Orient Paper & Industries Limited, Kolkata V. DCIT, Circle-6(1), Kolkata, Kolkata

ITA 817/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6640 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: A CHOUDHURY
• Keywords: Earning of tax free income; Proportionate interest
• Section: 14A; 143(3)

Judgement Text

ITA NO.817/KOL/2017 ORIENT PAPER & INDUSTRIES LTD. A.Y.2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D KOL KATA [BEFORE HONBLE SHRI S.S.GODARA, JM & SHRI M.BALA GANESH, AM ] ITA NO.817/KOL/2017 ASSESSMENT YEAR : 2011-12 ORIENT PAPER & INDUSTRIES LTD. -VERSUS- D.C.I .T., CIRCLE-6(1) KOLKATA KOLKATA (PAN: AAACO 3279 J) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI A.CHOUDHURY FOR THE RESPONDENT:SHRI A.BHATTACHARJEE, ADDL. CIT DATE OF HEARING : 18.06..2018. DATE OF PRONOUNCEMENT : 27.06.2018. ORDER PER S.S.GODARA, JM: THIS ASSESSEES APPEAL FOR A.Y.2011-12 ARISES AGAI NST THE CIT(A)-17, KOLKATAS ORDER DATED 30.12.2016 PASSED IN APPEAL N O.270/CIT(A)-17/KOL/15-16 UPHOLDING THE ASSESSING OFFICERS ACTION MAKING SEC TION 14A READ WITH RULE 8D DISALLOWANCE OF PROPORTIONATE INTEREST OF RS.1,05,3 1,136/- IN ASSESSMENT ORDER DATED 27.03.2014 INVOLVING PROCEEDINGS U/S 143 (3) OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. WE COME TO THE ABOVE SOLE ISSUE OF CORRECTNESS O F SECTION 14A READ WITH RULE 8D DISALLOWANCE. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAS DERIVED EXEMPT INCOME FROM DIVIDENDS AMOUNTING TO RS.4,49,6 5,951/- IN THE RELEVANT PREVIOUS YEAR. THE ASSESSING OFFICER INVOKED SECTION 14A REA D WITH RULE 8D CLAUSE (I) TO (III) OF THE INCOME TAX. RULES TO COMPUTE THE IMPUGNED DI SALLOWANCE IN THE NATURE OF DEMAT CHARGES, PROPORTIONATE INTEREST AND ADMINISTR ATIVE EXPENDITURE INVOLVING SUMS OF RS.330, RS.1,05,77,957/- AND RS.24,68,828/- RESP ECTIVELY; COMING TO RS.1,30,47,105/- AS UPHELD IN COURSE OF THE LOWER A PPELLATE PROCEEDINGS TO THE EXTENT OF PROPORTIONATE AND ADMINISTRATIVE EXPENDITURE IN QUESTION OF RS.1,05,31,136/-. ITA NO.817/KOL/2017 ORIENT PAPER & INDUSTRIES LTD. A.Y.2011-12 2 3. LEARNED COUNSEL REPRESENTING ASSESSEE FILES ITS BALANCE SHEET OF THE RELEVANT PREVIOUS YEAR. ITS NON INTEREST BEARING FUNDS THERE IN READ A FIGURE OF RS.90262.24 LAKHS WHEREAS ITS TOTAL INVESTMENTS ARE OF RS.6631. 54 LAKHS. THESE CRUCIAL DETAILS HAVE GONE UNDISPUTED FROM THE REVENUES SIDE. WE THEREFO RE QUOTE HONBLE GUJARAT HIGH COURTS DECISION IN PCIT VS NIMA CREDIT & CAPITAL P VT. LTD. [2018] 300 CTR 286 (GUJARAT) AS WELL AS THAT OF HONBLE BOMBAY HIGH CO URT IN CIT VS RELIANCE UTILITIES AND POWER LTD 313 ITR 340 TO CONCLUDE THAT THE IMPU GNED SECTION 14A DISALLOWANCE IS NOT SUSTAINABLE IN CASE OF AN ASSESSEE HAVING SU RPLUS NON INTEREST BEARING FUNDS THEREBY DERIVING NET INTEREST INCOME AND THAT THE N ECESSARY PRESUMPTION IN THIS KIND OF FACTUAL BACK DROP IS THAT IT HAD MADE INVESTMENTS O UT OF NON INTEREST BEARING FUNDS ONLY; RESPECTIVELY TO DELETE THE IMPUGNED PROPORTIO NATE EXPENDITURE DISALLOWANCE OF RS.1,05,77,957/-. 4. COMING TO ADMINISTRATIVE EXPENDITURE DISALLOWANC E OF RS.24,68,828/- @ % OF AVERAGE VALUE OF INVESTMENTS, BOTH PARTIES ARE A D ITEM THAT THIS TRIBUNAL COORDINATE BENCH IN REI AGRO LTD VS DCIT 144 ITD 141 (KOL) HAS HELD THAT ONLY DIVIDEND YIELDING INVESTMENTS ARE TO BE CONSIDERED FOR THE P URPOSE OF COMPUTATION OF THE DISALLOWANCE IN QUESTION. THERE IS NO DISPUTE THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS PROCEEDED ON THE SAID ASSUMPTION. WE THE REFORE RESTORE THE INSTANT LATTER ISSUE BACK TO THE ASSESSING OFFICER FOR CONSEQUENTI AL COMPUTATION. 5. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN THE ABOVE TERMS. O RDER PRONOUNCED IN THE COURT ON 27.06.2018. SD/- SD/- [M.. BALAGANESH ] [ S.S.GODHARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27.06.2018. [RG SR.PS] ITA NO.817/KOL/2017 ORIENT PAPER & INDUSTRIES LTD. A.Y.2011-12 3 COPY OF THE ORDER FORWARDED TO: 1.ORIENT PAPER & INDUSTRIES LIMITED, 9/1, R.N.MUKHE RJEE ROAD, KOLKATA-700001. 2. D.C.I.T., CIRCLE-6(1), KOLKATA. 3. C.I.T.(A)- 17, KOLKATA 4. C.I.T-2, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES