I.T.O Wd - 4(3),kolkata, Kolkata V. M/s ABP Entertainment Pvt Ltd, Kolkata

ITA 966/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3187 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 08-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2013
• Court: TRIBUNAL
• Assessee Lawyers: SOUM ITRA CHODHURY LD A
• Keywords: Capital asset; Earning of tax free income; Deemed dividend; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A

Judgement Text

ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, KOLKATA BEFORE : SHRI MAHAVIR SINGH, JUDICIAL MEMBER, A ND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 966/KOL/2013 A.Y 2009-10 I.T.O WARD 4(3), KOLKATA VS. M/S. ABP ENTE RTAINMENT PVT. LTD PAN: AAFCA 7616L (APPELLANT) (RESPONDENT) FOR THE APPELLANT: NONE APPEARED FOR THE RESPONDENT : SHRI SOUM ITRA CHODHURY, ADVOCATE, LD. AR DATE OF HEARING: 08-02-2016 DATE OF PRONOUNCEMENT: 10 -02- 2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDER OF THE LEARNED CIT(A)-IV, KOLKATA IN APPEAL NO. 161/CIT(A)-IV/2011-12 DATED 29-01-2013 FOR THE ASST YEAR 2009-10 AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARNED AO U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT TOWARDS D EEMED DIVIDEND COULD BE INVOKED IN THE SUM OF RS.1,14,45,125/- IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE COMPANY DURING THE ASSESSMENT YEAR UNDER CONSIDERATION HAD RECEIVED AN ADVANCE O F RS.1,14,45,125/- FROM ANOTHER GROUP COMPANY M/S. ABP PVT. LTD [ IN SHORT ABP]. THE A SSESSEE IS AN ENTERTAINMENT COMPANY AND ADVANCE THAT WAS RECEIVED FROM M/S. ABP PVT. LT D WAS FOR THE INVESTMENT IN M/S. KALEIDO SCOPE ENTERTAINMENT PVT. LTD, WHICH WAS TO PRODUCE AND EVENTUALLY PRODUCED A BOLLYWOOD MOVIE CALLED SATHIYA . THIS AMOUNT OF ADVANCE OF RS. 1,14,45,125/-, WHI CH ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 2 WAS RECEIVED FROM M/S. ABP HAS BEEN TREATED AS DEEM ED DIVIDEND U/S. 2(22)(E) BY THE AO. ON 1ST APPEAL, THE SAID ADDITION WAS DELETED BY THE LD.CIT(A). AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GRO UND:- 1. THAT ON FACTS AND CIRCUMSTANCES, THE LD CIT (A) ERRED IN NOT TREATING DEEMED DIVIDEND U/S 2(22) (E) IN THE HANDS OF THE ASSESSEE. 4. NONE APPEARED ON BEHALF OF THE REVENUE. IT IS NO TICED THAT THE LD. JCIT/SR.DR HAD FILED AN ADJOURNMENT PETITION IN RESPECT OF 16 CASE S AS AGAINST 21 CASES LISTED FOR HEARING TODAY. IT IS NOTICED THAT THE LD. JCIT/SR.DR WAS ON LEAVE ON THE SAID DATE OF HEARING. WE DO NOT APPRECIATE SUCH ACTION OF THE LD.JCIT/SR.DR IN THIS REGARD AS IT IS BOUNDEN DUTY TO HANDOVER THE FILES TO ANY OTHER LD.DR WITH THE CON SENT OF THE LD.CIT/DR, ITAT. THE INSTITUTION OF ITAT CANNOT SUFFER DUE TO THE ABSENC E OF LD. SR.DR. ACCORDINGLY, THE ADJOURNMENT PETITION FILED BY THE LD.SR.DR IS HEREB Y REJECTED AND WE PROCEEDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD.AR AND PERUSING THE MATERIAL AVAILABLE ON RECORD. 5. THE LD.AR ARGUED THAT THE ASSESSEE COMPANY IS N OT A SHAREHOLDER OF M/S. ABP PVT. LTD. ACCORDINGLY, THE PROVISIONS OF SECTION 2(22)(E ) OF THE ACT CANNOT BE INVOKED IN THE HANDS OF THE ASSESSEE. THE LD.AR OF THE ASSESSEE HA S ALSO BROUGHT TO OUR ATTENTION TO PAGES 2-3 OF THE LD.CIT(A)S ORDER, WHEREIN SHAREHOLDING PATTERN OF BOTH THE LENDING COMPANY AS WELL AS THE ASSESSEE COMPANY IS REPRODUCED HEREIN B ELOW:- (A) MAJOR SHARE HOLDERS OF M/S. ABP (P) LTD HOLDIN G MORE THAN 10% OF SHARES AND VOTING RIGHTS WERE:- 1. A. SARKAR 2. S. SARKAR 3. ABP HOLDING (P) LTD 4. SATELLITE HOLDING (P) LTD MAJOR SHAREHOLDERS OF ASSESSEE COMPANY HOLDING MORE THAN 10% OF SHARES AND VOTING RIGHTS WERE:- 1. ABP HOLDING (P) LTD. 2. SATELLITE HOLDING (P) LTD. 6. THE LD.AR FURTHER ARGUED THAT MONEY WAS RECEIVED BY THE ASSESSEE COMPANY FOR INVESTMENT IN M/S. KALEIDO SCOPE ENTERTAINMENT PVT. LTD, WHO EVENTUALLY PRODUCED A ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 3 BOLLYWOOD MOVIE CALLED SATHIYA . ACCORDINGLY, THIS BORROWING SHOULD BE CONSTRUED ONLY IN THE COURSE OF BUSINESS. IT TAKES THE CHARACTER O F PURE BUSINESS AND FALLS UNDER THE EXCEPTION OF CLAUSE (II) TO SECTION 2(22)(E) OF THE ACT. 7. WE HAVE HEARD THE LD.AR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE RECORDS THAT THE ASSESSEE IS A NOT SHAREHO LDER IN THE LENDING COMPANY I.E M/S. ABP PVT. LTD. WE ALSO FIND FROM THE RECORDS THAT L ENDING WAS IN THE ORDINARY COURSE OF BUSINESS. ACCORDINGLY, IT DEFINITELY FALLS WITHIN T HE EXCEPTION CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. WE HOLD THAT PROVISIONS FOR DE EMED DIVIDEND COULD BE INVOKED IN THE HANDS OF THE SHAREHOLDER AND NOT OTHERWISE. IN THIS REGARD, WE PLACE OUR RELIANCE ON THE FOLLOWING JUDGMENTS :- IN THE CASE OF UNIVERSAL MEDICARE (P) LTD REPORTED IN 190 TAXMAN 144 (BOM), WHEREIN IT WAS HELD AS UNDER:- 'HOWEVER, EVEN ON THE SECOND ASPECT WHICH HAS WEIG HED WITH THE TRIBUNAL, WE ARE OF THE VIEW THAT THE CONSTRUCTION WHICH HAS BEEN PLACED ON THE PROVISIONS OF SECTION 2(22)(E) IS COR RECT. SECTION 2(22)(E) DEFINES THE AMBIT OF THE EXPRESSION 'DIVID END. ALL PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDER. THE EFFECT OF SECT ION 2(22) IS TO PROVIDE AN INCLUSIVE DEFINITION OF THE EXPRESSION D IVIDEND. CLAUSE (E) EXPANDS THE NATURE OF PAYMENTS WHICH CAN BE CLASSIF IED AS A DIVIDEND. CLAUSE (E) OF SECTION 2(22) INCLUDES A PAYMENT MADE BY THE COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED BY WAY OF AN ADVANCE OR LOAN TO A SHAREHOLDER OR TO ANY CONCERN TO WHICH SUCH SHAREHOLDER IS A MEMBER OR PARTNER, SUBJECT TO THE FULFILLMENT OF THE REQUIREMENTS WHICH ARE SPELT OUT IN THE PROVISION. SIMILARLY, A PAYMENT MADE BY A COMPANY ON BEHALF, OF FOR THE IND IVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER IS TREATED BY CLAUSE (E) TO BE INCLUDED IN THE EXPRESSION 'DIVIDEND'. CONSEQUENTLY, THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS TO BROADEN THE AMBIT OF THE EXPRESSION 'DI VIDEND' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE I NDIVIDUAL BENEFIT OF A SHAREHOLDER. THE DEFINITION DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHARE HOLDER. CONSEQUENTLY IN THE PRESENT CASE THE PAYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND WOULD HAVE TO BE TAXED NOT IN THE HA NDS OF THE ASSESSEE BUT IN THE HANDS OF THE SHAREHOLDER. THE T RIBUNAL WAS, IN THE CIRCUMSTANCES, JUSTIFIED IN COMING TO THE CONCLUSI ON THAT, IN ANY ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 4 EVENT, THE PAYMENT COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOTE THAT THE BASIS ON WHICH THE ASSESSEE IS SOUGHT TO BE TAXED IN THE PRESENT CASE IN RESPECT OF THE A MOUNT OF RS.32,00,000 IS THAT THERE WAS A DIVIDEND UNDER SEC TION 2(22)(E) AND NO OTHER BASIS HAS BEEN SUGGESTED IN THE ORDER OF T HE ASSESSING OFFICER. 8. WE ALSO FIND THAT THE LD. CIT(A) HAD DELETED THE ADDITION ON THIS ISSUE BY OBSERVING AS UNDER:- .. THE INTENTION OF THE LEGISLATURE BEHIND TH E PROVISION OF 2(22)(E) IS TO TAX DIVIDEND IN THE HAN DS OF THE SHARE HOLDER. FURTHER, THE A.R HAS ALSO DISTINGUISHED THE JUDICIAL DECISIONS CITED BY THE AO IN HIS ASSESSMENT ORDER FROM THE PR ESENT CASE. ANOTHER ISSUE WHICH HAS TO BE KEPT IN MIND IS THE PURPOSE BEHIND GIVING THE ADVANCE. ADVANCE HAS BEEN GIVEN BY ONE G ROUP COMPANY TO ANOTHER SO THAT THAT COMPANY IS ABLE TO CARRY O UT AND PURSUE ITS BUSINESS ACTIVITIES WITH ANOTHER PARTY. THIS HAS NO T BEEN DOUBTED BY THE AO. IT THEREFORE, IMPLIES THAT THIS WAS A GENU INE BUSINESS ADVANCE AND NOT A PLOY TO PASS ON THE PROFITS OF M/S. ABP P VT. LTD AS AN ADVANCE AND NOT AS DIVIDEND IN ORDER TO SAVE PAYMEN T OF TAX ON DIVIDEND DISTRIBUTION. BASE ON ABOVE DISCUSSION, I HOLD THAT ADVANCE OF RS. 1,14,45,125/- GIVEN BY M/S. ABP PVT. LTD TO THE APPELLANT CANNOT BE CATEGORIZED AS DEEMED DIVIDEND U/S. 2(22) (E) OF THE I.T ACT, 1961. THE APPELLANT GETS A RELIEF OF RS.1,14,45,125 /-. 9. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN T HE IMPUGNED ORDER OF THE LD.CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S. 2(22)( E) OF THE ACT. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. NEXT GROUND IS TO BE DECIDED IN THIS APPEAL OF THE REVENUE IS AS TO WHETHER A SUM OF RS.23,00,717/- COULD BE TREATED AS REVENUE EXP ENDITURE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSE SSEE HAS INCURRED THE FOLLOWING EXPENDITURE AND CLAIMED THE SAME AS REVENUE IN NATU RE:- ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 5 01 BROKERAGE RS.11,05,173/- 02. STAMP DUTY RS. 3,20,120/- 03. REGISTRATION CHARGES RS. 05,024/- 04. FILING FEE RS. 2,00,000/- 05. LEGAL & PROFESSIONAL CHARGES RS.5,80,520/- TOTAL RS.23,00,717/- 12. THE LD.AO DISALLOWED THE AFORESAID EXPENDITURE TREATING THE SAME AS CAPITAL IN NATURE. ON 1 ST APPEAL, BEFORE THE LD. CIT(A) THE LD.AR HAD STATED THAT THE BROKERAGE CHARGES, STAMP DUTY AND REGISTRATION CHARGES HAVE BEEN PAID TOWARDS ACQUIRING ON LEASE AN OFFICE SPACE OF 5650 SQ.FT AT THE GARIAHAT MALL FOR THE PURPOSE OF ASSESSEES BUSINESS, WHICH HAS NOT BEEN DISPUTED BY THE LD.AO. THE LEAS E RENTALS PAID HAVE BEEN DEBITED IN THE P & L ACCOUNT AND WERE ALLOWED AS DEDUCTION BY THE LD.AO. IT WAS ALSO ARGUED THAT THERE WAS NO CREATION OF CAPITAL ASSET WARRANTING CAPITAL IZATION OF THE SAME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. CIT(A) HAS RELIE D UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HOECHST PHARMACEUT ICALS LTD REPORTED IN (1978) 113 ITR 877(BOM) , WHEREIN IT HAS BEEN HELD AS UNDER- '1. IT HAS BEEN OBSERVED IN HOECHST PHARMACEUTICALS LTD. 'S CASE [1978)113 ITR 877 (BOM) THAT THE PERIOD OF LEASE WHICH WAS OF FIV E YEARS COULD NOT BE SAID TO BE SUCH A LONG PERIOD THAT THE ASSESSEE COULD BE SAID TO HAVE ACQUIRED OR BROUGHT INTO EXISTENCE AN ADVANTAGE OF AN ENDURING CHARACTER. IT WAS MENTIONED FURTHER THAT THE BROKERAGE PAID 'WAS REALLY IN THE NATURE OF REMUNER ATION PAID IN ORDER TO AVAIL OF THE SERVICES OF THE BROKER WITH A VIEW OF ACQUIRE T HE PREMISES ON RENT'. THE FIVE- YEAR PERIOD WAS DESCRIBED IN THE SAID JUDGMENT AS A RELATIVELY SHORT PERIOD END, FOLLOWING THE DECISION OF THE SUPREME COURT IN INDI A CEMENTS LTD. 'S CASE [1966] 60 ITR 52 AND THE RATIO SPELT OUT THEREIN IT WAS HE LD IN HOECHST PHARMACEUTICALS LTD. 5 CASE [1978] 113 ITR 877 (BOM) THAT THE TRIBU NAL HAD TAKEN THE CORRECT VIEW AND ALLOWED THE EXPENDITURE AS BEING EXPENDITURE OF A REVENUE NATURE. 2. IN THE CASE OF DCIT VS. METRO SHOES PVT. LTD., 258 ITR 106 ITAT, MUMBAI BENCH IT WAS HELD THAT IT IS WELL SETTLED THAT WHEN THE TRANSACTION INVOLVED IS A LEASE AND NOT A PURCHASE, THE EXPENDITURE INCURRED THEREON, INCLUDING BROKERAGE OF COMMISSION OR STAMP DUTY OR THE LIKE, IS AN ALLO WABLE REVENUE EXPENDITURE.' ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 6 13. ACCORDINGLY, HE HELD THAT THE EXPENDITURE INCU RRED FOR ACQUIRING OFFICE SPACE ON LEASE FOR THE PURPOSE OF ASSESSEES BUSINESS WAS SQ UARELY ALLOWABLE AS REVENUE EXPENDITURE. THUS, HE DELETED THE ADDITION MADE BY THE LD.AO TOWARDS BROKERAGE, STAMP DUTY AND REGISTRATION CHARGES. AGGRIEVED, THE REVEN UE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. THAT ON FACTS AND CIRCUMSTANCES, THE LD CIT (A) ERRED IN ALLOWING RS.23,00,717/- AS REVENUE EXPENDITURE. 14. WE HAVE HEARD THE LD.AR, WHO VEHEMENTLY SUPPORT ED THE ORDER OF THE LD.CIT(A). WE FIND THAT THE LD.CIT(A) HAD DEALT WITH THE ISSU E IN FAVOUR OF THE ASSESSEE BY PLACING HIS RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (P) LTD (SUPRA) . WE HOLD THAT THE EXPENDITURE INCURRED BY THE ASSE SSEE TOWARDS BROKERAGE, STAMP DUTY AND REGISTRATION CHARGES FOR ACQUIRING THE OFFICE SPACE OF 5650 SQ.FT AT GARIAHAT MALL ON LEASE FOR THE PURPOSE OF ASSESSEES BUSINESS WAS SQUARELY ALLOWABLE AS REVENUE EXPENDITURE AND CANNOT BE ADDE D AT ANY STRETCH OF IMAGINATION AS CAPITAL EXPENDITURE. WE FIND NO INFIRMITY IN THE I MPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE. WE UPHOLD THE SAME. ACCORDINGLY, THIS PORTI ON OF GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 15. IN RESPECT OF FILING FEE OF RS. 2 LAKHS, WE FIN D THAT THE LD. CIT(A) WRONGLY HAD DELETED THE ADDITION AS THE ISSUE IS SETTLED BY TH E HONBLE SUPREME COURT IN THE PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT RE PORTED IN (1997) 225 ITR 792 AGAINST THE ASSESSEE, WHEREIN IT WAS HELD THAT THE FILING FEES PAID TO REGISTRAR OF COMPANIES [ ROC] TOWARDS INCREASING OF AUTHORIZED CAPITAL IS N OT ALLOWABLE AS REVENUE EXPENDITURE. THE LD.AR DURING THE COURSE OF HEARING BEFORE US H AS FAIRLY CONCEDED TO THIS ISSUE. ACCORDINGLY, THIS PORTION OF GROUND NO.2 RAISED BY THE REVENUE BEFORE US IS ALLOWED TO THAT EXTENT. 16. IN RESPECT OF LEGAL & PROFESSIONAL CHARGES AMOU NTING TO RS.5,80,520/-, WE FIND THAT THE SAME WAS PAID TOWARDS CONSULTANCY EXPENSES FOR GETTING THE LICENSES AND CLEARANCES FROM THE MINISTRY OF INFORMATION & BROADCASTING. TH E LD. CIT(A) APPRECIATED THE FACT THAT ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 7 BUSINESS ACTIVITY OF THE ASSESSEE IS ENTERTAINMENT, MEDIA AND EVENT MANAGEMENT. WE ALSO FIND THAT THE LD. AO HAD MERELY DISALLOWED THE SAI D LEGAL & PROFESSIONAL EXPENSES BY TREATING THE SAME AS CAPITAL IN NATURE WITHOUT ADDU CING ANY REASON FOR THE SAME. WE HOLD THAT THESE EXPENSES ARE REQUIRED FOR OBTAINING CLEA RANCES/LICENSES IN CONNECTION WITH BUSINESS ACTIVITY OF THE ASSESSEE. ACCORDINGLY, IT IS SQUARELY ELIGIBLE FOR DEDUCTION. HENCE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER O F THE LD. CIT(A) ON THIS ISSUE. THIS PORTION OF GROUND NO.2 IS DISMISSED. TO SUM, GROU ND NO. 2 RAISED BY THE REVENUE ON VARIOUS ISSUES IS PARTLY ALLOWED. 17. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL OF REVENUE IS AS TO WHETHER THE DISALLOWANCE U/S. 14A OF THE ACT COULD BE MADE TO THE EXTENT OF RS.8,57,363/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 18. THE LD.AO MECHANICALLY HAD APPLIED RULE 8D(2)(I II) OF THE I.T RULES 1962 FOR MAKING ADDITION U/S. 14A OF THE ACT TO THE EXTENT O F RS.8,57,363/-. ON 1 ST APPEAL, THE LD. CIT(A) DELETED THE SAME. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. THAT ON FACTS AND CIRCUMSTANCES, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCES U/S 14A TO THE TUNE OF RS.8,57,363/-, WHICH WAS CALCULATED BY THE ASSESSING OFFICER AS PER RULE-8D BECAUSE THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAIN/LOSS (EXEMPTED INCOME). 19. WE HAVE HEARD THE LD.AR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE TOTAL INCOME EARNED BY THE ASSESSEE COMPAN Y WAS OF RS. 1,16,86,236/- OUT OF WHICH RS. 1,10,50,000/- WAS PROFIT ON SALE OF INVE STMENT. AFTER INDEXATION THIS PROFIT BECOMES A LONG TERM CAPITAL LOSS AND NO TAX WAS REQ UIRED TO BE PAID. IN THIS SCENARIO, A QUESTION ARISES WHETHER PROVISIONS OF SECTION 14A C OULD BE APPLIED WHEN THERE IS NO RESULTANT INCOME MUCH LESS EXEMPT INCOME. WE FIND THAT THE ASSESSEE HAD INCURRED ONLY LONG TERM CAPITAL LOSS AFTER INDEXATION AND IN ORDE R TO INVOKE THE PROVISIONS OF SECTION 14A OF THE ACT, THE EXISTENCE OF EXEMPT INCOME IS SINE QUA NON . THE LD. AO HAS NOT DISPUTED THE LONG TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE AND HAD ALLOWED THE SAME. HENCE, IN ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 8 THIS SCENARIO INVOKING THE PROVISIONS OF RULE 8D(2) (III) OF IT RULES 1962 DIRECTLY WITHOUT RECORDING THE SATISFACTION IN TERMS OF RULE 8D(1) IS NOT WARRANTED IN ACCORDANCE WITH LAW. IN THIS REGARD, WE PLACE RELIANCE ON THE FOLLOWING DECISIONS :- CIT VS ASHISH JHUNJHULLWALA IN G.A.NO. 29900[2013 I N ITAT NO. 157 OF 2013 DATED 8.1.2014 RENDERED BV CALCUTTA HIGH COURT ' WHILE REJECTING THE CLAIM OF THE. ASSESSEE WITH R EGARD TO EXPENDITURE OR NO EXPENDITURE, AS. THE CASE MAY BE, IN RELATION TO EXEMPTED INCOME. THE AO HAS TO INDICATE COGENT R EASON FOR THE SAME. FROM THE FACTS OF THE PRESENT CASE. IT IS NOTICED THAT THE AO HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE AND STRAIGHT AWAY EMBARKED UPON COMPUTING DISALLOWANCE UNDER RUL E 8D OF THE RULES ON PRESUMING THE AVERAGE VALUE OF INVEST MENT AT 1/2% OF THE TOTAL VALUE. IN VIEW' OF THE ABOVE AND RESPE CTFULLY FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE 0/ J.K. INVESTORS (BOMBAY) LTD., SUPRA, WE UPHOLD THE ORDER OF CIT(A). CIT VS R.E.1. AGRO LTD ILL GA 3022 OF 2013 ILL 1TAT 161 OF 2013 DATED 23.12.2013 RENDERED BY CALCUTTA HIGH COURT WH ICH APPROVED THE FINDINGS O THIS TRIBUNAL WHICH WAS REL IED UPON BY THE LEARNED AR THE ASSESSING OFFICER ALSO DISALLOWED THE EXPENDITU RE UNDER SECTION J 4A OF THE INCOME TAX A ET, 1961 WITHOUT F IRST RECORDING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF T HE CLAIM AS REGARDS THE CLAIM THAT 'NO EXPENDITURE' WAS MADE BY THE ASSESSEE. CHALLENGING THE ORDER OF THE TRIBUNAL, THE PRESENT APPEAL HAS BEEN FILED. WE HAVE HEARD MR.BHOWMIK AND ARE OF THE OPINION THA T NO POINT OF LAW HAS BEEN RAISED THEREFORE, THIS APPEAL IS DI SMISSED. 20. IN VIEW OF THE AFORESAID FACTS AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS (SUPRA), WE HAVE NO HESITATION IN CONFIRMING THE I MPUGNED ORDER OF THE LD.CIT(A) IN DELETING THE ADDITION ON THIS ISSUE. GROUND NO.3 RA ISED BY THE REVENUE IS DISMISSED. ITA NO. 966/KOL/2013-C-AM M/S. ABP ENTERTAINMENT PVT. LTD 9 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AS STATED ABOVE. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 10-02- 2016 1.. THE APPELLANT: THE I T O WARD 4(3), P-7 CHOWRI NGHEE SQ, 8 TH FL., KOL-69. 2 THE RESPONDENT- M/S. ABP ENTERTAINMENT PVT. LTD 6 PRAFULLA SARKAR STREET, KOLKATA-700 001. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( MAHAVIR SINGH, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 10 -02-2016 COPY OF THE ORDER FORWARDED TO:-