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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Bench:
The captioned appeal filed by the Revenue, pertaining to assessment year 2013-14, is directed against the order passed by the Commissioner of Income Tax (Appeal)-2, Kolkata, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the Act) dated 29/03/2016.
The appeal filed by the Revenue is barred by limitation by 32 days. The Revenue filed a condonation petition for requesting the Bench to condone the delay. We have heard both the parties on this preliminary issue and having regard to the reasons
M/s Williamson Magor and Company Ltd. Assessment Year:2013-14 given in the petition for condonation of delay, we condone the delay and admit the appeal of the revenue for hearing.
The grounds of appeal raised by the Revenue are as follows:
1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in re-computing the disallowance u/s 14A r.w. Rule 8D of the Income Tax Act, 1961 made by the A.O. depending on the judicial pronouncement of Hon’ble ITAT, Kolkata without appreciating the fact that interest bearing loan fund was utilized in dividend earning investment made in group companies.
2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in re-computing the calculation of the disallowance u/s 14A of the Income Tax Act, 1961 made by the A.O. to the Book profit u/s 115JB of the I.T. Act.
3. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in not appreciating the guideline as stated in CBDT’s Circular No. 05/2014 that those investments may be taken into consideration for computation of Rule 8D which have not earned any exempt income during the year.
4. That the appellant craves for leave to add, delete and modify any of the grounds of appeal before or at the time of hearing.
Brief facts qua the issue are that during the assessment proceedings, the Assessing Officer noticed that the assessee earned tax free income amounting Rs 7,43,62,000/- by way of dividend against which the assessee has suo-moto disallowed expenditure of Rs. 3,79,31,810/- to earn such income in its computation of income u/s 14A of the Act. However, on examination it was noticed by the Assessing Officer that the calculation has not been done in accordance with sec. 14A read with rule 8D of the Income Tax Rules, 1962. Therefore, the Assessing Officer himself computed the disallowance under rule 8D read with section 14A of the Act at Rs. 7,86,05,270/- under rule 8D(2)(ii) and Rs. 1,11,47,565/- under Rule 8D(2)(iii) of the Income Tax Rules. The total disallowance made by the Assessing Officer came to Rs. 8,97,52,835/-. Since, the assessee company has already disallowed suo-moto Rs. 3,79,31,810/- in its computation of income therefore the M/s Williamson Magor and Company Ltd. Assessment Year:2013-14 amount of Rs. 5,18,21,025/- (Rs. 8,97,52,835/- - Rs. 3,79,31,810/-) was added back to the total income of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer observing the following:
“I have considered the grounds of appeal, statement of facts and submission of the authorized representative of the appellate company as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AO had worked out the disallowance u/s. 14A of the I. T. Act read with Rule 8D of the I. T. Rules. As regards to disallowance of the expenses under rule 8D (ii) and (iii), Hon'ble jurisdictional ITAT in the case of RE1 Agro Ltd. vs. DC1T (144 1TD 141] has held that only the investments which actually yield exempt income has to be considered for the purposes of application of Rule 8D(2)(iii). The ITAT held that the investments which did not yield any tax-free income in the relevant year were not required to be considered for the purposes of application of Rule 8D.
Keeping in view, of above and by following the judgement of Hon'ble jurisdictional ITAT, the AO is directed to recalculate the disallowance of those shares, which has yielded dividend income while taking the investment.
In view of above, the appellant shall furnish before the AO the details in the matter. The AO is also directed to verify the same and accordingly re-compute the disallowance u/s v 14A r.w. Rule 8D. The AO shall allow the appellant an opportunity of hearing before passing any order in this regard. This ground is therefore allowed for statistical purposes.
As regards to disallowance of the expenses under section 115IB. the jurisdictional ITAT in the case of PAN Emami Cosmed Ltd under for Assessment Year 2014-15 vide order dated 04.07.2018 has held as under: -
"The only issue to be decided is as to whether the CIT(A) is justified in deleting the addition made on account of provision u/s 14A while computing the disallowance under MAT proceedings in the facts and circumstances of the case. Heard rival submissions and perused the record including the case law/order as relied on by the assessee. On perusal of record, we find that the similar issue was decided by this Co-ordinate Bench, ITAT, Kolkata in the case of TMT Viniyogan Pvt. Ltd supra as referred by the Id.AR before us, wherein the Tribunal held that no disallowance could be made u/s. 14A while computing the book profit u/s. 115JB of the Act and remanded the matter to the file of AO for computing the disallowance under clause (f) to section 115JB of the Act by placing reliance on the decision of Page | 3
M/s Williamson Magor and Company Ltd. Assessment Year:2013-14 the Hon'ble High Court of Calcutta in the case of CIT Vs. Jayshree Tea Industries Ltd in GA No. 1501 of 2014 (ITAT No. 47 of 2014) dt. 19-11-14. Relevant partition of order dt. 15-12-2017 is reproduced herein below for better understanding: - 14. We have heard the rival submissions and perused the materials available on record. The issue in the instant case relates to the disallowances made by Assessing Officer u/s 14A r.w.r 8D of the Income Tax Rules while determining the income under normal computation of income. The disallowance of the same was also made while determining the profit u/s 115JB of the Act. However, we note that in recent judgment of Special Bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. Relevant portion of the said order is reproduced below: "In view of above discussion, the computation under clause (f) of Explanation 1 to section 115]B(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962. "
The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 of section 115JB of the Act. However it is also clear that the disallowance needs to be made in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so we draw our support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO N0.1501 of 2014 (ITAT NO.47 of 2014) dated 19.11.14 wherein it was held that the disallowance in relation to exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:-
"we find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (J) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act. " In view of above we hold that the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec.115JB of the Act as per direction of the Hon'ble jurisdictional High Court in the case of CIT Vs. Shree Tea Industries Ltd. (Supra). Therefore, the AO shall work out the disallowances in terms of the clause (J) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Therefore we are inclined/ to restore this issue to the file of AO for fresh adjudication in accordance to law and in the light of above discussion. Thus this ground of appeal of the assessee is allowed for Page | 4
M/s Williamson Magor and Company Ltd. Assessment Year:2013-14 statistical purposes.” In view of the said decision of Hon’ble High Court and respectfully following the same, we remand the matter to the Assessing Officer and to work the disallowance relating to exempt income in terms of clause (f) to Explanation-1 of Section 115JB of the Act. Order of CIT(A) is set aside. Ground raised by the Revenue is allowed for statistical purposes.” In view of the above and by following the above order, the Assessing Officer is directed to recomputed the disallowance relating to exempt income in terms of clause (f) to Explanation-1 of Section 115JB of the Act. This ground of appeal is allowed for statistical purpose.
6. Aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us.
We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the issue under consideration in respect of disallowance u/s 14A read with Rule 8D is no longer res integra. As per the judgment of jurisdictional ITAT Kolkata in REI Agro Limited vs DCIT reported in 144 ITD 141 on the dividend bearing security is to be taken into account for the purpose of disallowance under Rule 8D(2)(ii) and (iii). Apart from this, the disallowance made u/s 14A is not the subject matter of computation of book profit u/s 115JB as has been held by the Special Bench of ITAT in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 therefore, we find no infirmity in the order passed by the ld. CIT(A), that being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby accepted and the grounds of appeal raised by the revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 22.11.2019