M/S. HOWRAH FORGINGS LTD.,KOLKATA V. ACIT, CIRCLE 1(1), KOLKATA

ITA 60/KOL/2025

AI Insights

The case involves an appeal by M/s Howrah Forgings Ltd. against the order of the Ld. Commissioner of Income Tax (Appeals), Addl/JCIT(A)-1, Mumbai, concerning the assessment year 2016-17. The primary contention was related to the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, which pertains to expenses incurred in relation to income not chargeable to tax. The AO had included all investments in the disallowance computation, whereas the assessee argued that only those investments which actually yielded exempt income should be considered. The ITAT agreed with the assessee's position and directed a re-computation of the disallowance accordingly.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360561 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: REI Agro Limited in ITAT No. 161/Kol/2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROMA CHAUDHARY
• Assessee Lawyers: SHARAD JOSHI
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No. 60/Kol/2025 Assessment Year: 2016-17 M/s Howrah Forgings Ltd., 18, R.N. Mukherjee Road, Kolkata - 700001 (PAN: AAACH6139E) Vs. Circle 1(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 (Appellant) (Respondent) Present for: Appellant by : Shri Sharad Joshi, AR Respondent by : Roma Chaudhary, JCIT, Sr. DR Date of Hearing : 20.05.2025 Date of Pronouncement : 20.05.2025 O R D E R Per Bench : The captioned appeal by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeal), Addl/JCIT(A)-1, Mumbai [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/APL/S/250/2024-25/1071171365(1)(1) dated 12.12.2024, passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2016-17. 2. Shri Deepak Mundhra and Sharad Joshi, AR represented on behalf of the assessee and Roma Chaudhary appeared on behalf of the revenue. 3. On perusal of the order of the Ld. JCIT(A), most specifically at page 6 of impugned order, the decision portion reads as under: “Decision: There are mainly three grounds of appeal involved. 2 ITA No. 60/Kol/2025 M/s Howrah Forgings Ltd. AY 2016-17 Ground No.1 & 2 are interrelated and there decided together. These two grounds relate with addition u/s.14A r.w. Rule 8D. Here it is seen that assessee has shown balance sheet wherein investment made out of reserved & surplus fund but in proceeding u/s.143(3) of the Act, assessee had filed to filed details. Therefore, AO made addition u/s.14A r.w Rule 8D of the Act and demand raised. In this regard show-cause notice issued. Assessee filed reply vide letter dated 22.08.2023. The submission so made does not stand to rationale and accordingly it is held that AO was right in making addition of Rs.5,34,459/-u/s. 14A r.w Rule 8D of the Act. Hence appeal on these grounds is dismissed. Ground No.3 relates with interest consequential in nature does not require not require adjudication. In the result appeal of the assessee is dismissed.” 4. The Ld. Sr. DR also was unable to respond as to what the Ld. JCIT(A)-1, Mumbai proposed into the said decision. It is worthwhile to mention here that the assessee has taken pains to give written submissions and explaining his case in detail. Obviously, the appellate authority is expected to apply his mind and a give a reasoned order. The said finding of the appellate authority lacks any reasoning whatsoever. This aspect has been reiterated in numerous decisions of various Hon’ble High Courts and the Hon’ble Supreme Court. Unfortunately, a perusal of the order of the Ld. JCIT(A)-1, Mumbai shows that principles enunciated in such decisions have not percolated to the said appellate authority. Surprisingly even the case laws quoted by the assessee has not been discussed or distinguished. 5. On perusal of the issues in the appeal it is seen that the issue is in respect of the disallowance u/s 14A read with Rule 8D of the IT Rules. The Ld. AO has admittedly, not considered those investments which have given rise to the exempt income. The Ld. AO has taken the entire investments while computing the disallowance u/s 14A read with Rule 8D. The assessee earned exempt income of Rs. 14,000/- which has been mentioned in the order of Ld. JCIT(A), Mumbai and in the written submissions and grounds of appeal. This being so and in the interest of justice, we restore the issues to the file of Ld. AO, for computing the disallowance u/s 14A on the basis of only those investments which 3 ITA No. 60/Kol/2025 M/s Howrah Forgings Ltd. AY 2016-17 yielded the exempt income. The AO shall apply the principle laid down by the Hon’ble Jurisdictional High Court in the case of REI Agro Limited in ITAT No. 161/Kol/2024 dated 23.12.2013. The principles laid down therein are that the disallowance u/s 14A read with Rule 8D of the I T Rules, shall be only in respect of investments which have resulted in exempt income and not other non- income yielding investments. 6. Also, this Tribunal is suo-moto invoking its powers under section 254(1) of the Act and staying the demand in the said matter till disposal of this appeal by the Ld. JCIT(A)-1, Mumbai by passing a speaking order. 7. In the result, the appeal of the assessee is partly allowed for statistical purposes. Sd/- Sd/- (Sanjay Awasthi) (George Mathan) Accountant Member) Judicial Member Dated: 20th May, 2025 AK, Sr. P.S. Copy to: 1. The Appellant: M/s Howrah Forgings Ltd. 2. The Respondent: Circle 1(1), Kolkata 3. CIT(A) 4. Pr. CIT- 5. DR, ITAT, Kolkata Bench, Kolkata 6. Guard file. //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "