M/S. CHEMCROWN EXPORTS LTD.,KOLKATA vs. DCIT, CIRCLE - 11(1), KOLKATA, KOLKATA

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ITA 15/KOL/2018Status: DisposedITAT Kolkata05 December 2018AY 2013-142 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal restricted the disallowance under Section 14A to the amount of exempt income earned, following a jurisdictional High Court judgment. However, the disallowance under Section 40(a)(ia) for non-deduction of TDS on interest was upheld as the assessee failed to provide evidence for the proviso.

What were the facts?

The assessee company appealed an order concerning disallowances under Section 14A and Section 40(a)(ia) of the Income Tax Act. The assessee had earned exempt dividend income and made interest payments without deducting TDS.

What were the issues?

Whether disallowance under Section 14A should be restricted to exempt income, and whether disallowance under Section 40(a)(ia) applies when TDS was not deducted on interest payments.

Which sections of the Income-tax Act were involved?

Section 14A,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi

Assessment Year : 2013-14 M/s. Chemcrown Exports Ltd………...................................…..……………….…...……..…….............Appellant 95 Park Street 2nd Floor Kolkata – 700 016 [PAN : AABCC 1681 M] Vs. Deputy Commissioner of Income Tax Circle-11(1), Kolkata......………………...…...........Respondent Appearances by: Shri Srikumar Banjerjee, FCA, appeared on behalf of the assessee. Shri C.J. Singh, JCIT Sr. D/R. appearing on behalf of the Revenue. Date of concluding the hearing : November 26th , 2018 Date of pronouncing the order : December 5th , 2018 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the assessee directed against the order of the Learned Commissioner of Income Tax (Appeals)-4, Kolkata, (ld. CIT(A)) passed u/s. 250 of the Income Tax Act, 1961, (the ‘Act’), dt. 04/10/2017, for the Assessment Year 2013-14.

2.

After hearing rival contentions, we find that Ground Nos. 1 to 3 are on the disallowance u/s 14A of the Act. The assessee has earned exempt income by way of dividend only to the tune of Rs.60,000/-. In terms of the judgement of the Hon'ble Jurisdictional High Court in the case of CIT vs. Ashika Global Securities Ltd. ITAT 100 of 2014, GA 2122 of 2014, judgment dt. 11/06/2018, the disallowance in question should be restricted to Rs.60,000/- only. The ld. Counsel for the assessee argued for the disallowance to be restricted to this amount. Hence we order accordingly. Hence Ground Nos. 1 to 3 are allowed in part.

4.

Ground No. 4 is against the disallowance made u/s 40(a)(ia) of the Act, for non- deduction of tax at source on interest payments made.

Assessment Year : 2013-14 M/s. Chemcrown Exports Ltd 4.1. The assessee submits that the payee companies are major companies and may have discharged their tax liabilities and hence no disallowance should be made in his hands. Such generalized arguments cannot form the basis of invoking the second proviso to Section 40(a)(ia) of the Act. The undisputed fact is that the assessee is under a legal obligation to deduct tax at source from the interest paid. It is for the assessee to lead evidence and claim the benefit of the 2nd proviso to Section 40(a)(ia) of the Act. As this was not done, we find no infirmity in the order of the Assessing Officer as confirmed by the ld. CIT(A). Hence Ground No. 4 of the assessee is dismissed.

5.

In the result, appeal of the assessee is allowed in part.

Kolkata, the 5th day of December, 2018.

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