DCIT(Central), Circle-4(3), Kolkata, Kolkata V. M/S. REI Agro Ltd., Kolkata

ITSSA 152/KOL/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3287 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 20-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2014
• Court: TRIBUNAL
• Department Lawyers: ASSESS MENT YEAR
• Keywords: Business income; Earning of tax free income; Additional evidence
• Section: 43B; 14A; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH - C ) BEFORE SHRI N. V. VASUDEVAN JUDICIAL MEMBER AND SHRI M . BALAGANESH, ACCOUNTANT MEMBER, I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 ORDER PER M. BALAGANESH , AM THESE ARE APPEAL S PREFE RRED BY THE REVENUE AGAINST TWO SEPARATE ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS ) CENTRAL - II (HEREINAFTER REFERRED TO AS THE LD. CIT(A)) , KOLKATA, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) , DT. 18.09.2014 & 19.09.2014 , FOR THE ASSESSMENT YEAR 2010 - 2011 & 2011 - 12. 2. IDENTICAL GROUNDS ARE RAISED FOR BOTH THE ASSESSMENT YEARS BY THE REVENUE AND HENCE THEY A RE TAKEN UP TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. DCIT, CENTRAL CIRCLE - 4(3) - VS - M/S. REI AGRO LTD. [PAN : AABCR4929H ] (APPELLANT) (RESPONDENT) FOR THE APP ELLANT/REVENUE SRI G. MALLIKARJUNA, CIT, DR FOR THE RESPONDENT/ASSESSEE SRI PARNASHREE BANERJEE, ADVOCATE DATE OF HEARING 23 .03.2017 DATE OF PRONOUNCEMENT 31.03.2017 2 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE DISALLOWANCE U/S 2(24)(X) R.W. SECTION 36(1)(VA ) OF THE ACT ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF AND ESI. 3.1. BRIEF FACTS OF THIS ISSUE IS THAT THE LD. AO FOUND FROM THE TAX AUDIT REPORT THAT THE ASSESSEE HAD DEPOSITED THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEYOND THE DUE DATE PRESCRIBED IN THE RELEVANT ACT. HOWEVER, IT WAS POINTED OUT THAT THE SAME WERE DULY REMITTED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT AND ACCORDINGLY PLEADED FOR ALLOWABILITY OF THE SAME AS DEDUCTION FROM THE TOTAL INCOME. THE LD. AO APPLYING THE PROVISIONS OF SECTION 2(24) (X) R.W. SECTION 36(1)(VA) OF THE ACT, DISALLOWED THE SAME. THE LD. CIT(A) BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. VIJAY SHREE L TD. IN ITA NO. 245 O F 2011 IN GA NO. 2607 OF 2011, DT. 6 TH SEPTEMBER, 2011. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: FOR ASSESSMENT YEAR 2010 - 11 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION OF THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND & ESI AMOUNTING TO RS.49,996/ - & RS.1,81,755/ - RESPECTIVELY WHICH WAS PAID AFTER THE DUE DATE AS SPECIFIED IN EXPLANATION TO SECTION 36(1)(VA) OF THE ACT, AS SE CTION 43B CANNOT BE PRESSED INTO SERVICE BECAUSE SECTION 43B COMES INTO PLAY ONLY WHEN A DEDUCTION IS OTHERWISE ALLOWABLE UNDER THE INCOME - TAX ACT. & 3 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . FOR ASSESSMENT YEAR 2011 - 12 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION OF THE EMPLOYEES CONTRIBUTION TO ESI & PF AMOUNTING TO RS.1,74,548/ - AND 10,12,162/ - WHICH WAS PAID AFTER THE DUE DATE AS SPECIFIED IN EXPLANATION TO SECTION 3(1)(VA) OF THE ACT, AS SECTI ON 43B CANNOT BE PRESSED INTO SERVICE BECAUSE SECTION 43B COMES INTO PLAY ONLY WHEN A DEDUCTION IS OTHERWISE ALLOWABLE UNDER THE INCOME - TAX ACT. 3.2. THE LD. DR CONCEDED THAT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. 4. WE HAVE HEARD THE LD. DR, AND WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS IS DISMISSED. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE DISALLOWANCE MADE U/S 14A OF THE ACT R.W. RULE 8D OF THE INCOME TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES ) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE FACTS OF ASSESSMENT YEAR 2010 - 11 ARE CONSIDERED HEREIN AND THE DECISION RENDERED FOR ASSESSMENT YEAR 2010 - 11 WOULD APPLY WITH EQUAL FORCE FOR 4 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . ASSESSMENT YEAR 2011 - 12 AND ALSO AS THE FACTS ARE IDENTICAL EXCEPT FOR THE VARIANCE IN FIGURES. 6. THE LD. AO OBSERVED THAT THE ASSESSEE HAD SHOWN EXEMPT DIVIDEND INCOME OF RS.71,44,190/ - , IN ITS PLA ON ACCOUNT OF PAYMENT OF INTEREST. HE ALSO OB SERVED THAT THE ASSESSEE HAD INVESTMENTS TO THE TUNE OF RS.11,07,27,282/ - AS ON 31.03.2010. THE ASSESSEE OFFERED DISALLOWANCE OF RS.78,23,771/ - U/S 14A OF THE ACT R.W. RULE 8D OF THE RULES IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. AO APPLIED THE PRO VISIONS OF SECOND AND THIRD LIMB OF THE RULE 8D(2) OF THE RULES AND MADE THE DISALLOWANCE OF RS.8,21,84,050/ - , AFTER REDUCING THE DISALLOWANCE OFFERED BY THE ASSESSEE TO THE TUNE OF RS.78,23,771/ - . THE LD. CIT(A) DELETED THE DISALLOWANCE BY OBSERVING AS U NDER : I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. AS MENTIONED ABOVE, IN THE YEAR UNDER CONSIDERATION THE APPELLANT HAD EARNED EXEMPT DIVIDEND INCOME OF R - S.71,44,190/ - . AS PER THE BALANCE S HEET THE INVESTMENT IN SHARES FROM WHICH THE EXEMPT INCOME WAS EARNED WAS RS. 7,58,27 ,282/ - . DURING THE COURSE OF APPELLATE - PROCEEDINGS IT IS CONTENDED BY THE APPELLANT THAT NO DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(II) IS APPLICABLE IN ITS CASE BECAUS E THE LOAN WERE TAKEN FOR THE PURPOSE OF BUSINESS AND NOT FOR MAKING INVESTMENT IN SHARES. THAT, THE APPELLANT WAS HAVING ITS OWN FUNDS MORE THAN THE INVESTMENT IN SHARES AND MOREOVER IN THE YEAR UNDER CONSIDERATION NO NEW INVESTMENT IN SHARES WAS MADE AS APPARENT FROM THE BALANCE SHEET. IT IS ALSO ARGUED BY THE APPELLANT THAT THE AO HAS MADE DISALLOWANCE UNDER RULE 8D(2)(III) BEING 0.5% OF AVERAGE VALUE OF THE INVESTMENT BY CONSIDERING TH E ENTIRE VALUE OF THE INVESTMENT WHEREAS 5 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . THE VALUE OF INVESTMENTS FRO M WHICH EXEMPT INCOME IN THE FORM OF DIVIDEND WAS RECEIVED WAS RS.7,58,27,282/ - . THUS, AT THE MOST THE AO WOULD HAVE MADE DISALLOWANCE UNDER RULE 8D(2)(III) BY ADOPTING THE AVERAGE VALUE OF THE INVESTMENT FORM WHICH DIVIDEND INCOME WAS EARNED. SUCH DISALLO WANCE COMES TO RS.3,79,136/ - . THE APPELLANT PLACE RELIAN C E ON THE DE C ISION OF THE ITAT, KOLKATA IN ITS OWN CASE FOR THE A.Y. 2008 - 09 I.E. REI AGRO LTD. VS. DCIT, ITA NO. 1331/KOL/2011 AND DCIT VS. REI AGRO LTD., ITA NO. 1423/KOL/2011 DATED 19.06.2013. FURT HER, IT IS SUBMITTED BY THE APPELLANT THAT THE REVENU ES APPEAL U/S 260A HAS BEEN DISMISSED BY THE HONBLE CALCUTTA HIGH COURT VIDE ORDER DATE 09.04.2014 6 .2. THE LD CIT ( A ) BY PLACING RELIANCE ON THE CO - ORDINATE BENCH DECISION OF THIS TRIBUNAL IN ASSESSE E OWN CASE DIRECTED THE LD. AO TO RECALCULATE THE DISALLOWANCE UNDER RULE 8D (2)(II) AND 8D(2)(III) BY CONSIDERING THE VALUE OF ONLY THOSE INVESTMENTS WHICH HAVE YIELDED THE BUSINESS INCOME IN THE YEAR UNDER APPEAL. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS VOLUNTARILY DISALLOWED A SUM OF RS.78,23,771 U/S 14A IN THE RETURN OF INCOME, THEREFORE, HE DIRECTED THE LD. AO THAT IF THE DISALLOWANCE U/S 14A OF THE ACT AS PER THE DIRECTIONS ABOVE IS LESS THAT THE AMOUNT DISALLOWED BY THE ASSESSEE ON ITS OWN, THEN THE DISALLOWANCE WOULD REMAIN AT RS.78,23,771/ - AS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 6 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . FOR ASSESSMENT YEAR 2010 - 11 THE LD. CIT(A) DIRECTED TO CALCULATE THE DISALLOWANCE U/S 14A BY CONSIDERING THE VALUE OF EXEMPTED INCOME YIELDING INVESTMENTS ONLY AND FURTHER DIRECTED THAT THE EXEMPTION AMOUNT SHOULD NOT BE LESS THAN THE AMOUNT OF EXEMPTION CALCULATED BY THE ASSESSEE IT SELF. SINCE THE CALCULATION OF THE ASSESSEE IS VITIATED WITH SOME MISTAKE WHICH IS RECTIFIED IN AOS CALCULATION THE DISALLOWANCE SHOULD BE TAKEN AS PER AOS CALCULATION. IN VIEW OF ABOVE AS THE LD. CIT(A) HAS ERRED IN DELETING THE FURTHER DISALLOWANCES U/ S 14A OF THE ACT AMOUNTING TO RS.8,21,84,050/ - THAT THE DEPARTMENT CRAVES LEAVE TO ADD, MODIFY OR ALTER ANY OF THE GROUND(S) OF APPEAL AND/ OR ADDUCE ADDITIONAL EVIDENCE AT THE TIME OF HEARING OF THE CASE. FOR ASSESSMENT YEAR20 11 - 12 THE LD. CIT(A) DIRECTED TO CALCULATE THE DISALLOWANCE U/S 14A BY CONSIDERING THE VALUE OF EXEMPTED INCOME YIELDING INVESTMENTS ONLY AND FURTHER DIRECTED THAT THE EXEMPTION AMOUNT SHOULD NOT BE LESS THAN THE AMOUNT OF EXEMPTION CALCULATED BY THE ASSESSEE ITSELF. SINCE THE CALCULATION OF THE ASSESSEE IS VITIATED WITH SOME MISTAKE WHICH IS RECTIFIED IN AOS CALCULATION THE DISALLOWANCE SHOULD BE TAKEN AS PER AOS CALCULATION. IN VIEW OF ABOVE AS THE LD. CIT(A) HAS ERRED IN DELETING THE FURTHER DISALLOWANCES U/S 14A OF THE AC T AMOUNTING TO RS.30,26,654/ - . 7 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . THAT THE DEPARTMENT CRAVES LEAVE TO ADD, MODIFY OR ALTER ANY OF THE GROUND(S) OF APPEAL AND/ OR ADDUCE ADDITIONAL EVIDENCE AT THE TIME OF HEARING OF THE CASE. 6.3 THE LD. DR FAIRLY CONCEDED THAT THE ISSUE UNDER DISPUTE IS CO VERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE WHICH HAS BEEN SUBSEQUENTLY UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT. 7. WE HAVE HEARD THE LD. DR AND WE FIND THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THIS TRIBUNAL IN TH E ASSESSEE OWN CASE, WHICH HAS BEEN SUBSEQUENTLY APPROVED BY THE HONBLE CALCUTTA HIGH COURT. THE LD. CIT(A) HAD RIGHTLY FOLLOWED THE SAID DECISION WHILE DIRECTING THE LD. AO TO RE - COMPUTE THE DISALLOWANCE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD IS DISMISSED FOR BOTH THE ASSESSMENT YEARS. 8. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31.03.2017 . SD/ - SD/ - [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.03.2017 {SC SPS} 8 I.T. (SS) A. NO. 152 & 153/KOL/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 M/S. REI AGRO LTD . COPY OF THE ORDER FORWARDED TO: 1.APPELLANT/ASSESSEE - M/S REI AGRO LTD. ROOM NO. 154B, 15 TH FLOOR, EVEREST HOUSE, 46C, CHOWRINGHEE ROAD, KOLKATA - 700071 2. RESPONDENT DCIT CENTRAL CIRCLE - 4(3), KOLKATA. 3. CIT( A) - KOLKATA. 4. CIT , KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES