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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
क$ �त&थ Date of Pronouncement/ 21.04.2023 आदेश उ)घोषणा क$ �त&थ For the Appellant/ Shri Miraj D Shah, A.R �नधा�/रती क$ ओर से For the Respondent/ Shri P. P. Barman, Addl. CIT राज�व क$ ओर से ORDER / आदेश Per Rajesh Kumar, AM: This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-9, Kolkata (hereinafter referred to as the Ld. CIT(A)”] dated 24.06.2019 for the AY 2013-14.
The issue raised in ground no. 1 and 2 is against the order of Ld. CIT(A)partly confirming the addition to the extent of Rs. 2,63,500/- as against the disallowance of Rs. 5,82,847/- made by AO u/s 14A of the Act.
Facts in brief are that the assessee earned exempt income of Rs. 2,63,500/- during the year by way of dividend which was claimed as exempt u/s 10 of the Act
Assessment Year: 2013-14 Bisseswarlal Mannalal & Sons and accordingly the assessee was asked to furnish the details of disallowance u/s 14A of the Act read with Rule 8D. The AO noted that the assessee has claimed interest expenditure of Rs. 21,26,852/-. The assessee replied before the AO that it is engaged in the business of growing and manufacturing of tea and therefore all the expenses were wholly and exclusively incurred for the purpose of business and none of the expenses was attributable to the earning of exempt income. The reply of the assessee was simply rejected by the AO and by invoking the provisions of Section 14A read with Rule 8D making disallowance of Rs. 5,82,847/- comprising Rs. 3,54,098/- towards interest rule 8D(2)(ii) and Rs. 2,28,749/- under Rule 8D(2)(iii).
4. In the appellate proceedings, the Ld. CIT(A) observed that disallowance is not required to be made under Rule 8D(2)(ii) whereas it was required to be made under Rule 8D(2)(iii), however, the Ld. CIT(A) finally restricted disallowance to Rs. 2,63,500/- being expenses relating to dividend income and hence the assessee is in appeal before us.
After hearing the rival contention and perusing the material on record, we find that the assessee replied before the AO as to why the assessee has not made any disallowance u/s 14A of the Act however the AO simply stated that the reply of the assessee is not acceptable without pointing out particular defects as to how the books of accounts made by the assessee were wrong and not reliable. In other words, the AO has not recorded satisfaction and in absence of any satisfaction by the AO the provisions of Section 14A cannot be invoked. Accordingly we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance.
Issue raised in ground no. 3 and 4 is against the reduction of claim u/s 80IC of the Act to the extent of Rs. 20,49,677/-.
Facts in brief are that the AO during the course of assessment proceedings observed that the assessee has earned interest income of Rs. 67,21,948/- on unsecured loans given to others beside paying interest of Rs. 20,49,677/- to other parties. The assessee declared net amount of interest income of Rs. 46,72, 271/- in the profit and Assessment Year: 2013-14 Bisseswarlal Mannalal & Sons loss account and the deduction u/s 80IC of the Act has been claimed amounting to Rs. 2,58,36,926/- after reducing net interest of Rs. 46,72,271/-. However according to AO gross interest of Rs. 67,21,948/- which is non-business income and can not be part of deduction u/s 80IC of the Act meaning thereby that the assesse suo motto reduced the claim u/s 80IC by Rs. 46,72,271/- resulting excess claim of deduction u/s 80IC by Rs. 20,49,677/-.
At the outset it has been brought to our notice by the ld. Counsel for the assessee, the said issue is squarely covered by the decision of Co-ordinate Bench in assessee’s own case in the earlier in AY 2013-14 vide order dated 19.06.2019. After perusing the said order, we find that the issue is squarely covered by the decision of the coordinate bench. The relevant portion is reproduced as under:
“20. Ground No. 7 is relating to the deletion of addition made on account of excess claim u/s 80IC of the Act.
Heard both parties and perused the material available on record. According to AO, the assessee earned interest of Rs.22,93,941/- on unsecured loans given to other parties. The assessee paid interest of Rs. 18,43,708/- to other/ parties for loans taken by it. The assessee declared an amount of/Rs.4,50,233/- [Rs.22,93,941/- - Rs. 18,43,708/-] as net interest income/in its P&L A/c. According to AO, the said amount is inclusive of amount of Rs. 1,72,35,293/- claimed as deduction u/s 80IC of the Act and held the net interest income as declared in the P&L A/c is not a business income and not entitled to claim deduction u/s 80IC of the Apt by adding the same under the head ‘excess claim’ and added to the total income of the assessee. According to CIT(A), no claim was made before the assessee in the assessment proceedings that the said amount is exempt income u/s 80IC of the Act. The relevant portion is reproduced herein below for ready-reference:- 2. “Quite on the other hand, the Ld A.R for the appellant has opposed such action by the Ld. AO, and pleaded that the interest income was not taken in any part of the exempted income under Sec 80-IC, and the Ld. AO has proceeded on a misconceived notion while directing that the interest income be taken from other sources. It was submitted by the Ld. A.R. for the appellant that the ground is related to the earlier Ground No.
It was submitted that the Interest Expenses of Rs. 18,43,708/- was incurred by the Appellant on moneys borrowed and utilized for the purpose of its business including its business of advancing money to others, and that the disallowance was of Rs.1843,708/- was not justified.
3. It is seen that the Ld.AO has made, this disallowance in continuation of the disallowance dealt with at ground 4 (supra). I find that the Ld AO has concluded that the entire interest income ofRs.22,93,941/- was its non-business income and the assessee was not entitled to claim deduction u/s 80-IC on this entire amount. However, it is to be said that the appellant-assessee has not made any claim that such Assessment Year: 2013-14 Bisseswarlal Mannalal & Sons income would be exempt income u/s 80-IC. Therefore, I do not see the logic of the Ld AO in making any presumptions in the matter. I find the same to be without any legal basis. Be that the case, the matter of disallowance of the interest income as made by the Ld. AO has been adjudicated in favour of the appellant at ground no. 4 supra. ON facts and in law, I find the action of the Ld. AO to be unsustainable, and therefore such action is directed to be deleted.”
In our opinion, on perusal of the above reasons stated by the Ld. CIT(A) when there is no claim for deduction, there cannot he any addition made thereon. Therefore, we find no infirmity in the order of Ld. CIT(A) and accordingly, it is justified. Thus, ground no. 7 raised by the revenue fails and it is dismissed.” We therefore respectfully following the said decision of the Co-ordinate Bench set aside the order of Ld. CIT(A) and direct the AO to delete the addition of Rs. 20,49,677/- .
Issue raised in ground no. 4 is against the confirmation of addition of Rs. 1,23,749/- by the Ld. CIT(A) as made by the AO on account of difference between the books of accounts of the assesse and as confirmed by the sundry creditor M/s Sirohia and Sons.
We have perused the order of authorities below and find that the assessee has not filed any necessary details before the AO. Accordingly in our opinion, the issue is required to be examined at the end of AO. Accordingly we restore the issue back to the file of AO with the direction to decide the same afresh and also direct the assessee to furnish the necessary details. Therefore the ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order is pronounced in the open court on 21st April, 2023