ACIT, CC-1(1), Kolkata, Kolkata V. M/s Manganese & Minerals Ltd., Kolkata

ITSSA 110/KOL/2016

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3086 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-10-2016
• Court: TRIBUNAL
• Department Lawyers: VIJAYENDRAA KUMAR J
• Assessee Lawyers: A K TULSIAN
• Keywords: Business expenditure; Search and seizure; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER IT (SS) A NO. 110 / KOL / 2016 ASSESSMENT YEAR :2012-13 ACIT CENTRAL CIRCLE- 1(1), AAYKAR BHAWAN POORVA,110, SHANTIPALLY, 3 RD FLOOR,KOLKATA-700 107 V/S . M/S ORISSA MANGANESE & MINERALS LTD., 14, NETAJI SUBHAS ROAD, 2 ND FLOOR, KOLKATA-700 001 [ PAN NO.AAACO 3635 J ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI VIJAYENDRAA KUMAR, JCIT-DR /BY RESPONDENT SHRI A.K. TULSIAN, FCA /DATE OF HEARING 21-02-2017 /DATE OF PRONOUNCEMENT 03 -03-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-20, KOLKATA DA TED 25.07.2016. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE-III, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 31.03.2014 FOR ASSESSMENT YEAR 2012-13. SHRI VIJAYENDRA KUMAR LD. DEPARTMENTAL REPRESENTATI VE REPRESENTED ON BEHALF OF REVENUE AND SHRI A.K. TULSIAN, LD. AUTHOR IZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 2 2. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN BUSINESS OF EXTRACTION OF MI NERALS AND OTHER MINING ACTIVITIES. THE ASSESSEE IN THE YEAR UNDER CONSIDER ATION FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF 24,23,54,360/- COMPRISING OF INCOME UNDER THE HEAD BUSINESS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE RESIDENTIAL AND BUSINESS PREMISES OF ASSESSEE ON 19 .09.2011. THEREAFTER CASE WAS SELECTED UNDER SCRUTINY AND NOTICE U/S 143 (2)/142(1) OF THE ACT WERE DULY SERVED UPON ASSESSEE. THE ASSESSMENT WAS FRAME D U/S. 143(3) OF THE ACT AT A TOTAL LOSS OF 40,36,39,720/- AFTER MAKING CERTAIN ADDITIONS / DISALLOWANCES TO THE TOTAL INCOME OF THE ASSESSEE. 3. FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR 26,04,701/- ON ACCOUNT OF DELAYED DEPOSITED OF EMPLOYEES CONTRIBUTION IN PF. 4. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, OBSERVED THAT ASSESSEE HAS FAILED TO DEPOSIT THE EMPLOYEES CONTR IBUTION TO PROVIDENT FUND FOR 22,58,698/- AND EMPLOYEES CONTRIBUTION TO EMPLOYEE S STATE INSURANCE FOR 3,46,003/- WITHIN DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT. ACCORDINGLY, AO INVOKED THE PROVISION OF SEC. 2(24) (X) R.W.S. SEC. 36(1)(V) OF THE ACT AND DISALLOWED THE SAME WHICH WAS SUBSEQUEN TLY ADDED TO THE TOTAL INCOME OF ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THERE WAS A DELAY IN DEPOSITING OF PF AND ESI CONTRIBUTION AS DISCUSSED ABOVE BUT SAME WAS DEPOSITED BEFORE FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT. T HE ASSESSEE IN SUPPORT OF ITS CLAIM ALSO DREW ATTENTION OF LD. CIT(A) ON THE TAX AUDIT REPORT WHERE THE NECESSARY DETAILS WERE RECORDED. AFTER CONSIDERING THE SAME, LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UND ER:- 4. APPEALS ON GROUND NO 1 IS AGAINST THE DISALLOWA NCE AND ADDITION OF RS.91,55,500/- UNDER RULE 8D READ WITH SECTION 14A OF THE IT ACT, 1961. DURING THE APPELLATE PROCEEDINGS THE AR HAS FILED A WRITTEN SUBMISSION. I HAVE CONSIDERED THE FINDING OF THE AO ON THIS ISS UE IN THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE AR. I N THE ASSESSMENT ORDER THE AO HAS DISALLOWED UNDER RULE 8D(2)(III) O F RS.91,55,500/-. IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 3 HERE THE IMPORTANT THING IS THAT THE ASSESSEE HAS C ATEGORICALLY DECLARED THAT INVESTMENT OF RS.276,59,00,000/- HAS NOT YIELD ED ANY DIVIDEND/EXEMPTED INCOME. THEREFORE IN MY OPINION, AS THE ASSESSEE HAS NOT EARNED ANY EXEMPTED INCOME DURING THE YEAR UNDER CONSIDERATION, THEREFORE RESPECTFULLY FOLLOWING THE RATIO DECIDED BY THE HON'BLE KOLKATA TRIBUNAL IN THE CASE OF M/S COMPACT FINSTOCK PVT LTD (SUPRA), ASSESSEES APPEAL ON GROUND NO 1 IS ALLOWE D. BEING AGGRIEVED BY THIS, REVENUE HAS COME UP IN APP EAL BEFORE US ON THE FOLLOWING GROUND:- 1) THAT THE CIT(A) ERRED IN FACTS AS WELL AS IN LA W IN DELETING THE ADDITION OF RS.26,04,701/- RELYING ON ASSESSEE SUBM ISSION IGNORING THE REASONED ORDER MADE BY THE AO WHO TREATED THE SAME AS INCOME U/S.2(24)(X) READ WITH RULE SECTION 36(1)(VA) IN VI EW OF THE MEANING OF DUE DATE AS PER THE EXPLANATION TO SECTION 36(1)(IV ). 6. BEFORE US LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO AND HE LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE FILED PA PER BOOK WHICH IS RUNNING FROM PAGES 1 TO 55 AND DREW OUR ATTENTION ON ANNEXU RE B OF THE TAX AUDIT REPORT WHICH IS PLACED ON PAGES 43 TO 44 OF THE PAP ER BOOK AND DEMONSTRATED THAT ALL THE DUES WERE DEPOSITED WITHI N THE DUE DATES OF FILING RETURN OF INCOME AS PRESCRIBED U/S. 139(1) OF THE A CT. HE RELIED ON THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INS TANT CASE RELATES TO DISALLOWANCE MADE BY AO ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES PF AND ESI AS PRESCRIBED UNDER THE RELEVANT ACT. ACCORDING LY, AO INVOKED PROVISION OF SEC. 2(24) R.W.S 36(1)(VA) OF THE ACT. HOWEVER, THE LD. CIT(A) GRANTED RELIEF TO ASSESSEE BY OBSERVING THAT THE AMOUNT OF PF AND ESI WAS DEPOSITED BEFORE DUE DATE AS PRESCRIBED U/S. 139(1) OF THE AC T. ADMITTEDLY, THE AMOUNT OF PF AND ESI WAS NOT DEPOSI TED WITHIN DUE DATE AS SPECIFIED UNDER THE RESPECTIVE ACT. HOWEVER, THERE IS NO DISPUTE THAT THE AMOUNT OF PF AND ESI WERE PAID WITHIN DUE DATES OF FILING OF IT RETURN IN THE YEAR UNDER CONSIDERATION. WE FIND THAT ISSUE IS SQU ARELY COVERED IN FAVOUR OF IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 4 ASSESSEE AND AGAINST THE REVENUE AS CONTRIBUTION WE RE MADE WITHIN DUE DATE OF FILING IT RETURN AS OBSERVED BY LD. CIT(A) IN HI S ORDER. WHILE DOING SO, WE FIND SUPPORT AND GUIDANCE FROM THE DECISION OF CO-O RDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. M/S VIJAY SHREE LTD. IN ITA NO. 1091/KOL/2010 FOR AY 2006-07, WHEREIN IT WAS HELD THAT THE EMPLOYEES CONTRIBUTION MADE TOWARDS PF BEFORE THE DUE DATE OF FILING OF RETURN IS ALLOWABLE BUSINESS EXPENDITURE. THE ABOVE VIEW WAS ALSO UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 06.09.2011 IN ITAT NO. 245 OF 2011. IN THIS VIEW OF THE MATTER, WE ALLOW THE CLAIM OF ASSESSEE AND UPHOLD THE ORDER OF LD. CIT(A). THUS, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE MADE ON ACCOUNT OF DELAYED DEPOSIT FOR PF AND ESI. HENCE, I SSUE RAISED BY REVENUE IS DISMISSED ACCORDINGLY. 8. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR 91,55,500/- BY INVOKING THE PROVISION OF RULE 8D(2)(III) R.W.S. U/S 14A OF THE ACT. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE IN ITS BALANCE SHEET HAS SHOWN INVESTMENT IN SHARE, UNITS OF MUTUAL FUND AND BONDS. THE INCOME FROM SUCH INVESTMENT IS ELIGIBLE FOR EXEMPTION UNDER THE ACT. IT WAS ALSO OBSERVED BY AO THAT IN T HE YEAR UNDER CONSIDERATION NO INCOME WAS EARNED FROM THE AFORESAID INVESTMENT. HOWEVER, AO WAS OF THE VIEW THAT DISALLOWANCE IS REQUIRED U/S. 14A R.W .S RULE 8D IN TERMS OF CIRCULAR NO. 5 OF 2014 ISSUED BY CBDT VIDE DATE 11. 02.2014. AS PER AO THE DISALLOWANCE IS TO BE MADE EVEN THERE IS NO EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, ASSESSING OFFICER MADE DISALLOWANCE UNDER THE PROVISION OF RULE 8D(2)(III) OF IT RULES, 1962 FOR 91,55,500/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THERE WAS NO EXEMPTED INCOME EARNED DURING THE YEAR AND THEREFORE NO DISALLOWANC E IS WARRANTED. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 5 5. APPEAL ON GROUND NO 2 IS AGAINST THE ADDITION O F RS.26,04,701/- U/S 36(1)(VA) FOR DELAYED PAYMENT OF PF IN GOVERNMENT A CCOUNT. I HAVE CONSIDERED THE FINDING OF THE AO IN THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FLED BY THE AR DURING THE APPELL ATE PROCEEDINGS. I THINK AS THE PAYMENT IN GOVERNMENT ACCOUNT HAS BEEN MADE BEFORE THE DUE DATE OF THE FILING OF THE RETURN, THEREFORE RES PECTFULLY FOLLOWING THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. COAL INDIA LTD (SUPRA) AND ITAT KOLKATA BENCH DECISION I N THE CASE OF ACIT VS. M/S VIJAYSHREE LTD (SUPRA), ASSESSEES APPEAL O N GROUND NO 2 IS ALLOWED. BEING AGGRIEVED BY THIS, REVENUE HAS COME UP IN APP EAL BEFORE US ON THE FOLLOWING GROUND:- 2) THE LD. CIT(A) ERRED IN FACTS AS WELL AS IN DEL ETING THE ADDITION OF RS.91,55,500/- MADE BY THE AO U/S 14A READ WITH RUL E 8D(2)(III) BY RELYING FULLY ON THE ASSESSEES SUBMISSIONS. 11. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF A UTHORITIES BELOW AS FAVORABLE TO THEM. 12. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INS TANT CASE RELATES TO DISALLOWANCE MADE BY AO U/S 14A R.W.S RULE 8D(2)(II I). ADMITTEDLY, THERE WAS NO INCOME EARNED DURING THE YEAR UNDER CONSIDERATIO N FROM THE AFORESAID INVESTMENT. IT IS A SETTLED LAW THAT NO DISALLOWANC E SHALL BE WARRANTED UNDER THE PROVISION OF SEC. 14A R.W. RULE 8D IF THERE IS NO EXEMPT INCOME EARNED BY ASSESSEE UNDER THE YEAR CONSIDERATION. WHILE DOING SO, WE FIND GUIDANCE AND SUPPORT FROM THE JUDGMENT OF HON'BLE DELHI HIGH COU RT IN THE CASE OF CHEM INVESTMENT LTD. VS. CIT REPORTED IN 378 ITR 33 (DEL ), WHEREIN IT WAS HELD AS UNDER: IN VIEW OF THE ADMITTED FACTUAL POSITION IN THIS C ASE THAT THE ASSESSEE HAS MADE STRATEGIC INVESTMENT IN SHARES OF MAX INDIA LTD.; T HAT NO EXEMPTED INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT AY AND SINCE THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT IN DOUB T, THE QUESTION FRAMED IS REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE A ND AGAINST THE REVENUE. SIMILARLY THE HONOURABLE ITAT IN THE CASE OF REI AG RO LIMITED V. DCIT REPORTED IN 144 ITD 141 HAS ALLOWED THE ISSUE IN FA VOUR OF ASSESSEE BY OBSERVING AS UNDER : IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 6 8. IN RESPECT OF PROVISIONS OF RULE 8D(2)(III), WH ICH IS THE SUBJECT-MATTER OF THE APPEAL IN THE ASSESSEES HAND, A PERUSAL OF THE SAI D PROVISION SHOWS THAT WHAT IS DISALLOWABLE UNDER RULE 8D(2)(III) IS THE AMOUNT EQ UAL TO PERCENTAGE OF THE AVERAGE VALUE OF INVESTMENT THE INCOME FROM WHICH D OES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THUS, UNDER SUB-CLAUSE (I II), WHAT IS DISALLOWED IS PERCENTAGE OF THE NUMERATOR B IN RULE 8D(2)(II). AG AIN THIS IS TO BE CALCULATED IN THE SAME LINE AS MENTIONED EARLIER IN RESPECT OF NU MERATOR B IN RULE 8D(2)(II) OF THE ACT. 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-MA TTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS TO BE IN REL ATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE D ONE ONLY BY TAKING INTO CONSIDERATION THE INVESTMENT WHICH HAS GIVEN RISE T O THIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. UNDER THE CIRCUMSTAN CES, THE COMPUTATION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2) (III), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE A O FOR RECOMPUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UNDER SE CTION 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS NOT EARNED ANY EXEMPTED INCOME. T HEREFORE THE PRINCIPLES OF THE ABOVE CASE ARE VERY MUCH APPLICABLE TO THE F ACTS OF THE CASE IN HAND. IN VIEW OF ABOVE WE DO NOT FIND ANY INFIRMITY IN THE O RDER OF LEARNED CIT-A. HENCE THIS GROUND OF APPEAL FILED BY THE REVENUE IS DISMI SSED. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 03 /03/2017 SD/- SD/- ( ') ( ') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $- 03 / 03 /201 7 IT(SS)A NO.110/KOL/2016 A.Y. 2012-13 ACIT CC-1(1) KOL. VS. M/S ORISSA MANGANESE & MINERALS LTD. PAGE 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT,C.C-1(1),AAYKAR BHWAN, POORVA, 110, SHANTIPALLY 3 RD FL, KOL-107 2. /RESPONDENT-M/S ORISSA MANGANESE&MINERALS LTD.,14, N.S. ROAD, 2 ND FL, KOL-001 3. / 2 / CONCERNED CIT KOLKATA 4. 2- / CIT (A) KOLKATA 5. 5 /, /, / DR, ITAT, KOLKATA 6. ; / GUARD FILE. BY ORDER/ , / /,