M/s Anushreya Investments Pvt. Ltd., Kolkata V. ITO, Ward-3(2), Kolkata

ITA 767/KOL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5847 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-09-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 12-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA JCIT LD
• Assessee Lawyers: MANISH TIWARI F C A LD
• Keywords: Proportionate interest; TDS; Rule 8D; Set aside; FORM 26AS
• Section: 14A; 264; 194A; 13; 22

Judgement Text

1 IT A NO . 767 /KOL/201 9 A.Y 20 14 - 15 ANUSHREYA INVESTMENTS P.LTD. , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM AND HONBLE SHRI A. T. VARKEY, JM ITA NO. 767 /KOL/201 9 ASSESSMENT YEAR: 20 14 - 15 ANUSHREYA INVESTMENTS PVT. LT D. PAN: AACCA3658B VS. INCOME TAX OFFICER, WARD 3(2), KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 2 4 - 09 .2020 DATE OF PRONOUNCEMENT 30 .09.2020 FOR THE APPELLANT SHRI MANISH TIWARI, FCA, LD.AR FOR THE RESPONDENT SHRI JAYANTA KHANRA, JCI T, LD. SR.DR ORDER SHRI A. T. VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A) , 10 , KOLKA TA D ATED 25 - 01 - 2019 FOR THE ASSESSMENT YEAR 20 14 - 15 . 2. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE. THE SAME D OES NOT REQUIRE ANY ADJUDICATION AND, THEREFORE, THE SAME (GROUND NOS. 1 & 5 OF ASSSSEES APPEAL) ARE DISMISSED. 3. GROUND NOS. 2 & 3 READ S AS UNDER: - 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. C . I . T . (A) - 10, KOLKATA HAS FAILED TO CONSID ER PROPORTIONATE DISALLOWANCE U/S 14A OF INTEREST BY COMPARING DIVIDEND INCOME WITH TOTAL EARNINGS OF ASSESSEE AND HAS ALSO ERRED IN NOT FOLLOWING DECISION OF ITAT IN ASSESSEE'S OWN CASE (IN ITA NO. 1126/KOL/2017) FOR AY 2012 - 13 DATED 13 . 02.2019 ON THI S APPORTIONMENT ISSUE . 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT RESTR I CTING THE DISALLOWANCE TO RS . 1 , 78,628/ - AS AGAINST RS . 8 , 77 , 680/ - SINCE DIVIDEND INCOME CONSTITUTED ONLY 2.13% OF TOTAL EAR N INGS . 3. AT THE OUTSET, SHRI MANISH TIWARI, FCA, LEARNED AUTHORISED REPRESENTATIVE ( IN SHORT, THE LD. AR) FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THE ISSUE OF 2 IT A NO . 767 /KOL/201 9 A.Y 20 14 - 15 ANUSHREYA INVESTMENTS P.LTD. DISALLOWANCE ON PROPORTIONATE MANNER U/S. 14A OF THE INCOME - TAX ACT, 1961 ( IN SHORT, HERE INAFTER REFERRED TO AS THE ACT ) READ WITH RULE 8D OF THE INCOME - TAX RULES, 1962 (IN SHORT, HEREINAFTER REFERRED TO AS THE RULES ) HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE (ITA NO. 1126/KOL/2017 FOR THE AY 2012 - 13, ORDER DATED 13 - 02 - 2 019), WHEREIN THE TRIBUNAL HAS ADJUDICATED THE ISSUE BY HOLDING AS UNDER: - 2. THE ASSESSEES SOLE SUBSTANTIVE GROUND SEEKS TO REVERSE BOT THE LOWER AUTHORITIES ACTION MAKING SEC. 14 R.W.S RULE 8D DISALLOWANCE OF RS. 49,24,682/ - COMPRISING OF DEMAT CHARGE S, PROPORTIONATE INTEREST AND ADMINISTRATIVE EXPENDITURE OF RS. 1,43,005/ - , RS. 43,53,951/ - & RS. 4,27,726/ - ; RESPECTIVELY. LEARNED COUNSELS FIRST ARGUMENT DURING THE COURSE OF HEARING IS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FAC TS IN APPLYING THE ABOVE DISALLOWANCE PROVISION IN CASE OF SHARES HELD AS STOCK - IN - LAW. WE FIND NO MERIT IN ASSESSEES INSTANT ARGUMENT AS HONBLE APEX COURT S RECENT DECISION IN MAXOPP INVESTMENT LTD VS. CIT (2018) 402 ITR 640 (SC) HAS SETTLED THE LAW THA T SEC. 14A R.W.S RULE 8D DISALLOWANCE APPLIES EVEN IN AN INSTANCE OF SHARES HELD AS STOCK - IN - TRADE. THE ASSESSEE FAILS IN ITS FORMER ARGUMENT THEREFORE. 3. NEXT COMES EQUALLY SIGNIFICANT ASPECT OF COMPUTATION OF THE IMPUGNED DISALLOWANCE IN CASE OF SHARE HELD AS STOCK - IN - TRADE. THIS TRIBUNALS CO - ORDINATE BENCHS DECISION IN MARUTI TRADERS & INVESTORS VS. ACIT IN ITA NO. 846/KOL/2017 DATED ON 28.11.2018 HOLDS THAT THE IMPUGNED DISALLOWANCE HAS TO BE COMPUTED IN CASE OF SHARES HELD AS STOCK - IN - TRADE IN TH E FOLLOWING MANNER: - ' MARUTI TRADERS & IN VES TORS V S. ACIT - 3 1 , IN I . T . A . N O . 8 46 /KOL/2017, I . T .A. NO. 63 7 1 KO1 / 20 1 8. IN THIS THE LD ITAT H E LD AS F OLLO W S : - ' 2.3 WE HA V E HE A RD THE RI V A L S UBMI SSI ON S. A T TH E OUT S ET , W E F IND F ROM TH E AUDIT E D A CCOUNTS OF THE A S SESS EE , TH A T TH E S H A R ES WER E H E L D AS S TO C K IN TR A DE B Y THE AS SESSEE AND NOT A S IN V ES T ME NT S. H E N CE THE COMPUTAT IO N MECH A NISM PRO V IDED IN RULE 8 D OF TH E RUL ES C A NN OT BE AP P LICAB L E . WE FIND THAT THE ID AO THOUGH HAD NOT M E NTI O N E D TH AT THE DIS A LLO W ANC E H AS BEEN MADE IN ACCORDANCE WITH THIRD L I MB OF RUL E 8 D (2) OF TH E RU LE S E X PLICITLY IN IS ORDER , HOWEVER , RE S TORED TO TA K E TH E CO M P U TA TI O N MECHANI S M PRO VI DED TH E REIN A T 0 . 5 % O F A V E RA GE VA LU E O F IN V E S TME N T S. WE HOLD TH A T SINCE RULE 8D OF THE RULES CONTEMPL AT ES CONSIDERATIO N O F AV E RAG E VA LU E O F IN V ESTMENT S ONLY AND NOT AS S T OCK IN T R A D E, TH E S AM E C ANNOT B E A DOPT E D IN THE FACTS OF TH E IN S T A NT C ASE , NOW I T IS WE L L S E T T L ED BY THE HON ' BLE SUPREME COURT IN TH E CA S E OF M AXO P P IN VEST M E NT S R EPOR TE D I N 402 ITR 640 (SC ) THAT THE DISALLO W AN CE U / S. 1 4A O F T HE ACT IS T O BE MADE EVE N IF THE S HAR ES AR E H E LD A S STOC K I N TR A D E . S I NCE R UL E 8 D CA NN O T B E A D O PT E D H E R E IN , THE DI S ALLO WA NC E S H O UL D B E M A D E BA S E D ON TH E A CC O UN TS O F TH E ASS E SSE E. 2. 3 . 1 W E F IND THAT THE HON'BLE SU PREM E COURT IN TH E C ASE OF C I TED S UP R A 3 IT A NO . 767 /KOL/201 9 A.Y 20 14 - 15 ANUSHREYA INVESTMENTS P.LTD. IN PARA 39 OF TH E ORDER HAD ALSO OBS E R V ED THAT EVE N TH O U GH T H E D IVI D END HAS BEEN EAR N E D AS AN INCIDENTAL ACTI V IT Y IN RE S P E CT O F S H ARES HE LD A STOCK IN TR A DE , I T TRI G GERS THE APPLICABILIT Y OF S E CTION 14 A OF TH E AC T A D D E PEND I N G U PON THE FACTS OF EACH CASE , THE E X P E NDITUR E I NCURR E D I N ACQUIRIN G T H OSE S H A RE S A ND MAINTAINING THO S E S HAR ES WO ULD HA V E TO BE APPORTION E D B E T WEE N T A XABLE AND EXEMPT INCO ME . T H E ID A R PL ACED RELIANCE ON TH E DECI S ION OF THE CO - ORDINATE B E NCH OF THI S TRIBU NA L IN TH E EASE OF DCIT VS. S . G. I NVEST M E N TS & INDU ST R IES L T D R E PORTED IN 8 9 I T D 44 (KOL ) DATED 2 9 . 5 . 2003 WHEREIN TH E ID ASSES S ING O FF IC E R D E TE R MIN ED THE SUM OF RS. 19, 14,940 / - OUT OF TOTAL INTEREST PAID OF RS. 3 , 69 ,3 6 , 63 8 / - AS INTER E ST RELA TABLE TO EARNING OF EXEMPTED DI V IDEND B Y W ORKIN G OUT TH E PERCENTAGE OF DIVIDEND VIS A VIS TOTAL TURNOVER DURING THE YEAR. THE DIVIDEND EARNED IN THAT CASE WAS RS. 41,38,924/ - WHICH WORKED OUT TO 5.2% OF TOTAL EARNINGS AND ACCORDINGLY PROPORTIONATE INTEREST DEBITED IN PROFIT AND LOSS ACCOUNT AT THE SAME PERCENTAGE WAS DISALLOWED U/S. 14A OF THE ACT IN THAT CASE. THIS ACTION OF THE LD. AO WAS UPHELD BY THIS TRIBUNAL. T H E ID A R BEFORE US STATED THAT THE NAME OF S.G INVESTMENTS & IN DUST RI ES L T D GO T C H ANGE D T O IS G TRADERS LTD . WE FIND THAT TH I S T R IBUNAL D ECIS I O N D A T E D 29 . 5 . 2003 HAD BEEN UPHE L D B Y T H E H O N 'B L E JURISDICTION A L H I G H CO UR T I N TH E CASE OF IS G TRADERS LT V S . CIT I N IT A NO. 264 OF 20 03 D A T E D 22 . 9 . 20 11 . HENCE B Y RESP ECT FULLY FOLLO W IN G TH E S A ID D ECI S I O N , W E HOLD TH A T T HE EXPE N DITURE TO BE DISALLOWED U / S. 14A OF T H E A C T IS TO B E W O RK E D O UT IN THE SIMILAR FAS H ION. ' 4 . BO T H T H E L EA RN E D R E PRESENT A T I VES ARE FAIR IN ENOUGH AT THIS ST AGE TH A T TH E ASS E S SIN G O FF I CER N EE D S TO F IN A LI ZE THE CONSEQUENTI A L DISALLOW ANCE COMPUT A TI O N A S P E R L AW. W E TH EREFORE R ES T O R E THI S CO MP U T A TI O N IS S U E BACK 0 THE ASS E S S ING O FF I CER T O BE F IN A LI ZE D AF T E R AFFO RDIN G A D E QU ATE O PP O RTUNIT Y OF HE A R ING TO THE ASSES S E E. 4. SINCE THERE IS NO CHANGE IN FACTS OR LAW ON THE ISSUE IN THE PRES ENT APPEAL , RESPECTFULLY FOLLOWING THE ABOVE SAID TRIBUNAL ORDER IN ASSESSEES OWN CASE (SUPRA) FOR THE AY 2012 - 13 , WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND REMAND THE MATTER BACK TO THE ASSESSING OFFICER TO F IN A LI ZE THE CONSEQUENTI A L DISALLO WANCE AS DIRECTED BY THIS TRIBUNAL VIDE ORDER DATED 13 - 02 - 2019 IN ASSESSEES OWN CASE (SUPRA) AND IN ACCORDANCE TO LAW . THESE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 5. COMING TO GROUND NO. 4 , WHICH READS AS UNDER: - 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD . CIT(A) ERRED IN CONFIRMING AO'S C ALCULATION THAT COMMISSION INCOME U/S 194H AS PER 26AS WAS RS. 4 IT A NO . 767 /KOL/201 9 A.Y 20 14 - 15 ANUSHREYA INVESTMENTS P.LTD. 9 , 51,039/ - AND CONSEQUENTLY, THE ADDITION OF RS . 1 , 2 0 ,515 / - I N EXCESS O F CORRECT COMMISSION OF RS . 8,30,524/ - IS ERRONEOUS, MEAN I NG L ESS A ND UN SUSTA I NAB L E. 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER ON PERUSAL OF FORM 26AS NOTED THAT THE ASSESSEE HAS RECEIVED COMMISSION INCOME OF RS. 9,51,039/ - . HE FURTHER NOTED THAT THE ASSESSE E HAS SHOWN ITS COMMISSION INCOME OF RS. 3,30,524/ - IN ITS ACCOUNTS. ACCORDING TO THE AO, THOUGH THE AR OF THE ASSESSEE WAS AS KED TO EXPLAIN THE DIFFERENCE IE TO RECONCILE , HE FAILED TO DO SO. THEREFORE, THE DIFFERENCE IN AMOUNT OF RS. 1,20,515/ - (RS. 9, 51,039 RS. 8,30,524) WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A) , WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 7. ACCORDING TO THE L D. AR , SHRI MANISH TIWARI, FCA, THE ASSESSEE HAS EARNED COMMISSION INCOME OF RS. 8,30,525/ - ON WHICH TDS WAS DULY DEDUCTED U/S. 194H OF THE ACT AND INTEREST EARNED OF RS. 1,92,880/ - ON WHICH TDS U/S. 194A OF THE ACT WAS DEDUCTED. THUS, THE L D. AR CONTENDED BEFORE US THAT THERE WAS NO MIS - MATCH OF THE COMMISSION INCOME AS SHOWN BY THE ASSESSEE DURING THE ASSESSMENT YEAR (HEREINAFTER THE A.Y ) UNDER CONSIDERATION. ACCORDING TO HIM, THE AO HAS ERRED IN CONSIDERING THE INTEREST INCOME AS COMMISSION INCOME EARNED DURING TH E AY UNDER CONSIDERATION AND MADE THE SAID ADDITION ERRONEOUSLY. ACCORDING TO HIM, THE RECONCILIATION OF INCOME AS PER BOOKS OF ACCOUNTS VIS - - VIS FORM 26AS IS PLACED AT PAGE - 18 OF THE PAPER BOOK. ACCORDING TO HIM THIS RECONCILIATION COULD BE ABLE TO EX PLAIN/RECONCILE THE MIS - MATCH , IF ANY, WHEN FOR M 26AS IS CONSIDERED. ACCORDING TO THE LD. AR SINCE THE AO HAS MADE THE ADDITION BECAUSE ASSESSEE WAS NOT ABLE TO RECONCILE THE DIFFERENCE AND THE AO DID NOT GET THE BENEFIT OF RECONCILIATION KEPT AT PAGE - 18 OF PAPER BOOK , THE MATTER MAY BE REMITTED BACK TO THE AO FOR FRESH CONSIDERATION/ADJUDICATION . PER CONTRA , LD. DR PRAYS THAT NO FURTHER OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE. 8. HAVING HEARD BOTH THE PARTIES AND AFTER PERUSAL OF THE RECORDS, WE ARE NOT REPEATING T HE AFORESAID FACTS AN D SUBMISSIONS AGAIN FOR THE SAKE OF BREVITY. WE TAKING NOTE OF RECONCILIATION OF INCOME PLACED AT PAGE - 18 OF THE PAPER BOOK, FIND THAT THE AO WAS NOT ABLE TO PERUSE THE SAME AND SO HAD MADE THE ADDITION. THEREFORE, WE ARE OF THE OPINION 5 IT A NO . 767 /KOL/201 9 A.Y 20 14 - 15 ANUSHREYA INVESTMENTS P.LTD. THAT THE AO SHOULD VERIFY THE RECONCILIATION AS SUBMITTED BY THE ASSESSEE IN RESPECT OF MIS - MATCH OF INCOME SHOWN BY THE ASSESSEE. THEREFORE, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REMAND THE ISSUE BACK TO THE AO FOR ADJUDICATING THE ISSUE AFRESH AND TO PASS A FRESH ORDER AS PER LAW, AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF HEARING. THE ASSESSEE IS DIRECTED TO FILE NECESSARY DOCUMENTS/EVIDENCES, IF ANY, TO RECONCILE THE MIS - MATCH AS FOUND BY THE AO. T HIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 9 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 SEPTEMBER 2020. SD/ - SD/ - ( J. SUDHAKAR REDDY) (ABY. T. VARK EY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 SEPTEMBER 2020 **PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT / ASSESSEE: M/S. ANUSHREYA INVESTMENTS P.LTD 18 BRITISH INDIA ST, 1 ST FL., KOL - 69. 2 RESPONDENT / DEPARTMENT: THE I.T.O. W - 3(2), AAYKAR BHAVAN, P - 7 CHOWRINGHEE SQ., KOL - 69. 3. 4. 5. CIT(A) - , KOLKATA (SENT THROUGH E - MAIL) CIT - , KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E - MAIL) BY ORDER, / TRUE COPY, ASSISTANT REGISTRAR