M/s Merino Exports Pvt. Ltd., Kolkata V. DCIT, Cir. 12(1), Kolkata

ITA 534/KOL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4901 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-02-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 15-10-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA JCITSRDR
• Assessee Lawyers: SHAYAM SUNDAR JHA
• Keywords: Condonation of delay; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER . / ITA NO.534/KOL/2020 ASSESSMENT YEAR:2012-13 M/S MERINO EXPORTS PVT. LTD. 5, ALEXANDRA COURT, 60/1 CHOWRINGHEE ROAD, KOLKATA-700 0201 [ PAN NO.AABCM 5670 N ] / V/S . DY. COMMISSIONER OF INCOME TAX, CIRCLE- 12(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SHAYAM SUNDAR JHA, C.A /BY RESPONDENT SHRI JAYANTA KHANRA, JCIT-SR-DR /DATE OF HEARING 08-02-2021 /DATE OF PRONOUNCEMENT 08-02-2021 /O R D E R THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 27.02.2020 OF THE COMMISSIONER OF INCOME-TAX (APPEA LS)-20, KOLKATA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE PRESENT APPEAL IS BARRED BY LIMITATION PERIO D OF 171 DAYS. A SEPARATE APPLICATION FOR CONDONATION OF DELAY HAS BEEN FILED BY THE ASSESSEE EXPLAINING THAT DUE TO RESTRICTIONS IMPOSED BECAUSE OF COVID-19 PANDEMI C, THE ASSESSEE COULD NOT FILE THE APPEAL IN TIME. IN VIEW OF THE REASONS EXPLAINED AN D CONSIDERING THE CIRCUMSTANCES IN THE PANDEMIC SITUATION OF COVID-19, I CONDONE THE D ELAY IN FILING THE PRESENT APPEAL. CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. ITA NO.534/KOL/2020 A.Y.2012-13 M/S MERINO EXPORTS PVT. LTD. VS. DCIT, CIR-12 (1), KOL. PAGE 2 3. THE SOLE ISSUE RAISED IN THIS APPEAL IS REGARDIN G THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) R.W. RULE 8D OF INCOME TAX RULES, 1962. 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF TAX EXE MPT INCOME. THAT THE ASSESSEE HAD MADE OLD INVESTMENTS IN ITS SISTER CONCERN FROM WHI CH THE DIVIDED INCOME HAS BEEN RECEIVED. THE INVESTMENTS WERE MADE OUT OF ITS OWN FUNDS BY THE ASSESSEE. THAT EVEN NO ADMINISTRATIVE EXPENDITURE HAS BEEN INCURRED ON MAKING THESE INVESTMENTS AS NO NEW INVESTMENT WAS MADE DURING THE YEAR. THAT THE A SSESSING OFFICER, WITHOUT CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, HAS MADE THE DISALLOWANCE IN MECHANICAL MANNER BY STRAIGHTWAY APPLYING THE PROVI SION OF RULE 8D OF THE IT RULES AND EVEN WITHOUT EXAMINING THE ACCOUNTS OF THE ASSE SSEE. 5. LD. DR ON THE OTHER HAND, HAS RELIED ON THE FIND INGS OF THE LOWER AUTHORITIES AND HAS SUBMITTED THAT ASSESSEE HAS EARNED SUFFICIE NT DIVIDEND INCOME, THEREFORE, THE DISALLOWANCE HAS BEEN RIGHTLY MADE BY THE ASSESSING OFFICER AS PER THE RELEVANT STATUTORY PROVISIONS. 6. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. THOUGH, THE LD. DR HAS RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES, HO WEVER, HE CANNOT REBUT THE FACT THAT THE INVESTMENTS MADE WERE OLD INVESTMENTS AND NO NE W INVESTMENT HAS BEEN MADE DURING THE YEAR. THAT EVEN THERE IS NO CHURNING OF THE PORTFOLIOS. THE INVESTMENTS HAD BEEN MADE IN THE SISTER CONCERN OF THE ASSESSEE LON G TIME BACK FROM WHICH THE ASSESSEE HAS BEEN REGULARLY GETTING DIVIDEND INCOME . CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES, IN MY VIEW LD ASSESSING OFFICER SHOU LD NOT HAVE APPLIED THE PROVISION OF RULE 8D IN A MECHANICAL MANNER. HE WAS SUPPOSED TO FIRST CONSIDER THE SUBMISSION OF THE ASSESSEE, CO-RELATE THE SAME WITH THE ACCOUN TS OF THE ASSESSEE AND IF HE DOES NOT GET SATISFIED WITH THE SUBMISSION OF THE ASSESSEE, ONLY THEN HE SHOULD HAVE INVOKED THE PROVISIONS OF RULE 8D OF THE IT RULES. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THIS CASE, IN MY VIEW, THE INTEREST OF JUSTICE WILL BE WELL SERVED IF THE DISALLOWANCE U/S 14A IS RESTRICTED TO RS.1,00,000/- IN THIS CASE ON ACCOUNT OF ADMINISTRATIVE ITA NO.534/KOL/2020 A.Y.2012-13 M/S MERINO EXPORTS PVT. LTD. VS. DCIT, CIR-12 (1), KOL. PAGE 3 EXPENDITURE. HOWEVER, NO DISALLOWANCE OF INTEREST E XPENDITURE IS WARRANTED IN THIS CASE AS THE ASSESSEE HAS NOT MADE ANY NEW INVESTMEN T DURING THE YEAR AND THE OLD INVESTMENTS HAD BEEN MADE OUT OF AT ITS OWN FUND BY THE ASSESSEE. IN VIEW OF THE ABOVE OBSERVATION, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER DICTATED AND PRONOUNCED IN OPEN COURT IMMEDIA TELY ON COMPLETION OF HEARING ON MONDAY, 8 TH FEBRUARY, 2021 SD/- (SANJAY GARG) JUDICIAL MEMBE R *DKP/SR.PS ' - 08/02/2021 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S MERINO EXPORTS PVT. LTD., 5, ALEXAND RA COURT, 60/1 CHOWRINGHEE R OAD, KOLKAATA-700 020 2. /RESPONDENT-DCIT, CIR-12(1), AAYAKAR BHAWAN, P-7, C HOWRINGHEE SQUARE, KOLKAT A-69 3. % ' / CONCERNED CIT 4. ' - / CIT (A) 5. ( ++% , % / DR, ITAT, KOLKATA 6. - / GUARD FILE. BY ORDER/ , /TRUE COPY/ %,