Allahabad Bank, Kolkata V. D.C.I.T Cir - 6,kolkata., Kolkata

ITA 466/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5142 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 08-03-2013
• Court: TRIBUNAL
• Department Lawyers: S S ALAM JCITSR
• Assessee Lawyers: B K GHOSH; PIJUSH DEY FCAS LD ARS
• Keywords: Earning of tax free income; Retrospective amendment
• Section: 143(3); 14A

Judgement Text

ITA NO. 466/KOL/2013-A-AM ALLAHABAD BANK 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI N.VASUDEVAN, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 466/KOL/2013 A.Y 2002-03 ALLAHABAD BANK VS. DCIT, CIRCLE-6, KOLKATA PAN: AACCA8464F (APPELLANT) (RESPONDENT) FOR THE APPELLANT/ASSESSEE: S/SHRI B.K GHOSH & PIJUSH DEY, FCAS, LD.ARS FOR THE RESPONDENT/DEPARTMENT: SHRI S.S ALAM, JCIT/SR.DR DATE OF HEARING: 09-12 -2015 DATE OF PRONOUNCEMENT: 13 -01-2 016 ORDER SHRI M.BALAGANESH, AM : THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORD ER OF THE LEARNED CIT(A)-VI, KOLKATA IN APPEAL NO. 06/CIT(A)-VI/CIR-6/11-12/KOL DATED 24-12-2012 FOR THE ASST YEAR 2002-03 PASSED AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE IN THE SUM OF RS. 8,89,18,716/-. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE HAD DERIVED THE FOLLOWING EXEMPT INCOME :- DIVIDEND INCOME 14,89,69,574 INTEREST ON TAX FREE SECURITIES 3,86,70,000 ITA NO. 466/KOL/2013-A-AM ALLAHABAD BANK 2 ------------------ 18,76,39,574 THE ASSESSEE VOLUNTARILY DISALLOWED A SUM OF RS. 19 ,44,035/- U/S 14A OF THE ACT FOR THE ASST YEAR 2002-03. THE LEARNED AO ADOPTED RUL E 8D OF THE RULES AND MADE DISALLOWANCE U/S 14A OF THE ACT TO THE TUNE OF RS. 8,89,18,716/-. ON FIRST APPEAL, THE LEARNED CITA RESTRICTED THE DISALLOWANCE U/S 14A OF THE ACT TO THE TUNE OF RS. 1,39,49,000//- BEING 0.5% OF AVERAGE VALUE OF INVES TMENTS BY ADOPTING RULE 8D(2)(III) OF THE RULES. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) - VI, KOL HAS ERRED IN CONFIRMING THE APPLICATION OF PROVISIONS OF RULE 80 READ WITH SECTION 14A(2) OF T HE INCOME TAX ACT, 1961 WITHOUT BRINGING ON RECORD ANY COGENT REASONS FOR DISREGARDING AND REJECTING THE ESTIMATE INCLUDING THE MANNER OF MAKING ESTIMATE OF DISALLOWANCES AMOUNTING TO RS.19,44,035 OFFERED BY THE APPELLANT BANK ITSELF. 2. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEAL) - VI, KOL HAS ERRED IN DIRECTING THE L EARNED ASSESSING OFFICER TO CONSIDER RS.1 ,39,49,000, BEING 0.5% OF THE TAX FREE INVESTMENT, AS AMOUNT DISALLOWABLE UNDER SECTION 14 A. 3. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEAL) - VI, KOL HAS ERRED IN DISREGARDING TH E DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MANUFACTURING COMPANY LTD. [(2010) 328 ITR 81 (BOM) ] IN WHICH IT WAS HELD THAT RULE 80 SHALL BE APPLICABLE FROM ASSE SSMENT YEAR 2008- 09 ONWARDS. 4. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) - VI, KOL HAS ERRED IN RESTRICTING TH E DISALLOWANCES UNDER SECTION 14A TO RS. 1,39,49,000 INSTEAD OF RS. 19,44,035 OFFERED BY THE APPELLANT BANK WHICH IS MOST REASONABLE EXPE NSES IN RELATION TO EARNING OF TAX-FREE INCOME. 5. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) - VI, KOL HAS ERRED IN DISREGARDING T HE ORDER OF LEARNED CIT(A) - VI, KOL IN RESPECT OF ASSESSMENT Y EAR 2007-08 IN THE APPELLANT'S OWN CASE (APPEAL NO. 1 014/CIT(A)-VI/20 09-1 0/CIR- 6/KOL AND ORDER DATED 15.11.2010) IN WHICH 1 % OF T HE TAX-FREE ITA NO. 466/KOL/2013-A-AM ALLAHABAD BANK 3 INCOME WAS HELD TO BE REASONABLE EXPENSES FOR THE P URPOSE OF DISALLOWANCES UNDER SECTION 14A. 6. THAT, ON FACTS AS WELL AS ON LAW, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) - VI, KOL HAS ERRED IN DISALLOWING 0. 5% OF TAX FREE INVESTMENTS UNDER SECTION 14A IN TOTAL DISREGARD OF MANY JUDICIAL PRONOUNCEMENTS OF HON'BLE ITAT, KOLKATA IN WHICH HO N'BLE ITAT, KOLKATA HELD THAT 1 % OF TAX-FREE INCOME SHALL BE H ELD AS AMOUNT OF DISALLOWANCES U/S 14A IN RELATION TO EARNING OF TAX -FREE INCOME. 7. THAT, YOUR APPELLANT BEGS YOUR LEAVE TO URGE AN Y ADDITIONAL GROUND OR MODIFY ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. THE LEARNED AR ARGUED THAT FOR THE ASST YEAR 2002-03, THE PROVISIONS OF RULE 8D CANNOT BE MADE APPLICABLE AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LT D REPORTED IN 328 ITR 81 (BOM) A ND THE SAME IS APPLICABLE ONLY FROM ASST YEAR 2008- 09 ONWARDS. HE FURTHER ARGUED THAT THIS ISSUE IS COVERED BY THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF R.R.SEN & BROS PVT LTD WHEREIN IT WAS HELD THAT 1% OF EXEMPT INCOME IS TO BE ADOPTED FOR THE PURPOSE OF DISALLOW ANCE U/S 14A OF THE ACT. IN RESPONSE TO THIS, THE LEARNED DR VEHEMENTLY SUPPORT ED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE RELEVANT ASSESSMENT YEAR UNDER APPEAL IS 2002-03 AT WHICH POINT OF TIME , THE PROVISIONS OF RULE 8D WAS NOT IN FORCE AND THE SAME WAS MADE APPLICABLE ONLY FROM ASST YEAR 2008-09 AS DECIDED IN THE DECISION OF GODREJ & BOYCE MANUFACTURING COMPANY LTD IN 328 ITR 81 (BOM). HOWEVER, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD DERIVED TAXABLE INCOME AS WELL AS TAX FREE INCO ME AND INCURRED EXPENDITURE FOR DERIVING BOTH THE INCOMES AND HENCE DISALLOWANCE IS DEFINITELY WARRANTED IN TERMS OF SECTION 14A WHICH IS BROUGHT IN THE STATUTE BOOK WI TH RETROSPECTIVE EFFECT FROM 1.4.1962. THE DISALLOWANCE HAD TO BE MADE ONLY ON AN ESTIMATED BASIS WITH REGARD TO THE EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING TAX FREE INCOME. THE HONBLE ITA NO. 466/KOL/2013-A-AM ALLAHABAD BANK 4 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S R.R.SEN & BROTHERS P LTD IN GA NO. 3019 OF 2012 IN ITAT NO. 243 OF 2012 DATED 4 .1.2013 HAD HELD AS UNDER:- THE ASSESSEE DID NOT SHOW ANY EXPENDITURE INCURRE D BY HIM FOR THE PURPOSE OF EARNING THE MONEY WHICH IS EXEMPTED UNDE R INCOME TAX. THE TRIBUNAL HAS COMPUTED EXPENDITURE AT 1% OF SUCH DIV IDEND INCOME, WHICH, ACCORDING TO THEM, IS THE THUMB RULE APPLIED CONSIS TENTLY. WE FIND NO REASON TO INTERFERE. THE APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENT, WE D IRECT THE LEARNED AO TO DISALLOW 1% OF DIVIDEND INCOME UNDER THIS ISSUE AND ACCORDIN GLY, THE GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE TO THE FILE OF LEARNED AO TO MAKE ADDITION AS DIRECTED ABOVE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED SUBJECT TO DIRECTIONS CONTAINED HEREINABOVE. ORDER PRONOUNCED ON 13 . 01.2016 1. THE APPELLANT: ALLHABAD BANK 2 N.S ROAD, KOL-1. . 2 THE RESPONDENT-DY. COMMISSIONER OF INCOME-TAX, C IR-6 AAYKAR BHAVAN, P-7 CHOWRINGHEE SQ, KOL-69. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP/SPS SD/- ( N.V.VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE 13 /01/2016 COPY OF THE ORDER FORWARDED TO: