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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice-(KZ) & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap, Vice-President (KZ):- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 05.06.2017 and the grounds raised
by the assessee therein read as under:-
1. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in not deleting the arbitrary and baseless disallowance of expenses of Rs.8,81,839/- u/s. 14A of the Act/ Rule 8D(2)(i)(ii) & (iii) of the I. Tax Rules made in the assessment against the small dividend income of Rs.72,000/- earned on shares entirely held as stock-in-trade in business in respect of which Rule 8D(2) is not applicable.
2. For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in issuing a direction to the AO, based on a judgment of the Hon'ble ITAT, Kolkata in the case of Teenlok Advisory Services (P) Ltd. to M/s. Patrex Vyapar Limited
recalculate the disallowance of expenses by considering only those shares whether held as "Investment" or as "Stock-in- trade" which have yielded the exempt dividend income, without at all considering the assessee's written submission citing various Court and Tribunal decisions applicable in the case.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in not considering the facts that (i) there was no share held by the assessee under the pro-folio of “Investment" rendering Rule 8D(2)(i)(ii) & (iii) inapplicable and (ii) such Rules cannot also be applied for disallowance of expense in respect of the exempt dividend income incidentally earned on trading shares held as "Stock-in-trade" as the shares were traded only for earning business profit with least intention to earn dividend income coming as a windfall.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in not considering the facts emerging from the Audited a/cs that the shares held as "Stock-in-trade" were acquired/purchased by the assessee exclusively out of its own funds comprised of share capital and reserve & surplus and not out of any loan (the loans borrowed utilized in advancing loan) and as such no interest expense can be disallowed under Rule 8D(2)(i) & (ii) of the I. Tax Rules and Rule 8D(2)(iii), which is linked with investment in shares, is also not applicable as the assessee had no such share held as "Investment" .
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in not considering the facts that no satisfactory note was recorded by the AO to justify the applicability of Section 14A/Rule 8D(2) for disallowing any expense against the exempt dividend income incidentally received on trading shares.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in upholding the AO's decision that the loss of Rs.19,02,678/- suffered in the share trading business was a deemed speculation loss in terms of the Explanation to Section 73 of the Act without considering the facts that the assessee being a RBI registered NBFC carrying on the business of granting loans and advances and earning substantial interest income the Explanation to Section 73 does not at all apply in the case.
For that in view of the facts and circumstances of the case the Ld. CIT(A) was wholly wrong and unjustified in not considering the facts that the amendment made w.e.f A.Y 2015- 16 in the Explanation to Section 73 by Finance (No.2) Act, 2014, specifically excluding the application of Explanation to Section 73 in a case where the principal business of a company M/s. Patrex Vyapar Limited
is trading in shares, is curative and classificatory in nature and as such the amendment can be applied retrospectively from the original date of insertion of the Explanation to Section 13 on 01.04.1977 in keeping with the Hon 'ble Apex Court judgment in the case of CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and also ITAT, A-Bench, Kol's judgment dt 24.8.2016 in the case of Jalan Cement Works v. CIT ( ITA No. 1112/Kol/2013)”.
At the time of hearing before the Tribunal, the ld. Counsel for the assessee has not pressed Grounds No. 6 & 7 raised by the assessee in this appeal. The same are accordingly dismissed as not pressed.
3. As regards the common issue involved in Grounds No. 1 to 5 relating to the disallowance of Rs.8,81,839/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A read with Rule 8D, the limited relief sought by the ld. Counsel for the assessee is that the exempt dividend income actually earned by the assessee during the year under consideration being only Rs.72,000/-, the disallowance under section 14A read with Rule 8D on account of expenses incurred in relation to the said exempt income cannot exceed Rs.72,000/- being the amount of dividend income actually earned. Since this issue is squarely covered by the decision of the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Limited –vs.- CIT (372 ITR 694), wherein it was held that the disallowance under section 14A cannot exceed the actual amount of exempt income earned by the assessee, we allow the limited relief claimed on behalf of the assessee and restrict the disallowance of Rs.8,81,839/- made under section 14A read with Rule 8D to Rs.72,000/-.