Lexicon Commercial Enterprises Limited, Kolkata V. D.C.I.T, Circle-1(1), Kolkata

ITA 719/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3000 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 09-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Earning of tax free income; TDS; Rule 8D
• Section: 43B; 14A; 37(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (B), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) & SHRI ABY T. VARKEY, JM] I.T.A. NO. 719/KOL/2019 ASSESSMENT YEAR: 2015-16 LEXICON COMMERCIAL ENTERPRISE LTD..................................................APPELLANT C/O. V.N. PUROHIT & CO., CHARTERED ACCOUNTANTS, DIAMOND CHAMBERS, UNIT-III, 4 TH FLOOR, SUITE NO. 4G, 4, CHOWRINGHEE LANE, KOLKATA 700 016. [PAN: AAACL 5025 H] VS DCIT, CIRCLE 1(1), KOLKATA.............................RESPONDENT AAYAKAR BHAWAN, 7 TH FLOOR, R. NO. 20, KOLKATA 700 069. APPEARANCES BY: SHRI H.V. BHARDWAJ, FCA APPEARING ON BEHALF OF THE ASSESSEE. SMT. DHRUBAJYOTI ROY, JCIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 23, 2020 DATE OF PRONOUNCING THE ORDER : MARCH 13, 2020 ORDER PER P.M. JAGTAP, VICE-PRESIDENT (KZ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 12, KOLKATA DATED 08.02.2019. 2. GROUND NO. 1 RELATES TO THE ISSUE OF DISALLOWANCE OF RS. 1,56,289/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF INCOME TAX RULES, 1962. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEALERSHIP OF PASSENGER CARS THROUGH SALES AND SERVICE OUTLETS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.09.2015 DECLARING A TOTAL INCOME OF RS. 1,41,74,020/-. IN THE SAID RETURN, DIVIDEND INCOME OF RS. 11,50,924/- 2 I.T.A. NO. 719/KOL/2019 A.Y. 2015-16 LEXICON COMMERCIAL ENTERPRISE LTD. RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. A DISALLOWANCE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE SAID EXEMPT INCOME WAS ALSO OFFERED BY THE ASSESSEE TO THE EXTENT OF RS. 11,510/- BEING 1% OF THE EXEMPT DIVIDEND INCOME. SINCE THE DISALLOWANCE SO OFFERED WAS NOT SUPPORTED BY ANY BOOKS OF ACCOUNTS SEPARATELY MAINTAINED BY THE ASSESSEE, THE ASSESSING OFFICER APPLIED RULE 8D AND WORKED OUT THE EXPENSES INCURRED BY THE ASSESSEE IN RELATION TO THE EARNING OF EXEMPT INCOME AT RS. 1,67,799/-. ACCORDINGLY, A FURTHER DISALLOWANCE OF RS. 1,56,289/- (1,67,799/- - 11,510/-) WAS MADE BY HIM U/S 14A READ WITH RULE 8D. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE DISALLOWANCE U/S 14A BY APPLYING RULE 8D WAS MADE BY THE AO BY TAKING INTO CONSIDERATION THE ENTIRE INVESTMENT MADE BY THE ASSESSEE IN SHARES INSTEAD OF TAKING ONLY THAT INVESTMENT IN SHARES WHICH HAD ACTUALLY EARNED DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. SINCE THIS CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS DULY SUPPORTED BY THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF REI AGRO LTD. GA NO. 3022 OF 2013 (ITAT NO. 161 OF 2013) JUDGEMENT DATED 23.12.2013, WE DIRECT THE AO TO RE-COMPUTE THE DISALLOWANCE TO BE MADE BY APPLYING RULE 8D BY TAKING INTO CONSIDERATION ONLY THE INVESTMENT MADE BY THE ASSESSEE IN SHARES WHICH ACTUALLY FETCHED THE EXEMPT DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY IS THUS PARTLY ALLOWED. 3 I.T.A. NO. 719/KOL/2019 A.Y. 2015-16 LEXICON COMMERCIAL ENTERPRISE LTD. 5. AS REGARDS GROUND NO. 2, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) AMOUNTING TO RS. 14,405/- ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE ON TDS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF MUKAND LTD. VS ITO 174 ITD 605 (MUM) WHEREIN IT WAS HELD THAT INTEREST PAID ON DELAYED PAYMENT OF TDS IS ALLOWABLE AS DEDUCTION U/S 37(1) OF THE ACT. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE DELETE THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE ON TDS AND ALLOW GROUND NO. 2 OF ASSESSEES APPEAL. 6. GROUND NO. 3 RELATES TO THE ISSUE OF DISALLOWANCE OF RS. 68,46,336/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ENTRY TAX LIABILITY. 7. AS NOTED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM THE TAX AUDIT REPORT, ENTRY TAX PAYABLE TO THE EXTENT OF RS. 68,46,336/- WAS NOT PAID BY THE ASSESSEE BEFORE THE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE SAME THEREFORE WAS DISALLOWED BY HIM AS PER SECTION 43B OF THE ACT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO ON THIS ISSUE BY OBSERVING THAT THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE HAD NOT BEEN PRESSED BY THE ASSESSEE. 4 I.T.A. NO. 719/KOL/2019 A.Y. 2015-16 LEXICON COMMERCIAL ENTERPRISE LTD. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LIMITED RELIEF THAT IS SOUGHT BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THIS ISSUE IS THAT THE AO MAY BE DIRECTED TO ALLOW THE DEDUCTION ON ACCOUNT OF THE AMOUNT OF ENTRY TAX IN QUESTION IN THE SUBSEQUENT YEARS ON PAYMENT BASIS. WE ARE UNABLE TO GIVE SUCH DIRECTION FOR THE SUBSEQUENT YEARS WHICH ARE NOT IN APPEAL BEFORE US. HOWEVER THE ASSESSEE IS AT LIBERTY TO CLAIM SUCH DEDUCTION ON PAYMENT BASIS IN THE RELEVANT YEARS AND THE AO SHALL CONSIDER THE SAME IN ACCORDANCE WITH LAW. GROUND NO. 3 IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2020. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER VICE PRESIDENT DATED: 13/03/2020 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. LEXICON COMMERCIAL ENTERPRISE LTD., C/O. V.N. PUROHIT & CO., CHARTERED ACCOUNTANTS, DIAMOND CHAMBERS, UNIT-III, 4 TH FLOOR, SUITE NO. 4G, 4, CHOWRINGHEE LANE, KOLKATA 700 016. 2. DCIT, CIRCLE 1(1), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA