Rose Financiers & Commercials Pvt. Ltd., , Kolkata V. ITO, Ward - 12(4), Kolkata , Kolkata

ITA 753/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6191 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJOY MUKHERJEE
• Assessee Lawyers: M SATNALIWALA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

1 ITA NO.753/KOL/2018 ROSE FINANCIERS & COMMERCIALS P VT. LTD. A.Y.2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI N.S.SAINI, AM ] ITA NO.753/KOL/2018 ASSESSMENT YEAR : 2012-13 ROSE FINANCIERS & COMMERCIALS -VERSUS- I.T.O., WA RD 12 (4) PVT. LTD., KOLKATA KOLKATA (PAN:AABCR 2935 H) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI M.SATNALIWALA, AR FOR THE RESPONDENT: SHRI SANJOY MUKHERJEE, ADDL. CI T DATE OF HEARING : 11.07.2018. DATE OF PRONOUNCEMENT : 13.07.2018. ORDER PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER DATED 13.03.2018 OF C.I.T-(A)-4, KOLKATA FOR A.Y. 2012-13. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER DISAL LOWING RS.1,83,895/- U/S 14A OF THE INCOME TAX ACT, 1961 (ACT). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT CBDTS CIRCULAR NO.5/2014 DATED 11.02.2014 STATES THAT RU LE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF THE EXPENDITUR E EVEN WHERE TAX PAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. HE OBSERVED THAT THE ASSESSEE MADE INVESTMENT OF RS.15,91,82,710/- IN F.Y. 1010-1 1 AND RS.11,27,73,650/- IN F.Y.2011-12. AVERAGE INVESTMENT AMOUNTS TO RS.13,59 ,78,180/- BUT NO INCOME EARNED FROM THE SAID INVESTMENT DURING THE YEAR . HE OBSER VED THAT AS PER SECTION 14A READ WITH RULE 8D(III) 0.5% OF AVERAGE INVESTMENT COMES TO RS.6,79,890/-. FURTHER THE 2 ITA NO.753/KOL/2018 ROSE FINANCIERS & COMMERCIALS P VT. LTD. A.Y.2012-13 ASSESSEE HAS CLAIMED EXPENDITURE ONLY RS.1,83,895/- FOR A.Y.2012-13. HENCE HE DISALLOWED RS.1,83,895/- U/S 14A R.W.RULE 8D OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. BEFORE ME THE ONLY ARGUMENT OF THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE IS THAT NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL. NO DISALLOWANCE U/S 14A R.W.R. 8D WAS WARRANTED. FOR H IS CONTENTION HE PLACED RELIANCE ON THE DECISION OF THE FOLLOWING HIGH COURTS :- (1) CHEMINVEST LTD. VS. CIT281 CTR447 (2) CIT VS. HOLCIN INDIA (P) LTD. 272 CTR (DELHI) 2 82 (3) CIT VS. LAKHANI MARKETING INDIA 272 CTR 265 HAR YANA &. PUNJAB) (4) C1T VS. SHIVAM MOTOR (P) LTD., ALLAHABAD HIGH C OURT ITA NO.88 OF 2014 DATED 05.05.2014. IN THE CASE OF PR. CIT VS. IL & PS ENERGY DEVELOPME NT CO. LTD. (2017) 84 TAXMAN.COM. 186 (DELHI). IT HAS BEEN DECIDED THAT C BDT CIRCULAR CANNOT OVERRIDE THE EXPRESSED PROVISIONS OF SECTION 14A RE AD WITH RULE 8D. IT HAS ALSO BEEN HELD BY THE KOLKATA BENCH OF THE ITAT IN THE CASE OF REI AGRO LTD. VS. DCIT (144) ITD 141) THAT THE INVESTMENTS W HICH DID NOT YIELD DIVIDED INCOME WERE NOT REQUIRED TO BE CONSIDERED FOR DISAL LOWANCE UNDER RULE 8D(2)(I) & IIII). THE SAID DECISION HAS BEEN APPROVED BY THE CALCUTTA HIGH COURT. IT HAS ALSO BEEN HELD IN THE FOLLOWING JUDGEMENTS T HAT SECTION 14A IS NOT APPLICABLE WHERE NO DIVIDEND INCOME WAS RECEIVED. CIT VS. CORTECH ENERGY (P) LTD. 223 TAXMAN I 30 (GU JARAT HIGH COURT) CLT VAS. SHIVAM MOTORS (P) LTD. 240 TAXMAN 63 (ALLA HABAD HIGH COURT). CIT VS. HOLCIN INDIA (P) LTD.(272 CTR 282) DELHI HI GH COURT. CHEMIN VEST LTD. VS. CIT (61 TAXMAN.COM 118) DELHI HIGH COURT CIT VS. IL &. FS ENERGY DEVELOPMENT CO. LTD. (2017) 84 TAXMAN.COM. 186 (DELHI) 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT AS PER CBDT CIRCULAR NO.5/2014 DATED 11.02.2014 RELIED ON BY THE ASSESSING OFFICER 3 ITA NO.753/KOL/2018 ROSE FINANCIERS & COMMERCIALS P VT. LTD. A.Y.2012-13 DISALLOWANCE U/S 14A IS TO BE MADE EVEN WHERE THE A SSESSEE HAS EARNED NO EXEMPT INCOME SINCE THE CIRCULAR IS BINDING ON THE ASSESSI NG OFFICER HE HAS NO ALTERNATIVE BUT TO MAKE THE DISALLOWANCE AS MADE BY HIM IN THE ASSE SSMENT ORDER. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. I FI ND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD V CIT 378 ITR 33 (DEL HI) HELD AS FOLLOWS :- 15. TURNING TO THE CENTRAL QUESTION THAT ARISES FO R CONSIDERATION, THE COURT FINDS THAT THE COMPLETE ANSWER IS PROVIDED BY THE DECISIO N OF THIS COURT IN CIT V. HOLCIM INDIA (P) LTD. (DECISION DATED 5TH SEPTEMBER 2014 IN ITA NO. 486/2014). IN THAT CASE A SIMILAR QUESTION AROSE, VIZ., WHETHE R THE ITAT WAS JUSTIFIED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEN NO DIVIDEND INCOME HAD BEEN EARNED BY THE ASSESSEE IN THE RELEVANT AY? THE COURT REFERRED TO THE DECISION OF THIS COURT IN MAXOPP INVESTMENT LTD. (S UPRA) AND TO THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THIS VERY CASE I.E . CHEMINVEST LTD. V. CIT (2009) 317 ITR 86. THE COURT ALSO REFERRED TO THREE DECISI ONS OF DIFFERENT HIGH COURTS WHICH HAVE DECIDED THE ISSUE AGAINST REVENUE. THE F IRST WAS THE DECISION IN COMMISSIONER OF INCOME TAX, FARIDABAD V. M/S. LAKHA NI MARKETING INCL . (DECISION DATED 2ND APRIL 2014 OF THE HIGH COURT OF PUNJAB AND HARYANA IN ITA NO. 970/2008) WHICH IN TURN REFERRED TO TWO EARLIER DECISIONS OF THE SAME COURT IN CIT V. HERO CYCLES LIMITED [2010] 323 ITR 518 AND CIT V. WINSOME TEXTILE INDUSTRIES LTD . [2009] 319 ITR 204. THE SECOND WAS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX-I V. CORRTECH ENERGY (P) LTD . [2014] 223 TAXMANN 130 (GUJ.) AND THE THIRD OF THE ALLAHABAD H IGH COURT IN COMMISSIONER OF INCOME TAX, KANPUR V. SHIVAM MOTORS (P) LTD. (DE CISION DATED 5TH MAY 2014 IN ITA NO. 88/2014). THESE THREE DECISIONS REITERAT ED THE POSITION THAT WHEN AN ASSESSEE HAD NOT EARNED ANY TAXABLE INCOME IN THE R ELEVANT AY IN QUESTION 'CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE.' 8. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS EARNE D NO TAX FREE INCOME DURING THE YEAR UNDER CONSIDERATION ON THE INVESTMENTS MADE BY HIM. THEREFORE THE DECISION QUOTED ABOVE OF THE HONBLE DELHI HIGH COURT APPLIE S TO THE FACTS OF THE CASE. THE HONBLE DELHI HIGH COURT IN THE CASE OF IL & FS ENE RGY DEVELOPMENT COMPANY LTD (SUPRA) HAS HELD THAT CBDT CIRCULAR CANNOT OVERRIDE THE EXPRESSED PROVISIONS OF SECTION 14A READ WITH RULE 8D. RESPECTFULLY FOLLOWI NG SAME I SET ASIDE THE ORDERS OF 4 ITA NO.753/KOL/2018 ROSE FINANCIERS & COMMERCIALS P VT. LTD. A.Y.2012-13 THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE O F RS.1,83,895/- MADE U/S 14A R.W.R. 8D AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE . 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. O RDER PRONOUNCED IN THE OPEN COURT ON 13.07.2018. SD/- [ N.S.SAINI ] ACCOUNTA NT MEMBER DATED : 13.07.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.ROSE FINANCIERS & COMMERCIALS PVT. LTD., 10, RAJA SANTOSH ROAD, ALIPORE, KOLKATA-700027. 2. I.T.O., WARD-12(4), KOLKATA. 3. C.I.T.(A)-4, KOLKATA 4. C.I.T.-4 , KOLKATA.. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES