CTC (India) Pvt Ltd., Kolkata V. D.C.I.T Cir - 6,kolkata., Kolkata

ITA 711/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3403 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT AGARWALACA
• Assessee Lawyers: VIVEK VERMA JCITSRDR
• Keywords: Earning of tax free income
• Section: 14A; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 711 / KOL / 2013 ASSESSMENT YEAR :2008-09 CTC (INDIA) PVT. LTD. ROOM NO. 322, CENTRE POINT, 21, HEMANT BASU SARANI, KOLKATA-700 001 [ PAN NO.AAACC 7922 K ] V/S . DCIT, CIRCLE-6, AAYAKARBHAWAN, KOLKATA /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI VIVEK VERMA, JCIT-SR-DR /BY RESPONDENT SHRI AMIT AGARWAL, ACA /DATE OF HEARING 15-12-2015 /DATE OF PRONOUNCEMENT 20-01-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA IN APPEAL NO.148/C IT(A)-VI, CIR-6/10-11/KOL DATED 21.02.2013. ASSESSMENT WAS FRAMED BY DCIT, CI RCLE-6, KOLKATA U/S 143(3)R.W.S.115WE(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.12.2010 FOR ASSE SSMENT YEAR 2008-09. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE M ADE U/S 14A READ WITH RULE 8D(2)(III) OF THE INCOME TAX ACT EVEN THO UGH NO PROXIMATE CAUSE BETWEEN THE EXPENSES INCURRED AND EARNING OF TAX FREE INCOME BY WAY OF DIVIDEND WAS PROVED BY THE LOWER AUTHORIT IES. ITA NO.711/KOL/2013 A.Y.2008-09 CTC (I) PVT. LTD. V. DCIT CIR-6, KOL. PAGE 2 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE DISALLOWANCE U/S 14A MAY KINDLY BE DELETED AND/OR REDUCED. 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT(A) WAS NOT JUSTIFIED IN NOT DIRECTING THE AO TO GRANT DEDU CTION U/S 10B OF THE I.T. ACT IN RESPECT OF THE ENTIRE GAIN DERIVED ON EXCHAN GE FLUCTUATION WHICH HAD INTRINSICALLY RELATED TO EXPORT OF GOODS AND TH EREFORE QUALIFIED FOR DEDUCTION U/S 10B OF THE ACT. 3. AT THE TIME OF HEARING, LD. AR FOR ASSESSEE HAS NOT PRESSED GROUND NO.3, HENCE, SAME IS DISMISSED AS NOT PRESSED. 4. THE ONLY ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE U/S 14A READ WIT H RULE 8D(2)(III) OF THE IT RULES, 1962. 5. BRIEFLY STATED FACTS ARE THAT DURING THE YEAR AS SESSEE HAS EARNED EXEMPTED DIVIDEND INCOME OF 17,64,841/- AND LONG TERM CAPITAL GAINS (LTCG) INCOME OF 12,09,992/-. HOWEVER THE ASSESSEE HAS NOT DISALLOWE D ANY EXPENSE IN RELATION TO EXEMPT INCOME EARNED DUR ING THE YEAR. THE AO SOUGHT THE CLARIFICATION IN VIEW OF THE PROVISION C ONTAINED UNDER SECTION 14A OF THE ACT FROM THE ASSESSEE FOR NON-DISALLOWANCE EXPE NSE. ASSESSEE SUBMITTED THAT THERE WAS NO EXPENSE INCURRED IN RELATION TO E XEMPTED INCOME SO NO DISALLOWANCE WAS MADE IN ITS RETURN OF INCOME. HOWE VER THE AO DISREGARDED THE CLAIM OF ASSESSEE BYDISALLOWING THE SUM OF 5,46,047/- IN TERMS OF THE PROVISIONS SPECIFIED IN RULE 8D(2)(III) OF THE IT R ULES AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER :- 8. THEREFORE, IN THE FACTS & CIRCUMSTANCES AS DISC USSED ABOVE AND SINCE THE SAME ISSUE HAS BEEN DECIDED IN THE ASSESS MENT YEAR 2009- 10 VIDE APPEAL NO.209/CIT(A)-VI/CIR-6/11-12 DATED 2 1.11.2012 AND FOLLOWING THE JUDGMENTS OF THE HON'BLE APPELLATE AU THORITIES INCLUDING THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F ISG TRADERS LTD. VS. ITA NO.711/KOL/2013 A.Y.2008-09 CTC (I) PVT. LTD. V. DCIT CIR-6, KOL. PAGE 3 CIT-II, KOLKATA & DHANUKA & SONS V. CIT (CENTRAL)-1 ; THE HON'BLE SPECIAL BENCH OF ITAT IN THE CASE OF CHEMINVEST LTD . V. INCOME-TAX OFFICER, NEW DELHI AND THE HON'BLE ITAT DELHI BENCH H IN THE CASE OF TECHNOPAK ADVISORS (P) LTD. V. ADDITIONAL COMMISSIO NER OF INCOME-TAX, RANGE-16, NEW DELHI, THE TOTAL DISALLOWANCE OF RS.5 ,46,393/- INCLUDING INTEREST OF RS.346/- AS PER RULE 8D READ WITH SECTI ON 14A IS UPHELD. THIS GROUND OF APPEAL IS DISMISSED. 7. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASS ESSEE PREFERRED SECOND APPEAL BEFORE US. 8. MR.AMIT AGARWAL, LD. AUTHORIZED REPRESENTATIVE APPEARING ON BEHALF OF ASSESSEE AND MR. VIVEK VERMA, LD. DEPARTMENTAL REPR ESENTATIVE APPEARING ON BEHALF OF REVENUE. 9. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUB MITTED THE LIST OF INVESTMENTS AND DEMONSTRATED THAT ALL THE INVESTMEN TS HAVE NOT GENERATED THE DIVIDEND INCOME DURING THE YEAR. THE LD. AR PRA YED THAT DIVIDEND INCOME/ INVESTMENT WHICH HAS GIVEN YIELD THE DIVIDEND INCOM E DURING THE YEAR SHOULD ONLY BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE U/S.14A OF THE ACT. FINALLY, LD. AR PRAYED TO RESTORE THE FILE TO AO FOR FRESH C OMPUTATION OF DISALLOWANCE U/S14A OF THE ACT IN THE LIGHT OF HIS SUBMISSION. 10. ON THE CONTRARY, LD. VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 11. FROM THE AFORESAID DISCUSSION, WE FIND THAT AO HAS APPLIED TO RULE 8D(2)(III) OF THE IT RULE FOR MAKING THE DISALLOWAN CE OF THE EXPENSE UNDER SECTION 14A OF THE ACT. ON THE OTHER SIDE THE LD. A R PRAYED TO CONSIDER THE DISALLOWANCE IN RELATION TOTHOSE INVESTMENTS WHICH HAS GENERATED THE INCOME IN THE FORM OF DIVIDEND DURING THE YEAR. HOWEVER WE FIND FROM THE ASSESSEES OWN CASE IN ITA NO.97/KOL/2013 DATED 13.11.2015 FOR THE AY 2009-10 HONBLE KOLKATA TRIBUNAL C BENCH HAS CONFIRMED TH E DISALLOWANCE UNDER ITA NO.711/KOL/2013 A.Y.2008-09 CTC (I) PVT. LTD. V. DCIT CIR-6, KOL. PAGE 4 RULE 8D(2)(III) OF THE IT RULES CONSIDERING ONLY TH OSE INVESTMENT WHICH ARE YIELDING INCOME TO THE ASSESSEE. THE RELEVANT EXTRA CT OF THE ORDER IN PARA-7 IS REPRODUCED:- 7. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE PLEA OF ASSESSEES LD. COUNSEL IS QUITE REASONABLE FOR THE REASON THAT THE DISALLOWANCE UNDER SECTION 14 OF THE ACT READ W ITH RULE 8D OF THE RULES IS TO BE IN RELATION TO THE INCOME, WHICH DOE S NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKEN INT O CONSIDERATION THE INVESTMENT, WHICH HAS GIVEN RISE TO THE INCOME. WE DIRECT THE ASSESSING OFFICER TO DISALLOW ONLY 0.5% OF AVERAGE OF INVESTMENTS, WHICH GIVE RISE TO DIVIDEND INCOME. WE DIRECT ACCOR DINGLY. 12. TAKING A CONSISTENT VIEW IN ASSESSEES OWN CAS E IN ITA NO.97/KOL/2013 (SUPRA) WE DIRECT THE ASSESSING OFFICER TO DISALLOW THE EXPENSES IN TERMS OF RULE 8D(III) OF I.T. RULES BY TAKING OF THE AVERAGE INVESTMENTS WHICH HAS GIVEN RISE TO DIVIDEND INCOME. THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 13. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 20/01 /2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 20 / 0 1/201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-CTC (INDIA) PVT. LTD. ROOM NO.322, CENTR E POINT, 21, HEMANT BASUSARAN I, KOLKATA -01 2. /RESPONDENT-DCIT, CIR-6, AAYKARBHAWAN, KOLKATA 3. ) *+ , , - / CONCERNED CIT KOLKATA 4., , -- / CIT (A) KOLKATA 5. 012 33*+,, *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,