D.C.I.T CC - XVI,kolkata., Kolkata V. M/s Anarcon Resources Pvt Ltd., Kolkata

ITSSA 6/KOL/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2271 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2013
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 153A; 14A; 132

Judgement Text

I.T.(S.S.)A . NO. 06/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.(S.S.)A. NO. 06 /KOL/ 2013 ASSESSMENT YEAR: 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,................. ...................APPELLANT CENTRAL CIRCLE-XVI, KOLKATA, AAYAKAR BHAWAN POORVA, 4 TH FLOOR, 110, SHANTIPALLY, KOLKATA-700 107 -VS.- M/S. ANARCON RESOURCES PVT. LIMITED,............... .................RESPONDENT 4, CHOWRINGHEE LANE, KOLKATA-700 016 [PAN : AADCA 7352 D] APPEARANCES BY: SHRI G. MALLIKARJUNA, CIT, D.R., FOR THE DEPARTMENT N O N E, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JUNE 15, 2016 DATE OF PRONOUNCING THE ORDER : JULY 8, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, K OLKATA DATED 23.10.2012, WHEREBY HE RESTRICTED THE DISALLOWANCE OF RS.37,39,418/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A REA D WITH RULE 8D OF THE INCOME TAX RULES TO RS.1,09,000/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY. P URSUANT TO A SEARCH ACTION CONDUCTED UNDER SECTION 132 ON 23.06.2009, A NOTICE UNDER SECTION 153A WAS ISSUED BY THE ASSESSING OFFICER, IN RESPON SE TO WHICH THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY THE ASSESSEE ON 30.11.2011 DECLARING TOTAL INCOME AT NIL. DURING THE COURSE OF I.T.(S.S.)A . NO. 06/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 5 ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS CLAIMED EXEMPTION IN RESPECT OF DIVIDE ND INCOME OF RS.4,90,900/- RECEIVED IN THE YEAR UNDER CONSIDERAT ION. THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO T HE SAID EXEMPT INCOME, HOWEVER, WAS NOT OFFERED BY THE ASSESSEE AS REQUIRE D BY THE PROVISIONS OF SECTION 14A. THE ASSESSING OFFICER, THEREFORE, INVO KED THE SAID PROVISION AND MADE A DISALLOWANCE OF RS.37,39,418/- AS COMPUT ED AS PER RULE 8D OF THE INCOME TAX RULES IN THE ASSESSMENT COMPLETED UN DER SECTION 143(3) READ WITH SECTION 153A VIDE AN ORDER DATED 30.12.20 11. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 153A, AN APPEAL WAS PREFER RED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING T HE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE O N RECORD, THE LD. CIT(APPEALS) RESTRICTED THE DISALLOWANCE OF RS.37,3 9,418/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES TO RS.1,09,967 FOR THE FOLLOWING REASONS GIVE N IN PARAGRAPHS NO. 5, 5.1 & 5.2 OF HIS IMPUGNED ORDER:- 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THRO UGH THE VARIOUS DECISIONS ON THE ISSUE RELIED UPON BY THE A PPELLANT. ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT FOR THE Y EAR ENDED 31.03.2008, IT IS OBSERVED THAT THE APPELLANT COMPA NY HAD CREDITED SUM OF RS.24,52,102/- UNDER THE HEAD 'DIVI DEND INCOME', WHICH WAS CLAIMED AS EXEMPT FROM TAX. BESIDES, THE APPELLANT HAD CREDITED SUM OF RS.8L,318/- ON ACCOUNT OF INTEREST INCOME. THUS, FROM THE INCOME AND EXPENDITURE ACCOUNT, IT IS APPA RENT THAT DURING THE YEAR UNDER APPEAL THE MAIN SOURCE OF INC OME OF THE APPELLANT COMPANY WAS DIVIDEND INCOME. IT IS FURTHE R OBSERVED THAT IN THE INCOME AND EXPENDITURE ACCOUNT THE APPE LLANT HAS DEBITED AMOUNT OF RS.1,09,967/- UNDER THE HEAD 'ADM INISTRATIVE & OTHER EXPENSES'. SINCE, IN THE YEAR UNDER CONSIDERA TION THE MAJOR SOURCE OF INCOME WAS DIVIDEND INCOME, HENCE THE EXP ENSES DEBITED BY THE APPELLANT HAVE TO BE TREATED AS EXPE NSES INCURRED IN RELATION TO THE EXEMPT INCOME. HOWEVER, WHILE FI LING THE RETURN OF INCOME, THE APPELLANT COMPANY DID NOT MAKE ANY D ISALLOWANCE OF EXPENSES IN COMPLIANCE TO PROVISIONS OF SECTION 14A OF THE ACT. THEREFORE, IN THE ASSESSMENT ORDER, THE AO COMPUTED THE DISALLOWANCE U/S 14A BY INVOKING PROVISIONS OF RULE BD. HE COMPUTED THE DISALLOWANCE AT RS.37,39,418/- UNDER R ULE 8D(2)(III) BEING 0.5% OF AVERAGE INVESTMENT. IN THE COURSE OF I.T.(S.S.)A . NO. 06/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 5 APPELLATE PROCEEDINGS IT IS ARGUED BY THE APPELLANT THAT AS PER THE PROVISIONS OF SECTION 14A OF THE ACT, NO DEDUCT ION OF EXPENSES IS ALLOWABLE WHICH WERE INCURRED IN RELATION TO EAR NING OF EXEMPT INCOME. THUS, TO MAKE DISALLOWANCE U/S 14A, THE FIR ST CONDITION IS THAT AN ASSESSEE HAS INCURRED THE EXPENDITURE AND I F SUCH EXPENDITURE IS IN RELATION TO EARNING OF EXEMPT INC OME, THE DISALLOWANCE COULD BE MADE BY THE AO. BUT, IF NO EX PENDITURE HAS BEEN INCURRED TO EARN THE EXEMPT INCOME, NO DISALLO WANCE COULD BE MADE BY APPLYING PROVISIONS OF RULE 8D OF THE I. T. RULES. FURTHER, THERE CANNOT BE NOTIONAL DISALLOWANCE OF E XPENSES AND THE DISALLOWANCE CANNOT BE HIGHER THAN THE TOTAL EX PENSES DEBITED AND CLAIMED BY THE ASSESSEE. IT IS CONTENDE D BY THE APPELLANT THAT THE COMPANY HAD NOT INCURRED ANY EXP ENDITURE TO EARN THE DIVIDEND INCOME. HOWEVER, THE AO HAS MECHA NICALLY APPLIED THE PROVISIONS OF RULE BD TO COMPUTE THE QU ANTUM OF DISALLOWANCE U/S 14A. HE HAS MADE THE DISALLOWANCE AT RS.37,39,418/- WHEREAS THE APPELLANT COMPANY HAS NE ITHER DEBITED THE EXPENSES TO THAT EXTENT NOR CLAIMED IN THE COMPUTATION OF INCOME. THE APPELLANT HAS ONLY DEBIT ED THE EXPENSES TO THE EXTENT OF RS.L,09,967/- BEING THE A DMINISTRATIVE AND OTHER EXPENSES. NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME AND, THEREFORE, NO DISALLOWANCE U/S 1 4A IS REQUIRED TO BE MADE. IT IS FURTHER ARGUED BY THE AP PELLANT THAT IN ANY CASE THE DISALLOWANCE CANNOT EXCEED TO RS.1,09, 967/- I.E. THE TOTAL AMOUNT OF EXPENDITURE DEBITED TO THE INCOME A ND EXPENDITURE ACCOUNT. 5.1 ON CAREFUL CONSIDERATION OF FACTS AND IN LAW, I FIND FORCE IN THE SUBMISSION OF THE APPELLANT THAT THE DISALLOWAN CE U/S 14A CANNOT BE MADE MORE THAN THE AMOUNT OF TOTAL EXPENS ES CLAIMED BY THE APPELLANT, EVEN IF, THE AMOUNT COMPUTED UNDE R RULE 8D IS MORE THAN THE AMOUNT OF TOTAL EXPENSES. IN THE CASE OF DCIT, CIRCLE-4, KOLKATA VS. M/S TRADE APARTMENT LTD. ITA NO. 1277/KOL/2011 DATED 30.03.2012, IT IS HELD BY THE H ON'BLE ITAT, KOLKATA THAT WHEN ENTIRE EXPENSES INCURRED BY THE A SSESSEE HAVE BEEN OFFERED FOR DISALLOWANCE, AND ONCE THAT HAPPEN , NOTHING REMAINS FOR FURTHER DISALLOWANCE U/S 14A. THE DISAL LOWANCE UNDER SECTION 14A CAN COME INTO PLAY ONLY OUT OF EX PENSES CLAIMED FOR DEDUCTION. SIMILARLY, IN THE CASE OF M/ S GILLETTE GROUP INDIA PVT. LTD. VS. ACIT, CIRCLE-2(1), NEW DELHI, I TA NO. 267/DE1/2012 DATED 23.03.2012, IT IS HELD BY THE HO N'BLE ITAT, NEW DELHI THAT THE DISALLOWANCE U/S 14A CANNOT EXCE ED THE EXPENDITURE ACTUALLY CLAIMED BY THE ASSESSEE. 5.2. IN THE CASE OF APPELLANT COMPANY, IT HAD CLAI MED ACTUAL EXPENSES OF RS.1,09,967/-, WHEREAS, THE AO HAS MADE THE DISALLOWANCE U/S 14A BY INVOKING PROVISIONS OF RULE 8D AT RS.37,39,418/- I.E. THE DISALLOWANCE IS MUCH MORE T HAN THE ACTUAL CLAIM OF EXPENSES. AS MENTIONED ABOVE, IN THE COURS E OF APPELLATE PROCEEDINGS IT IS CLAIMED BY THE APPELLANT THAT THE COMPANY HAD NOT INCURRED ANY EXPENDITURE TO EARN THE DIVIDEND I NCOME. HOWEVER, THE SAID CONTENTION OF THE APPELLANT IS NO T ACCEPTABLE BECAUSE IN THE YEAR UNDER APPEAL, ITS MAIN SOURCE O F INCOME WAS I.T.(S.S.)A . NO. 06/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 5 THE EXEMPT INCOME IN THE FORM OF DIVIDEND. THEREFOR E, THE EXPENSES CLAIMED BY THE APPELLANT HAVE BEEN INCURRE D IN RELATION TO THE EXEMPT INCOME. HOWEVER, RESPECTFULLY FOLLOWI NG THE DECISIONS OF ITAT, KOLKATA AND ITAT, NEW DELHI (SUP RA), I DIRECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A TO THE EXTENT OF RS.1,09,967/- I.E. THE ACTUAL AMOUNT OF EXPENSES CL AIMED BY THE APPELLANT COMPANY. IN VIEW OF ABOVE, THE GROUND NOS . 1 & 2 ARE PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, NONE HAS APPEA RED ON BEHALF OF THE ASSESSEE. IT IS ALSO NOTED THAT THERE WAS NO COMPLI ANCE ON THE PART OF THE ASSESSEE TO THE NOTICES ISSUED EARLIER FIXING THIS APPEAL FOR HEARING FROM TIME TO TIME. THIS APPEAL OF THE REVENUE IS, THEREF ORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT-ASSESSEE AFTER HEARING THE ARGUMENT S OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILAB LE ON RECORD. AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O F TRADE APARTMENT LIMITED (SUPRA) RELIED UPON BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER, THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES CANNOT EXCEED THE AMOUNT OF EXPENDITURE A CTUALLY INCURRED BY THE ASSESSEE AND THIS POSITION IS NOT DISPUTED EVEN BY THE LD. D.R. HE, HOWEVER, HAS REITERATED THE STAND AS TAKEN BY THE R EVENUE IN THE GROUNDS RAISED IN THIS APPEAL THAT EVEN THOUGH THE EXPENDIT URE ACTUALLY INCURRED BY THE ASSESSEE ON ADMINISTRATIVE AND OTHER EXPENSE S WAS ONLY RS.1,09,967/-, DEPRECIATION OF RS.5.99 LAKHS AND LO SS ON SALE OF INVESTMENT OF RS.12.63 LAKHS WERE SEPARATELY DEBITE D BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT, WHICH THE LD. CIT(APPEAL S) FAILED TO CONSIDER. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. D.R. IN OUR OPINION, BOTH THESE AMOUNTS DO NOT REPRESENT EXPENDITURE INC URRED BY THE ASSESSEE IN RELATION TO THE EARNING OF EXEMPT DIVID END INCOME BY ANY STRETCH OF IMAGINATION AND EVEN THE LD. D.R. HAS NO T BEEN ABLE TO RAISE ANY MATERIAL CONTENTION TO REBUT OR CONTROVERT THE SAME . WE, THEREFORE, FIND NO MERIT IN THIS APPEAL FILED BY THE REVENUE AND DI SMISS THE SAME. I.T.(S.S.)A . NO. 06/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 5 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 8, 2016. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 8 TH DAY OF JULY, 2016 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XVI, KOLKATA, AAYAKAR BHAWAN POORVA, 4 TH FLOOR, 110, SHANTIPALLY, KOLKATA-700 107 (2) M/S. ANARCON RESOURCES PVT. LIMITED, 4, CHOWRINGHEE LANE, KOLKATA-700 016 (3) COMMISSIONER OF INCOME TAX (APPEALS, CENTRAL-II , KOLKATA, (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.