JCIT(OSD), Circle -5, Kolkata, Kolkata V. M/s Pilani Investment & Industries Corpn. Ltd., Kolkata

ITA 653/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1633 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILI P KR RAKSHIT
• Assessee Lawyers: A K GUPTA
• Keywords: Earning of tax free income; Reasonable cause
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 653/ KOL. / 2012 AS SESSMENT YEAR : 2008-09 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 653/ KOL. / 2012 ASSESSMENT YEAR : 2008-09 JOINT COMMISSIONER OF INCOME TAX (OSD),..... APPELLANT CIRCLE-5, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. PILANI INVESTMENT & INDUSTRIES CORPN. LTD.,.. ..RESPONDENT, 9/1, R.N. MUKHERJEE ROAD, KOLKATA-700 069 [PAN :AABCP 7642 R] APPEARANCES BY: DILIP KR. RAKSHIT, JCIT, SR. D.R., FOR THE APPELLAN T A.K. GUPTA, FCA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : FEBRUARY 04, 2013 DATE OF PRONOUNCING THE ORDER : FEBRUARY 04, 2013 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF LEARNED COMMISSIONER OF INC OME TAX (APPEALS)S ORDER DATED 13 TH DECEMBER, 2011, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) ERRED IN LAW IN DIRECTING THE ASSESSING OFFI CER TO I.T.A. NO. 653/ KOL. / 2012 AS SESSMENT YEAR : 2008-09 PAGE 2 OF 4 WORK OUT THE DISALLOWANCE OF EXPENSES RELATING TO E XEMPTED DIVIDEND INCOME AS PER THE METHOD OF COMPUTATION SH OWN BY THE LD. CIT(A). 2. THE APPEAL IS, HOWEVER, TIME BARRED BY 24 DAYS. THE ASSESSING OFFICER HAS MOVED A PETITION SEEKING CONDONATION OF THIS DELAY. HAVING PERUSED THE SAID PETITION, AND HAVING HEARD RIVAL C ONTENTIONS ON THE SAME, WE ARE INCLINED TO CONDONE THE DELAY AS THE D ELAY SEEMS TO HAVE BEEN EXPLAINED BY A REASONABLE CAUSE. ACCORDINGLY, WE CONDONE THE DELAY AND PROCEED TO TAKE UP THE MATTER ON MERITS. 3. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPAS S OF MATERIAL FACTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS EARNED TAX FR EE DIVIDEND INCOME AND LONG TERM CAPITAL GAINS, AND, ACCORDINGLY, PROC EEDED TO COMPUTE DISALLOWANCE U/S. 14A READ WITH RULE 6D(III) IN RES PECT OF EXPENDITURE INCURRED ON SUCH TAX EXEMPT INCOME. OUT OF TOTAL GE NERAL EXPENDITURE OF RS.1,16,94,912/-, THE ASSESSING OFFICER EXCLUDED RS.19,96,228/- BEING EXPENSES RELATED TO HOUSE PROPERTY INCOME, INTEREST EXPENDITURE OF RS.71,42,636/- AND DE-MAT CHARGES OF RS.2,14,481/-, AND THE BALANCE EXPENSES WERE ALLOCATED AS RELATING TO TAX EXEMPT I NCOME IN THE RATIO OF TAX EXEMPT RECEIPTS TO TOTAL RECEIPTS. ON THIS BASI S, 46.68% OF BALANCE EXPENDITURE, I.E. RS.54,35,795/- WAS DISALLOWED U/S . 14A R.W.R. 6D(III). AGGRIEVED BY THE QUANTUM OF DISALLOWANCE, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS). IT WAS CO NTENTION OF THE ASSESSEE THAT EXPENSES WHICH WERE ALLOCATED BY THE ASSESSING OFFICER FOR THE PURPOSE OF DISALLOWANCE U/S. 14A R.W.R. 6D( III) INCLUDED RS.57,14,450/- WHICH WAS EXCLUSIVELY ON BUILDING MA INTENANCE AND SERVICE EXPENSES. IT WAS SUBMITTED THAT SINCE NO PA RT OF THESE EXPENSES I.T.A. NO. 653/ KOL. / 2012 AS SESSMENT YEAR : 2008-09 PAGE 3 OF 4 COULD BE ATTRIBUTED TO TAX EXEMPT INCOME, THESE EXP ENSES OF RS.57,14,450/- OUGHT TO HAVE BEEN TAKEN OUT OF COMP UTATION OF 14A DISALLOWANCE. LEARNED CIT(APPEALS) UPHELD THIS CONT ENTION AND OBSERVED AS FOLLOWS :- 8. THE ASSESSEE HAS SUBMITTED DURING THE APPELLATE PROCEEDINGS THAT THE AMOUNT OF RS.57,14,450/- IS EX CLUSIVELY ON BUILDING MAINTENANCE AND SERVICE EXPENSES. THESE ARE DIRECTLY RELATED TO RECEIPT OF RENT FROM THE LET OU T PROPERTY. THE ASSESSING OFFICER HAS ERRONEOUSLY TAKEN THIS AM OUNT IN THE GENERAL ALLOCATION. I HAVE EXAMINED THE BUILDIN G MAINTENANCE AND SERVICE EXPENSES ACCOUNTS AND FOUND THAT THESE EXPENSES ARE RELATED TO EARNING OF RENT. THER EFORE, THESE EXPENSES ARE NOT GENERAL IN NATURE SINCE THES E ARE ATTRIBUTABLE TO A SEPARATE HEAD OF INCOME, I.E. BUS INESS INCOME EARNED AS RENT. 4. AGGRIEVED BY THE STRAND SO TAKEN BY THE CIT(APP EALS), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 5. HAVING HEARD THE RIVAL CONTENTIONS, AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO DISTURB TH E FAIR AND JUDICIOUS STAND OF THE CIT(APPEALS). ONCE IT IS FOUND THAT AN EXPENSE IS SPECIFICALLY RELATABLE TO A TAXABLE INCOME, AS IS T HE UNDISPUTED POSITION IN THIS CASE, NO PORTION OF SUCH AN EXPENSE CAN BE DISALLOWED U/S. 14A. THE ALLOCATION OF GENERAL EXPENSES VIS--VIS TAX EX EMPT INCOME AND TAXABLE INCOME CAN ONLY BE MADE IN RESPECT OF EXPEN DITURE WHICH CANNOT EITHER BE WHOLLY ALLOCATED TO TAXABLE INCOME , THEN OR WHICH CAN NOT BE WHOLLY ALLOCATED TO TAX EXEMPT INCOME; THE A LLOCATION CAN BE MADE, EVEN ON THE BASIS OF FORMULA SET OUT IN RULE 6D(III), IN RESPECT OF SUCH EXPENSES WHICH DO NOT FALL ANY OF THESE CATEGO RIES. THERE IS NO INFIRMITY IN THE STAND OF THE CIT(APPEALS). WE APPR OVE THE SAME. I.T.A. NO. 653/ KOL. / 2012 AS SESSMENT YEAR : 2008-09 PAGE 4 OF 4 6. FOR THE REASONS SET OUT ABOVE, WE CONFIRM THE OR DER OF THE CIT(APPEALS) AND DECLINE TO INTERFERE IN THE MATTER . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DAY OF FEBRUARY, 2013. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) KOLKATA, THE 4 TH DAY OF FEBRUARY, 2013 COPIES TO : (1) THE ASSESSEE (2) THE DEPARTMENT (3) COMMISSIONER OF INCOME-TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.