Bisnauth Investments Ltd, Kolkata V. DCIT, Circle-6, Kolkata, Kolkata

ITA 680/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1806 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: D S DAMLE
• Keywords: Business expenditure; Earning of tax free income; Bad and doubtful debts
• Section: 14A

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NOS. 680 & 681/KOL/2017 ASSESSMENT YEARS: 2009-10 & 2010-11 BISNAUTH INVESTMENTS LTD. (PREVIOUSLY M/S. METALS CENTRE LTD.) (PAN: AABCM7767N) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 05.07.2018 DATE OF PRONOUNCEMENT 05.09.2018 FOR THE APPELLANT SHRI D. S. DAMLE, FCA FOR THE RESPONDENT SHRI A. BHATTACHARJEE, ADDL. CIT ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS PREFERRED BY THE ASSESSEE ARE AG AINST THE SEPARATE ORDERS OF THE LD. CIT(A) 17, KOLKATA DATED 08.02.2017 AND 30.12.201 6 FOR ASSESSMENT YEARS 2009-10 AND 200-11 RESPECTIVELY. SINCE ISSUES ARE COMMON AND FA CTS ARE IDENTICAL EXCEPT VARIANCE IN AMOUNT, WE DISPOSE OF BOTH THESE APPEALS BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE BY TAKING THE CASE OF AY 2009-10 AS THE LEAD CASE. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN BOTH THESE APPEALS IS AGAINST THE ACTION OF LD. CIT(A) IN COMPUTING THE EXPENSES DISALLOWABLE U/S. 14A OF THE INCOME TAX 1961(HEREIN AFTER THE ACT ) READ WITH RULE 8D OF THE INCOME TAX. RULES, 1962( HEREIN AFTER THE RULES ). BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A NON-BANKING FINANCIAL COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MONEY LENDING. APART FRO M THE FOREGOING, THE APPELLANT ALSO INVESTS IN SHARES OF ITS GROUP / ASSOCIATE COMPANIES. DURIN G THE RELEVANT YEAR THE ASSESSEE DERIVED EXEMPT INCOME OF RS.70,04,061/- FROM THE SHARES & S ECURITIES, AGAINST WHICH DISALLOWANCE OF RS.3,500/- WAS OFFERED U/S 14A OF THE ACT. THE AO S OUGHT CLARIFICATION FROM THE ASSESSEE AS TO WHY RULE 8D SHOULD NOT BE APPLIED. AFTER CONSIDERIN G THE APPELLANTS SUBMISSIONS, THE AO HOWEVER REJECTED THE ASSESSEES EXPLANATIONS AND MA DE THE DISALLOWANCE OF RS.1,26,51,029/- 2 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 2 BY INVOKING RULE 8D(2). THE AO HELD THAT FOR EARNIN G TAX FREE DIVIDEND OF RS.70,04,061/- IT WAS INCONCEIVABLE TO ACCEPT THAT ONLY DEMAT EXPENSE S OF RS.3,500/- WERE INCURRED. IN AOS OPINION THE ADMINISTRATIVE EXPENSES INCURRED BY THE APPELLANT WERE ATTRIBUTABLE TO EARNING DIVIDEND INCOME, AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY.CITVS S.G. INVESTMENTS & INDUSTRIES LTD (89 ITD 44) . ACCORDINGLY THE AO COMPUTED THE AMOUNT DISALLOWABLE AS PER RULE 8D(2) AT RS.1,51,28,768/- BUT SINCE THE INTEREST & EXPENSES DEBITED IN THE P&L A/C AND CLAIMED IN THE RETURN WERE RS.1,26, 51,029/-, THE AO RESTRICTED THE DISALLOWANCE U/S 14A TO RS.1,26,51,029/-. AGGRIEVED BY THE AOS ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HOWEVER DISMISSED THE ASSESSEES APPEAL AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AT THE TIME OF HEARING THE LD. AR SUBMITTED THAT DURING THE RELEVA NT YEAR THE APPELLANT CARRIED ON ONLY TWO ACTIVITIES VIZ., GRANTING OF LOANS AND MAKING INVES TMENT IN SHARES. THE ASSESSEES BUSINESS FUNDS WERE UTILIZED IN THESE TWO ACTIVITIES. HE SUB MITTED THAT SAVE & EXCEPT THE FOREGOING TWO ACTIVITIES THE APPELLANT DID NOT CONDUCT ANY OTHER BUSINESS ACTIVITY, NOR ANY INCOME RECEIVED FROM ANY OTHER SOURCE. DRAWING ATTENTION TO THE APP ELLANTS FINANCIAL STATEMENTS, THE LD. AR POINTED OUT THAT FROM THE SAID TWO ACTIVITIES THE A PPELLANT DERIVED INCOME IN FORM OF INTEREST AMOUNTING TO RS.65,00,064/- AND DIVIDEND OF RS.70,0 4,061/-. THE LD. AR FURTHER POINTED OUT THAT IN CONNECTION WITH EARNING THE FOREGOING INCOM E THE APPELLANT HAD PAID INTEREST OF RS.97,24,941/-. NETTING OFF THE INTEREST PAID AGAIN ST INTEREST RECEIVED, THE NET INTEREST EXPENDITURE WHICH THE AO COULD HAVE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D(2)(II) WAS ONLY RS.32,24,877/- AS OPPOSED TO RS.89,46,546/-, D ISALLOWED BY THE AO IN THE IMPUGNED ORDER. THE LD. AR THEREFORE SUBMITTED THAT THE INTE REST DISALLOWANCE U/S 14A COULD NOT EXCEED RS.32,24,877/-. IN SUPPORT OF THE PROPOSITION FOR N ETTING OFF INTEREST RECEIVED AGAINST INTEREST PAID FOR THE PURPOSE OF MAKING DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(II), THE LD. AR RELIED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS NIRMA CREDIT & CAPITAL PVT LTD (300 CTR 286). 4. AS REGARDS DISALLOWANCE UNDER RULE 8D(2)(III), T HE LD. AR DREW OUR ATTENTION TO THE FACT THAT THE TOTAL EXPENDITURE DEBITED TO P&L A/C WAS RS.1,62,34,321/-, WHICH INTER ALIA 3 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 3 INCLUDED PROVISION FOR NPA AMOUNTING TO RS.35,66,84 6/- WHICH WAS SUOMOTO DISALLOWED AND THEREFORE EVEN THE AO HAD AGREED TO EXCLUDE THE SA ME FOR MAKING DISALLOWANCE UNDER THE THIRD LIMB OF RULE 8D(2). THE LD. AR POINTED OUT TH AT THE SUM OF RS.1,62,34,321/- INTER ALIA INCLUDED INTEREST OF RS.97,24,941/- AND BAD DEBTS O F RS.12,56,135/-. THE INTEREST EXPENDITURE WAS SEPARATELY CONSIDERED UNDER RULE 8D(2)(II), RS. 97,24,941/- WERE LIABLE TO BE EXCLUDED FOR THE PURPOSES OF MAKING DISALLOWANCE UNDER RULE 8D(2 )(III). SIMILARLY BAD DEBTS WRITTEN OFF RELATED EXCLUSIVELY TO THE ASSESSEES FINANCING BUS INESS FROM WHICH NO TAX FREE INCOME WAS EARNED AND THEREFORE THE SAME WAS ALSO LIABLE TO BE EXCLUDED FROM THE AMBIT OF ADMINISTRATIVE EXPENSES LIABLE FOR DISALLOWANCE UNDER RULE 8D(2)(I II). THE LD. AR THEREFORE ARGUED THAT IF THE FOREGOING THREE ITEMS DEBITED IN P&L A/C WERE E XCLUDED, THEN THE BUSINESS ESTABLISHMENT EXPENSES WORKED OUT ONLY TO RS.16,86,399/-, WHICH A LONE COULD BE TAKEN INTO ACCOUNT FOR DISALLOWANCE UNDER RULE 8D(2)(III). THE LD. AR FURT HER SUBMITTED THAT EXPENDITURE OF RS.16,86,399/- INTER ALIA INCLUDED ITEMS OF EXPENSE S WHICH WERE NECESSARILY REQUIRED TO BE INCURRED BY EVERY CORPORATE ASSESSEE TO MAINTAIN IT S CORPORATE IDENTITY AND TO COMPLY WITH REGULATORY REQUIREMENTS UNDER THE COMPANIES ACT, 19 56 AND UNDER VARIOUS LAWS WHICH GOVERN THE FUNCTIONING OF THE CORPORATE ENTITIES. HE THERE FORE SUBMITTED THAT IT WOULD BE WHOLLY INAPPROPRIATE TO DISALLOW THE ENTIRE SUCH EXPENDITU RE MERELY BECAUSE AS PER THE MATHEMATICAL FORMULA PRESCRIBED IN RULE 8D(2)(III), THE EXPENDIT URE DISALLOWABLE EXCEEDED THE ACTUAL EXPENSES. RELYING ON THE JUDGMENT OF THE JURISDICTI ONAL CALCUTTA HIGH COURT IN THE CASE OF DHANUKA& SONS VS CIT (339 ITR 319), HE THEREFORE SU BMITTED THAT THE APPROPRIATE COURSE IN SUCH A SCENARIO WOULD BE TO ALLOCATE THE ACTUAL ADM INISTRATIVE EXPENDITURE ON PROPORTIONATE BASIS AND DISALLOW THE EXPENSEWHICH IS RELATABLE TO EARNING TAX FREE INCOME. THE LD. AR THEREFORE SUBMITTED THAT IF SUCH PROPORTIONATE EXPE NDITURE WAS DISALLOWED THEN THE AMOUNT DISALLOWABLE UNDER CLAUSE (III) OF RULE 8D(2) WOULD AMOUNT ONLY TO RS.8,74,170/-. 5. PER CONTRA, THE LD. DR APPEARING ON BEHALF OF TH E REVENUE FULLY SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. HE SUBMITTED THAT SINCE THE APPELLANT HAD HIMSELF OFFERED ONLY RS.3,500/- AS THE SUM DISALLOWABLE UNDER SECTION 14 A WHICH WAS CLEARLY NOT SUPPORTED BY ANY LOGIC, THE AO WAS LEFT WITH NO OTHER ALTERNATIVE BU T TO MAKE THE DISALLOWANCE IN CONFORMITY WITH RULE 8D(2) AND IN THAT VIEW OF THE MATTER THE AUTHORITIES BELOW WERE JUSTIFIED IN MAKING 4 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 4 THE DISALLOWANCE OF RS.1,26,51,029/- AND NO INTERFE RENCE IN THE ORDERS OF LOWER AUTHORITIES WAS CALLED FOR. 6. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES, WE FIND MERIT IN THE LD. ARS SUBMISSIONS. IT IS EVIDENT FROM THE AUDITED FINANCI AL ACCOUNTS THAT DURING THE RELEVANT YEAR THE ASSESSEE CARRIED ON ONLY TWO ACTIVITIES VIZ., GRANT ING LOANS & ADVANCES AND INVESTMENT IN SHARES. ADMITTEDLY THE APPELLANT HELD BOTH INTEREST AND NON-INTEREST BEARING FUNDS WHICH WERE ROUTED THROUGH COMMON BANK ACCOUNTS AND AS SUCH IT WAS NOT POSSIBLE TO IDENTIFY THE PRECISE SOURCE FROM WHICH INVESTMENTS WERE MADE AND LOANS & ADVANCES WERE GRANTED. IN THE CIRCUMSTANCES THE ONLY PROPER COURSE TO BE ADOPTED IN ARRIVING AT THE INTEREST AMOUNT DISALLOWABLE FOR THE PURPOSES OF RULE 8D(2)(II) WAS TO NET OFF THE INTEREST RECEIPT AGAINST THE INTEREST PAYMENT AND ONLY THE NET INTEREST EXPENDIT URE COULD BE CONSIDERED FOR THE PURPOSE OF MAKING DISALLOWANCE RULE 8D(2)(II). IN THIS REGARD, WE FIND SUPPORT IN THE OBSERVATIONS MADE IN THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF PR.CITVSNIRMA CREDIT & CAPITAL PVT LTD (SUPRA) . THE RELEVANT EXTRACTS OF THE JUDGMENT ARE AS FOLL OWS: 10. FORMULA UNDER CLAUSE (II) OF SUB-RULE (2) OF R ULE 8D IS AX5 B/C, WHERE A REPRESENTS THE AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR, 'B' REPRESENTS T HE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF THE TOTAL INCOME, AS PE R THE BALANCE SHEET ON THE FIRST AND THE LAST DAY OF THE PREVIOUS YEAR AND 'C' IS THE AVERAGE OF TOTA L ASSETS AS PER THE BALANCE SHEET AGAIN ON THE FIRST AND THE LAST DAY OF THE PREVIOUS YEAR. AS PER THIS FORMULA THEREFORE, INTEREST EXPENDITURE TO BE DISALLOWED WOULD BE THE TOTAL INTEREST EXPENDITURE WHICH IS IN PROPORTION OF ASSESSEE'S AVERAGE VALUE OF INVESTMENT NOT FORMING PART OF THE TOTAL I NCOME TO THE AVERAGE TOTAL ASSETS. THE LEGISLATURE HAS THEREFORE PROVIDED THAT WHENEVER IT IS NOT POSSIBLE TO CORRELATE WITH PRECISION A CERTAIN INTEREST EXPENDITURE FOR THE PURPOSE OF EAR NING INCOME NOT FORMING PART OF THE TOTAL INCOME, DISALLOWANCE OF SUCH EXPENDITURE WOULD BE I N THE PROPORTION OF ASSESSEE'S AVERAGE INVESTMENT EARNING INCOME NOT FORMING PART OF THE T OTAL INCOME, TO THE AVERAGE VALUE OF ASSESSEE'S TOTAL ASSETS. 11. IT IS IN THIS CONTEXT THAT THE COMPUTATION OF F ACTOR 'A' IN THE SAID FORMULA ASSUMES SIGNIFICANCE. IN PLAIN TERMS, 'A' REPRESENTS THE AMOUNT OF EXPEND ITURE BY WAY OF INTEREST IGNORING THE INTEREST EXPENDITURE ALREADY INCLUDED IN CLAUSE (I). THE EXP RESSION USED BY THE LEGISLATURE IS 'AMOUNT OF EXPENDITURE BY WAY OF INTEREST'. WHEN THE LEGISLATU RE HAS THEREFORE, USED THIS EXPRESSION 'AMOUNT OF EXPENDITURE', THE SAID TERM SHALL HAVE TO BE INT ERPRETED IN THE MANNER THAT WILL BRING ABOUT THE CORRECT LEGISLATIVE INTENT AND EQUITABLE APPLICATIO N THEREOF. AS IN CASE ON HAND, WHEN THE ASSESSEE PAYS INTEREST ON BORROWINGS AS ALSO EARNS TAXABLE I NTEREST ON INVESTMENTS MADE BY HIM DURING A PARTICULAR YEAR, HIS INTEREST EXPENDITURE HAS TO BE CONSIDERED AS ONE WHICH IS THE NET OF INTEREST PAID MINUS INTEREST EARNED. ANY OTHER VIEW WOULD GI VE THE UNINTENDED COMPUTATION OF FACTOR 'A' PROVIDED IN CLAUSE (II) OF SUB-RULE (2) OF RULE 8D WHICH WILL IN TURN DISTORT THE COMPUTATION OF DISALLOWABLE EXPENDITURE UNDER THE SAID CLAUSE. IT IS TRUE THAT THE LEGISLATURE HAS NOT GIVEN ANY FURTHER INDICATION AS TO HOW SUCH AMOUNT OF EXPENDI TURE WOULD BE ASCERTAINED. WE WOULD 5 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 5 THEREFORE HAVE TO APPLY THE REASONABLE TEST AND INT ERPRETE THE PROVISION AS IS MOST LIKELY TO GIVE EFFECT TO LEGISLATIVE INTENT FOR DISALLOWANCE OF EX PENDITURE BY AN ASSESSEE FOR EARNING INCOME WHICH IS NOT ACCOUNTABLE TO TAX. IT IS TRUE THAT IN VESTMENT MADE BY THE ASSESSEE OUT OF SUCH BORROWED FUNDS WILL CONTINUE TO BE FACTORED IN DENO MINATOR IN THE FORMULA PROVIDED IN CLAUSE (II) OF SUB-RULE (2) SINCE FACTOR 'C' WHICH FORMS THE DE NOMINATOR REFERS TO AVERAGE OF TOTAL ASSETS OF ASSESSEE AS ON THE FIRST AND THE LAST DAY OF THE PR EVIOUS YEAR. HOWEVER, IGNORING TAXABLE INTEREST EARNED BY THE ASSESSEE FOR THE PURPOSE OF ASCERTAIN ING THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF INTEREST, WOULD AMOUNT TO DISTOR TING THE FACTOR 'A' PROVIDED BY THE LEGISLATURE IN CLAUSE (II) OF SUB-RULE (2) OF RULE 8D. IT MAY B E POSSIBLE FOR VARIETY OF REASONS THAT IN A GIVEN FINANCIAL YEAR THE ASSESSEE MIGHT HAVE EARNED INTER EST INCOME WHICH IS HIGHER THAN THE INTEREST PAID ON THE BORROWED FUNDS. THIS MAY BE BECAUSE ASS ESSEE'S INVESTMENTS MAY HAVE EARNED INTEREST AT RATES HIGHER THAN THE INTEREST RATE PAI D BY THE ASSESSEE ON THE BORROWINGS OR MAY ALSO BE BECAUSE ASSESSEE'S INVESTMENT IN EARNING INTERES T MAY BE HIGHER IN VALUE THAN THE ASSESSEE'S BORROWINGS, INVITING INTEREST. IN SUCH A SITUATION, ESSENTIALLY, THE ASSESSEE WOULD HAVE EARNED MORE INTEREST THAN THE INTEREST PAID. IF WE ACCEPT THE INTERPRETATION SUGGESTED BY THE REVENUE AND APPLY THE FORMULA BY COMPUTING FACTOR 'A' BY TAKING INTO ACCOUNT INTEREST PAID IGNORING THE INTEREST EARNED, THERE WOULD BE DISALLOWANCE UNDER THIS FORMULA EVEN IF IN THE NET RESULT, THE ASSESSEE MAY HAVE NOT PAID ANY INTEREST ON BORROWIN GS . 7. APPLYING THE RATIO LAID DOWN IN THE ABOVE JUDGME NT TO THE FACTS OF THE APPELLANTS CASE, WE FIND THAT DURING THE YEAR UNDER CONSIDERATION TH E GROSS INTEREST EXPENSE WAS RS.97,24,941/- AND GROSS INTEREST RECEIPT WAS RS.65,00,064/-.THERE BY THE NET INTEREST EXPENDITURE WAS RS.32,24,877/-. THIS NET EXPENDITURE IN OUR CONSIDE RED VIEW WAS RELATABLE TO EARNING DIVIDEND, DERIVED FROM INVESTMENTS ACQUIRED OUT OF BORROWED F UNDS. ACCORDINGLY WE HOLD THAT THE INTEREST DISALLOWABLE UNDER SECTION 14A OF THE ACT SHOULD BE RS.32,34,877/- INSTEAD OF RS.89,46,546/-. 8. AS REGARDS AMOUNT DISALLOWABLE UNDER RULE 8D(2)( III), WE AGREE WITH THE LD. ARS CONTENTION THAT IN WORKING OUT THE COMMON BUSINESS ESTABLISHMENT EXPENSES THE AO SHOULD HAVE EXCLUDED THE EXPENDITURE DEBITED BY WAY OF INT EREST BAD DEBTS WRITTEN OFF & PROVISION FOR NPA TOTALING TO RS.1,45,47,922/-. EXCLUDING THESE T HREE ITEMS, THE COMMON BUSINESS EXPENSES WHICH COULD BE CONSIDERED FOR DISALLOWANCE UNDER RU LE 8D(2)(III) AMOUNTED ONLY TO RS.16,86,399/-. THIS EXPENDITURE WAS MUCH BELOW RS. 61,78,722/- WORKED OUT BY THE AO BY APPLYING THE FORMULA UNDER RULE 8D(2)(III). WE THER EFORE FIND THAT MECHANICAL APPLICATION OF RULE 8D(2)(III) IN THE PRESENT CASE LEADS TO ABSURD RESULTS. WE ALSO FIND FORCE IN THE LD. ARS SUBMISSIONS THAT THE EXPENSES INTER ALIA INCLUDED I TEMS SUCH AUDIT FEES, ROC EXPENSES ETC. WHICH WERE REQUIRED TO BE INCURRED TO MAINTAIN CORP ORATE IDENTITY OF THE APPELLANT. SUCH EXPENSES WERE REQUIRED TO BE INCURRED IRRESPECTIVE WHETHER TAX FREE OR TAXABLE INCOME WAS 6 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 6 EARNED. IN THE CIRCUMSTANCES THEREFORE IT WOULD BE INAPPROPRIATE TO CONCLUDE THAT THE ENTIRE EXPENDITURE OF RS.16,86,399/- WAS RELATABLE ONLY TO EARNING TAX FREE INCOME. TO HOLD SO WOULD MEAN THAT THE OTHER TAXABLE INCOME WAS EARNED BY TH E APPELLANT WITHOUT INCURRING EVEN A SINGLE RUPEE EXPENDITURE AND SUCH CONCLUSION WOULD BE ANOMALOUS. IN THE CIRCUMSTANCES THEREFORE WE FIND MERIT IN THE LD. ARS SUBMISSIONS THAT THE DISALLOWANCE OUT OF COMMON ESTABLISHMENT EXPENSES SHOULD BE MADE IN PROPORTION OF DIVIDEND INCOME TO GROSS RECEIPTS CREDITED TO P&L A/C. THIS METHODOLOGY WAS ALSO UPHE LD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY.CITVS S.G. INVESTMENT & INDUSTRIES LTD (89 ITD 4 4) WHICH WAS SINCE AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT I N THE CASE OF ISG TRADERS LTD VS CIT (ITA NO. 264 OF 2003) DATED 22.09.2011 . APPLYING THE SAID PRO-RATA CALCULATION, WE FIND T HAT THE AMOUNT DISALLOWABLE OUT OF COMMON ADMINISTRATIV E EXPENSES WORKS OUT TO RS.8,74,170/-. WE ACCORDINGLY DIRECT THE AO TO RESTRICT THE DISALL OWANCE OUT OF ADMINISTRATIVE EXPENDITURE U/S 14A TO RS.8,74,170/-. 9. IN RESULT, THE AMOUNT DISALLOWABLE UNDER RULE 8D (2) IS CONFIRMED TO THE EXTENT OF RS.41,02,547/- [3,500 + 32,24,877 + 8,74,170]. ACCO RDINGLY THESE GROUNDS ARE PARTLY ALLOWED. ITA NO. 681/KOL/2017 OF AY 2010-11 10. IN ALL THE GROUNDS TAKEN UP IN THIS APPEAL, THE APPELLANT HAS OBJECTED TO THE DISALLOWANCE OF RS.42,67,044/- MADE BY THE AO UNDER SECTION 14A OF THE ACT. AT THE TIME OF HEARING THE LD. AR HOWEVER RESTRICTED HIS ARGUMENTS ONLY IN RES PECT OF DISALLOWANCE OF RS.26,37,064/- MADE OUT OF ADMINISTRATIVE EXPENSES UNDER RULE 8D(2 )(III). THE ARGUMENTS OF THE LD. AR WERE IDENTICAL WITH THAT OF AY 2009-10. THE LD. AR POINT ED OUT THAT THE EXPENDITURE DEBITED IN P&L A/C FOR THE FY 2009-10 WAS RS.1,77,81,539/-, WH ICH INTER ALIA INCLUDED INTEREST OF RS.55,35,341/-, CONSIDERED FOR DISALLOWANCE UNDER R ULE 8D(2)(II) AND RS.1,14,10,300/- BEING PROVISION FOR NPA DISALLOWED BY THE APPELLANT SEPAR ATELY. EXCLUDING THESE TWO ITEMS, THE COMMON BUSINESS EXPENSES WHICH COULD BE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D(2)(III) AMOUNTED TO RS.8,35,898/-. THE LD. AR THEREFORE SUB MITTED THAT ON PRO RATA BASIS, THE AMOUNT DISALLOWABLE SHOULD BE WORKED OUT. 7 ITA NO.680 & 681/KOL/2017 BISNAUTH INVESTMENTS LTD., AYS 2009-10 & 2010-11 7 11. WE FIND THAT THE FACTS AND THE ISSUE INVOLVED I N THIS APPEAL ARE IDENTICAL WITH THE ISSUE INVOLVED IN AY 2009-10. IN THE PRESENT APPEAL, THE APPELLANT HAS NOT DISPUTED THE AMOUNT DISALLOWABLE UNDER RULE 8D(2)(I) AND (II) AMOUNTING TO RS.28,500/- AND RS.16,01,480/- RESPECTIVELY AND THE SAME ARE ACCORDINGLY CONFIRMED . THE ASSESSEES GRIEVANCE RELATES ONLY TO AMOUNT DISALLOWED UNDER RULE 8D(2)(III). FOR THE RE ASONS DISCUSSED IN PARA 8 OF THIS ORDER, WE HOLD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWIN G RS.26,37,064/- UNDER RULE 8D(2)(III) WHEN THE ACTUAL COMMON ADMINISTRATIVE EXPENDITURE W AS ONLY RS.8,35,898/-. THE DIVIDEND INCOME DURING THE RELEVANT YEAR WAS RS.1,42,68,931 /- WHEREAS GROSS AMOUNT CREDITED IN P&L A/C WAS RS.4,49,13,861/-. ACCORDINGLY PRO-RATA ADMI NISTRATIVE EXPENSES RELATABLE TO EARNING OF DIVIDEND AMOUNTED ONLY TO RS.2,65,561/-. THE AO IS ACCORDINGLY DIRECTED TO DISALLOW THE SUM OF RS.2,65,561/- IN PLACE OF RS.26,37,064/- UND ER RULE 8D(2)(III). THE AO SHALL ACCORDINGLY MODIFY THE AMOUNT DISALLOWABLE U/S 14A OF THE ACT. 12. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 5TH SEPTE MBER, 2018 SD/- SD/- (DR. A.L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :5TH SEPTEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT BISNAUTH INVESTMENTS LTD. (PREVIOUSL Y M/S. METALS CENTRE LTD.), 4, MANGOE LANE, SURENDRA MOHAN SARANI, KOLKA TA-700 001. 2 RESPONDENT DCIT, CIRCLE-6, KOLKATA. 3. THE CIT(A) -17, KOLKATA. (SENT THROUGH E-MAIL) 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY