Special Steel & Wire Wings, Kolkata V. ACIT, Cir-36, Kolkata, Kolkata

ITA 856/KOL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0522 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-05-2012
• Court: TRIBUNAL
• Department Lawyers: AMITABHA ROY
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM ] I.T.A NO. 856 /KOL/201 2 ASSESSMENT YEAR : 200 5 - 0 6 SPECIAL STEEL & WIRE WINGS VS. ASSISTANT COMMISSIONER OF INCOME - TAX, (PAN: AA MFS1817P) CIRCLE - 36 , KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 1 7 .0 6 .2015 DATE OF PRONOUNCEMENT: 17 . 0 6 . 2015 FOR THE APPELLANT: SHRI SUNIL SURANA, FCA FOR THE RESPONDENT: S HRI AMITABHA ROY, ADDL. CIT ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A) - XX , KOLKATA IN APPEAL NO. 3 50 / CIT(A) - XX / CIR - 36/2007 - 08/ KOL . DATED 25 . 0 4 .20 12 . ASSESSMENT WAS FRAMED BY A CIT, CIRCLE - 36 , KOLKATA U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 5 - 0 6 VIDE HIS ORDER DATED 3 1 .1 2 .200 7 . 2. THE SOLE ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF A SUM OF RS.2,71,195/ - UNDER SECTION 14A OF T HE I. T. ACT, 1961 ALLEGING LOSS INCURRED DUE TO DEPLOYMENT OF BORROWED FUND OUTSIDE FIRM S BUSINESS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO NOTICED FROM THE CAPITAL ACCOUNT OF THE PA RTNERS AND BALANCE SHEET THAT LOAN OFFERED TO ONE PARTNER SHRI S. K. KHANDELWAL OF RS.90,07,107/ - @ 12 % HAS INCURRED LOSS DUE TO DEPLOYMENT OF BORROWED FUNDS OUTSIDE THE BUSINESS. ACCORDINGLY, HE TREATED THE DIFFERENTIAL AMOUNT OF RS.2,71,195/ - AS AGAINST EXEMPTED INCOME OF PARTNERS PROFITS BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. 4. WE FIND THAT THE AO CONCLUDED THAT THE LOSS WAS DUE TO DEPLOYMENT OF BORROWED FUNDS OUTSIDE THE BUSINESS OF THE ASSESSEE @ 4% I.E. TO ONE OF THE PARTNERS MR. S. K. 2 ITA NO. 856 /K/201 2 SPECIAL STEEL & WIRE WINGS . AY 200 5 - 0 6 KHANDELWAL OF RS.90,07,170/ - WHEREAS INTEREST IS PAID @ 12% ON THIS AMOUNT WHICH COMES TO RS.8,13,585/ - . THE INTEREST TO BE CHARG ED ON THE PARTNERS CAPITAL IS AT 8% WHICH COMES TO RS.5,42,390/ - . ACCORDINGLY, THE EXEMPT INCOME I.E. THE PROFIT OF THE FIRM IS EARNED BY THE ASSESSEE AND HENCE, THE DIFFERENTIAL AMOUNT IS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. WE FIND THAT THE DISALLOWANCE SHOULD BE RESTRICTED @ 1% OF THE EXEMPTED INCOME FOR THE REASON THAT THE RELEVANT AY INVOLVED IS 2005 - 06 IN WHICH YEAR RULE 8D WAS NOT APPLICABLE. HENCE, WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE BY APPLYING 1% OF THE E XEMPTED INCOME. WE ORDER ACCORDINGLY. APPEAL OF ASSESSEE IS PARTLY ALLOWED 5 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. 6 . ORDER IS PRONOUNCED IN THE OPEN COURT . S D / - S D / - (B. P. JAIN) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 17 TH JUNE, 201 5 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT SPECIAL STEEL & WIRE WINGS, C/O SRI R. P. SHARMA, ADVOCATE, 19D, MUKTARAM BABU STREET, KOLKATA - 700 007 . 2 RESPONDENT A CIT, CIR - 36 , KOLKATA 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .