DCIT, Circle - 5, Kolkata, Kolkata v. M/s. Shree Capital Services Ltd., Kolkata

ITA 442/KOL/2011 | 2005-2006
Pronouncement Date: 07-09-2011 | Result: Dismissed

Appeal Details

RSA Number 44223514 RSA 2011
Assessee PAN AAGCS5082D
Bench Kolkata
Appeal Number ITA 442/KOL/2011
Duration Of Justice 5 month(s) 23 day(s)
Appellant DCIT, Circle - 5, Kolkata, Kolkata
Respondent M/s. Shree Capital Services Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 07-09-2011
Date Of Final Hearing 07-09-2011
Next Hearing Date 07-09-2011
Assessment Year 2005-2006
Appeal Filed On 15-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE /AND . ! . '# ) [BEFORE HONBLE SRI MAHAVIR SINGH JM & HONBLE SHR I C. D. RAO AM] $ $ $ $ / I.T.A NO. 442/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR: 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. SHREE CAPITAL SERVICES LTD. CIRCLE-5 KOLKATA. (PAN AAGCS 5082 D) (*+ /APPELLANT ) ( -*+/ RESPONDENT ) FOR THE APPELLANT: SHRI R. K. SAHA FOR THE RESPONDENT: S/SHRI ATUL PODDAR & S. AGAR WAL '. / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-V1 KOLKATA IN APPEAL NO.774/CIT(A)-V1/CIR-5/09-10 VIDE DATED 06.12.2010. THE EFFECT OF ORDER WAS GIVEN BY ACIT CIRCLE-5 KOLKATA U/S. U/S. 254 OF THE INCOME TAX A CT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORDER DA TED 14.10.2009 AND ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 2 9.12.2006. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE MADE BY ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES 1962 (HEREINA FTER REFERRED TO AS THE RULE) AT 1% OF EXEMPT INCOME AT RS.11 43 466/- AS AGAINST THE DISA LLOWANCE MADE BY ASSESSING OFFICER AT RS.83 12 891/-. AGGRIEVED REVENUE RAISED FOLLOWIN G GROUND NO.1: 1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(A)-VI KOLKATA HAS ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANC E U/S. 14A OF RS.83 12 891/- AND COMPUTING DISALLOWANCE @ 1% OF EXEMPT INCOME I.E. R S.11 43 679/- WITHOUT ANY BASIS AND LOGIC IRRESPECTIVE OF THE DIRECTION OF THE LD. ITAT IN THIS CASE THAT TO COMPUTE THE DISALLOWANCE U/S. 14A BY FOLLOWING THE PRINCIPLES L AID DOWN IN THE CASE OF ITO VS. M/S. DAGA CAPITAL MANAGEMENT PVT. LTD. AND WHICH IS MORE SO AS IN THE CASE OF CIT VS. HERO CYCLES NOVEMBER 4 2009 (P&H) IT WAS HELD THAT EVE N IF THE FUNDS ARE MERGED IN A COMMON KITTY THE DISALLOWANCE U/S. 14A IS JUSTIFIE D. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ORIGINAL ASSESSMENT WAS FRAMED FOR ASSESSMENT YEAR 2005-06 U/S. 143(3) ON 29.12.2006 B Y VIRTUE OF WHICH ASSESSING OFFICER MADE ADDITION BY INVOKING PROVISIONS OF SECTION 14A OF R S.21 57 152/-. AGGRIEVED ASSESSEE 2 ITA 442/K/2011 SHREE CAPITAL SERVICES LTD. A.Y.05- 06 PREFERRED APPEAL BEFORE CIT(A) WHO REDUCED DISALLO WANCE TO RS.3 07 991/- AND AGAINST THE ORDER OF CIT(A) REVENUE PREFERRED APPEAL BEFORE ITA T WHO VIDE ORDER DATED 9.2.2009 SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER BY DIREC TING TO FOLLOW THE PRINCIPLE LAID DOWN IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. ( 2009) 312 ITR (AT) 1 (MUM S.B.). THE ASSESSING OFFICER BY APPLYING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES COMPUTED DISALLOWANCE AT RS.83 62 891/-. AGG RIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A) WHO FOLLOWING THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT [2010] 328 ITR 81 (BOM .) ESTIMATED THE DISALLOWANCE AT 1% FOLLOWING THE DECISIONS OF ITAT KOLKATA AS UNDER: AS REGARDS THE OTHER EXPENSES IT IS SEEN THAT IN RECENT DECISIONS HONBLE ITAT KOLKATA HAS ADOPTED 1% OF THE EXEMPT INCOME AS THE ADMINIST RATIVE & OTHER EXPENSES WHICH CAN BE SAID TO BE RELATED TO EARNING OF THE EXEMPT INCO ME. IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE THE FOLLOWING INCOMES ARE THOSE WHICH HAVE BEEN CLAIMED BY THE ASSESSEE AS EXEMPT UNDER I. T. ACT AND HAVE NOT BEEN INCLUDED I N THE TOTAL INCOME. (I) DIVIDEND INCOME RS.3 07 79 133/- (II) PROFIT ON SALE OF INVESTMENT RS.8 35 67 546 /- RS.11 43 46 679/- 1% OF THE ABOVE INCOMES WOULD BE RS.11 43 466/-. T HEREFORE IT IS HELD THAT THIS AMOUNT SHOULD BE DISALLOWED U/S. 14A. AGGRIEVED NOW REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA) HAS ALREADY HELD THAT APPLICABILITY OF RULE 8D OF T HE RULES IS PROSPECTIVE AND NOT RETROSPECTIVE W.E.F. ASSESSMENT YEAR 2007-08 WHEREIN HONBLE HIG H COURT HAS ALSO DIRECTED TO RECOMPUTE DISALLOWANCE IN CASE THERE IS A NEXUS FOR EXPENSES WITH EXEMPT INCOME BY LAYING DOWN THE PRINCIPLE AS UNDER: (V) THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RU LES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24 2008 SHALL APPLY WITH E FFECT FROM THE ASSESSMENT YEAR 2008-09; (VI)EVEN PRIOR TO THE ASSESSMENT YEAR 2008-09 WHE N RULE 8D WAS NOT APPLICABLE THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. FOR THAT PURPOSE THE ASSESSING OFF ICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED I N RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; (VII) THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2002 -03 SHALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH D OES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN 3 ITA 442/K/2011 SHREE CAPITAL SERVICES LTD. A.Y.05- 06 ADOPT REASONABLE BASIS FOR EFFECTING THE APPORTIONM ENT. WHILE MAKING THAT DETERMINATION THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT AND GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CAS E WE FURTHER FIND THAT THE TRIBUNAL KOLKATA BENCH ON THE SELF SAME FACTS IN THE CASE OF SAGRIKA GOODS & SERVICES PVT. LTD. VS. INCOME-TAX OFFICER I.T.A NO. 1278/KOL/2010 ASSESSMENT YEAR 2005-06 DATED 24 TH SEPTEMBER 2010 HAS HELD AS UNDER: 5. HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL A VAILABLE ON RECORD AND THE DECISIONS RELIED ON BY THE LD. AUTHORISED REPRE SENTATIVE OF THE ASSESSEE CITED SUPRA. WE FIND THAT ON THE ISSUE OF DISALLOWANCE U/ S. 14A THIS BENCH OF THE TRIBUNAL HAS BEEN TAKING A CONSISTENT VIEW THAT THIS DISALLO WANCE SHOULD BE RESTRICTED TO 1% OF DIVIDEND INCOME. FOLLOWING THE SAME IN THIS AP PEAL ALSO WE HOLD THAT THE DISALLOWANCE U/S 14A FOR EARNING EXEMPT DIVIDEND IN COME SHOULD BE RESTRICTED TO 1% OF DIVIDEND INCOME. THE ASSESSING OFFICER IS AC CORDINGLY DIRECTED TO DO SO AND WORK OUT THE QUANTUM OF DISALLOWANCE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED AS DIRECTED ABOVE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF JURISDICTION TRIBUNAL (CITED SUPRA) WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY RESTRICTED DISALLOWANCE AT 1% OF EXPENSES AND WE CONFIRM THE SAME. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . ! . '# (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED : 7 TH SEPTEMBER 2011 /0 %12 3 JD.(SR.P.S.) '. 4 5''6- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT DCIT CIRCLE-5 KOLKATA. 2 -*+ / RESPONDENT M/S. SHREE CAPITAL SERVICES LTD. 21 STRAND ROAD KOLKATA-700 001. 3 . .% ( )/ THE CIT(A) KOLKATA 4. .% / CIT KOLKATA 5 . => % / DR KOLKATA BENCHES KOLKATA - / TRUE COPY '.%?/ BY ORDER 2 /ASSTT. REGISTRAR .