Raniganj Co-operative Bank Ltd., Asansol V. ACIT, CIR-2, ASANSOL, Asansol

ITA 637/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1249 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 15-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ADD L CIT LD
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO. 637/KOL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICI AL MEMBER I.T.A NO. 637/KOL/ 2015 ASSESSMENT YEAR: 20 10-11 RANIGANJ CO-OPERATIVE BANK LTD. PAN: AAFFR3315J. APPELLANT VS ASSTT. COMMISSIONER OF INCOME-TAX, CIR-2, ASANSOL. RESPONDEN T FOR THE APPELLANT : NONE APPEARED FOR THE RESPONDENT : SHRI DAVID Z. CHAWNGTHU, ADD L.CIT, LD.SR.DR DATE OF HEARING : 03-08-2017 DATE OF PRONOUNCEMENT : 13-10-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), ASANSOL FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. FOR THAT THE ORDER OF THE LD. CIT (A) IS ARBITRA RY, EXCESSIVE AND HENCE BAD IN LAW, BECAUSE THE PROVISIONS OF SEC. 14A OF THE ACT'61, I S NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. 2. FOR THAT ON THE FACTS OF THE CASE THE LD.CIT{A), ASANSOL, WAS NOT LEGALLY JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 6,21,550/- U/S.14A O F THE ACT'61, AND THE SAID ADDITION IS WITHOUT ANY LEGAL SANCTION AND MAY PLEASE BE DELETE D. 3. FOR THAT ON THE FACTS OF THE CASE NEITHER THE LD .CIT{A), NOR THE LD. A.O. HAS MADE OUT A CASE, REGARDING APPLICABILITY OF PROVISIONS OF SE C. 14A OF THE ACT'61, IN ABSENCE OF ANY EXEMPTED INCOME, AND ADDITION MADE MERELY ON PRESUM PTIONS AND ASSUMPTIONS MAY PLEASE BE DELETED. 4. FOR THAT THE LD. CIT(A) FAILED TO GIVE COGNIZANC E TO THE WRITTEN SUBMISSIONS/ARGUMENTS, FILED BY THE APPELLANT, IN C OURSE OF HEARING, AND HAS PASSED A VERY CRYPTIC ORDER, WITHOUT ANY APPLICATION OF MIND , AND WITHOUT ANY DISCUSSIONS, TO THE SUBMISSIONS OF THE APPELLANT, AND THE APPEAL ORDER IS LEGALLY ERRONEOUS ON THIS COUNT. 5. FOR THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTE R, AMEND ANY FURTHER GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 ITA NO. 637/KOL/2015 2. NEITHER ANY ONE APPEARED FOR THE ASSESSEE NOR AN Y APPLICATION FILED FOR SEEKING ADJOURNMENT. THEREFORE, WE PROCEE D TO HEAR THE LD.DR AND DISPOSE OF THE APPEAL ON MERITS AND BY PERUSING THE MATERIAL AVAILABLE ON RECORD. 3. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.2,85,680/-. NO DISALLOWANCE U/S. 14A O F THE ACT WAS MADE BY THE ASSESSEE IN ITS COMPUTATION FILED ALONG WITH THE RETURN OF INCOME. THE AO WAS OF THE VIEW THAT DISALLOWANCE SH OULD BE MADE U/S. 14A R.W.R 8D OF THE IT RULES. ON A SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE INVESTMENT IN QUESTION WAS MANDATORILY TO BE MADE BY THE BANK AS PER BANKING REGULATIONS A CT AND HENCE, THERE IS NO NEXUS BETWEEN EXPENDITURE INCURRED AND INCOME GENERATED ON THESE INVESTMENTS AND THUS SECTION 14A R.W.R 8D OF THE IT RULES IS NOT ATTRACTED. THE AO RELIED ON THE ORD ER OF THE HONBLE SPECIAL BENCH OF ITAT, DELHI, IN THE CASE OF CHEM I NVEST LTD VS. ITO AND REJECTED THIS CONTENTION. HE ALSO HELD THAT SUC H ADMINISTRATIVE AND OTHER EXPENSES SHOULD HAVE BEEN INCURRED BY THE ASSESSEE, WHICH HAD FACILITATED IN EARNING THE DIVIDEND INCO ME. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E THE LD.CIT(A). THE FIRST APPELLATE AUTHORITY REJECTED T HE APPEAL OF THE ASSESSEE. 5. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEF ORE US. 6. IN OUR VIEW SECTION 14A R.W.R 8D IS SQUARELY APP LICABLE TO THE FACTS OF THIS CASE. WHILE HOLDING SO, WE OBSERVED T HAT NO DISALLOWANCE OF INTEREST EXPENDITURE CAN BE MADE, IF THE INVESTM ENT IN QUESTION WAS MANDATORILY REQUIRED TO BE MADE AS PER BANKING REGULATIONS ACT. THIS CLAIM NEEDS TO BE VERIFIED. THE ASSESSEE ALSO CLAIMS THAT IT HAS INTEREST FREE FUNDS WHICH SHOULD BE PRESUMED TO HAVE BEEN UTILIZED FOR MAKING THIS INVESTMENT. THE AO DISALLO WED AN AMOUNT OF 3 ITA NO. 637/KOL/2015 RS. 5,67,301/- UNDER RULE 8D(2)(II) OF THE IT RULES , 1962. THIS PROPOSITION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WHICH FOLLOWED THE J UDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC LTD. WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE AO FURTHER DISALLOWED AN AMOUNT OF RS. 54, 249/- UNDER RULE 8D(2)(III) OF THE IT RULES 1962. 7. THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE IS RS. 2,85,680/-. THE DISALLOWANCE CANNOT EXCEED THIS AMO UNT. THE AO HAS NOT MADE A DISALLOWANCE UNDER RULE 8D(2)(I) OF THE IT RULES 1962. WE UPHOLD THE DISALLOWANCE UNDER RULE 8D(2)(I II) OF THE IT RULES. 8. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE, WHILE WE UPHOLD THE DISALLOWANCE TO RS. 54,249/- UN DER RULE 8D(2)(III), THE DISALLOWANCE UNDER RULE 8D(2)(II) I S SET ASIDE TO THE FILE OF THE AO FOR DENOVO ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART, ORDER PRONOUNCED IN THE OPEN COURT ON 13- 10-2017 SD/- SD/- J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13-10-2017 4 ITA NO. 637/KOL/2015 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT RANIGANJ CO-OPERATIVE BANK LIMITED 67 & 67A, C.R. ROAD, P.O RANIGANJ, PIN 713347. 2 RESPONDENT THE ACIT, CIR-2, ASANSOL-713304. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT, KOLKATA