M/s. Suryamani Financing Company Limited , Kolkata V. ITO, Ward - 7(3), Kolkata , Kolkata

ITA 62/KOL/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6632 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Business expenditure
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH : KOLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM] I.T.A NO. 62/KOL/2018 ASSESSMENT YEAR : 2011-1 2 M/S SURYAMANI FINANCING COMPANY LTD. VS- IT O, WARD-7(3), KOLKATA [PAN: AADCS 5559 E] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MANOJ KATARUKA, ADV OCATE FOR THE REVENUE : SMT. RANU BISWAS, ADDL. C IT DATE OF HEARING : 06.06.2018 DATE OF PRONOUNCEMENT : 27.06.2018 ORDER THIS APPEAL BY THE ASSESSEE DIRECTED AGAINST THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKATA [ I N SHORT THE LD CITA] DATED 22.11.2017 PASSED UNDER SECTION 143(3) OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2011-12. 2. THE SOLE ISSUE THAT ARISES IN THIS APPEAL, IS TH E DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(III) OF THE RULE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO APPLY THE PROPOSITION OF LAW LAID DOWN THE DECISION OF JURISD ICTIONAL HIGH COURT IN THE CASE OF REI AGRO LIMITED AND THAT WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III), ONLY THOSE INVESTMENTS WHICH HAVE YIELDED DIVIDEND SHOULD BE C ONSIDERED. THIS DIRECTION IS UPHELD. 3. THE ASSESSEES CASE IS THAT IT HAS INCURRED EXPE NDITURE TOWARDS PAYMENT OF EMPLOYEES AND ADMINISTRATION EXPENSES OF RS. 3,70,600/- AND R S. 4,06,296/- TOTALING TO RS. 2 ITA NO.62/KOL/2018 M/S SURYAMANI FINANCING COMPANY LTD. A.YR .2011-12 2 7,76,896/- ONLY AND DISALLOWANCE OF RS. 4,44,808/- IS EXCESSIVE AND UNREASONABLE. HE FURTHER SUBMITS THAT OUT OF THE TOTAL SCRIPS HELD B Y THE ASSESSEE, DIVIDENDS WERE EARNED ONLY IN RESPECT OF THREE SCRIPS AND FOR THIS PURPOS E, THE ASSESSEE CANNOT BE SAID TO HAVE SPENT THE DISALLOWED AMOUNT OF RS. 4,44,808/-. 4. THE LD. DR OPPOSES THE CONTENTIONS OF THE ASSE SSEE. I FIND THAT THESE ARGUMENTS AND FACTS HAVE NOT BEEN CONSIDERED IN THIS CASE BY THE LD. AO. HENCE, I DEEM IT FIT AND APPROPRIATE TO SET ASIDE THE MATTER TO THE FILE OF THE LD. AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW BY TAKING INTO ACCOUNT ALL THE CONTENTIONS OF THE ASSESSEE AND ALSO APPLYING THE PROPOSITIONS OF LAW LAID DOWN TO THE H ONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT IN 402 ITR 640 (SC), AT PARA 31 AND 32 HELD AS FOLLOWS: 31. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE ARGUMENT OF COUNSEL FOR THE PARTIES ON BOTH SIDES, IN THE LIGHT OF VARIOUS JUDG MENTS WHICH HAVE BEEN CITED BEFORE US, SOME OF WHICH HAVE ALREADY BEEN TAKEN NOTE OF ABOVE . 32) IN THE FIRST INSTANCE, IT NEEDS TO BE RECOGNISE D THAT AS PER SECTION 14A(1) OF THE ACT, DEDUCTION OF THAT EXPENDITURE IS NOT TO BE ALLOWED WHICH HAS BEEN INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. AXIOMATICALLY, IT IS THAT EXPENDITURE ALONE W HICH HAS BEEN INCURRED IN RELATION TO THE INCOME WHICH IS INCLUDIBLE IN TOTAL INCOME THAT HAS TO BE DISALLOWED. IF AN EXPENDITURE INCURRED HAS NO CAUSAL CONNECTION WITH THE EXEMPTED INCOME, THEN SUCH AN EXPENDITURE WOULD OBVIOUSLY BE TREATED AS NOT RELAT ED TO THE INCOME THAT IS EXEMPTED FROM TAX, AND SUCH EXPENDITURE WOULD BE ALLOWED AS BUSINESS EXPENDITURE. TO PUT IT DIFFERENTLY, SUCH EXPENDITURE WOULD THEN BE CONSIDE RED AS INCURRED IN RESPECT OF OTHER INCOME WHICH IS TO BE TREATED AS PART OF THE TOTAL INCOME. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 27.06.2018 SD/- [ J.SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED : 27.06.2018 SB, SR. PS 3 ITA NO.62/KOL/2018 M/S SURYAMANI FINANCING COMPANY LTD. A.YR .2011-12 3 COPY OF THE ORDER FORWARDED TO:Y 1. M/S SURYAMANI FINANCING COMPANY LTD., 5, RUSSEL STREET, 1 ST FLOOR, KOLKATA-700071. 2. ITO, WARD-7(3), KOLKATA, AAYAKAR BHAWAN, P-7, CH OWRINGHEE SQUARE, KOLKATA-700069. 3..C.I.T.(A)- , KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S