DCIT, CIR-5, KOLKATA, Kolkata V. M/s Pilani Investment and Industries Corpn. Ltd., Kolkata

ITA 497/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9541 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: A K GUPTA
• Keywords: Business income; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NO.497/KOL/2014 ( / ASSESSMENT YEAR: 2010-11) DCIT, CIR-5/KOL, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 VS. M/S PILANI INVESTMENT AND INDUSTRIES CORPORATION LTD., BIRLA BUILDING, 14 TH FLOOR, 9/1, R.N.MUKHERJEE ROAD, KOLKATA-700001 ./ ./PAN/GIR NO.: AABCP 7642 R ( /APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI RAJAT KUMAR KUREEL, JCIT, SR.D R ASSESSEE BY : SHRI A.K.GUPTA, FCA / DATE OF HEARING : 05/01/2017 /DATE OF PRONOUNCEMENT 13/01/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINI NG TO THE ASSESSMENT YEAR 2010-2011, IS DIRECTED AGAINST THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA, I N APPEAL NO.67/12- 13/CIT(A)-VI/CIR-5/KOL, DATED 06.12.2013, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO), UNDER S ECTION 143(3) OF THE INCOME TAX ACT 1961, (IN SHORT THE ACT), DATED 30 .01.2013. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF INVESTMENT H OLDING COMPANY. IT FILED ITS RETURN OF INCOME ON 06.10.2010 DECLARI NG TOTAL INCOME OF RS.73,00,020/-. ASESSEES CASE WAS SELECTED FOR SCR UTINY U/S.143(3) AND THE AO HAS COMPLETED THE ASSESSMENT MAKING DISALLOW ANCE OF RS.2,47,04,283/- U/S.14A R.W.RULE 8D OF THE I.T.RUL ES. ITA NO.497/14 M/S PILANI INVESTMENT AND INDUSTRIES CORPORATION LT D. 2 3. AGGRIEVED FROM THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS DELETED THE ADDITION SO MADE BY THE AO AFTER HAVING THE FOLLOWING OBSERVATIONS :- 8.2 I HAVE CONSIDERED THE FACTS OF THE CASE. AS MEN TIONED EARLIER, THE APPELLANT HAD, IN ITS RETURN, ITSELF OFFERED AN AMOUNT OF RS.72,69,153/- AS DISALLOWANCE U/S 14A. THE ASSESSI NG OFFICER HAS, HOWEVER, MADE DISALLOWANCE BY INVOKING RULE 8D. THE SAID RULE HAS BEEN FRAMED WITH REFERENCE TO SUB-SECTION (2) O F SECTION 14A WHICH READS AS UNDER:- 'THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT O F EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REG ARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH COR RECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITUR E IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT.' THUS, THE ASSESSING OFFICER IS REQUIRED TO DETERMIN E EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME IN ACCORDANCE WITH THE PRESCRIBED METHOD, I.E. RULE 8D, ONLY IF HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SEVERAL JUDICIAL RULINGS, INCLUDING TH AT OF THE JURISDICTIONAL BENCH OF TRIBUNAL IN THE CASE OF ASH ISH- JHUNJHUNWALA, ITA NO. 1809/KOL/2012, ALSO SUPPORT THIS PROPOSITIO N. RECORDING OF SUCH SATISFACTION DOES NOT MEAN ONLY A GENERAL MENT ION REGARDING NON-SATISFACTION BUT ALSO SOME REASONING, EVEN IF O N PRIMA FACIE BASIS, FOR THE SAME. 8.3 THOUGH THE ASSESSING OFFICER HAS MENTIONED THAT HE WAS NOT SATISFIED WITH CLAIM OF THE APPELLANT, HE HAS STATE D SO IN A VERY GENERAL MANNER AND NOT DISPROVED THE CLAIM OF THE A PPELLANT. THE ONLY JUSTIFICATION GIVEN BY HIM IS THAT THE EXPLANA TION GIVEN BY THE APPELLANT WAS NOT LOGICAL, REASONABLE AND MEETING T HE INTENTION OF LAW. HE HAS ALSO STATED, THAT THE DISALLOWANCE OFFE RED WAS ON ESTIMATE BASIS, WHICH, AS SHALL BE DISCUSSED LATER, IS FACTUALLY INCORRECT. 8.4. AS THE CLAIM OF THE APPELLANT IN RESPECT OF TH E EXPENSES RELATING TO EXEMPT INCOME HAS NOT BEEN EXAMINED PROPERLY BY THE ASSESSING OFFICER, THE SAME HAS BEEN EXAMINED BY TH E UNDERSIGNED. IT IS SEEN, THAT OUT OF THE EXPENSES D EBITED IN THE P&L A/C, THE APPELLANT HAS ADDED BACK, IN ITS COMPUTATI ON OF BUSINESS INCOME, THE EXPENSES RELATING TO RENTAL INCOME. THE REAFTER, ALL OTHER EXPENSES WHICH WERE NOT RELATED TO RENTING OF PROPE RTIES HAVE BEEN FULLY DISALLOWED U/S 14A OF THE I.T ACT, 1961 BY TH E APPELLANT. THUS, THERE REMAINS NO OTHER EXPENSE, WHICH CAN BE DISALL OWED. IT MAY BE MENTIONED THAT THE ISSUE WAS ALSO INVOLVED IN TH E IMMEDIATELY ITA NO.497/14 M/S PILANI INVESTMENT AND INDUSTRIES CORPORATION LT D. 3 PRECEDING YEAR I.E. AY: 2009-10 AND HENCE CAME UP I N APPEAL NO. 143/CIT(A)-VI/CIR-5/11-12/KOL. WHILE DECIDING THE S AID APPEAL, MY ID. PREDECESSOR, VIDE HIS ORDER DATED 21.06.2012, H AS GIVEN THE FOLLOWING FINDINGS IN PARA 9 OF THE ORDER- 'THEREFORE, I AM SATISFIED THAT ALL THE EXPENSES IN CURRED BY THE APPELLANT AGAINST EARNING OF DIVIDEND INCOME, I NTEREST INCOME HAVE BEEN DISALLOWED AND NO OTHER EXPENSES U NDER RULE 8D READ WITH SECTION 14A OF THE I.TACT, 1961 C AN BE DISALLOWED. ' THE FACTS IN THE YEAR UNDER CONSIDERATION ARE IDENT ICAL. THEREFORE, FOLLOWING THE REASONING OF MY ID. PREDECESSOR AND C ONSIDERING THAT THE APPELLANT HAS ALREADY DISALLOWED ALL THE EXPENS ES RELATING, DIRECTLY OR INDIRECTLY, TO THE EXEMPT INCOME, IT IS HELD, THAT NO FURTHER DISALLOWANCE UNDER RULE 8D IS REQUIRED TO BE MADE. CONSIDERING THIS, THE FURTHER DISALLOWANCE OF RS. 2,47,04,283/- MADE BY THE ASSESSING OFFICER IS DELETED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US, AND HAS TAKEN THE FOLLOWING GROUN DS OF APPEAL :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE CIT(A) ERRED IN HOLDING THAT FURTHER DISALLOWANCE U/S14A O F RS.2,47,04,238/- IN ADDITION TO SUO-MOTO DISALLOWAN CE OF RS.72,69,153/- WAS NOT WARRANTED, IGNORING THE FACT THAT IN VIEW OF CBDT CIRCULAR NO. 5/2014 AND DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ITO VS CHEMINVEST LTD. WHEREIN IT WAS HELD THAT EVEN IF IN ANY PARTICULAR YEAR THE ASSESSEE HA S NOT RECEIVED ANY EXEMPT INCOME, DISALLOWANCE CAN BE MADE U/S 14A READ WITH RULE 8D. 2 THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. 5. LD. DR FOR THE REVENUE SUBMITTED BEFORE US THAT ONCE THE ASSESSEE HAS FAILED TO ESTABLISH HIS EXPLANATION TH EN THE ONLY COURSE PERMISSIBLE FOR WORKING OUT THE AMOUNT OF DISALLOWA BLE IS APPLICATION OF RULE 8D. IN CBDT CIRCULAR NO. 5/2014 IT IS CLEARLY MENTIONED THAT EVEN IF IN ANY PARTICULAR YEAR THE ASSESSEE HAS NOT RECEIVE D ANY EXEMPT INCOME, DISALLOWANCE CAN BE MADE U/S 14A READ WITH RULE 8D. THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE SAME U/S.14A READ WITH R ULE 8D. ITA NO.497/14 M/S PILANI INVESTMENT AND INDUSTRIES CORPORATION LT D. 4 5.1. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE HAS STATED THAT DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT EX CEED THE TOTAL EXPENSES INCURRED BY THE ASSESSEE AND DEBITED IN PR OFIT AND LOSS ACCOUNT. BESIDES, THE CBDT CIRCULAR CITED BY THE LD DR FOR T HE REVENUE DOES NOT APPLY TO HIM. 5.2. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF LD. AR FOR THE ASSESSEE, AS THE PROPOSITION CANVASSED BY LD. AR FO R THE ASSESSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. FROM THE RECORD WE FOUND THAT THE LD. CIT(A) WHILE DEALING WITH THE VERY SAM E ISSUE, DELETED THE ADDITION SO MADE BY THE AO RELYING ON ITS EARLIER A PPELLATE ORDER PASSED BY HIS LD. PREDECESSOR, AS ALL THE EXPENSES INCURRE D BY THE ASSESSEE ARE AGAINST EARNING OF DIVIDEND INCOME, INTEREST INCOME HAVE BEEN DISALLOWED AND NO OTHER EXPENSES UNDER RULE 8D READ WITH SECTI ON 14A OF THE I.TACT, 1961 CAN BE DISALLOWED. THEREFORE, CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A JU ST AND PROPER ORDER AND OUR INTERFERENCE IS NOT CALLED FOR. ACCORDINGLY, WE CONFIRM THE SAME. 5.3. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13/0 1/2017. SD/ - (A.T.VARKEY) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 13/01/2017 ' $%& /PRAKASH MISHRA , 0 . / PS ITA NO.497/14 M/S PILANI INVESTMENT AND INDUSTRIES CORPORATION LT D. 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-DCIT, CIR-5, KOLKATA 2. / THE RESPONDENT.- M/S PILANI INVESTMENT & INDUSTRIES CORP.LTD 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//