN LAW AND IN FACT IN NOT APPRECIATI NG THE ARGUMENT OF THE ASSESSEE THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE RULE 8D OF THE INCOME TAX RULES IS NOT APPLICABLE AND ASSESSEE S OWN CALCULATION OF DISALLOWANCE WHICH IS ABOUT 82.5% OF THE EXEMPT INCOME, SHOULD HAVE BEEN ADOPTED. 2. FOR THAT THE LEARNED CIT(A) FAILED TO CONSIDER THAT THE ASSESSEE HAVING HIMSELF CALCULATED THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 WHICH HAD NOT BEEN DISPUTED BY THE ASSESSING OFFICER BY A REASONED ORDER, THE DISALLOWANCE AS COMPUTED BY THE L D. CIT(A) BY MECHANICALLY APPLYING RULE 8D DEHORSE THE RELEVANT PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES IS PER SE ILLEGAL AND LIABLE TO BE SET ASIDE. 3. FOR THAT EVEN ASSUMING BUT NOT ADMITTING THAT RULE 8D MAY BE APPLICABLE IN THE PRESENT C AS E THE LD. CIT(A) GROSSLY ERRED BOTH IN LAW AND IN FACT IN NOT ALLOWING THE INTEREST EXPENDITURE INCURRED FOR EARNING INTEREST ON FIXED DEPOSIT OF RS.33,25,732/ - , WHICH IS NOT EXEMPTED THOUGH HE HAD FOUND THAT THE ASSESSEE S CLAIM IN THAT REGARD WAS CORRECT . 4. FOR THAT THE ASSESSEE CRAVES LEAVE TO REFER TO ANY OTHER GROUND OR GROUNDS OF APPEAL AT THE TIME OF HEARING, IF NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ADDED BACK RS.13,33,331/ - CONSISTING OF INTEREST ON LOANS OF RS.12,93,98 5/ - AND SECURITY TRANSACTION TAX ITA NO. 310 /KOL/2013 M/S. SRI RAM COMMERCIAL CO. A.YR. 2008 - 09 2 RS.39,346/ - IN ITS COMPUTATION OF INCOME ON ACCOUNT OF DISALLOWANCE U/S 14A AGAINST RECEIPT OF EXEMPT INCOME OF RS.16,15,911/ - . BUT, THE ASSESSING OFFICER DISSATISFYING WITH THE ASSESSEE S SUBMISSION MADE FRESH CALCULATION AND RS.73,86,100/ - WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESEE BY APPLYING THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES. 3.1. BEFORE THE LD. CIT(A) THE ASSESSEE ARGUED THAT THE INTEREST PAID AS SHOWN IN THE CALCULATION BY THE AS SESSING OFFICER IS RS.93,20,871/ - WHICH IS TOTAL OF INTEREST, WHEREAS OUT OF THE SAME AN AMOUNT OF RS.30,72,719/ - HAS BEEN PAID TO THE PARTNERS ALLOWABLE UNDER SECTION 40(B)(IV) OF THE ACT. SINCE IT IS DIRECTLY ATTRIBUTABLE TO A PARTICULAR RECEIPT AS SHOWN IN THE PARTNERS CURRENT ACCOUNT THE SAME IS NOT INCLUDABLE IN THE INTEREST AMOUNT PAID. IT WAS ARGUED THAT THE ASSESSEE ALSO EARNED AN AMOUNT OF RS.33,28,094/ - BY WAY OF INTEREST FROM FIXED DEPOSITS WHICH IS NOT EXEMPT AND AS SUCH INTEREST EXPENDITURE IN CURRED FOR EARNING THE INTEREST ON FIXED DEPOSIT CANNOT BE SAID TO BE ATTRIBUTABLE TO THE EXEMPT INCOME AND ACCORDINGLY INTEREST EXPENDITURE SHOULD BE FURTHER REDUCED BY THAT AMOUNT. 3.2. THE LD. CIT(A) CONFIRMED THE ARGUMENTS OF THE ASSESSEE AS CORRECT AN D HE OBSERVED THAT AO WAS NOT JUSTIFIED IN NOT CONSIDERING THE SAID AMOUNTS WHILE CALCULATING THE DISALLOWANCE UNDER RULE 8D OF IT RULES. ACCORDINGLY THE DISALLOWANCE UNDER RULE 8D WAS CALCULATED BY THE LD. CIT(A) AT PAGES 5 AND 6 OF HIS ORDER AND THE TOTA L DISALLOWANCE UNDER RULE 8D(2)(III) WAS RESTRICTED TO RS.40,46,316/ - AS AGAINST RS.73,86,100/ - MADE BY THE AO. ACCORDINGLY THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF VALID SERVICE OF NOTICE. THE LD. DR, ON THE OTHER HAND RELIED UPON THE ORDER OF LD CIT(A). 5. I HAVE HEARD THE LD. DR AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. CIT(A) HAS MADE THE FOLLOWING CALCULATIONS WHICH ARE AVAILABLE AT PAGES 5 AND 6 OF HIS ORDER WHICH FOR THE SA KE OF CONVENIENCE ARE REPRODUCED HEREIN BELOW : - ITA NO. 310 /KOL/2013 M/S. SRI RAM COMMERCIAL CO. A.YR. 2008 - 09 3 ( 1 ) AVERAGE INVESTMENT FROM WHICH EXEMPT I.E. DIVIDEND TOTAL INVESTMENT AS ON 31 - 03 - 2008 90733242.00 LESS: INVESTMENT IN MUTUAL FUNDS INCOME FROM WHICH ARE NOT EXEMPT 13750000.00 76983242.00 TOTAL INVESTMENTS AS ON 31 - 03 - 2007 81083907.00 LESS: INVESTMENTS IN MUTUAL FUNDS UNITS INCOME FROM WHICH ARE NOT EXEMPT 13479923.00 67603984.00 TOTAL 144587226.00 AVERAGE OF THE TWO 72293613.00 ( 2 ) TOTAL ASS ETS AS PER BALANCE SHEET AS ON 31 - 03 - 2008 135922979.00 AS ON 31 - 03 - 2007 94289378.00 TOTAL 230212357.00 AVERAGE OF THE TWO 115106178.00 (3) TOTAL INTEREST FOR THE YEAR AS PER P&L A/C. 9320871.00 LESS: INTEREST TO PARTNER S ON CURRENT CAPITAL ALLOWABLE U/S 40(B)(IV) 3072719.00 NET INTEREST FOR CALCULATION OF DISALLOWANCE 6248152.00 6248152.00 (4) DISALLOWABLE UNDER RULE 8D(2)(II) 3924216.00 6248152 X 72293613 115106178 (5) TOTAL CLAIM OF EXPENSES AS PER P&L A/C. 161446.00 LESS:SECURITY TRANSACTION TAX ALREADY ADDED BACK BY THE APPELLANT IN ITS COMPUTATION OF INCOME 39346.00 BALANCE TOTAL EXPENSES 122100.00 122100.00 TOTAL DISALLOWANCE UNDER RULE 8D(2 )(III) 4046316.00 THE DISALLOWANCES COMPUTED BY THE LD. CIT(A) IS AS PER RULE 8D AND I FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE ARE DISMISSED. 6. IN THE RESULT THE APPEAL OF ASSESSEE IS DISMISSED. ORD E R PRONOUNCED IN THE OPEN COURT ON 01.06 .2015. SD/ - [ B.P.JAIN ] ACCOUNTANT MEMBER DATE: 01.06 .2015. R.G.(.P.S.) ITA NO. 310 /KOL/2013 M/S. SRI RAM COMMERCIAL CO. A.YR. 2008 - 09 4 C OPY OF THE ORDER FORWARDED TO: 1 . M/S. SRI RAM COMMERCIAL CO., 21, STRAND ROAD, GROUND FLOOR, KOLKATA - 700001. 2 A.C. I.T., CIRCLE - 36, KOLKATA. 3 . CIT(A) - XX, , KOLKATA 4. CIT - KOLKATA. 5. CIT - DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRA R , ITAT, KOLKATA BENCHES