Consolidated Entertainment Pvt. Ltd., Kolkata V. D.C.I.T., Circle-11(1), Kolkata

ITA 740/KOL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1193 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-11-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: I BAN ERJEE
• Keywords: Depreciation; Earning of tax free income; TDS; Rule 8D
• Section: 143(3); 14A; 40(a)(ia)

Judgement Text

ITA NO. 740/KOL/2019 ASSESSMENT YEAR: 2014-2015 CONSOLIDATED ENTERTAINMENT PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B(SMC) BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT I.T.A. NO. 740/KOL/2019 ASSESSMENT YEAR: 2014-2015 CONSOLIDATED ENTERTAINMENT PVT. LIMITED,........... .......................APPELLANT FLAT-1B, BLOCK-D, 56, BANGUR AVENUE, KOLKATA-700055 [PAN: AACCC1722C] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. .........................RESPONDENT CIRCLE-11(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700069 APPEARANCES BY: SHRI I. BANERJEE, FCA, FOR THE APPELLANT SHRI DHRUBAJYOTI ROY, JCIT, SR. D.R., FOR THE RESPO NDEN T DATE OF CONCLUDING THE HEARING : NOVEMBER 14, 2019 DATE OF PRONOUNCING THE ORDER : DECEMBER 18, 2019 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 31.01.2019 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS.37,74,969/- SUSTAINED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DISALLOWANCE OF INTEREST UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MAKING INVESTMENT IN ENTERTAINMENT INDUSTRY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 30.09.2014 ITA NO. 740/KOL/2019 ASSESSMENT YEAR: 2014-2015 CONSOLIDATED ENTERTAINMENT PVT. LIMITED 2 DECLARING A LOSS OF RS.38,38,607/-. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICE R THAT EVEN THOUGH NO EXEMPT INCOME IN THE FORM OF DIVIDEND WAS EARNED BY THE ASSESSEE- COMPANY DURING THE YEAR UNDER CONSIDERATION, SUBSTA NTIAL INVESTMENT WAS MADE BY IT IN THE EQUITY SHARES OF OTHER COMPANIES. SINCE THE WHOLE ACTIVITY OF THE ASSESSEE-COMPANY DURING THE YEAR UN DER CONSIDERATION WAS ONLY TO THE EXTENT OF MAKING SUCH INVESTMENT, THE E NTIRE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF FINANCE COST, ADMINIS TRATIVE EXPENSES AND DEPRECIATION AGGREGATING TO RS.38,38,142/- WERE TRE ATED BY THE ASSESSING OFFICER AS THE DIRECT EXPENDITURE INCURRED BY THE A SSESSEE IN RELATION TO THE EARNING OF EXEMPT INCOME AS PER RULE 8D(2)(I) A ND THE SAME WAS DISALLOWED BY HIM UNDER SECTION 14A IN THE ASSESSME NT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 30.11.2016. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS). KEEPING IN VIEW THE DECISION OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS.- MACDONALD S INDIA PVT. LIMITED (2018 SCC ONLINE DEL.6617), THE LD. CIT(APPEALS) HE LD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A READ WITH RULE 8D WAS NOT SUSTAINABLE AS THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE-COMPANY DURING THE YEAR UNDER CONSIDER ATION. HE, HOWEVER, HELD THAT THE INTEREST PAID BY THE ASSESSEE-COMPANY TO THE VARIOUS PARTIES DURING THE YEAR UNDER CONSIDERATION AMOUNTING TO RS .37,74,969/- WAS REQUIRED TO BE DISALLOWED UNDER SECTION 40(A)(IA) A S THERE WAS FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE INTER EST SO PAID. HE ACCORDINGLY SUSTAINED THE DISALLOWANCE TO THE EXTEN T OF RS.37,74,969/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). AGGR IEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED TH IS APPEAL BEFORE THE TRIBUNAL. ITA NO. 740/KOL/2019 ASSESSMENT YEAR: 2014-2015 CONSOLIDATED ENTERTAINMENT PVT. LIMITED 3 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS DEMONSTRA TED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE BASIS OF RELEVANT DOCUMENTA RY EVIDENCE PLACED ON RECORD IN THE FORM OF COPIES OF LEDGER ACCOUNT OF I NTEREST AND TDS AS WELL AS THE COPY OF RELEVANT TDS RETURN FILED BY THE ASS ESSEE, TAX AT SOURCE WAS DULY DEDUCTED BY THE ASSESSEE FROM THE INTEREST OF RS.37,74,969/- PAID DURING THE YEAR UNDER CONSIDERATION. HE HAS ALSO IN VITED MY ATTENTION TO PAGE NO. 2 OF THE ASSESSMENT ORDER, WHEREIN A FINDI NG WAS RECORDED BY THE ASSESSING OFFICER TO THE EFFECT THAT THERE WAS A PROPER COMPLIANCE ON THE PART OF THE ASSESSEE TO THE RELEVANT PROVISIONS OF TDS IN RESPECT OF INTEREST AMOUNT DEBITED IN THE PROFIT & LOSS ACCOUN T. IT IS THUS CLEAR THAT THE TAX AT SOURCE WAS DULY DEDUCTED BY THE ASSESSEE AS PER THE RELEVANT PROVISIONS FROM THE INTEREST OF RS.37,74,969/- PAID DURING THE YEAR UNDER CONSIDERATION AND THE LD. CIT(APPEALS) WAS NOT JUST IFIED IN DISALLOWING THE SAID INTEREST BY INVOKING THE PROVISIONS OF SEC TION 40(A)(IA) ON THE WRONG PRESUMPTION THAT THERE WAS A FAILURE ON THE P ART OF THE ASSESSEE TO COMPLY WITH THE TDS REQUIREMENT. I, THEREFORE, DELE TE THE DISALLOWANCE MADE ON THIS ISSUE AND ALLOW THIS APPEAL OF THE ASS EESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 18, 2019. SD/- (P.M. JAGTAP) VICE-PR ESIDENT) KOLKATA, THE 18 TH DAY OF DECEMBER, 2019 COPIES TO : (1) CONSOLIDATED ENTERTAINMENT PVT. LIMITED, FLAT-1B, BLOCK-D, 56, BANGUR AVENUE, KOLKATA-700055 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), KOLKATA, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-700069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-4, KO LKATA; ITA NO. 740/KOL/2019 ASSESSMENT YEAR: 2014-2015 CONSOLIDATED ENTERTAINMENT PVT. LIMITED 4 (4) COMMISSIONER OF INCOME TAX- , KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.