M/s. Borbheta Estate P. Ltd., Kolkata V. JCIT(OSD)C-4, Kolkata, Kolkata

ITA 798/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6148 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: V N PUROHIT; H V BHARDWAJ
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA BEFORE SH. WASEEM AHMED, ACCOUNTANT MEMBER AND SH. S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.798/KOL/2017 [ASSESSMENT YEAR: 2009 - 10] APPELLANT BY SH. H.V.BHARDWAJ & SH. V.N.PUROHIT, FCA RESPONDENT BY SH. A.BHATTACHARJEE, ADDL. CIT DATE OF HEARING 01.05.2018 DATE OF PRONOUNCEMENT 1 8 .07.2018 ORDER PER S.S . VISWANETHRA RAVI , JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 31.01.2017 PASSED BY CIT(A) - 16, KOLKATA FOR AY 2009 - 10. 2. THE ONLY ISSUE EMANATES AMONGST THREE GROUNDS RAISED BY THE ASSESSEE IS AS TO WHETHER T HE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO BY INVOKING RULE 8D(2) (II) & (III) OF THE INCOME TAX RULES, 1962 (IN SHORT RULES). 3. BRIEFLY FACTS AND CIRCUMSTANCES OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TEA MANUFACTURING AND GROWING . THE AO FOUND THE ASSESSEE HAS EARNED DIVIDEND INCOME AND BY INVOKING RULE 8D(II) & (III) DISALLOWED RS.8,92,570/ - FOR THE PURPOSE OF SECTION 14A OF THE ACT. THE RELEVANT PORTION OF AO IS REPRODUCED HEREUNDER: - COMPUTATION OF DISALLOWANCE VIS. 14A IN VIEW OF RULE - 8D : THE ASSESSEE HAS EARNED DIVIDEND INCOME AND CLAIMED IT AS EXEMPTED BUT DID NOT MAKE ANY PROVISION FOR DISALLOWANCE U/S. 14A, FROM THE EXPENDITURE MADE. THE ASSESSEE HAS INCURRED DIRECT AS WELL AS INDIRECT EXPENDITURE FOR M/S. BORBHETA ESTATE PVT.LTD., 25 BALLYGUNGE CIRCULAR ROAD, KOLKATA - 700019. PAN - AABCB1010H VS JCIT(OSD)C - 4, AAYAKAR BHAWAN, P - 7, CHOWRINGHEE SQUARE, KOLKATA. (APPELLANT) (RESPONDENT) ITA NO.798/KOL/2017 [ASSESSMENT YEAR: 2009 - 10] PAGE | 2 EARNING EXEMPT INCOME. SINCE THE AS SESSEE DID NOT MAKE ANY PROVISIONS FOR SUCH DISALLOWANCE U/S.14A, SOME DISALLOWANCE U/S.14A HAS TO BE MADE SINCE THE ASSESSEE HAS INCURRED SOME EXPENDITURE FOR EARNING THE EXEMPT DIVIDEND INCOME. SINCE NO CALCULATION IS AVAILABLE HENCE, AS PER THE RATIO IN THE CASE OF ITO - VS - DAGA CAPITAL MARKET PVT. LTD. (2009) 312 ITR I (SB)(MUMBAI) DISALLOWANCE U/S. 14A READ WITH RULE 8D HAS TO BE MADE. THE COMPUTATION OF WHICH IS GIVEN AS UNDER. I. DIRECT EXPENSE RELATING TO EXEMPT INCOME - DEMAND CHARGES NIL 11. A . INTEREST DEBITED TO P/L A/C= 1279440 B. AVERAGE VALUE OF INVESTMENT = 89372395 C. AVERAGE VALUE OF TOTAL ASSETS = 150407520 AX B/C 760245 III 0.5% OF 9372395 (AVERAGE VALUE OF INVESTMENT) 446862 TOTAL DISALLOWANCE U/S. 14A 1207107 LESS: DISALLOWANCE BY ASSESSEE 314537 892570 (ADDITION RS.892570/ - ) 4. THE CIT(A ) PLACING RELIANCE ON THE DECISION OF HONBLE SPECIAL BENCH OF ITAT IN THE CASE OF DAGA CAPITAL MARCHANT 312 ITR 1 (SB) [MUMBAI] CONFIRMED THE ADDITION MADE BY THE AO. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: - 3. GROUNDS 1 TO 3 ARE DISALLOWANCE OF RS.8,92,570/ - U/S 14A OF THE IT ACT. THE AO HAS MADE THE ADDITION AS THE ASSESSEE HAS EARNED DIVIDEND INCOME AND DID NOT MAKE DI SALLOWANCE U/S 14A. THE A.O. HAS RELIED UPON THE DECISION OF HON'BLE SPECIAL BENCH OF ITAT IN THE CASE OF ITO VS. DAGA CAPITAL MARCHANT 312 ITR (1) SB MUMBAI. THE ASSESSEE FILED VARIOUS DETAILS THAT IT ITSELF HAS DISALLOWED 314537 U/S 14A AND NO FURTHER D ISALLOWANCE IS NEEDED. BUT AGAIN IN THE REMAND PROCEEDINGS OF THE A.O. NO PROPER SUBMISSION WAS MADE TO SEGREGATE EXPENSES AND INVESTMENTS. HENCE, THE DISALLOWANCE OF THE A.O. WORTH RS. 8,92,570/ - IS CONFIRMED, AND THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. BEFORE US, LD. AR SUBMITS THAT THE A O HAS CONSIDERED ENTIRE INVESTMENTS AND DISALLOWED IMPUGNED AMOUNT OF RS.8,92,570/ - WHICH WAS CONFIRMED BY THE CIT(A) WHICH IS INCORRECT. THE AO IGNORED OUR CALCULATION IN RESPECT OF THOSE ITA NO.798/KOL/2017 [ASSESSMENT YEAR: 2009 - 10] PAGE | 3 INVESTMENTS WHICH HAS GIV EN EXEMPT INCOME. FURTHER, LD.AR ARGUED THAT THE AO SHOULD TAKE THOSE INVESTMENTS WHICH HAVE BEEN YIELDED EXEMPT INCOME FOR THE PURPOSE OF WORKING OF DISALLOWANCE U/S 14A OF THE ACT. THE RESPONDENT - REVENUE ACCEPTED THE CALCULATIONS SUBMITTED BY THE ASSES SEE IN THIS RESPECT FOR AY 2008 - 09 AND PRAYED TO REMAND THE MATTER TO THE FILE OF THE AO FOR A FRESH CONSIDERATION TO WORK OUT DISALLOWANCE TAKING INTO CONSIDERATION THOSE INVESTMENTS WHICH HAVE BEEN GIVEN EXEMPT INCOME. THE LD. D R SUBMITS THAT THE ASSESSEE DID NOT GIVE ANY CALCULATIONS IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS IN THE REMAND PROCEEDINGS AND REFERRED TO PARA 3 OF THE CIT(A) AND ARGUED THAT THE ASSESSEE FAILED TO SEGREGATE THE EXPENSES AND INVESTMENTS AND SUPPORTED THE ORDERS O F BOTH THE AUTHORITIES BELOW. 6. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE O N RECORD. IT IS ALSO NOTED FROM THE ORDER OF CIT(A) IN PARA NO.3 THAT NO PROPER SUBMISSION WAS MADE TO SEGREGATE EXPENSES AND INVESTMENTS, WHICH IS, IN OUR OPINIO N, IS NECESSARY FOR WORKING OUT EXPENSES THAT MAY HAVE BEEN INCURRED IN EARNING THE EXEMPT INCOME AND THE ARGUMENTS OF THE LD.AR WAS THAT ANY DISALLOWANCE SHOULD RELATE TO THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME IN SUCH CIRCUMSTANCES, TAKING INTO CON SIDERATION THE FACTS & CIRCUMSTANCES OF THE CASE, WE DEEM IT PROPER TO REMAND THE FILE OF THE AO FOR HIS FRESH CONSIDERATION TO WORK OUT THE EXPENSES RELATING THOSE INVESTMENTS WHICH YIELDED EXEMPT INCOME. THE ASSESSEE IS DIRECTED TO FILE ALL RELEVANT DET AILS IN THIS REGARD SEGREGATING THE EXPENSES AND INVESTMENTS. THUS, GROUNDS NO.1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE O PEN COURT ON 1 8 . 07.2018. SD / - S D / - (WASEEM AHMED) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO.798/KOL/2017 [ASSESSMENT YEAR: 2009 - 10] PAGE | 4 DATE: - 1 8 .07.2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT - M/S. BORBHETA ESTATE PVT.LTD., 25 BALLYGUNGE CIRCULAR ROAD, KOLKATA - 700019. 2. RESPONDENT - JCIT(OSD)C - 4, AAYAKAR BHAWAN, P - 7, CHOWRINGHEE SQUARE, KOLKATA. 3. CIT - KOLKATA 4. CIT(APPEALS) - KOLKATA 5. DR: ITAT - KOLKATA BENCH SR.P.S./H.O.O ITAT, KOLKATA