DCIT, Circle -1, Kolkata, Kolkata V. M/s G.V.N.Fuels Ltd., Howrah

ITA 562/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7917 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Court: TRIBUNAL
• Department Lawyers: K K DAS
• Assessee Lawyers: MANOJ LOHIA
• Section: 143(3); 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () , , !' ] ]] ] [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SANJAY AROR A AM] $ $ $ $ /ITA NO.562/KOL/2012 %& '(/ ASSESSMENT YEAR : 2007-08 (*+ / APPELLANT ) - % - ( -.*+ /RESPONDENT) D.C.I.T., CIRCLE-I, -VERSUS- M/S.G.V.N.FUELS LTD . KOLKATA KOLKATA (PAN : AAACG 9200 D ) *+ / 0 !/ FOR THE APPELLANT: SHRI K.K.DAS -.*+ / 0 !/ FOR THE RESPONDENT: SHRI MANOJ LOHIA 1%2 / 3' /DATE OF HEARING : 09.08.2012. 4' / 3' /DATE OF PRONOUNCEMENT : 09.08.2012. !5 / ORDER IMMEDIATELY UPON CONCLUSION OF HEARING OF THIS APPE AL ON 9 TH AUGUST, 2012, THE BENCH PASSED THE FOLLOWING ORDER : 9 TH AUGUST, 2012 REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN OP EN COURT. DETAILED ORDER WILL FOLLOW. PER BENCH THIS APPEAL OF THE REVENUE IS ARISING OUT OF ORDER OF THE CIT(A)-KOLK ATA IN APPEAL NO.574/CIT(A)-I/CIRCLE-1/2009-10 DATED 14.12 .2011. ASSESSMENT WAS FRAMED BY ADDL. COMMISSIONER OF INCOME-TAX, RANGE-1, KOLKA TA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR A.YR. 2007-08 VIDE ITS ORDER DATED 31.12.2009. 2. THERE IS A DELAY OF 30 DAYS IN FILING OF THE APPEAL BY THE REVENUE FOR WHICH THE REVENUE HAS FILED A CONDONATION PETITION EXPLAINING THE REASONS FOR SUCH DELAY. AFTER CONSIDERING THE SUBMISSIONS BY THE REVENUE THE DELA Y IS CONDONED. 2 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF LD. CIT(A) REDUCING THE DISALLOWANCE TO THE EXTENT OF RS.54,31 ,492/- MADE BY AO U/S 14A OF THE ACT AT RS.1,58,60,941/-. FOR THIS THE REVENUE HAS R AISED THE FOLLOWING EFFECTIVE GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD.CIT(A) HAS ERRED IN REDUCING THE AMOUNT OF DISALLOWANCE TO THE EXTENT O F RS.54,31,492/-. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD.CIT(A) HAS ERRED IN FOLLOWING THE DECISION OF HONBLE HIGH COURT IN THE CASE OF ISG TRADERS LTD. AND DIRECTED THE AO TO CALCULATE THE DISALLOWANCES IN T HE LIGHT OF THE ABOVE DECISION. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF STATED FACTS ARE THAT THE AO FRA MED ASSESSMENT U/S 143(3) OF THE ACT AND MADE DISALLOWANCE OF INTEREST ON THE AMOUNTS IN VESTED IN EXEMPTED INCOME I.E. IN ORDER TO EARN DIVIDEND INCOME BY INVOKING THE PROVI SION OF SECTION 14A OF THE ACT R.W.S. RULE 8D OF IT RULES, 1962. THE ASSESSEE IS E NGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND ALSO MADE INVESTMENT IN SHAR ES AND SECURITIES. THE ASSESSEE BORROWED FUNDS IN BOTH THE ACTIVITIES. THE AO DISAL LOWED THE ENTIRE INTEREST EXPENDITURE OF RS.1,58,60,941/- BY INVOKING SECTION 14A OF THE ACT R.W.S. RULE 8D OF IT RULES. ASSESSEES OBJECTION WAS THAT THE AO MADE DISALLOWANCE WITHOUT SHOWING ANY NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN SHARE AND SECURITIES FROM WHICH ASSESSEE EARNED DIVIDEND INCOME AT RS.1,98,87 ,005/-. AS AGAINST THE DISALLOWANCE THE LD. CIT(A) FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LTD. VS CIT, WB-II , KOLKATA (I.T.A. NO.264 OF 2003- 2011-TIOL-621-HC-KOL-IT) DIRECTED THE AO TO RESTRIC T DISALLOWANCE AT RS.54,31,492/- BY GIVING THE FOLLOWING FINDINGS IN PARAS 6.2, 6.3. AND 7 : 6.2. THUS THE A.O. HAS RIGHTLY INVOKED THE PROVI SIONS OF SECTION 14A OF THE IT ACT. THE BASIS OF THE DISALLOWANCES HAS TO BE WORKED OUT AS PER THE PRO-RATA INTEREST EXPENDITURE AS RELATABLE TO EARNING OF DIVIDEND INC OME AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LTD. VS. CIT, WB-I L, KOLKATA (L.T.A NO.264 OF 2003 201 1-TIOL-621-HC- KOL-IT). 6.3 RESPECTFULLY, FOLLOWING THE JUDGEMENT OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LTD. VS. CIT, WB-LL, KOLKATA (SUPRA) , THE DISALLOWANCES OF PRO-RATA INTEREST IS TO BE MADE. 7. ON THE BASIS OF APPROACH APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT THE PRO- RATA INTEREST AS SUBMITTED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS IS WORKED OUT TO BE AT RS.37,39,625/- WHICH SHOULD BE DISALLO WED BUT AS THE APPELLANT HAS ITSELF ACCEPTED RS.54,31,492/- DURING ASSESSMENT PROCEEDIN GS THE DISALLOWANCE SHOULD BE AT 3 RS. 54,31,492/-. THUS, THE DISALLOWANCES OF PRO-RAT A INTEREST IN LINE WITH ISG TRADERS LTD.SUPRA) BY APPELLANT IS HELD TO BE PROPER. THE A PPELLANT GETS RELIEF ON THIS ISSUE. WE FIND THAT THE MAIN GRIEVANCE OF THE REVENUE IS A GAINST THE ORDER OF LD. CIT(A) IS THAT HE HAS FOLLOWED THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT AND WHEN THIS WAS PUT TO SR.CIT(DR) HE FAIRLY CONCEDED THE POSITI ON. WE FIND THAT THE CIT(A) HAS WORKED OUT PRO-RATA INTEREST RELATABLE TO EARNING O F DIVIDEND INCOME AND ACCORDING TO HIM THE DISALLOWANCE OF RS.54,31,492/- WHICH THE AS SESSEE HIMSELF HAS ACCEPTED DURING THE ASSESSMENT PROCEEDINGS IS IN ACCORDANCE WITH THE PROVISIONS OF LAW. IN SUCH CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF ISG TRADERS LTD. VS CIT,WB-II, KOLKATA (SUPRA). WE CONFIRM THE ORDER OF LD.CIT(A) AND DISMISS THE APPEAL OF REVENUE. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08.2012. SD/- SD/- [ , !' ] [ , ] [ SANJAY ARORA ] [ MAHAVIR SI NGH ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( (3' 3' 3' 3') )) ) DATE: 09.08.2012. R.G.(.P.S.) !5 / -6 7!6'8- COPY OF THE ORDER FORWARDED TO: 1. M/S.G.V.N.FUELS LTD., 109/1, GIRISH GHOSH ROAD, BEL UR MATH, HOWRAH- 711202, WEST BENGAL. 2 THE D.C.I.T., CIRCLE-I, KOLKATA 3. THE CIT, 4. THE CIT(A)-I, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA .6 -/ TRUE COPY, !5%1/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 4