Rajendra Kumar Bachhawat, Kolkata V. ACIT, CIR-33, KOLKATA, Kolkata

ITA 58/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0776 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: S L KOCHAR
• Section: 14A

Judgement Text

1 ITA NOS.57 & 58/KOL/2016 RAJENDRA KR. BACHHAWAT, AYS 2010-11&2011-12 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NOS. 57 & 58/KOL/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 RAJENDRA KUMAR BACHHAWAT (PAN: AEEPB8725R) VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-33, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 26.09.2017 DATE OF PRONOUNCEMENT 29.11.2017 FOR THE APPELLANT S/SHRI ANIL KOCHAR & S.L.KOCHAR, ADVOCATES FOR THE RESPONDENT SHRI ARINDAM BHATTACHARJEE, ADDL . CIT ORDER PER SHRI A.T.VARKEY, JM THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-9, KOLKATA DATED 24.11.2015 FOR AYS 2010-11 AND 2011-1 2. FOR BOTH THE APPEALS THE ASSESSEE HAS RAISED SIMILAR/IDENTICAL GROUNDS, THEREFORE, TH E ORDER PASSED IN THE LEAD CASE OF AY 2010- 11 WILL BE FOLLOWED ALSO IN THE OTHER CASE. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST TH E ACTION OF THE AO WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A) WHEREIN THE AO DISALLOW ED AN AMOUNT OF RS.5,78,652/- U/S. 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED AF TER PERUSAL OF THE P&L ACCOUNT AND COMPUTATION OF INCOME THAT THE ASSESSEE RECEIVED DI VIDEND INCOME OF RS.1,65,68,906/- EXEMPTED U/S. 10(34) OF THE ACT WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE. THE AO NOTED THAT THE ASSESSEE HAS DEBIT ED RS.11,67,658/- AS INTEREST ON THE UNSECURED LOAN RAISED BY HIM DURING THE YEAR, THERE FORE, THE AO ASKED THE ASSESSEE TO SUBMIT THE EXPLANATION AND THE COMPUTATION OF DISAL LOWANCE U/S. 14A OF THE ACT READ WITH 2 ITA NOS.57 & 58/KOL/2016 RAJENDRA KR. BACHHAWAT, AYS 2010-11&2011-12 RULE 8D OF THE RULES. IT WAS BROUGHT TO THE KNOWLED GE OF THE AO THAT ASSESSEE IN HIS COMPUTATION OF INCOME HAS HIMSELF MADE DISALLOWANCE IN COMPUTING THE INCOME FROM BUSINESS TO THE EXTENT OF RS.1,19,819/-. THE AO TH EREAFTER, APPLIED RULE 8D OF THE RULES AND DISALLOWED A SUM OF RS.5,78,652/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DISMISS IT AND T HEREBY CONFIRMED THE ORDER OF AO. AGGRIEVED, THE ASSESSEE IS IN APPEALS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE MAINTAINS TWO PORT FOLIOS, WHEREIN ONE HE TRANSACTS SHARES AS AN INVESTOR AND OTHER THAT OF A TRADER. AS PER THE ASSESSEE, THE INVESTMENT MADE IN HIS PERSONAL/SELF BOOKS OF ACCOUNT WHEREIN ASSESSEE HAS MADE INVESTMENTS IN SHARES, THE ASSESSEE HAS SHOWN TO HAVE RECEIVED RS.1,65,68,906/ - AS DIVIDEND INCOME. THE ASSESSEES OTHER PORTFOLIO WHEREIN HE DOES THE SHARE TRADING I S DONE THROUGH HIS PROPRIETORSHIP CONCERN NAMED M/S. RAJENDRA KUMAR BACHHAWAT AND IN ITS BOOK S OF ACCOUNT, THE ASSESSEE HAS SHOWN TO HAVE RECEIVED DIVIDEND INCOME OF RS.72,759/- WHI CH THE ASSESSEE CLAIMS TO HAVE NOT CLAIMED AS EXEMPT U/S. 10(34) OF THE ACT AND WAS OF FERED TO TAX. 5. WE NOTE THAT THE AO CALCULATED THE DISALLOWANCE BY APPLYING RULE 8D OF THE RULES AT RS. 6,98,471/- AND SINCE THE ASSESSEE HAS ALREADY O FFERED RS.1,19,919/-, ADDITION WAS RESTRICTED TO THE TUNE OF RS.5,78,652/-. WE NOTE T HAT IN RESPECT TO THE ASSESSEES PORTFOLIO, WHEREIN HE DOES TRADING AND THE SHARES ARE HELD AS STOCK-IN-TRADE, RULE 8D OF THE RULES DOES NOT APPLY. FOR THIS PROPOSITION OF LAW, WE RELY ON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHICH HELD THAT IF THE ASSESSEE IS HO LDING SHARES AS STOCK-IN-TRADE, RULE 8D COMPUTATION DOES NOT APPLY AND THIS VIEW OF THE TRI BUNAL HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. G.K.K. CAPITAL MARKETS PVT. LTD. (2017) 78 TAXMAN.COM 341 (CAL), THEREFORE, NO DISALLOWANCE IN RESPECT TO THE SHARES HELD IN TRADING ACCOUNT WHEREIN SHARES ARE HELD AS STOCK IN TRADE O UGHT NOT TO HAVE BEEN DONE BY THE AO. 6. COMING TO THE PORTFOLIO MAINTAINED BY THE ASSESS EE WHEREIN THE ASSESSEE HAD HELD SHARES AS INVESTMENTS IN HIS SELF ACCOUNT, WE NOTE FROM THE BALANCE SHEET AS ON 31.03.2010, THE ASSESSEE HAD OWN FUND IN THE CAPITAL ACCOUNT TO THE TUNE OF RS.12,21,95,321/- (I.E. MORE THAN RS.12 CR.) AND WE NOTE THAT THERE IS NO LOAN L IABILITY AND THAT THE INVESTMENTS MADE BY ASSESSEE IS ONLY TO THE TUNE OF RS.4,94,67,743/- WH ICH IS VERY LESS COMPARED TO THE CAPITAL 3 ITA NOS.57 & 58/KOL/2016 RAJENDRA KR. BACHHAWAT, AYS 2010-11&2011-12 ACCOUNT HELD BY THE ASSESSEE. THEREFORE, NO DISALL OWANCE CAN BE MADE UNDER RULE 8D(2)(II) OF THE RULES. COMING TO THE APPLICATION OF RULE 8D( 2)(III) OF THE RULES, WE ARE OF THE CONSIDERED OPINION THAT WHEN COMPUTATION IS MADE UN DER THIS LIMB OF THE RULES, THE INVESTMENT TO BE TAKEN ONLY IS IN RESPECT OF DIVIDE ND BEARING SCRIPS SHOULD ONLY BE TAKEN FOR THE PURPOSE OF CALCULATING RULE 8D(2)(III) AS HELD BY THE COORDINATE BENCH DECISION IN CIT VS. REI AGRO LTD. IN ITA NO. 1423/KOL/2011 WHICH DE CISION WAS CONFIRMED BY THE HONBLE CALCUTTA HIGH COURT VIDE ORDER DATED 09.04. 2014. SO, IT IS NO MORE RES INTEGRA THAT FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S. 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES, ONLY THE INVESTMENT GIVING RISE TO EXEMP T INCOME SHOULD BE CONSIDERED. WITH THE AFORESAID OBSERVATION, WE SET ASIDE THE IMPUGNED OR DER AND REMAND THE ISSUE BACK TO THE FILE OF AO TO RECOMPUTE THE DISALLOWANCE AS DIRECTED ABO VE. 5. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH N OVEMBER, 2017 SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED :29TH NOVEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI RAJENDRA KUMAR BACHHAWAT, C/O, S.L .KOCHAR, ADVOCATE, 86, CANNING STREET, KOL-1. 2 RESPONDENT ACIT, CIRCLE-33, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY