M/s. Usha Martin Ventures Ltd., Kolkata V. DCIT, C ircle- 6, Kolkata, Kolkata

ITA 739/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48144 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2010
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR
• Assessee Lawyers: S M SURANA
• Keywords: Rule 8D; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' # , ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #$ #$ #$ #$ / I.T.A NO. 739/KOL/2010 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2007-08 M/S. USHA MARTIN VENTURES LTD. VS DEPUTY COMMISS IONER OF INCOME-TAX, (PAN-AAACU 3843 J) CIRCLE-6, KOLKATA. (*+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: SHRI S. M. SURANA FOR THE RESPONDENT: SHRI S. K. MALAKAR . / ORDER PER MAHAVIR SINGH, JM/ ' # ' # ' # ' # , ! ! ! ! : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-VI, KOLKATA IN APPEAL NO.CIT(A)-VI/KOL/CIR-6/788 VIDE DATED 26.02.2010. T HE ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-6, KOLKATA U/S.143(3) R.W.S. 115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE H IS ORDER DATED 30.11.2009. 2. THE FIRST TWO INTERCONNECTED ISSUES RAISED BY TH E ASSESSEE VIDE GROUND NOS. 2 TO 5 ARE AS REGARDS TO DISALLOWANCE OF INTEREST BY INVOKING PRO VISIONS OF SECTION 14A OF THE ACT AND FURTHER DISALLOWANCE OF DEDUCTION OF RS.2,67,751/- DISALLOW ED THRICE BY ASSESSING OFFICER. THE FOLLOWING GROUND NOS. 2 TO 5 READ AS UNDER: 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.23,90,315/- U/S. 14A WHEN NO EXPENDITURE WERE INCURRED FOR EARNING THE E XEMPTED INCOME. THE SAME BEING DIRECTLY COLLECTED BY THE BANKER THROUGH E-SYSTEM. 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,23,30,187/- U/S. 14A WHEN THE ASSESSEE HAD NET INTEREST INCOME, THE INTEREST PAID WAS NOT CONNECTED WITH THE EXEMPTED INCOME AND FURTHER THE DISALLOWANCE CO ULD HAVE BEEN MADE ONLY FROM THE NET PAYMENTS, IF ANY, UNDER THE HEAD INTEREST. 4.FOR THAT THE LD. CIT(A) SHOULD HAVE FURTHER ALLOW ED THE DEDUCTION OF RS.2,67,751/- WHICH WAS DISALLOWED THRICE AND THE LD. CIT(A) HAS DIRECTED TO ALLOW DEDUCTION ONLY FOR RS.2,67,751/- WHEN SUCH DIRECTIONS SHOULD HAVEN FO R REDUCING TOTAL INCOME BY RS.2,67,751/- + RS.2,67,751/- SINCE THE SAID DISALL OWANCE WAS DULY COVERED U/S. 14A. 2 ITA 739/K/2010 M/S. USHA MARTIN VENTURES LTD.. A. Y.07-08 5. FOR THAT THE LD. CIT(A) SHOULD HAVE REDUCED THE DISALLOWANCE U/S. 14A BY RS.2,67,751/- WHICH WAS DULY HAS DISALLOWED BY THE ASSESSEE HIMSELF WHILE COMPUTING THE TOTAL INCOME. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE CLAIMED THAT THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES AND A DIVIDEND WAS RECEIVED THROUGH NET BANKING, THEREFOR E, THERE WAS NO QUESTION OF ANY EXPENSES INCLUDING INTEREST INCURRED FOR EARNING THE DIVIDEN D INCOME. THE AO DISALLOWED OF INTEREST EXPENSES AT RS.2,23,30,187/- BY INVOKING THE PROVIS IONS OF SECTION 14A OF THE ACT AND ALSO DISALLOWED BY THE ASSESSEE ITSELF AT RS.2,66,751/- AND FURTHER AGAIN THE SAME DISALLOWANCE OF RS.2,67,751/- WAS ALSO MADE. THE CIT(A) ALSO CONFI RMED THE ACTION OF THE ASSESSING OFFICER BY GIVING FOLLOWING FINDINGS: I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND ALSO THE ORDER OF THE A.O. THE A.O. APPLYING THE RATIO OF THE JUDGMENT IN THE CASE OF ITO VS. DAGA CAPITAL MARKETS (P) LTD. (2009) 312 ITR 1 (SB), MUMBAI DIS ALLOWED THE EXPENSES U/S. 14A READ WITH RULE 8D. APPLYING POINT NO.2 AND POINT N O.3 OF RULE 8D THE DISALLOWANCES WERE MADE U/S. 14A. I AGREE WITH THE A.O. ON THE D ISALLOWANCES MADE APPLYING THE SPECIAL BENCH DECISION OF THE MUMBAI TRIBUNAL. HEN CE, THESE GROUNDS OF APPEAL ARE DISMISSED. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE STATED T HAT THE ASSESSEE COMPANY HAD INTEREST INCOME AND INTEREST EXPENSES AND THE INTEREST PAID IS NETT ED AGAINST INTEREST RECEIVED. ACCORDING TO THE COUNSEL, WHEN THERE WAS NOT INTEREST PAYMENT DEBITE D TO THE P&L ACCOUNT THERE WAS NO QUESTION OF APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT. IT WAS STATED THAT THE ASSESSEE HIMSELF HAS OFFERED A SUM OF RS.2,66,751/- BY DISAL LOWING THIS AMOUNT U/S. 14A OF THE ACT, NO FURTHER DISALLOWANCE SHOULD HAVE BEEN MADE. WE FIN D THAT THIS ISSUE HAS BEEN DELIBERATED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOY CEE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM.) AT PAGES 138 & 139 VIDE SUB PARAS (V) TO (VII) BY HOLDING THAT RULE 8D IS PROSPECTIVE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, SHALL APPLY WITH E FFECT FROM THE ASSESSMENT YEAR 2008-09; (VI) EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09, WHE N RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE ASSESSING OFF ICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; 3 ITA 739/K/2010 M/S. USHA MARTIN VENTURES LTD.. A. Y.07-08 (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002 -03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT REASONABLE BASIS FOR EFFECTING THE APPORTIONM ENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E IN VIEW OF FACTS OF THIS CASE AND THE PRINCIPLE LAI D DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCEE MFG. CO. LTD. (S UPRA), THAT RULE 8D IS APPLICABLE FOR AND FROM ASSESSMENT YEAR 2008-09 AND PRIOR TO THAT THE ASSESSING OFFICER CAN MAKE ESTIMATE THE DISALLOWANCE IN THE GIVEN FACTS AND CIRCUMSTANCES. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AS PER THE DECISION CITED ABOVE. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 4. IN RESPECT OF ANOTHER ISSUE THAT THE AMOUNT OF R S.2,66,751/- DISALLOWED THRICE, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT FIRST THE ASSE SSEE HIMSELF HAS DISALLOWED THIS AMOUNT AND THE SAME WAS INCLUDED IN THE DISALLOWANCE OF INTERE ST OF RS.2,23,30,187/- AND FURTHER DISALLOWANCE OF THIS DEDUCTION WAS MADE AT RS.2,67, 751/-. THESE FACTS NEED VERIFICATION AND THE ASSESSING OFFICER CAN MAKE ONLY A SINGLE DISALL OWANCE WHETHER THE SAME IS INCLUDED IN THE TOTAL INTEREST DISALLOWED OR NOT, THIS NEEDS VERIFI CATION. ACCORDINGLY, THESE INTERCONNECTED ISSUES ARE SET ASIDE TO THE FILE OF THE ASSESSING O FFICER. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENT OF INTEREST ON SECURITY DEPOSIT AMOUNTING TO RS.1,52,259/- BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. FOR THIS THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.6: FOR THAT THE LD. CIT(A) SHOULD HAVE ALLOWED THE CL AIM FOR PAYMENT OF INTEREST ON SECURITY DEPOSIT AMOUNTING TO RS.1,52,259/- WHEN TH E SAME WAS PART OF THE DISALLOWANCE CONSIDERING U/S. 14A FROM THE INTEREST PAID AS SUC H THE SAME WAS A DOUBLE DISALLOWANCE. 6. AFTER HEARING RIVAL SUBMISSIONS AND GOING THROUG H FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THIS DISALLOWANCE OF PAYMENT OF INTERE ST ON SECURITY DEPOSIT ALSO NEEDS VERIFICATION AT THE LEVEL OF THE ASSESSING OFFICER AS CONTENDED BY THE ASSESSEE THAT THIS IS DOUBLE DISALLOWANCE AS THE SAME IS INCLUDED IN THE MAIN DI SALLOWANCE OF INTEREST. THIS FACT NEEDS 4 ITA 739/K/2010 M/S. USHA MARTIN VENTURES LTD.. A. Y.07-08 VERIFICATION. ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 8. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . . ! ' '' ' # # # # , ! (S. V. MEHROTRA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED 31ST DAY OF MAY, 2011 '01 %23 4' JD.(SR.P.S.) . 5 ,6 76'8- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT M/S. USHA MARTIN VENTURES LTD., 24, R. N . MUKHERJEE ROAD, KOLKATA-700001. 2 ,-*+ / RESPONDENT, D.C.I.T, CIR-6, KOLKATA 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . '> ,% / DR, KOLKATA BENCHES, KOLKATA -6 ,/ TRUE COPY, .%?/ BY ORDER, #3 /ASSTT. REGISTRAR .