DCIT, Cir-11(1), Kolkata, Kolkata V. M/a. Khaitan India Ltd, Kolkata

ITA 461/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2222 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 08-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI S.S.GODARA, JM & HONBLE SHRI M.BALAGANESH, AM] I.T.A NO. 461/KOL/2017 ASSESSMENT YEAR : 2013-1 4 DCIT, CIRCLE-11(1), KOLKATA -VS- M/S KHAITAN IN DIA LTD. [PAN: AABCK 2326 B] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SAURABH KUMAR , ADDL. CIT SR. DR FOR THE RESPONDENT : NONE DATE OF HEARING : 13.11.2018 DATE OF PRONOUNCEMENT : 16.11.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-4, KOLKATA [IN SHORT THE LD CIT (A)] IN APPEAL NO.158/CIT(A)- 4/CIRCLE-11(1)/KOL/16-17 DATED 30.12.2016 AGAINST THE ORDER PASSED BY DCIT, CIRCLE- 11(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 29.03.2016 FOR THE ASSE SSMENT YEAR 2013-14. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 14A OF THE AC T IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF CULTIVATION OF SUGAR CANE, MANUFACTURING OF SUGAR A ND TRADING IN FANS AND OTHER ELECTRICAL 2 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 2 APPLIANCES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2013-14 ON 27.9.2013 DECLARING TOTAL LOSS OF RS 5,44,78,899/-. THE ASSESSEE FILED A REVISED COMPUTATION DECLARING LOSS OF RS 3,74,14,050/- DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD AO OBSERVED THAT IN SUPPORT OF ASSESSEES CLAIM OF EXPENDITURE AND ON VARIOUS QUERIES RAISED IN COURSE OF HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THE DETAILS AS PER REQUISITION A ND XEROX COPIES OF DOCUMENTS. THE LD AO EXAMINED THE BALANCE SHEET, PROFIT AND LOSS ACCO UNT ALONG WITH SCHEDULES, TAX AUDIT REPORT AND OTHER DETAILS AND DOCUMENTS SUBMITTED DU RING THE COURSE OF HEARING. THE LD AO ASKED THE ASSESSEE AS TO WHY DISALLOWANCE OF EXP ENSES U/S 14A OF THE ACT SHOULD NOT BE MADE IN THE INSTANT CASE AS THE ASSESSEE WAS HAVING EXEMPTED INCOME . THE ASSESSEE OFFERED A SUM OF RS 8,25,160/- FOR DISALLO WANCE U/S 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE INCOME TAX RULES , 1962. TH E LD AO HOWEVER OBSERVED THAT THE ASSESSEE HAD PAID INTEREST ON ITS BORROWED FUNDS AN D ACCORDINGLY RECOMPUTED THE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT READ WIT H RULE 8D OF THE RULES AS UNDER:- DISALLOWANCE UNDER RULE 8D(2)(II) - RS 65,92,509/- DISALLOWANCE UNDER RULE 8D(2)(III) - RS 8,25,835 /- --------------------- RS 74,18,344/- 4. THE LD AO ALSO OBSERVED THAT THE ASSESSEE HAD CL AIMED EXEMPTION U/S 10(1) OF THE ACT ON ACCOUNT OF AGRICULTURAL INCOME OF RS 1,77,23 ,438/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO ASKED THE ASSESSEE TO EXPLAI N WHY THE EXPENDITURE IN RELATION TO SUCH AGRICULTURAL INCOME SHOULD NOT BE DISALLOWED I N COMPUTING THE TOTAL ICNOEM AND WHY THE QUANTUM OF DISALLOWANCE SHOULD NOT BE COMPU TED AS PER RULE 8D OF THE RULES. IN RESPONSE, THE ASSESSEE DID NOT GIVE ANY EXPLANAT ION. IT WAS FOUND THAT THE NET PROFIT OF AGRICULTURAL DIVISION OF RS 1,77,23,438/- WAS AR RIVED AFTER DEDUCTING TOTAL EXPENSES OF RS 4,74,51,873/- INCLUDING DEPRECIATION OF RS 2,70, 231/- FROM THE GROSS RECEIPTS OF RS 6,54,45,542/-. WHILE COMPUTING THE INCOME FROM BUS INESS, THE SAID NET PROFIT FROM 3 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 3 AGRICULTURAL DIVISION OF RS 1,77,23,438/- WAS DEDUC TED FROM THE NET LOSS AS PER PROFIT AND LOSS ACCOUNT. THE LD AO OBSERVED THAT THE FINA NCIAL RESULTS OF THE ASSESSEE COMPANY WOULD HAVE TO BE READ TOGETHER IN ORDER TO APPRECIA TE THE PERFORMANCE OF THE COMPANY. ALL THE THREE DIVISIONS VIZ SUGAR DIVISION, MARKETI NG DIVISION AND AGRICULTURE DIVISION ARE CONTROLLED BY THE SAME MANAGEMENT OF THE COMPAN Y BUT NO MANAGERIAL REMUNERATION OR OTHER MANAGEMENT EXPENSEES WERE FOUND TO HAVE B EEN ALLOCATED TO THE AGRICULTURE DIVISION. THE LD AO OBSERVED THAT AS FAR AS ALLOCAT ION OF EXPENSES IS CONCERNED, MAJOR PORTION OF ALL THE INDIRECT EXPENSES WERE FOUND TO HAVE BEEN BOOKED AGAINST THE OTHER DIVISIONS AND THE QUANTUM OF INDIRECT EXPENSES HAVE BEEN KEPT AT BARE MINIMUM FOR THE AGRICULTURE DIVISION. SINCE NO ALLOCATION OF EXPEND ITURE WAS PROVIDED BY THE ASSESSEE, THE LD AO HAD NO OTHER ALTERNATIVE TO APPLY THE PRO VISIONS OF RULE 8D TO DETERMINE THE QUANTUM OF EXPENDITURE INCURRED IN RELATION TO INCO ME FROM AGRICULTURE DIVISION. ACCORDINGLY, THE LD AO COMPUTED THE DISALLOWANCE TO BE MADE U/S 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES IN RESPECT OF AGR ICULTURE DIVISION AT RS 21,13,761/-. 5. THE LD AO ULTIMATELY MADE DISALLOWANCE U/S 14A O F THE ACT IN THE ASSESSMENT TO THE TUNE OF RS 87,06,160/- APART FROM VOLUNTARY DISALLO WANCE MADE BY THE ASSESSEE IN THE SUM OF RS 8,25,160/-. 6. BEFORE THE LD CITA, THE ASSESSEE SUBMITTED THAT ON BEING ASKED BY THE LD AO, IT HAD SUBMITTED THE SEGMENT WISE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WHEREIN VARIOUS RELEVANT AMOUNTS WERE SHOWN UNDER SEPARATE ACCOUNTS OF (I) CORPORATE OFFICE . (II) SUGAR DIVISION , (III) AGRICULTURE DIVISION AND (IV) MARK ETING DIVISION. COPIES OF ANNUAL ACCOUNTS TOGETHER WITH SEGMENTAL ACCOUNTS FOR THE Y EAR ENDED 31.3.2013 WERE AGAIN PRODUCED BEFORE THE LD CITA. THE ASSESSEE EXPLAINED FROM THE ANNUAL STATEMENT OF ACCOUNTS OF EACH DIVISION THAT THE ENTIRE BORROWED FUND, I.E. LOAN, HAD BEEN UTILIZED ONLY FOR THE PURPOSES OF THE BUSINESSES RUN UNDER THE SU GAR DIVISION AND MARKETING DIVISION AND NO PART OF THE LOAN HAS BEEN UTILIZED TOWARDS M AKING ANY INVESTMENTS. IT WAS ALSO 4 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 4 SUBMITTED BY THE ASSESSEE THAT ALL THE EXISTING SHA RE IN FINANCIAL YEAR 2012-13 IN VARIOUS COMPANIES HAD BEEN ACQUIRED IN THE EARLIER YEARS ONLY BY WAY OF UTILIZING ITS OWN FUND AVAILABLE FOR THE SHARE CAPITAL AND THE RE SERVES. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT THERE COULD NOT BE ANY DISALLOWANCE OF ANY PART OF THE INTEREST PAID ON LOAN SINCE THE LOAN HAD BEEN UTILIZED FOR SPECIFIC PURPOSES, VIZ., CARRYING ON THE BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES SUBMISSIONS AND AFTER MAKING REFERENCE TO CERTAIN DECISIONS OF THE ITAT AND THE HIGH COURTS, HE STATED THAT HE WOULD APPLY RULE 8D(2)(II) FOR DISAL LOWANCE OF INTEREST ON THE ASSUMPTION THAT THE CONCERNED LOAN HAD ALLEGEDLY BE EN UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS IN SHARES. THE ASSESSING OFFICER TOOK INTO ACCOUNT THE AVERAGE VALUE OF THE INVESTMENTS AT RS. 16,51,67,043/- AND THE AVERAGE VALUE OF THE TOTAL ASSETS AT RS. 105,29,69,354/- AND THEREAFTER HE APPLIED R ULE 8D(2)(II) AND HE ARRIVED AT AN AMOUNT OF RS. 65,92,509/- WHICH HE CONSIDERED AS TH E AMOUNT OF INTEREST ALLEGEDLY DISALLOWABLE U/S 14A READ WITH RULE 8D(2)(II). FURT HER, HE CONSIDERED ANOTHER DISALLOWABLE AMOUNT OF RS. 8,25,835/- UNDER RULE 8D (2)(II). AS A RESULT THE TOTAL AMOUNT CONSIDERED BY THE ASSESSING OFFICER AS DISALLOWABLE , CAME TO RS. 74,18,344/- (RS. 65,92,509 + 8,25,835). THE ASSESSEE SUBMITS THAT TH E VALUE OF SHARES AS PER THE ASSESSEES BALANCE SHEET AS AT 31.03.2013 HAD BEEN RS. 16,49,90,444/- WHICH REMAINED CONSTANT AT THE BEGINNING AS WELL AS AT THE END OF THE YEAR. HENCE, THE AVERAGE OF THE BALANCES SHOULD HAVE BEEN CONSIDERED BY THE ASSESSI NG OFFICER AT RS. 16,49,90,444/-. THE ASSESSEE SUBMITS THAT THE INVESTMENTS WHICH WER E EXISTING DURING THE FINANCIAL YEAR 2012-13, HAD BEEN MADE BY THE ASSESSEE IN THE EARLIER YEAR AS UNDER: 5 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 5 COPIES OF THE BALANCE SHEETS FOR THE FINANCIAL YEAR S 1992-93 TO 2015-16 ARE ENCLOSED FOR READY REFERENCE. FROM THE ABOVE CHART IT MAY K INDLY BE APPRECIATED THAT IN ALL THE YEARS WHEN INVESTMENTS HAD BEEN MADE IN SHARES THE ASSESSEE HAD MORE THAN SUFFICIENT BALANCE IN IT SHARE CAPITAL AND RESERVES AND ACCORD INGLY THE ENTIRE INVESTMENTS HAD BEEN MADE BY WAY OF UTILIZATION OF ONLY THE FUND OWNED B Y THE ASSESSEE AND NO PART OF THE BORROWED FUND, I.E. LOAN WAS EVER UTILIZED BY THE A SSESSEE. THOUGH THESE FACTS HAD DULY BEEN BROUGHT TO THE ATTENTION OF THE ASSESSING OFFI CER, YET HE DID NOT TAKE INTO ACCOUNT THE AVAILABILITY OF OWN FUND IN THE HANDS OF THE AS SESSEE AND HE WENT ON TO ASSUME THAT THE ASSESSEES UTILIZATION OF BORROWED FUND HAD BEE N PARTLY FOR THE PURPOSE OF MAKING INVESTMENTS IN SHARES AND HE MADE A DISALLOWANCE OF RS. 65,92,509/- OUT OF INTEREST PAID ON LOAN BY APPLYING RULE 8D(2)(II). THE ASSESS EE FURTHER SUBMITTED ON THE BASIS OF THE ABOVE FACTS THE APPELLANT SUBMITS THAT-(I) IN V IEW OF THE FACT THAT NO PART OF THE BORROWED FUND, I.E., LOAN HAD BEEN UTILIZED BY THE APPELLANT FOR MAKING INVESTMENTS IN SHARES, NO PORTION OF THE INTEREST PAID ON LOAN SHO ULD HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER U/S 14A READ WITH RULE 8D(2)(II) AND ACCORDINGLY THE APPELLANT SUBMITS THAT THE DISALLOWANCE OF INTEREST OF RS.65, 92,509 SHOULD BE HELD AS UNJUSTIFIED. THE ASSESSEE SUBMITS THAT IT WAS REQUIRED OF THE A SSESSING OFFICER TO ESTABLISH THAT THERE HAD BEEN ALLEGED NEXUS BETWEEN THE LOAN AND THE INV ESTMENTS MADE TO HOLD THAT PART OF LOAN COULD ALLEGEDLY HAVE BEEN UTILIZED FOR MAKING INVESTMENTS. IN THIS REGARD SEVERAL DECISIONS HAVE BEEN TAKEN BY THE COURTS AND ITATS H OLDING THAT NO DISALLOWANCE WOULD BE CALLED FOR WHERE AN ASSESSEE HAD MADE INVESTMENT S OUT OF HIS OWN FUNDS OR THE OWN 6 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 6 FUNDS AVAILABLE WITH HIM HAD BEEN QUITE SUFFICIENT TO MAKE INVESTMENTS FROM WHICH THE INCOME COULD BE EXEMPT AND FURTHER THAT FOR MAKING ANY DISALLOWANCE IT WOULD BE NECESSARY TO PROVE NEXUS BETWEEN THE LOAN AND THE M AKING OF INVESTMENTS. SOME OF THE DECISIONS ARE BEING REFERRED TO HEREUNDER: (A) CIT V. WINSOME TEXTILE LNDUSTRIES LTD. [2009] 3 19 ITR 204 (PUNJ & HAR); (B) YATISH TRADING CO. (P.) LTD. V. ASST CIT [2011] 129 ITD 237(MUM ITAT); (C) MARUTI UDYOG LTD. V. DY, CIT [2005] 921TD 119(D ELHI ITAT); (D) ITO V, STRIDES ARCOLAB LTD. [2012] 138 ITD 323 (MUM ITAT); (E) BALARAMPUR CHINI MILLS LTD. V. DY. CIT [2012] 2 0 TAXMAN.COM 117(KOL); (T) CIT V. RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM); (G) CIT V. HERO CYCLES LTD. [2010] 323 ITR 518 (PUN J & HARYANA); (H) CIT V. HDFC BANK LTD. [2014] 366 ITR 505 (BOM). (II) WITHOUT PREJUDICE TO THE SUBMISSION MADE IN (I ) ABOVE, THE ASSESSEE SUBMITS THAT THE COMPUTATION OF THE ALLEGEDLY DISALLOWABLE AMOUNT BY APPLYING RULE 8D(2)(II) BY TAKING INTO ACCOUNT THE AVERAGE VALUE OF INVESTMENTS AT RS .16,51,67,043 INSTEAD OF THE CORRECT FIGURE OF RS.16,49,90,444, SHOULD BE HELD TO BE WRO NG AND THE CORRECT AMOUNT MAY KINDLY BE DIRECTED TO BE TAKEN INTO ACCOUNT WHEREBY THE ALLEGEDLY DISALLOWABLE SUM WOULD ARRIVE AT RS.65,85,460 INSTEAD OF RS.65,92,50 9 AS COMPUTED BY THE ASSESSING OFFICER. (III) WITHOUT PREJUDICE TO THE SUBMISSIONS MADE AT (I) AND (II) ABOVE, THE APPELLANT SUBMITS THAT THE ACTION OF THE ASSESSING OFFICER IN TAKING INTO ACCOUNT THE INTEREST PAYMENT OF RS.4,20,28,419 FOR THE PURPOSE OF MAKING A DISALLOWANCE BY APPLYING RULE RULE 8D(2)(II) HAD BEEN WRONG IN VIEW OF HIS NOT AP PRECIATING THE FACT THAT AS PER THE SEGMENT ACCOUNTS THE INTEREST HAD BEEN UTILIZED EXC LUSIVELY FOR THE PURPOSES OF THE ASSESSEES BUSINESSES UNDER THE SUGAR DIVISION AND MARKETING DIVISION RESPECTIVELY. 7 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 7 HENCE, THE ASSESSING OFFICER MAY KINDLY BE DIRECTED NOT TO CONSIDER THE INTEREST OF RS. 4,20,28,419 FOR DISALLOWANCE UNDER RULE 8D(2)(II). WITHOUT PREJUDICE TO THE SUBMISSIONS MADE AT (I),(II) AND (III) ABOVE, THE A SSESSEE FURTHER SUBMITS THAT SINCE THE ASSESSEE HAD NOT EARNED ANY DIVIDEND DURING THE YE AR WHICH COULD BE EXEMPT, THERE COULD NOT BE ANY DISALLOWANCE U/S 14A AND SO THE AC TION OF THE ASSESSING OFFICER IN MAKING ANY DISALLOWANCE U/S 14A WAS WRONG. HENCE, THE ASSESSEE SUBMITS THAT THE ENTIRE DISALLOWANCE OF RS. 74,18,344/- MAY KINDLY B E DELETED. 7. THE LD CITA APPRECIATED THE AFORESAID CONTENTION S OF THE ASSESSEE AND DELETED THE DISALLOWANCE U/S 14A OF THE ACT IN THE SUM OF RS 74 ,18,344/- (6592509 + 825835) BY OBSERVING AS UNDER:- 7.1. I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE ASSESSEE IN THE BACKDROP OF THE ASSESSMENT ORDER. I HAVE ALSO TAKEN NOTE OF THE VAR IOUS JUDICIAL DECISIONS AS REFERRED TO BY THE AR IN SUPPORT OF HIS ARGUMENT. IT IS THE CON TENTION OF THE AR OF THE ASSESSEE THAT SINCE NO EXEMPT INCOME HAD BEEN EARNED DURING THE Y EAR UNDER CONSIDERATION, THERE WAS NO NEED FOR RESORTING TO THE PROVISIONS OF SECT ION 14A R.W.RULE 8D. HAVING PERUSED THE ACCOUNTS OF THE ASSESSEE AND FINDING THAT NO EX EMPT DIVIDEND INCOME HAD BEEN EARNED BY IT DURING THE YEAR UNDER CONSIDERATION. I DO NOT FIND ANY MERIT IN THE ACTION OF THE AO IN MAKING THE IMPUGNED DISALLOWANCE . THE MA TTER IS WELL SETTLED BY VARIOUS JUDICIAL FORUMS THAT WHEN THERE IS NO EXEMPT INCOME EARNED BY AN ASSESSEE, THE PROVISIONS OF SECTION 14A R.W. RULE 8D WOULD NOT BE APPLICABLE. THE DELHI HIGH COURT IN THE CASE OF CHEM INVEST LTD. VS. CIT REPORTED IN 378 ITR 33 (DEL) HAS HELD THAT WHERE THERE IS NO EXEMPT INCOME NO DISALLOWANCE IS CALLED FOR U/S 14A OF THE ACT. RESPECTFULLY FOLLOWING THE FOREGOING DECISION, I DI RECT THE AO TO DELETE THE IMPUGNED ADDITION. THIS GROUND IS ALLOWED ACCORDINGLY. 8. WITH REGARD TO DISALLOWANCE MADE U/S 14A OF THE ACT IN RESPECT OF AGRICULTURE DIVISION IN THE SUM OF RS 21,13,761/- , THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAD DULY MAINTAINED SEPARATE ACCOUNTS FOR ITS 3(THREE) SEPAR ATE BUSINESSES, VIZ., (I) AGRICULTURAL DIVISION (CULTIVATION OF SUGAR CANE), (II) SUGAR DI VISION (MANUFACTURING OF SUGAR FROM SUGAR CANE) AND (III) MARKETING DIVISION (RELATING TO FANS AND OTHER ELECTRICAL APPLICATIONS) AND ALSO SEPARATELY FOR ITS CORPORATE OFFICE. ALL THOSE SEPARATE, SEGMENT 8 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 8 ACCOUNTS WERE AUDITED AND COPIES THEREOF HAD BEEN S UBMITTED BEFORE THE ASSESSING OFFICER. COPIES OF THE SEGMENT ACCOUNTS ARE ENCLOSE D FOR READY REFERENCE. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY SHO ULD THERE BE NO DISALLOWANCE U/S 14A READ WITH RULE8D IN RELATION TO THE EXEMPT AGRI CULTURAL INCOME. THE ASSESSEE DULY EXPLAINED THE WHOLE ISSUE. IT WAS POINTED OUT TO THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED EXEMPTION FOR NET AGRICULTURA L INCOME AFTER REDUCING THE GROSS INCOME OF THE AGRICULTURE DIVISION BY THE EXPENDITU RE INCURRED TO EARN SUCH INCOME, BUT THE ASSESSING OFFICER DID NOT CONSIDER PROPERLY THE SAID FACT. THE ASSESSING OFFICER COMPUTED THE ALLEGED DISALLOWABLE AMOUNT U/S 14A AT RS.21,13,761 UNDER RULE 8D(2)(III). SINCE THE AGRICULTURAL INCOME HAD BEEN EXEMPT FROM TAX U/S 10(1), THE APPELLANT IN ITS RETURN REDUCED THE NET INCOME OF R S.1,77,23,438 EARNED FROM AGRICULTURAL DIVISION WHILE COMPUTING THE TAXABLE I NCOME. IN COMPUTING THE EXEMPT AGRICULTURAL INCOME, ALL THE RELATABLE EXPENSES HAD BEEN DEDUCTED FROM THE AGRICULTURAL INCOME AND NO PART OF SUCH EXPENDITURE WAS CLAIMED BY THE ASSESSEE . IN VIEW OF THE FACT THAT NO PART OF THE EXPENSE RELATING TO THE AG RICULTURAL DIVISION HAD BEEN CLAIMED BY THE ASSESSEE , THERE WAS NO NEED TO TAKE INTO ACCOU NT ANY EXPENSE, DIRECT OR INDIRECT, OF THE AGRICULTURAL DIVISION FOR THE PURPOSE OF COMPUT ING DISALLOWABLE EXPENSE U/S 14A. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE RE COULD NOT HAVE BEEN ANY REQUIREMENT OF ANY FURTHER DISALLOWANCE U/S 14A IN RELATION TO ANY EXPENSE ATTRIBUTABLE TO THE ASSESSEE'S AGRICULTURAL INCOME. HOWEVER, THE ASSESSING OFFICER WITHOUT PROPERLY EXAMINING THE RETURN VIS-A-VIS THE ACCOUNTS OF THE APPELLANT, HELD THAT FURTHER DISALLOWANCE WOULD ALLEGEDLY BE NECESSARY U/S 14A R ULE 8D IN 21,13,761. THE ASSESSEE SUBMITS THAT SINCE NO EXPENDITURE RELATABLE TO THE AGRICULTURAL INCOME HAD BEEN CLAIMED BY THE ASSESSEE , THE ASSESSING OFFICER'S ACTION IN MAKING A DISALLOWANCE OF RS.21,13,761 BY APPLYING RULE 8D(2)(III) SHOULD BE HELD AS UNJUSTIFIED AND SO THE DISALLOWANCE OF RS.21,13,761, MAY KINDLY BE DELETED . THE ASSESSEE FURTHER SUBMITS THAT FOR EARLIER TWO ASSESSMENT YEARS 2008-09 AND 2009-1 0 ALSO SIMILAR DISALLOWANCES HAD BEEN MADE BY THE ASSESSING OFFICER AND IN APPEALS T HE CIT(APPEALS)-4, KOLKATA .VIDE 9 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 9 HIS TWO SEPARATE APPELLATE ORDERS BOTH DATED 10/07/ 2015 DELETED THE SAID DISALLOWANCES. COPIES OF THE ABOVE-REFERRED TWO APPELLATE ORDERS B OTH DATED 10/07/2015 ARE ENCLOSED FOR READY REFERENCE. THE ASSESSEE SUBMITS THAT FOR THE ASSESSMENT YEAR 2013-14 ALSO, FOLLOWING THE ABOVE- REFERRED APPELLATE ORDERS, THE DISALLOWANCE OF RS.21, 13,761 MAY KINDLY BE DELETED. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE FURTHER SUBMITS THAT WHILE COMPUTING THE ALLEGED FURTHER DISALLOWABLE AM OUNT UNDER RULE 8D(2)(III) IN RELATION TO THE AGRICULTURAL DIVISION, THE ASSESSIN G OFFICER ASSUMED THE AVERAGE TOTAL VALUE OF THE ASSETS OF THE AGRICULTURAL DIVISION AT RS.42,27,52,232 AS THE APPELLANT'S ALLEGED AVERAGE OF VALUE OF INVESTMENTS FROM WHICH THE EARNED INCOME DID NOT FORM PART OF TOTAL INCOME AS APPEARING IN THE ACCOUNTS OF THE APPELLANT. THE APPELLANT SUBMITS THAT THIS ASSUMPTION OF THE ASSESSING OFFICER WAS N OT IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN RULE 8D OF THE INCOME-TAX RULES, 1962. THE ASSESSING OFFICER SHOULD HAVE APPRECIATED THAT THE INCOME OF THE AGRICULTURAL DIV ISION HAD BEEN EARNED THROUGH OPERATION AND NOT BY WAY OF ANY RETURN FROM ANY ALL EGED INVESTMENT. THUS THE ASSESSING OFFICER WAS WRONG IN TAKING INTO ACCOUNT THE ALLEGED AVERAGE INVESTMENT AT RS.42,27,52,232 AND IN MAKING A DISALLOWANCE OF RS. 21,13,761. ON THE BASIS OF THE ABOVE FACTS AND THE APPELLATE DECISIONS FOR THE EAR LIER YEARS, THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER'S ACTION IN DISALLOWING RS.21 ,13,761 UNDER RULE 8D(2)(III) IN RELATION TO THE ASSESSEE'S AGRICULTURAL DIVISION, H AD BEEN ON A WRONG ASSUMPTION AND THEREFORE THE SAID DISALLOWANCE, MAY KINDLY BE DELE TED. 9. THE LD CITA APPRECIATED THE AFORESAID CONTENTION S OF THE ASSESSEE AND DELETED THE DISALLOWANCE U/S 14A OF THE ACT IN RESPECT OF AGRIC ULTURE DIVISION IN THE SUM OF RS 21,13,761/- BY OBSERVING AS UNDER:- 8.1. I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE APPELLANT IN THE BACKDROP OF THE ASSESSMENT ORDER. I FIND FORCE IN THE ARGUMENTS OF THE AR THAT SINCE THE AGRICULTURAL INCOME HAD BEEN EXEMPT FROM TAX U/S 10(1), THE APPE LLANT IN ITS RETURN OF INCOME REDUCED THE NET INCOME OF RS. 1,77,23,438 EARNED F ROM AGRICULTURAL DIVISION WHILE COMPUTING THE TAXABLE INCOME. IN COMPUTING THE EXEM PT AGRICULTURAL INCOME, ALL THE 10 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 10 RELATABLE EXPENSES HAD ALREADY BEEN DEDUCTED FROM T HE AGRICULTURAL INCOME AND NO PART OF SUCH EXPENDITURE WAS CLAIMED BY THE APPELLANT. I N VIEW OF THE FACT THAT NO PART OF THE EXPENSE RELATING TO THE AGRICULTURAL DIVISION HAD B EEN CLAIMED BY THE APPELLANT, I FIND NO MERIT IN THE ACTION OF THE AA TO CONSIDER DIRECT OR INDIRECT EXPENSES OF THE AGRICULTURAL DIVISION FOR THE PURPOSE OF COMPUTING DISALLOWABLE EXPENSE U/S 14A. I FIND THAT THE AO HAS NOT CONSIDERED THE ISSUE PROPERLY A ND WITHOUT PROPERLY EXAMINING THE RETURN OF INCOME VIS-A-VIS THE ACCOUNTS OF THE APPE LLANT, AND MADE FURTHER DISALLOWANCE U/S 14A READ WITH RULE 80 AMOUNTING TO RS.21,13,761. I FIND THAT FOR AYS 2008-09 AND 2009-10 SIMILAR DISALLOWANCES HAD BEEN MADE BY THE AO AND THE CIT(APPEALS)-4, KOLKATA VIDE HIS TWO SEPARATE ORDER S BOTH DATED 10/07/2015 DELETED THE SAID DISALLOWANCES. COPIES OF THE TWO APPELLATE ORDERS BOTH DATED 10/07/2015 WERE FURNISHED BEFORE ME AS WELL. THEREFORE FOLLOWING TH E APPELLATE DECISIONS IN THE APPELLANTS OWN CASE FOR THE EARLIER YEARS, I DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS. 21,13,761 MADE UNDER RULE 8D(2)(III) IN RELATIO N TO THE APPELLANT'S AGRICULTURAL DIVISION. THESE GROUNDS ARE ALLOWED. 10. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 11. NONE APPEARD ON BEHALF OF THE ASSESSEE. WE HAV E HEARD THE LD DR. AT THE OUTSET, WITH REGARD TO DISALLOWANCE MADE IN THE SUM OF RS 7 4,18,344/- U/S 14A OF THE ACT IS CONCERNED IN RESPECT OF EXPENDITURE DEBITED IN THE TAXABLE DIVISIONS OF THE ASSESSEE, WE FIND THAT THE ASSESSEE HAD NOT DERIVED ANY EXEMPT I NCOME IN THE FORM OF DIVIDEND AND HENCE THERE IS NO QUESTION OF APPLICABILITY OF PROV ISIONS OF SECTION 14A OF THE ACT THEREON. THIS ISSUE IS NOW SETTLED BY THE FOLLOWING DECISIONS OF VARIOUS HIGH COURTS :- A) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS CHETTINAD LOGISTICS (P) LTD REPORTED IN 80 TAXMANN.COM 221 (MAD HC) B) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS H OLCIM INDIA PVT LTD IN ITA NO. 486 /2014 (DELHI HC) C) HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVE ST LTD VS CIT REPORTED IN 378 ITR 33 (DEL) D) HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS LAKHANI MARKETING IN ITA NO. 970/2008 DATED 2.4.2014 (P&H HC) E) HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS CORRTECH ENERGY PVT LTD REPORTED IN 223 TAXMAN 130 (GUJ) F) HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SHIVAM MOTORS PVT LTD IN ITA NO. 88 OF 2014 (ALL HC) G) HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS IL & FS ENERGY DEVELOPMENT CO LTD (2017) 399 ITR 483 (DEL) 11 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 11 11.1. HENCE RESPECTFULLY FOLLOWING THE RATIO LAID D OWN IN THE AFORESAID DECISIONS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD CITA DELET ING THE DISALLOWANCE U/S 14A OF THE ACT IN THE SUM OF RS 74,18,344/-. ACCORDINGLY, THE GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 11.2. WITH REGARD TO DISALLOWANCE U/S 14A OF THE AC T MADE TOWARDS AGRICULTURE DIVISION IN THE SUM OF RS 21,13,761/- , WE FIND THAT THE ASS ESSEE HAD PROVIDED SEGMENTAL ANNUAL STATEMENT OF ACCOUNTS FOR EACH OF ITS DIVISIONS. T HE ASSESSEE HAD CLAIMED AGRICULTURAL INCOME OF RS 1,77,23,438/- AS EXEMPT AFTER REDUCING THE EXPENDITURE ATTRIBUTABLE TO AGRICULTURE DIVISION FROM THE GROSS RECEIPTS OF AGR ICULTURE DIVISION. THE ASSESSEE HAD NOT CLAIMED EXEMPTION TOWARDS AGRICULTURAL INCOME ON IT S GROSS RECEIPTS. IT HAD CLAIMED EXEMPTION U/S 10(1) OF THE ACT ONLY FOR THE NET AGR ICULTURAL INCOME. HENCE WE HOLD THAT THERE IS NO NEED TO TAKE INTO ACCOUNT ANY DIRECT OR INDIRECT EXPENSES OF THE AGRICULTURE DIVISION AND APPLY THE PROVISIONS OF SECTION 14A OF THE ACT THEREON. WE HOLD THAT THE LD CITA HAD RIGHTLY DELETED THE DISALLOWANCE U/S 14A O F THE ACT IN THE SUM OF RS 21,13,761/- WHICH DOES NOT CALL FOR ANY INTERFERENC E. ACCORDINGLY, THE GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 16.11.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 16.11.2018 SB, SR. PS 12 ITA NO.461/KOL/2017 M/S KHAITAN INDIA LTD. A.YR. 2013-14 12 COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-11(1), KOLKATA, P-7, CHOWRINGHEE SQ UARE, KOLKATA-700069. 2. M/S KHAITAN INDIA LTD., 46C, J.L. NEHRU ROAD, E VEREST HOUSE, 18 TH FLOOR, KOLKATA- 700071. 3..C.I.T.(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER A SSISTANT REGISTRAR ITAT , KOLKATA BENCHES