DCIT, Circle - 1, Kolkata, Kolkata V. M/s. Crishpark Vincom Limited, Howrah

ITA 667/KOL/2012

• Counselvise Citation: 66723514 RSA 2012
• Duration Of Justice: 3 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMITABH CHOWDHURY ADDITIONAL
• Assessee Lawyers: S M SURANA
• Keywords: Proportionate interest
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI WASEEM AHMED(ACCOUNTANT MEMBER) I.T.A. NO.: 667/KOL/2012 ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME TAX,............. APPELLANT CIRCLE-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. CRISHPARK VINCOM LIM ITED,......................RESPONDENT, 251(66), G.T. ROAD, JINDAL MANSION, LILUAH, HOWRAH-711 2204 [PAN : AABCC 0201 H] APPEARANCES BY: SHRI AMITABH CHOWDHURY, ADDITIONAL CIT, D.R., FOR THE APPELLANT SHRI S.M. SURANA, AD VOCATE, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 24, 201 5 DATE OF PRONOUNCING THE ORDER : 06 NOVEMBER,2015 O R D E R PER WASEEM AHMED: 1. THIS APPEAL OF THE REVENUE ARISES OUT OF ORDER OF L D. COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA IN APPEAL NO. 417/CIT(A)-1/CIRCLE-1/09-10 DATED 16.12.2011 FOR TH E ASSESSMENT YEAR 2007-08, WHICH IS AGAINST THE ORDER OF ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 7 2. AT THE OUTSET, IT IS OBSERVED THAT THERE IS A DELAY OF 43 DAYS ON THE PART OF THE REVENUE IN FILING THE APPEA L BEFORE THIS TRIBUNAL. IN THIS REGARD, APPLICATION HAS BEEN FILE D BY THE REVENUE SEEKING CONDONATION OF THE SAID DELAY AS ME NTIONED IN THE APPLICATION. 3. LET US TO DEAL WITH LIMITATION ISSUE PRIMARILY B EFORE GOING TO THE MERITS OF THAT CASE AS THE CONTOURS OF THE A REA OF DISCRETION OF THE COURTS IN THE MATTER OF CONDONATION OF DELAYS I N FILING APPEALS ARE SET OUT IN A NUMBER OF APEX COURT AND SPECIALLY IN CA SE TITLED AS COLLECTOR LAND ACQUISITION, ... VS....... MST. KATI JI & ORS (1987 AIR 1353, 1987 SCR (2) 387) ANALYZED THE SITUATION WHILE DEAL ING WITH THE DELAY ON BEHALF OF THE GOVERNMENT AND OBSERVED AS ENUMERATE D BELOW: 'WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATI ONS ARE A PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUS TICE DESERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE O F A NON DELIBERATE DELAY.' 'IT MUST BE GRASPED THAT JUDICIARY IS RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALISE INJUSTICE ON TECHNICAL GRO UNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO.' CONSIDERING THE JUDGEMENT (SUPRA) WE FEEL THAT IN L ITIGATIONS TO WHICH GOVERNMENT IS A PARTY THERE IS YET ANOTHER ASPECT W HICH, PERHAPS, CANNOT BE IGNORED, IF APPEALS BROUGHT BY GOVERNMENT ARE LO ST FOR SUCH DEFAULTS, NO PERSON IS INDIVIDUALLY AFFECTED BUT WHAT, IN THE ULTIMATE ANALYSIS, SUFFERS IS PUBLIC INTEREST. THE DECISIONS OF GOVERN MENT ARE COLLECTIVE AND INSTITUTIONAL DECISIONS AND DO NOT SHARE THE CHARAC TERISTICS OF DECISIONS OF PRIVATE INDIVIDUALS. 4. IN THE INSTANT CASE AS THE GOVERNMENT IS APPELL ANT AS SUBMITTED THAT BEFORE FINALIZATION OF APPEAL, THE CASE HAS T O CROSS MANY CHANNEL AND EVEN THERE WAS NON-COMMUNICATION QUA FILING OF SLP IN SUPREME I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 7 COURT OF INDIA IS RELATED MATTER OF ISG TRADERS LTD . VS.- CIT , HENCE ON THE AFORESAID ANALYZATION WHILE FOLLOWING A JUSTICE-ORIENTED APPROACH FROM THIS PERSPECTIVE, WE FEEL THAT THERE IS SUFFICIENT CAUSE FOR CONDONING THE DELAY IN THE INSTITUTION OF THE APPEA L HENCE WE ARE INCLINED TO CONDONE THE DELAY OF 43 DAYS IN PREFERRING THE I NSTANT APPEAL. NOW LET US PROCEED WITH THE CASE ON MERITS. 5. THE SHORT ISSUE THAT IS REQUIRED TO ADJUDICATE I N THIS APPEAL IS WHETHER THE LD. COMMISSIONER OF INCOME TA X (APPEALS) WAS JUSTIFIED OR NOT IN CONFIRMING THE DISALLOWANCE/ADDITION OF RS.1,04,76,174/- MADE UNDE R SECTION 14A OF THE INCOME TAX ACT READ WITH RULE 8D OF THE INCOME TAX RULES. THE ASSESSMENT YEAR INVOLVED IS 2007-08 AND THE IMPUGNED ORDER WAS PASSED BY THE LD. CIT(APPEALS) O N 16 TH DECEMBER, 2011. 5.1. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS A NON-BANKING FINANCE COMPANY AND DERIVES INCOME FROM TRADING IN SHARES, FINANCE AND INVESTMENT. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME OF RS.1,96,37,935/-, AND THAT THE ASSESSEE HAS OFFERED DISALLOWANCE OF INTEREST UNDER SECTION 14A READ WIT H RULE 8D FOR AN AMOUNT OF RS. 92,53,907/- ONLY. IT WAS ALSO NOTED THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE H AS SHOWN INTEREST PAYMENT OF RS.5,65,90,151/- ON BORROWED CA PITAL. AND THE ASSESSEE HAS EARNED INTEREST INCOME ON THE LOAN GIVEN TO OUTSIDERS FOR AN AMOUNT OF RS. 3,86,05,209/- ONLY. SO THE EFFECTIVE INTEREST EXPENSES SHOWN ARE OF RS. 1,79,0 5,189/- ONLY (56590151.00-38605209.00) IT WAS IN THIS BACKDROP THAT THE ASSESSEE WAS ASKED TO COMPUTE THE DISALLOWANCE UNDE R SECTION I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 7 14A READ WITH RULE 8D. ACCORDINGLY THE ASSESSEE COM PUTED THE DISALLOWANCE OF INTEREST BASED ON THE NET/EFFECTIVE AMOUNT OF INTEREST I.E. INTEREST PAID MINUS INTEREST EARNED W HICH IS COMING FOR AN AMOUNT OF RS. 92,53,907/- ONLY. 6. HOWEVER THE AO DISREGARDED THE ABOVE WORKING OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD TAKEN FIGURES APPEARING AT THE CLOSE OF THE YEAR I.E. 31-03-2007 AND ONLY NET AMOUNT OF INTEREST WAS TAKEN I.E. 17905189.THE AO H AS WORKED OUT THE INTEREST EXPENSES BY TAKING THE GROSS INTER EST EXPENSES ON MONEY BORROWED WHICH IS COMING FOR AN A MOUNT OF RS. 2,99,92,780.00 ONLY AND DISALLOWED THE SAME. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS) . IT WAS CONTENDED BY THE ASSESSEE THAT THE ASSESSING OFFICE R WAS WRONG IN MAKING ADDITION UNDER SECTION 14A TO THE T UNE OF RS. 2,99,92,780/-. HOWEVER THE LD. CIT(A) HAS WORKED OU T THE ELEMENT OF INTEREST EXPENSES ON PRO-RATA BASIS IN S O FAR THE INTEREST EXPENDITURE RELATABLE TO THE EARNING OF EX EMPTED INCOME. HE FURTHER OBSERVED THAT THE APPROACH TO WO RK OUT THE INTEREST EXPENSES ON PRO RATA BASIS WAS QUITE IN CONFORMITY WITH THE PROVISIONS SECTION 14A OF THE ACT. WHILE P ASSING THE ORDER THE LD. CIT HAS PLACED HIS RELIANCE IN THE OR DER OF JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LTD. VS CIT, WEST BENGAL III, KOLKATA ( ITA NO. 264 OF 2003 ). IN VIEW OF THIS THE LD. CIT(A), FOLLOWING THE APPROACH OF PRO RATA INTEREST OF HONBLE JURISDICTIONAL HIGH COURT, HAS RESTRICTED THE DISALLOWANCES OF INTEREST FOR AN AMOUNT OF RS. 1,04 ,76,174/- ONLY. I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 7 THE REVENUE IS AGGRIEVED WITH THE ORDER OF LD. CIT( APPEALS) AND IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. SHRI AMITABH CHOWDHURY, LD. ADDL. D.R. SUBMITS T HAT THE ASSESSEE ON HIS OWN HAD OFFERED DISALLOWANCE BEFORE THE ASSESSING OFFICER AND, THEREFORE, IT IS NOT OPEN TO THE ASSESSEE TO RETRACT FROM THE SAID STAND AND CONTENDED THAT N O DISALLOWANCE WAS WARRANTED AT ALL. OUR ATTENTION WA S INVITED TO PAGES 6-9 OF THE ASSESSMENT ORDER, WHEREIN THE COMPUTATION WAS GIVEN BY THE ASSESSEE WAS REPRODUCED. OUR ATTEN TION IS FURTHER INVITED TO THE OBSERVATIONS MADE BY THE LD. CIT(APPEALS), WHEREIN IT IS STATED THAT DURING THE YEAR THE ASSESSEE COMPANY HAS EARNED DIVIDEND OF RS.1,96,37, 935/- ALONG WITH OTHER INCOMES. THEREFORE, PRIMA FACIE IT CAN BE SAID THAT PROPORTIONATE INTEREST HAS BEEN INCURRED IN RE SPECT OF DIVIDEND INCOME ALSO. HE, THEREFORE, SUBMITTED THAT ORDER OF LD. CIT(APPEALS) BE REVERSED. 8. SHRI S.M. SURANA, LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT HIS CASE IS SQUARELY COVERED BY JUDGEMENT PASS ED IN ISG TRADERS LTD. VS.- CIT (2011 TIOL-621-HC-KOL) AND THE LD. CIT APPEAL RIGHTLY PASSED THE ORDER WHICH IS LIABLE TO BE AFFIRMED AS THE SAME IS LOGICAL, REASONABLE AND WELL REASONED O RDER . LD. COUNSEL SUBMITS THAT NO DISALLOWANCE CAN BE MADE UN DER SECTION 14A ON THE FACTS OF THE CASE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 10. COMING TO THE MERITS OF THE CASE, WE FIND THAT THE ISSUE AS TO WHETHER THE GROSS INTEREST INCOME IS TO BE TAKEN INTO I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 6 OF 7 ACCOUNT OR NOT AS NOW BEING SETTLED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ISG TRADERS LTD. VS.- CIT (2011 TIOL-621-HC-CAL). IN THAT CASE, THEIR LORDSH IPS WERE PLEASED TO OBSERVE THAT THE DISALLOWANCE IS TO BE COMPUTED WITH REFERENCE TO THE NET FIGURE AND NOT T HE GROSS FIGURE. IT IS, THEREFORE, CLEAR THAT THE MATERIAL F IGURE SO FAR AS THE FIGURE UNDER SECTION 14A READ WITH RULE 8D IS C ONCERNED IS THE FIGURE, WHICH IS ACTUALLY DEBITED OR CREDITED T O THE PROFIT & LOSS A/C. AND NOT THE COMPONENTS THEREOF. 11. IN VIEW OF THE ABOVE DISCUSSIONS AND RESPECTFUL LY FOLLOWING THE ESTEEMED VIEWS OF THE HONBLE JURISDICTIONAL HI GH COURT, WE REJECT THE GROUND RAISED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 DAY OF NOVEMBER, 2015. SD/- SD/- MAHAVIR SINGH WASEEM AHMED (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, THE 6 TH DAY OF NOVEMBER, 2015 I.T.A. NO. 667/KOL/2012 ASSESSMENT YEAR: 2007-2008 PAGE 7 OF 7 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. CRISHPARK VINCOM LIMITED, 251(66), G.T. ROAD, JINDAL MANSION, LILUAH, HOWRAH-711 2204 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOLKA TA (4) COMMISSIONER OF INCOME TAX (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR /TRUE COPY/ INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA * DKP. P.S.