DCIT, Circle - 5, Kolkata, Kolkata V. M/s. The Orissa Minerals Development Co. Ltd., Kolkata

ITA 591/KOL/2011

• Counselvise Citation: 59123514 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

I.T.A. NOS. 591/ KOL./ 2011 & C.O. NO. 29/KOL/2011 ASSESSMENT YEAR : 2007-08 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI C.D. RAO (ACCOUNTANT MEMBER), AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO.: 591/ KOL. / 2011 ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME TAX ..APPELLANT CIRCLE-5, KOLKATA, VS. M/S. THE ORISSA MINERALS DEVELOPMENT CO. LTD...R ESPONDENT AG-104, SAURAV ABASAN, SECTOR-II, SALT LAKE CITY, KOLKATA-700 091 [PAN: AABCT 8879 J] & C.O. NO. 29/KOL./2011 (ARISING OUT OF I.T.A. NO. 591/KOL./2011) ASSESSMENT YEAR : 2007-2008 THE ORISSA MINERALS DEVELOPMENT CO. LTD... CROSS OBJECTOR AG-104, SAURAV ABASAN, SECTOR-II, SALT LAKE CITY, KOLKATA-700 091 [PAN: AABCT 8879 J] -VS.- DEPUTY COMMISSIONER OF INCOME TAX..RESPOND ENT CIRCLE-5, KOLKATA, APPEARANCES BY: SMT. SREEMATI GHOSH, FOR THE ASSESSEE SHRI B.K. DAS, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JULY 04, 2012 DATE OF PRONOUNCING THE ORDER : JULY 04, 2012 O R D E R PER GEORGE MATHAN : 1. ITA 591/KOL./2011 IS AN APPEAL FILED BY THE REVE NUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-V I, KOLKATA IN APPEAL NO. 945/(CIT(A)-VI/KOL/CIR-5/2009-10 DATED 1 3.01.2011 FOR THE I.T.A. NOS. 591/ KOL./ 2011 & C.O. NO. 29/KOL/2011 ASSESSMENT YEAR : 2007-08 PAGE 2 OF 5 ASSESSMENT YEAR 2007-08 AND C.O. 29/KOL./2011 IS A CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL IN IT A NO. 591/KOL./2011. 2. SMT. SREEMATI GHOSH, LD. COUNSEL APPEARED ON BEH ALF OF THE ASSESSEE AND SHRI B.K. DAS, LD. D.R. REPRESENTED ON BEHALF OF THE REVENUE. 3. AT THE TIME OF HEARING, LD. COUNSEL ON BEHALF OF THE ASSESSEE SUBMITTED THAT SHE DID NOT WISH TO PRESS THE CROSS OBJECTION FILED BY THE ASSESSEE IN C.O. 29/KOL./2011. LD. D.R. HAD NO OBJECTION TO THE SUBMISSION. CONSEQUENTLY THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED AS WITHDRAWN. 2. 4. IN REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A)-VI, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY DELETING THE DISALLOWANCE OF PERIOD EXPENDITURE WIT HOUT CONSIDERING THE FACTS AND MERITS OF THE CASE. (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A)-VI, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY DELETING THE DISALLOWANCE OF PERIOD EXPENDITURE OF RS.46,03,970/- WITHOUT CONSIDERING THAT THE ASSESSE E IS MAINTAINING ITS ACCOUNTS FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING AND THERE IS NO PROVISIONS OF ALLOWABILI TY OF PRIOR PERIOD EXPENDITURE IN THE INCOME TAX ACT. (3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A)-VI, KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY DELETING THE DISALLOWANCE U/S. 14A OF RS.7,06,030/- AND COMPUTING DISALLOWANCE @1% OF EXEMPT INCOME I.E. RS.2,82,240/- WITHOUT ANY BASIS AND LOGIC, WHICH IS MORE SO AS IN THE CASE OF CIT VS.- HERO CYCLES, NOVEMBER 4, 2 009 (P&H) IT WAS HELD THAT EVEN IF THE FUNDS ARE MERGED IN CO MMON KITTY, THE DISALLOWANCE U/S. 14A IS JUSTIFIED AND IN THE C ASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. CERTAIN PRINCIPLES H AVE BEEN LAID DOWN TO COMPUTE DISALLOWANCE U/S. 14A. I.T.A. NOS. 591/ KOL./ 2011 & C.O. NO. 29/KOL/2011 ASSESSMENT YEAR : 2007-08 PAGE 3 OF 5 (4) THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELETE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 5. IN REGARD TO GROUNDS NO. 1 & 2, IT WAS SUBMITTED BY THE LD. D.R. THAT THE ISSUE WAS AGAINST THE ACTION OF THE LD. CI T(APPEALS) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO T HE PRIOR PERIOD EXPENDITURE CLAIMED BY THE ASSESSEE. IT WAS THE SUB MISSION THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING AND UNDER THE MERCANTILE SYSTEM OF ACCOUNTING THE ASSESSEE COULD NOT CLAIM EXPENDITURE BEING PRIOR PERIOD EXPENDITURE. IT WAS THE SUBMISSION THAT THE ASSESSEE HAS ALSO NOT SHOWN AS TO HOW THE EXPEN DITURES, WHICH WERE CLAIMED AS PRIOR PERIOD EXPENDITURES, HAD CRYS TALLIZED DURING THE RELEVANT ASSESSMENT YEAR. IT WAS THE SUBMISSION THA T HE HAD NO OBJECTION IF THIS ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND ADJUDICATION AS TO THE CRYSTAL LIZATION OF THE EXPENDITURE DURING THE RELEVANT ASSESSMENT YEAR. 6. IN REPLY, LD. A.R. SUBMITTED THAT THE PRIOR PERI OD EXPENDITURE COULD NOT BE DISALLOWED. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS A GOVERNMENT OF INDIA UNDERTAKING AND NONE OF THE EXP ENDITURES COULD BE SPECIFICALLY PIN-POINTED TO HAVE BEEN SETTLED AT THE END OF THE FINANCIAL YEAR. IT WAS THE SUBMISSION THAT ALL THE EXPENDITURES WERE GENUINE AND THEY WERE INCURRED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE EXPENDITURES HAD CRYSTALLIZED ONLY DURING THE RELEVANT ASSESSMENT YEAR. IT WAS THE SUBMISSION THAT IN THES E CIRCUMSTANCES, THE ORDER OF THE LD. CIT(APPEALS) WAS LIABLE TO BE SUST AINED. IT WAS, HOWEVER, AGREED BY THE LD. A.R. THAT SHE HAD NO OBJ ECTION IF THIS ISSUE I.T.A. NOS. 591/ KOL./ 2011 & C.O. NO. 29/KOL/2011 ASSESSMENT YEAR : 2007-08 PAGE 4 OF 5 WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER F OR ADJUDICATION IN REGARD TO THE CRYSTALLIZATION OF THE EXPENDITURE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE AS TO WHETHER THE EXPENDITURE HAS CRYSTAL LIZED DURING THE RELEVANT ASSESSMENT YEAR HAS NOT BEEN VERIFIED OR A DJUDICATED BY ANY OF THE LOWER AUTHORITIES. THIS ISSUE IS RESTORED TO TH E FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION. IN REGARD TO THE ISSUE AS TO WHETHER THE EXPENDITURE HAS CRYSTALLIZED DURING THE YEAR, IF TH E EXPENDITURE HAS CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEAR, T HE EXPENDITURE AS CLAIMED BY THE ASSESSEE IS LIABLE TO BE ALLOWED. IN THESE CIRCUMSTANCES, GROUNDS NO. 1 & 2 OF THE REVENUES APPEAL STAND ALL OWED FOR STATISTICAL PURPOSES. 8. IN REGARD TO GROUND NO. 3 OF THE REVENUES APPEA L, IT WAS SUBMITTED BY THE LD. D.R. THAT THE ISSUE WAS AGAINS T THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION REPRESENTING THE DISALLOWANCE UNDER SECTION 14A ON ACCOUNT OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE. LD. D.R. VEHEMENTLY SUPPORTED THE ORDER O F THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT 1% OF THE TOTAL INVESTMENT HAS BEEN RIGHTLY DISALLOWED BY THE ASSESSING OFFICER BY INVO KING THE PROVISIONS OF RULE 8D OF THE ACT. 9. IN REPLY, LD. A.R. SUBMITTED THAT RULE 8D HAD NO APPLICATION TO THE ASSESSMENT YEAR UNDER APPEAL. IT WAS THE SUBMIS SION THAT LD. CIT(APPEALS) HAD FOLLOWED JUDICIAL DISCIPLINE IN FO LLOWING THE DECISION OF THE COORDINATE BENCHES OF THE ITAT, KOLKATA IN T HE CASE OF SAGARIKA GOODS & SERVICES PVT. LTD. IN I.T.A. NO. 1278/KOL/2 010 DATED I.T.A. NOS. 591/ KOL./ 2011 & C.O. NO. 29/KOL/2011 ASSESSMENT YEAR : 2007-08 PAGE 5 OF 5 24.09.2010, WHEREIN THE DISALLOWANCE U/S. 14A HAD B EEN ESTIMATED AND RESTRICTED TO 1% OF THE EXEMPT INCOME. IT WAS THE S UBMISSION THAT THE ORDER OF THE LD. CIT(APPEALS) WAS LIABLE TO BE UPHE LD. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE PROVISIONS OF RULE 8D HAVE NO APPLICABILITY TO THE ASSESSMENT YEAR 2007-08 BEING ASSESSMENT YEAR UNDER APPEAL, WE ARE OF THE VIEW THAT THE ORDER OF THE LD. CIT(APPEALS) IS LIABLE TO BE U PHELD INSOFAR AS HE HAS FOLLOWED JUDICIAL DISCIPLINE IN FOLLOWING THE D ECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN RESTRICTING TH E DISALLOWANCE TO 1% OF THE EXEMPTED INCOME. IN THESE CIRCUMSTANCES, GRO UND NO. 3 OF THE REVENUES APPEAL STANDS DISMISSED. 11. GROUND NO. 4 IS GENERAL IN NATURE AND DOES NOT CALL FOR ANY ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS DICTATED AND PRO NOUNCED IN THE OPEN COURT IMMEDIATELY UPON CONCLUSION OF HEARING TODAY ON 4 TH DAY OF JULY, 2012. SD/- SD/- C.D. RAO GEORGE MATHAN (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, THE 4 TH DAY OF JULY, 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.