HSIL Limited, Kolkata V. Addl. CIT, Range - 5, Kolkata, Kolkata

ITA 83/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83031 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: P K SANGHAI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] ITA NO.83/KOL/2012 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) H S I L LIMITED -VS- ADDL.COMMISSIONER OF I.TAX KOLKATA KOLKATA (PAN:AAACH 7564 H) FOR THE APPELLANT SHRI P.K.SANGHAI, FCA FOR THE RESPONDENT SHRI KALYAN NATH, JCIT, SR.DR DATE OF HEARING : 05.08.2014 DATE OF PRONOUNCEMENT : ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF LD. C.I.T.(A)- VI, KOLKATA DATED 23.11.2011 AND PERTAINS TO ASSESSMEN T YEAR 2008-09. 2. THE GROUNDS OF APPEAL IN THIS APPEAL READ AS UN DER :- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEAL) WAS WRONG IN UPHOLDING THE APPLICABILITY OF RULE 8D OF THE IN COME TAX RULE, 1962 CONTRARY TO ITS STRICT REQUIREMENT AND THEREBY ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER WHO DISALLOWED A SUM OF RS.17434539/- U/S 1 4A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF THE INCOME TAX RULE, 1962. 2. THAT, WITHOUT PREJUDICE TO THE ABOVE, IN THE FAC TS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEAL) WAS WRONG IN CONFIRMING THE DIS ALLOWANCE OF RS.17434539/- YU/S 14A OF THE INCOME TAX ACT, 1961 AS AGAINST THE TOTA L EXEMPT INCOME OF RS.1300000/- ONLY. 3. THAT THE APPELLANT CRAVES LEAVE TO MODIFY/ALTER/ ADD ANY GROUNDS OF APPEAL AT OR BEFORE HEARING. 3. IN THIS CASE THE AO NOTED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.13,00,000/-. AO ENQUIRED AS TO WHY NOT DISALLOWA NCE AS PER SECTION 14A BE MADE. THE ASSESSEE ACCEPTED THAT RS.19,05,738/- WAS LINKE D TO EARNING OF EXEMPT INCOME. HOWEVER, AO WAS NOT SATISFIED. HE COMPUTED THE DISA LLOWANCE U/S 14A OF THE ACT AS ITA.NO.83/KOL/2012 H S I L LIMITED A.YR.2008-09 2 PER RULE 8D. AO COMPUTED THE DISALLOWANCE AT RS.1,7 4,34,539/-. THIS HAD TWO COMPONENTS (I) ALLOCATION OF EXPENDITURE BY WAY OF INTEREST - RS.1,53,48,915/- (II) % OF THE AVERAGE OF VALUE OF INVESTMENT RS.20,85 ,624/-. 4. AGAINST THE ABOVE ORDER THE ASSESSEE WAS IN APPE AL BEFORE THE LD CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT T HE ASSESEE HAD CAPITAL WORTH RS.222 CRORES AND HAS INVESTED TO THE EXTENT OF RS.35 CROR ES. FURTHERMORE, IT WAS SUBMITTED THAT THE ASSESSEE HAS RAISED LOAN FUNDS FOR SPECIFI C PURPOSES WHICH HAS BEEN UTILIZED FOR THE SAID PURPOSES. HENCE NO APPORTIONMENT OF TH IS INTEREST EXPENDITURE CAN BE DONE FOR EARNING EXEMPT INCOME. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE. HE CONCLUDED AS UNDER :- THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMST ANCES THAT THE ASSESSEE MAY HAVE HIS OWN FUNDS AS CAPITAL AS COMPARE TO INVESTMENTS YIEL DING EXEMPT INCOME IN THE FORM OF DIVIDENDS BUT SINCE LOAN FUNDS HAVE BEEN USED FOR I NVESTMENT FORM THE COMMON KITTY, THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHEL D. THE SPECIFIC/DIRECT EXPENSES IN THE FORM OF STT HAVE ALREADY BEEN DISALLOWED BY THE ASS ESSEE ITSELF. THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS HEREBY UPHEL D IN ADDITION TO THE DIRECT EXPENSES IN RELATION TO THE EARNING OF EXEMPTED INC OME, DISALLOWED BY THE ASSESSEE ITSELF. THE APPEAL OF THE ASSESSEE IS DISALLOWED. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFOR E US. 5. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAS SUFFICIENT OWN FUNDS AND NO BORROWED FUNDS WERE UTILISED FOR MAKIN G THE INVESTMENT. HE FURTHER SUBMITTED THAT THE LOANS OBTAINED BY THE ASSESSEE W ERE FOR THE SPECIFIC PURPOSES AND WERE UTILIZED FOR THE CONCERNED PURPOSE. HENCE THER E IS NO QUESTION OF ALLOCATION OF THIS INTEREST EXPENDITURE TOWARDS EARNING OF INTERE ST INCOME. THE LD. COUNSEL OF THE ASSESSEE HENCE SUBMITTED THAT THE ASSESSEE IS DISPU TING THE ALLOCATION OF 1,53,48,915/- BEING INTEREST EXPENDITURE ALLOCATED FOR EARNING EX EMPT INCOME. THE LD. COUNSEL FAIRLY CONCEDED THAT THERE IS NO DISPUTE OF THE OTHER PART OF RS.20,85,624/- COMPUTED BY THE AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORDS. WE FIND THAT ASSESSEE HAS SUFFICIENT OWN CAPITAL WHICH DOES NOT BEAR ANY INTEREST. ASSESSEE ITA.NO.83/KOL/2012 H S I L LIMITED A.YR.2008-09 3 HAD CAPITAL AMOUNTING TO RS.222 CRORES AND INVESTME NT MADE BY THE ASSESSEE WERE ONLY RS.35 CRORES. THE LD. CIT(A) HIMSELF ACCEPTED THAT ASSESSEE IS HAVING SUFFICIENT OWN FUNDS AS CAPITAL AS COMPARED TO INVESTMENTS YIE LDING EXEMPT INCOME. IN THESE CIRCUMSTANCES WE HOLD THAT SINCE THE ASSESSEE HAS S UFFICIENT OWN CAPITAL TO MAKE INVESTMENT FOR EARNING EXEMPT INCOME NO PORTION OF INTEREST FROM BORROWED CAPITAL SHOULD BE ALLOCATED TO EARN EXEMPT INCOME IN THIS C ASE. ACCORDINGLY THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 07.08.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07.08.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. HSIL LIMITED, 2, RED CROSS PLACE, KOLKATA-700001,. 2 ADDL.COMMISSIONER OF INCOME TAX, RANGE-5, KOLKATA 3 . CIT(A)-VI, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES