Modern Hi-Rise Pvt. Ltd., Kolkata V. DCIT, Cen.Cir.-2(1) , Kolkata

ITA 562/KOL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1445 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-02-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 06-11-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA
• Keywords: Rule 8D
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C - SMC KOLKATA BEFORE SHRI S ANJAY GARG , JUDICIAL MEMBER . / ITA NO. 5 62 /KOL/2020 ASSESSMENT YEAR: 20 1 2 - 13 MODERN HI - RISE PRIVATE LIMITED (MERGER COMPANY M/S. HIMADRI DYES& INTERMEDIATES LTD)23A NETAJI SUBHAS ROAD, 8 TH FL., SUITE NO.15, KOLKATA - 700 001. [ PAN NO. A AACH 7634Q ] / V/S . D.C.I.T,C.C - 2(1), KOLKATA / APPELLANT .. / RESPONDENT HEARING THROUGH VIDEO CONFERENCING / BY APPELLANT MR. RAVI TULSIYAN, FCA, AR / BY RESPONDENT MR. JAYANTA KHANRA, JCIT, SR.DR / DATE OF HEARING 10 - 02 - 2021 / DATE OF PRONOUNCEMENT 10 - 02 - 2021 / O R D E R TH E PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 2 1 - 10 - 20 20 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - 20 , KOLKATA [HEREINAFTER REFERRED TO AS CIT(A)] . 2. THE SOLE ISSUE RAISED IN THIS APPEAL IS RELATING TO THE CONFIRMATI ON OF THE DISALLOWANCE MADE BY LEARNED ASSESSING OFFICER [HEREINAFTER REFERRED TO AS LD. AO] UNDER SECTION 14A OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] READ WITH RULE 8D OF THE INCOME - TAX RULES 1962 [HEREINAFTER REFERRED TO A S THE RULES] ITA NO. 5 62 /KOL/20 A.Y 201 2 - 13 MODERN HI - RISE P.LTD. PAGE 2 I N RESPECT OF EXPENDITURE RELATABLE TO EARNING OF TAX EXEMPT DIVIDEND INCOME . 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. AO HAS NOT FOLLOWED THE PRESCRIBED PROCEDURE AS ENVISAGED IN THE PROVISIONS OF SECTION 14A OF THE INCOME - TAX ACT READ WITH RULE 8D OF THE I.T RULES . T HAT , THE ASSESSEE ITSELF COMPUTED THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES. CONSIDERING THE NEXUS BETWEEN THE INVESTMENTS AND THE EXPENDITURE ATTRIBUTABLE TO SUCH INVEST MENTS THE ASSESSEE MADE SUO MOTU DISALLOWANCE OF RS. 61,692/ - . HOWEVER, THE LD.AO WITHOUT FOLLOWING THE MANDATE OF THE STATUTE , COMPUTED THE DISALLOWANCE AT RS.69,32, 9 09/ - BY STRAIGHT WAY APPLYING THE FORMULA OF RULE 8D OF THE I.T RULES . THAT, AS PER PROVISIONS OF SECTION 14A OF THE ACT, THE LD. AO FIRSTLY WAS REQUIRED TO GO T HROUGH COMPUTATION MADE BY THE ASSESSEE IN RESPECT OF SUO MOTU DISALLOWANCE MADE/DISALLOWED BY THE ASSESSEE AND BEFORE APPLYING RULE 8D HE SHOULD HAVE RECORDED HI S DIS - SATISFACTION TO THE METHOD ADOPTED BY THE ASSESSEE FOR MAKING THE SUO MOTU DISALLOWANCE. 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND REITERATED THE SAME SUBMISSIONS. IT WAS ALSO CONTENDED BEFORE THE LD. CIT(A) THAT THE TOTAL EX PENDITURE CLAIMED BY THE ASSESSEE WAS AT RS. 39,10 , 766/ - , THEREFORE, THE DISALLOWANCE OF EXPENDITURE IN ANY MANNER C ANNOT EXCEED THE SAID AMOUNT. CONSIDERING THE ABOVE SUBMISSIONS OF ASSESSEE THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO TOTAL EXPENDITURE CLAIMED AT RS.38,49,074/ - . BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE THIS TRIBUNAL. 5 . I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND GONE THROUGH THE RECORD. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ONLY FRESH INVESTMENTS OF RS. 10,67,692/ - WERE MADE DURING THE Y EAR UNDER CONSIDERATION. ALL THE INVESTMENTS WERE OLD INVESTMENTS MADE IN ASSESSEE S GROUP COMPANY . THAT, NO EXTRA EFFORT OR DAY TO DAY MONITORING WAS REQUIRED IN RESPECT OF SAID INVESTMENTS. CONSIDERING THE OVERALL SCENARIO , THE ASSESSEE HAS MADE APPROPRIATE DISALLOWANCE AT RS. 61,692/ - . THE LD. AO WITHOUT APPLICATION OF MIND AND WITHOUT CONSIDERING THE ASSESSEE S COMPUTATION OF SUO MOTU DISALLOWANCE , HAS APPLIED RULE 8D STRAIGHT WAY IN A MECHANICAL MANNER. ITA NO. 5 62 /KOL/20 A.Y 201 2 - 13 MODERN HI - RISE P.LTD. PAGE 3 LD. COUNSEL FOR THE ASSESSEE AT THIS STAGE HAS PRAYED THAT SOME REASONABLE DISALLOWANCE MAY BE CONFIRMED ON THIS ISSUE. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE FIND INGS OF THE LOWER AUTHORITIES. 6. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE VIEW THAT THE LD. AO STRAIGHT WAY APPLIED RULE 8D OF THE I.T RULES WITHOUT CONSIDERING THE METHOD / CALCULATION ADOPTED BY THE ASSESSEE FOR MAKING THE SUO MOTU DISALLOWANCE. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, IN MY VIEW THE DISALLOWANCE OF RS. 2,00,000/ - ON ACCOUNT OF ADMINISTRATIVE EXPENSES RELATABLE TO EARNING OF TAX EXEMPT DIVIDEND INCOME WILL BE JUSTIFIED. THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS , THEREFORE, RESTRICTED TO RS. 2,00,000/ - THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT AT THE CLOSE OF THE HEARING ON WEDNES DAY, 10 TH FEBRUARY , 2021 . SD/ - /DATE - 10/02/2021 (SANJAY GARG) / KOLKATA JUDICIAL MEMBER * *PP /SR.PS / COPY OF ORDER FORWARDED TO: - 1. /APPELLANT - MODERN HI - RISE PVT. LTD ( MERGER COMPANY M/S. HIMADRI DYES & INTERMEDIATES LTD.) 23A, NETAJI SUBHAS ROAD, 8 TH FL., SUITE NO. 15, KOLKATA - 700 001. 2. /RESPONDENT - D.C.I.T, CENTRAL CIRCLE - 2(1), AAYKAR BHAVAN POORVA, 110 SHANTIPALLY,KOLKATA700 107. 3. / CONCERNED CIT 4. - / CIT (A) 5. , / DR, ITAT, KOLKATA 6. / GUARD FILE. /TRUE COPY / BY ORDER/ , / ,