DCIT, Circle - 1, Kolkata, Kolkata V. M/s. Vrindavan Services Pvt. Ltd., Howrah

ITA 56/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48251 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2011
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2011
• Court: TRIBUNAL
• Department Lawyers: R K SAHA
• Section: 14A

Judgement Text

, C , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C , CALCUTTA () BEFORE , SHRI MAHAVIR SINGH,, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , , , , '# , ,, , SHRI C.D. RAO, ACCOUNTANT MEMBER. $ $ $ $ / ITA NO. 56/ KOL/2011 %& '(/ ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1,KOLKATA M/S. VRINDAVAN SERVICES PVT. LTD. PAN: AAACV 8987C (*+ / APPELLANT ) - % - - VERSUS -. (-.*+/ RESPONDENT ) *+ / 0 '/ FOR THE APPELLANT: / SHRI R.K.SAHA, DR -.*+ / 0 '/ FOR THE RESPONDENT: / SHRI SUBHAS AGARWAL, AR '1 / ORDER . .. . ! ! ! !. .. . , , , , '# , ,, , SHRI C.D.RAO, ACCOUNTANT MEMBER.: REVENUE HAS FILED THIS APPEAL AGAINST ORDER DATED 27-09-2010 OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FOR THE ASSES SMENT YEAR 2007-08. 2. THE ONLY GROUND RAISED BY THE REVENUE IS AS UND ER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING TO RESTRICT THE DISALLO WANCE U/S.14A OF THE I.T. ACT THE EXTENT OF 1% OF THE DIVIDEND INCOM E WITHOUT CONSIDERING THE INTEREST ON LOAN WHICH IS DIRECTLY AND PROXIMATELY RELATED TO EARNED EXEMPTED INCOME BEING DIVIDED AND WITHOUT CONSIDERING THE PRINCIPLES LAID DOWN IN RULE 8D OF THE I.T RULES. 3. BRIEF FACTS OF THE CASE ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD EARNED DIVIDEND INC OME OF RS.30,97,71,574/- AND CLAIMED THE SAME AS INCOME NOT FORMING PART OF TOTAL INCOME AS PER PROVISIONS OF SECTIONS 10(34) OF THE I.T.ACT61 AND THE ASSESSEE HAS DISALLOWED THE AMOU NT OF RS.1,91,43,587/- U/S.14A AS UNDER:- ITA NO.56/KOL/2011-C-CDR 2 S.NO. DETAILS CALCULATION AMOUNT(RS.) 1. LOAN FROM JINDAL SOUTH WEST HOLDINGS LTD. 8% ON 275,00,000 FOR 7 MONTHS 10% ON 275,00,000 FOR 5 MONTHS 12,83,333 11,45,833 2. LOAN FROM INFRASTRUCTURE LEASING & FINANCIAL SERVICES PROPORTIONATE AMOUNT OF INTEREST ON LOANS USED FOR PURCHASE OF INVESTMENTS +1,68,33,561X9,39,87,904/2,000 0,000 63,28,604 3. LOANS FROM SICOM LTD PROPORTIONATE AMOUNT OF INT EREST ON LOANS USED FOR PURCHASE OF INVESTMENTS =1,60,34,248X X 11,61,00,000/22,00,00,000 84,61,710 4. LOAN FROM DSP MERRILL LYNCH CAPITAL LTD PROPORTIONATE AMOUNT OF INTEREST ON LOANS USED FOR PURCHASE OF INVESTMENT =74,44,521 X2,21,10,080/10,00,00,000 16,45,990 LOAN: (275,00,000 +25,00,00,000 + 22,00,00,000+10, 00,00,000= 59,75,00,000) INTEREST:12,83,333+11,45,833+1,68,33,561+1,60,34,24 8+74,44,521= 4,27,41,496 1,88,65,470 DEMAT CHARGES 2,78,117 TOTAL DISALLOWANCE 1,91,43,587 4. HOWEVER, THE LEARNED ASSESSING OFFICER HAS WORKE D THE DISALLOWANCE TO BE MADE U/S.14A AT RS.4,51,04,859/-. 5. ON APPEAL THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS RESTRICTED THE DISALLOWANCE TO 1% OF THE DIVIDEND INCOME BY OBSERV ING AS UNDER:- IT IS CLEAR THAT THE CONTROVERSY OF SEC 14A UPTO T HE ASSESSMENT YEAR 2006- 2007 IS COVERED BY THE JUDGMENT PASSED BY THE HON BLE HIGH COURT OF MUMBAI IN GODREJ & BOYCE MFG. CO. LTD, MUMBAI (APPE LLANT) VS. DY. COMMISSIONER OF INCOME-TAX, RANGE 10(2), MUMBAI & A NR. RESPONDENT, W.P 758/10. THE DECISIONS OF THE HONBLE ITAT (KOLK ATA) IN THE CASE OF ITO, WARD 5(3), KOLKATA (APPELLANT) VS. M/S. B.P.S SECURITIES (P) LTD (REPONDENT) AND M/S. CIVIL ENGINEERS ENTERPRISES (P ) LTD (APPELLANT) VS.- DEPUTY COMMISSIONER OF INCOME-TAX (RESPONDENT) ALSO IMPINGES WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF ESTIMA TING EXPENSES U/S.14A, 1% OF DIVIDEND INCOME SHOULD BE DISALLOWED. THEREFO RE, FOLLOWING TO THE DECISION QUOTED ABOVE I RESTRICT THE DISALLOWANCE T O 1% OF THE DIVIDEND INCOME OF THE APPELLANT COMPANY I.E. RS.2,94,664/- ONLY INSTEAD OF RS. 3,88,88,827 ON ACCOUNT OF SECTION 14A. ITA NO.56/KOL/2011-C-CDR 3 6. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL B EFORE US. 7. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT THE LEARNED COMMISSIONE R OF INCOME-TAX (APPEALS) HAS ERRED IN APPLYING 1% OF DIVIDEND INCOME FOR THE IMPUGNED AS SESSMENT YEAR. THOUGH THE HONBLE BOMBAY HIGH COURT HAS CATEGORICALLY MENTIONED THAT THE PROVISIONS OF RULE 8D READ WITH SECTION 14A ARE APPLICABLE TO THE A.Y 2007-08 I. E FOR THE A.Y UNDER DISPUTE. THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO MAKE DISALLOWANCE U/S.14A READ WITH RULE 8D OF THE I.T RULES 1962 IN THE LIGHT OF THE GUIDELINES GIVEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO.LTD (2010) 328 ITR 81 (BOM) (SUPRA). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSE. '1 #2' 3 2% 4 5 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT.13- 07-2011 SD/- SD/- ( , ) (SHRI MAHAVIR SINGH), JUDICIAL MEMBER) ( . .. . ! ! ! !. .. . ) '# '# '# '# ) (C.D. RAO), ACCOUNTANT MEMBER ) ( (( (!# !# !# !#) )) ) DATE: 13-07-2011 '1 / -6 7'6'8 / COPY OF THE ORDER FORWARDED TO: 1. . *+ / THE APPELLANT : DCIT,CIR-1, 7 TH FL., AAYKAR BHAWAN, KOL-69. 2 -.*+ / THE RESPONDENT- M/S. VRINDAVAN SERVICES PVT.LTD 66/A G.T ROAD, LILUAH, HOWRAH-711204 3. 1% / THE CIT, 4. 1% ( )/ THE CIT(A), 5 . 94 -% / DR, KOLKATA BENCH 6 . GUARD FILE . .6 -/ TRUE COPY, '1%2/ BY ORDER, : / ASSTT REGISTRAR . *PRADIP* ;< %=: >