ITO, Wd-36 (2), Kolkata, Kolkata V. M/s Sri Ram Commercial Co., Kolkata

ITA 77/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4132 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 24-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2014
• Court: TRIBUNAL
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 77/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER I.T.A. NO. 77/KOL/ 2014 ASSESSMENT YEAR: 2009-2010 INCOME TAX OFFICER,................................ ....................................APPELLANT WARD-36(2), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, 8 TH FLOOR, ROOM NO. 811, E.M. BYE PAS, KOLKATA-700 107 WARD-36(2), KOLKATA, -VS.- M/S. SRI RAM COMMERCIAL CO,.,...................... ...........................RESPONDENT 2, STRAND ROAD, KOLKATA-700 001 [PAN: AAMFS 4086 Q] APPEARANCES BY: SHRI C. VENKATARAMAEI ADDL. CIT, SR. D.R., FOR THE DEPARTMENT N O N E., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : OCTOBER 24, 2016 DATE OF PRONOUNCING THE ORDER : DECEMBER 02, 2016 O R D E R PER SHRI P.M. JAGTAP, A.M .: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 01.10.2013, WHEREBY HE RESTRICTED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.66,09,520/- UNDER SECTION 14A READ WITH RULE 8D TO RS.38,63,595/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM, WHICH IS ENGAGED IN THE BUSINESS OF FINANCE AND BILL DISCOUN TING. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 29.09.2009 DECLARING A LOSS OF RS.1,70,18,460/-. IN THE SAID R ETURN, THE DIVIDEND INCOME OF RS.24,00,714/- RECEIVED DURING THE YEAR U NDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE AND A DISA LLOWANCE OF RS.38,63,595/- WAS OFFERED BY IT UNDER SECTION 14A ON ACCOUNT OF I.T.A. NO. 77/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 5 EXPENSES INCURRED IN RELATION TO THE EARNING OF EXE MPT DIVIDEND INCOME. THE DISALLOWANCE SO OFFERED WAS WORKED OUT BY THE A SSESSEE BY APPLYING RULE 8D AS UNDER:- (1) AVERAGE INVESTMENT EARNING EXEMPT DIVIDEND AS ON 31.03.2008 76983242 AS ON 31.03.2009 65430874 AVERAGE INVESTMENTS 71207058 (2) TOTAL ASSETS AS ON 31.03.2008 135922979 AS ON 31.03.2009 99903273 AVERAGE TOTAL ASSETS 117913126 (3) TOTAL INTEREST AS PER P&L ACCOUNT 11787974 LESS: INTEREST PAID TO PARTNERS @ 7% ALLOWABLE U/S 40(B) (ALREADY CONSIDERED BY AO IN HIS ORDER) 3716390 8071584 LESS: SET OFF OF INTEREST EARNED ON BANK F.D. CREDITED TO P&L A/C. 2819173 5252411 (4) MAX.: DISALLOWABLE INTEREST U/R 8D(2)(II) 5252411 X 71207058/ 117913176 3171901 (5) DISALLOWANCE U/R 8D(2)(II) 0.5% OF AVERAGE INVESTMENTS LIMITED TO ACTUAL CLAIM OF TOTAL EXPENSES IN P&L A/C. MINUS STT & PROVISION FOR GRATUITY ALREADY ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION 433648 TOTAL EXPENDITURE 480019 I.T.A. NO. 77/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 5 (-) STT ALREADY ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION 150967 (-) PROVISION FOR GRATUITY 2614 326438 TOTAL MAXIMUM DISALLOWANCE (4+5) 3498339 AMOUNT ALREADY ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION 3863595 THE ASSESSING OFFICER, HOWEVER, PROCEEDED TO RE-COM PUTE THE DISALLOWANCE TO BE MADE UNDER SECTION 14A AS PER RU LE 8D AT RS.66,09,520/- AS PER THE FOLLOWING CALCULATION GIV EN IN THE ASSESSMENT ORDER:- (I) DIRE CT EXPENSES PORTFOLIO MANAGEMENT FEES RS.2,13,081/ - DEMAT C HARGES RS. 25,834/ - STT (ALREADY DISALLOWED IN COMPUTATION) NIL RS.2,38,915/ - TOTAL INTEREST PAYMENT RS.80,71,584/ - INVESTMENT IN SHARES- AS ON 31.03.2008 RS.9,07,33,242/ - AS ON 31.03.2009 RS.8,27,25,950/ - TOTAL INVESTMENT RS.17,34,59,200/ - AVERAGE INVESTMENT RS.8,67,29,600/ - TOTAL ASSETS- AS ON 31.03.2008 RS.13,59,22,979/ - AS ON 31.03.2009 RS. 9,99,03,273/ - TOTAL ASSET RS.23,58,26,252/ - AVERAGE ASSET RS.11,79,13,126/ - (II) INTEREST PAID X AVERAGE INVESTMENT AVERAGE ASSET RS.80,71,584 X 8,67,29,600 = RS.59,36,957/- RS.1,1,79,13,126/- (III) 0.5% OF AVERAGE INVESTMENT (RS.8,67,29,600/0) I.T.A. NO. 77/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 5 = RS.4,33,648/- RS.63,70,605/- __________________ TOTAL DISALLOWANCE U/S 14A READ WITH RULE 8D....... ....... RS.66,09,520/- ___________________ ACCORDINGLY, IN THE ASSESSMENT COMPLETED UNDER SECT ION 143(3) VIDE AN ORDER DATED 07.12.2011, THE DISALLOWANCE UNDER SECT ION 14A READ WITH RULE 8D WAS MADE BY THE ASSESSING OFFICER AT RS.66, 09,520/- AS AGAINST THE DISALLOWANCE OF RS.38,63,595/- OFFERED BY THE A SSESSEE. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE DIS PUTING THE ADDITIONAL DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A READ WITH RULE 8D AND SINCE THE CALCULATION MADE BY THE ASSES SEE OF THE DISALLOWANCE UNDER SECTION 14A BY APPLYING RULE 8D WAS FOUND TO BE CORRECT BY THE LD. CIT(APPEALS), HE RESTRICTED THE DISALLOWANCE OF RS.66,09,520/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A TO RS.38,63,595/-. AGGRIEVED BY THIS RELIEF GIVEN BY T HE LD. CIT(APPEALS) TO THE ASSESSEE, THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, NONE HAS APPEA RED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE IS, THEREFORE, BEING DISPOSED OF EX PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGUMENT OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A BY APPLYING RULE 8D, AVERAGE INVESTMENT EARNING EXEMPT DIVIDEND INCOME W AS TAKEN INTO CONSIDERATION BY THE ASSESSEE WHILE THE ASSESSING O FFICER HAD TAKEN THE AVERAGE TOTAL INVESTMENT MADE BY THE ASSESSEE IN TH E SHARES. THIS ISSUE ALREADY STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RE I AGRO LIMITED, KOLKATA VS.- DCIT IN ITA NO. 1331/KOL/2011, WHICH HAS ALRE ADY BEEN AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT. SIMILARLY NET I NTEREST EXPENDITURE WAS RIGHTLY CONSIDERED BY THE ASSESSEE WHILE COMPUT ING THE DISALLOWANCE I.T.A. NO. 77/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 5 UNDER SECTION 14A BY APPLYING RULE 8D AS AGAINST TH E GROSS INTEREST WRONGLY TAKEN INTO ACCOUNT BY THE ASSESSING OFFICER WHILE COMPUTING THE DISALLOWANCE. THE DISALLOWANCE UNDER SECTION 14A WO RKED OUT BY THE ASSESSEE AT RS.38,63,595/- THUS WAS IN ACCORDANCE W ITH RULE 8D AS RIGHTLY HELD BY THE LD. CIT(APPEALS) AND EVEN THE LD. D.R. HAS NOT BEEN ABLE TO REBUT OR CONTROVERT THIS POSITION. WE, THEREFORE, F IND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) RESTRICTING THE DISALLOWANCE OF RS.66,09,520/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A TO RS.38,63,595/- AND UPHOLDING HIS IMPUGNED ORDER ON THIS ISSUE, WE DISMISS THIS APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 02, 2016. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 2 ND DAY OF DECEMBER, 2016 COPIES TO : (1) INCOME TAX OFFICER, WARD-36(2), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, 8 TH FLOOR, ROOM NO. 811, E.M. BYE PAS, KOLKATA-700 107 (2) M/S. SRI RAM COMMERCIAL CO,. 2, STRAND ROAD, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKA TA; (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.