DCIT, Circle - 8, Kolkata, Kolkata v. M/s. TM International Logistics Limited, Kolkata

ITA 377/KOL/2012 | 2006-2007
Pronouncement Date: 29-04-2015

Appeal Details

RSA Number 37723514 RSA 2012
Assessee PAN AABCT5399M
Bench Kolkata
Appeal Number ITA 377/KOL/2012
Duration Of Justice 3 year(s) 1 month(s) 21 day(s)
Appellant DCIT, Circle - 8, Kolkata, Kolkata
Respondent M/s. TM International Logistics Limited, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 29-04-2015
Assessment Year 2006-2007
Appeal Filed On 09-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [BEFORE HON BLE SHRI MAHAVIR SINGH JM & HON BLE SHRI B.P.JAIN AM ] I.T.A NO S.377&378/KOL/2012 ASSESSMENT YEAR S : 2006 - 07 & 2007 - 08 D.C.I.T. CIRCLE - 8 VS. M/S. TM INTERNATIONAL KOLKATA LOGISTICS LTD. KOLKATA (PAN: AABCT 5399 M) (APPELLANT) ( RESPONDENT) C.O.NO S.37 & 38/KOL/2012 (A/O I.T.A NO S . 377&378/KOL/2012 ASSESSMENT YEAR S : 2006 - 07 & 2007 - 08 M/S. TM INTERNATIONAL VS. D.C.I.T. CIRCLE - 8 LO GISTICS LTD. KOLKATA KOLKATA ( CROSS OBJECTOR) ( RESPONDENT) (PAN: AABCT 5399 M) FOR THE DEPARTMENT : SHRI K.L.KANAK JCIT FOR THE ASSESSEE : SHRI AMIT PATNI AND SHRI NIMISH KUMAR DATE OF HEARING : 24 .04. 2015. DATE OF PRONOUNCEME NT: 29.04.2015. ORDER PER SHRI B.P.JAIN AM : THESE TWO APPEALS OF THE REVENUE ARISE FROM TWO DIFFERENT ORDER S OF LD. CIT(A) - VIII KOLKATA EACH DATED 20.12.2011 FOR ASSESSMENT YEAR S 2006 - 07 AND 2007 - 08. THE ASSESSEE IN BOTH THE APPEALS HAVE ALSO RAISED CROSS OBJ ECTION S. 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL IN BOTH THE APPEALS AS UNDER : - (1 ). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION OF COMMISSION PAYMENT TO NON - EXECUTIVE DI RECTORS WHEN IT WAS CLEARLY DISALLOWABLE U/S 40(A)(IA) OF IT ACT 1961. (2 ) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE U/S 14A OF IT ACT. WHEREAS AO WAS CORRECT IN COMPUTING DISALLOWA NCE U/S 14A OF IT ACT 1961. (3) THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR AMEND ALTER MODIFY ANY OF THE GROUNDS BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. ITA NOS. 377 378 & CO.37&38 OF 2012 M/S. TM INTERNATIONAL LOGISTICS LTD. A.YRS. 2006 - 07 & 2007 - 08 2 3. AS REGARDS GROUND NO.1 THE BRIEF FACTS OF THE CASE ARE THAT AO DISALLOWED THE COM MISSION U/S 40(A)(IA) OF THE ACT SINCE THE TDS ON THE COMMISSION TO THE DIRECTOR WAS PAID AFTER THE CLOSURE OF THE FINANCIAL YEAR BUT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 3.1. BEFORE THE LD. CIT(A) THE ASSESSEE MADE THE SUBMISSION AND RELIED UPON THE VARIOUS DECISIONS OF COURT OF LAW. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE AND DIRECTED THE AO TO DELETE THE DISALLOWANCE. 4. THE LD. DR RELIED UPON THE ORDER OF AO WHERE AS THE LD. COUN SEL FOR ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND THE ORDER OF LD. CIT(A). 5. W E HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. FOR THE SAKE OF CONVENIENCE WE REPRODUCE THE ORDER OF THE LD. CIT(A) FOR A.YR.2006 - 0 7 AS UNDER : - I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT ALONG WITH THE CASE LAWS RELIED UPON PERUSED THE IMPUGNED ASSESSMENT ORDER AND THE MATERIALS AVAILABLE ON RECORDS AND THE FACTS OF THE CASE. IT IS SEEN THAT THE DISALLOWANCE HAS BE EN MADE U/S 40(A)(IA) ON THE GROUND THAT NO TDS ON THE SAID AMOUNT HAS BEEN MADE PRIOR TO 31.03.2006. THE APPELLANT S SUBMISSION ON THIS ISSUE IS A MATTER OF RECORD. THE DECISION OF THE HON BLE MUMBAI TRIBUNAL IN THE CASE OF IDBI VS ITO (SUPRA) RELIED UPO N BY THE APPELLANT GONE THROUGH CAREFULLY. IN MY CONSIDERED VIEW THIS LIABILITY OF THE APPELLANT COMES OUT ONLY AT THE END OF THE PREVIOUS YEAR WHICH IS THE FINANCIAL YEAR. IN THAT EVENT THE CASE OF THE APPELLANT SEEMS TO HAVE BEEN COVERED BY THE CLAUSE (A) OF THE SECTION 40(A)(IA) OF THE ACT. THUS THE APPELLANT WOULD BE LIABLE TO DEDUCT AND PAY TAXES BEFORE THE STATUTORY DATE OF FILING THE RETURN OF INCOME. THERE IS NO DISPUTE IN THE ORDER OF THE AO THAT THE TDS HAD BEEN PAID BEFORE SUCH DATE. UNDER TH E CIRCUMSTANCES AND FOLLOWING THE DECISION OF MY PREDECESSOR IN THE CASE OF TATA RYERSON LIMITED IN APPEAL NO.231/CIT(A)VIII/KOL/08 - 09 I HOLD THAT THE APPELLANT HAS NOT CONTRAVENED THE PROVISION OF SECTION 40(A)(IA) OF THE I.T.ACT AND ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITION. 5.1. IN VIEW OF THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) BY THE LD. COUNSEL OF THE ASSESSEE AND THE ARGUMENTS MADE BY BOTH THE PARTIES WE CONCUR WITH THE VIEW OF THE LD. CIT(A) THAT THE ASSESSEE HAS PAID THE TAXES AT SOURCE BEFORE THE STATUTORY DATE OF FILING OF THE RETURN OF INCOME WHICH IS NOT UNDER DISPUTE AND IN VIEW OF THE DECISION ITA NOS. 377 378 & CO.37&38 OF 2012 M/S. TM INTERNATIONAL LOGISTICS LTD. A.YRS. 2006 - 07 & 2007 - 08 3 OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS VIRGIN CREATIONS IN ITAT NO.302 OF 2011 GA NO.3200/2011 DATED 23 RD NOVEMBER 2011IN VIEW OF THE SIMILAR FACTS OF THE CASE. THE RELEVANT PORTION OF THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE CIT VS VIRGIN CREATIONS (SUPRA) IS REPRODUCED HEREIN BELOW : - THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESSEE HAD DEDUCT ED TAX AT SOURCE FROM THE PAID CHARGES BETWEEN THE PERIOD APRIL 1 2005 AND APRIL 28 2006 AND THE SAME WERE PAID BY THE ASSESSEE IN JULY AND AUGUST 2006 I . E. WELL BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION . THIS FACTUAL POSITION WAS UNDISPUTED . MOREOVER THE SUPREME COURT AS HAS BEEN RECORDED BY THE LEARNED TRIBUNAL IN THE CASE OF ALLIED MOTORS PVT . LTD . AND ALSO IN THE CASE OF ALOM EXTRUSIONS LTD . HAS ALREADY DECIDED THAT THE AFORESAID PROVISION HAS RE TROSPECTIVE APPLICATION. AGAIN IN THE CASE REPORTED IN 82 ITR 570 THE SUPREME COURT HELD THAT THE PROVISION WHICH HAS INSERTED THE REMEDY TO MAKE THE PROVISION WORKABLE REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL . IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE SUPREME COURT THIS COURT CANNOT DECIDE OTHERWISE. HENCE WE D I SMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS . 5.2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIN D NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY DELETED THE ADDITION MADE BY AO. THUS GROUND NO.1 OF THE REVENUE IS DISMISSED. 6. AS REGARDS GROUND NO.2 OF THE REVENUE AO MADE DISALLOWANCE OF RS.12 98 872/ - BEING 0.5% OF AVERAGE INVESTMENT OF RS.25 85 74 242/ - AS PER RULE 8D OF IT RULES. 6.1. BEFORE THE LD. CIT(A) THE ASSESSEE S CONSUL MADE THE SUBMISSIONS AND THE LD. CIT(A) AFTER CONSIDERING THE SUB MISSIONS RESTRICTED THE DISALLOWANCE TO RS.28 428/ - BEING 1% OF EXEMPT OF DIVIDEND INCOME OF RS.28 42 805/ - INSTEAD OF TOTAL DISALLOWANCE AT RS.12 92 872/ - BY THE AO U/S 14A OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF CO NVENIENCE : - I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER AND THE SUBMISSION OF THE APPELLANT AND THE DECISIONS OF VARIOUS CASE LAWS AS REFERRED BY THE APPELLANT. I AM IN AGREEMENT WITH THE CONTENTION OF THE AR OF THE APPELLANT THA T PROVISION OF RULE - 8D IS NOT APPLICABLE PRIOR TO THE ASSESSMENT YEAR 2008 - 09. HOWEVER THE CONTENTION OF THE APPELLANT THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT DIVIDEND INCOME ITA NOS. 377 378 & CO.37&38 OF 2012 M/S. TM INTERNATIONAL LOGISTICS LTD. A.YRS. 2006 - 07 & 2007 - 08 4 IS NOT ACCEPTABLE. IN RESPONSE TO THIS QUERY AS TO WHY THE RECENT DECISION OF THE HON BLE HIGH COURT KOLKATA IN THE CASE OF M/S.ISG TRADERS LTD VS CIT (SUPRA) SHOULD NOT BE APPLICABLE IN THE APPELLANT S CASE AND PROPORTIONATE INTEREST PAID ON BORROWED FUND BE DISALLOWED BEING EXPENDITURE RELATABLE TO EARNING OF E XEMPT DIVIDEND INCOME THE AR OF THE APPELLANT SUBMITTED THAT THE INTEREST CHARGED IN THE P&L ACCOUNTS FOR THE RELEVANT YEAR UNDER APPEAL PERTAINS TO THOSE LOANS WHICH HAVE BEEN TAKEN FOR THE PURPOSE OF PURCHASING FIXED ASSETS AND THE INVESTMENT IN SHARES OR MUTUAL FUNDS ON WHICH DIVIDEND INCOME WAS EARNED WERE MADE OUT OF APPELLANT S OWN SURPLUS FUNDS. IN SUPPORT OF HIS CONTENTION THE COPIES OF RELEVANT EXTRACTS OF THE ACCOUNTS AND SUPPORTING DETAILS WERE FURNISHED. ON EXAMINATION OF THE ACCOUNTS AND DETAI LS FURNISHED THE CONTENTION OF THE APPELLANT APPEARS TO BE CORRECT AS THERE IS DIRECT NEXUS BETWEEN THE BORROWED FUND AND THE ACQUISITION OF ASSETS AND NO DIRECT RELATION WITH THE INVESTMENTS IN SHARES. SO IN VIEW OF THE ABOVE DISCUSSION THE CO NTENTION OF THE APPELLANT IS NOT FULLY ACCEPTABLE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE DIVIDEND INCOME AND IN MY OPINION EVEN IF RULE - 8D OF THE INCOME TAX 1962 IS NOT APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR BUT THE ELEMENT OF EXPEND ITURE INCURRED FOR THE EARNING OF EXEMPT INCOME CANNOT BE RULED OUT. THEREFORE FOLLOWING THE DECISIONS OF THE HON BLE JURISDICTIONAL TRIBUNAL IN A NUMBER OF CASES I RESTRICT THE DISALLOWANCE TO RS.28 428/ - (BEING 1% OF EXEMPT DIVIDEND INCOME OF RS.28 42 805/ - ) INSTEAD OF TOTAL DISALLOWANCE MADE AT RS.12 92 872/ - BY THE AO U/S 14A OF THE ACT. THUS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 7.1. THERE IS NO DISPUTE TO THE FACT THAT RULE 8D IS NOT APPLICABLE PRIOR TO A.YR.2008 - 09. THE CONTENTION OF THE ASS ESSEE BEFORE LD.CIT(A) AND BEFORE US THAT NO EXPENDITURE HAS BEEN INCURRED TO EARN THE EXEMPT INCOME AND THEREFORE WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) IN SUSTAINING THE DISALLOWANCE @1% OF THE EXEMPT DIVIDEND INCOME. OUR VIEW FIND SUPPORT FROM THE DECISION OF KOLKATA TRIBUNAL IN THE CASE OF DCIT VS M/S.VARANASI COMMERCIAL LTD. VIDE ITA NO.1539/KOL/2011 ORDER DATED 07.03.2012 FOR A.YR.2007 - 08. 3. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF MATERIALS AVAILABLE ON RECORD KEE PING IN VIEW OF THE FACT THAT SINCE THE ASSESSMENT YEAR INVOLVED IN THIS APPEAL IS RELATING TO A.YR. 2007 - 08 AS PER THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. PVT. LTD. (SUPRA) RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE RULE 8D IS NOT APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THIS TRIBUNAL HAS BEEN TAKING A CONSISTENT VIEW OF SUSTAINING THE DISALLOWANCE U/S 14A AT 1% OF THE DIVIDEND INCOME. ACCORDINGLY WE DIRECT THE AO TO DISALLOW 1% OF THE DIVIDEND INCOME AS EXPENDITURE RELEVANT TO EARNING OF DIVIDEND INCOME. WE ORDER ACCORDINGLY. THUS GROUND NO.2 OF THE REVENUE IS DISMISSED. 8. GROUND NO.3 BEING GENERAL IN NATURE DOES NOT REQUIRE ANY ADJUDICATION. ITA NOS. 377 378 & CO.37&38 OF 2012 M/S. TM INTERNATIONAL LOGISTICS LTD. A.YRS. 2006 - 07 & 2007 - 08 5 9. IN REVENUE S APPEAL VIDE ITA NO.378/KOL/201 2 FOR A.YR.2007 - 08 THE FACTS OF THE CASE ARE IDENTICAL IN GROUND NOS1 AND 2 TO THE FACTS IN ITA NO.377/KOL/2012 FOR A.YR.2006 - 07. THEREFORE OUR ORDER HEREIN ABOVE IN ITA NO.377/KOL/2012 IS IDENTICALLY APPLICABLE IN ITA NO.378/KOL/2012 FOR A.YR.2007 - 08 AND ACCORDINGLY GROUND NOS.1 AND 2 OF THE REVENUE S APPEAL IN ITA NO.378/KOL/2012 ARE DISMISSED. 10. THE CROSS OBJECTIONS OF THE ASSESSEE VIDE C.O.NOS.37& 38/KOL/2012 ARE NOT PRESSED AND THEREFORE THE SAME ARE DISMISSED. ORDE R PRONOUNCED IN THE COURT ON 2 9.04.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [ B.P.JAIN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29.04.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . M/S. TM INTERNATIONAL LOGISTICS LTD. 43 J.L.NEHRU ROAD KOLKATA - 700071. 2 D.C.I.T. CIRCLE - 8 KOLKATA 3 . CIT(A) - VIII KOLKATA 4. CIT - KOLKATA. 5. CIT - DR KOLKATA BENCHES KOLKATA TRUE COPY BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES