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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM & DR. A.L. SAINI, AM
सुनवाई क� तार�ख / Date of Hearing : 12/07/2018 घोषणा क� तार�ख/Date of Pronouncement: 05/10/2018 आदेश / O R D E R Per Dr. A. L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to Assessment Year 2012-13, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-17, Kolkata in Appeal No.325/CIT(A)-17/Kol/15-16 dated 05.01.2017 which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 02.07.2014.
The grievances raised by the assessee are as follows: “1. In the facts and circumstances of the case, the ld. Commissioner of Income tax(Appeals) has erred in confirming disallowance of Rs.6,25,975/- made u/s 14A of Income-tax Act, 1961 despite the fact that the appellant did
2 M/s. Jagadhatri Commodities (P) Ltd. Assessment Year: 2012-13 not claim any direct or indirect expenditure with reference to investment made. 2. In the facts and circumstances of the case, the ld. Commissioner of Income-tax (Appeals) has erred in deciding the appeal ex parte without giving adequate and reasonable opportunity of being heard. 3. The appellant reserves the right to add, amend, alter and omit all or any of the grounds of appeal with permission of the Hon’ble Appellate Authority.”
3. At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasion and Ld. Departmental Representative (DR), was present for the appellant Revenue. In the absence of any appearance by the assessee, the appeal is being disposed of ex parte qua the assessee, after hearing Ld. DR for the Revenue on merits in terms of Rule 24 of the Income Tax Appellate, Tribunal, 1963.
The facts of the case which can be stated quite shortly are as follows: During the assessment proceedings the assessee submitted before the ld AO that assessee company did not maintain separate books of account to calculate the expenditure relating to its income which did not form part of total taxable income. So, the assessee has been unable to Justify its claim of expenditure disallowable u/s 14A of I.T. Act. Therefore, ld AO recorded dissatisfaction regarding the genuineness of the assessee's claim of the expenses relating to exempt income with regards to his books of account maintained as the assessee has been unable to justify its claim by producing books of account and other evidences during the course of proceedings even after repeated opportunities having been offered to the assessee
3 M/s. Jagadhatri Commodities (P) Ltd. Assessment Year: 2012-13 forming the very basis of dissatisfaction. The ld AO noted that as per Section 14 A(2) of I.T. Act, the disallowance u/s 14A of I.T. Act had to be calculated as per the method prescribed in Rule 8D of I.T. Rules. Therefore, the necessary disallowances u/s 14A of I.T. Act read with Rule 8D of I.T. Rules was made by assessing officer as follows :
“The total amount of disallowance s.14A read with Rule 8D of I.T. Rules (i) Direct expenditure : Nil (ii) Disallowance of interest (A X B / C) : Nil Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year is Nil. B= the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year (Rs, 12,51,95,000/-) [(Rs, 13,28,90,000/- + Rs. 11,75,00,000 / 2] ; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ( Rs.13,35,94,578/-[(Rs.133059673/-+ Rs.134129483) / 2]; (iii) 0.5 % of the Average Investment :Rs.6,25,975/ - [i.e. 0.5% of Rs.12,51 ,95,000/ - ] iv)Total [(i) + (ii) + (iii) ] : Rs.6,25,975/ - Therefore, by applying the prescribed method as per Rule 8D of I.T. Rules, the ld AO made addition u/s 14A read with rule 8D (2) (iii) of the I.T. Act to the tune of Rs.6,25,975/-.
4 M/s. Jagadhatri Commodities (P) Ltd. Assessment Year: 2012-13 4. Aggrieved by the order of the ld. Assessing Officer, the assessee carried the matter in appeal before ld CIT(A) who has confirmed the addition made by assessing officer. The ld CIT(A) noted that the AO had made no disallowance under rule 8D(2)(i) and Rule 8D(2)(ii). The only disallowance is under rule 8D(2)(iii) i.e. 0.5% of average investments. During the course of appellate proceedings, the assessee had not appeared before the ld CIT(A) and had not filed any written submission, therefore, ld CIT(A) observed that the assessee had not been able to show any error in the order of the ld AO. The average investments of the assessee during the previous year was Rs. 12,51,95,000/-. Therefore, the disallowance made under section 14A of 0.05% of average investment i.e. Rs. 6,25,975/- was confirmed by ld CIT(A).
Aggrieved by the order of the ld CIT(A), the assessee is in appeal before this tribunal.
After hearing the ld DR for the Revenue, and perusing the judicial decisions on the said issue, we find that the issue involved in the present appeal is no longer res integra. The only issue in this case is disallowance of Rs. 6,25,975/- made by the AO u/s 14A read with Rule 8D (2) (iii). It is not disputed that the assessee has substantial investments and has received tax free income. The AO has made no disallowance under rule 8D(2)(i) and Rule 8D(2)(ii) of the Income Tax Rules. So far disallowance under rule 8D (2) (iii) is concerned, we note that Coordinate Bench of ITAT Kolkata in the case of REI Agro Ltd. Vs. DCIT 144 ITD 141 (Kol-Trib) has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(iii) of the Rules. The aforesaid view of the Tribunal has since been affirmed as correct by the Hon’ble Calcutta High Court in G.A.No.3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd. (supra).
5 M/s. Jagadhatri Commodities (P) Ltd. Assessment Year: 2012-13 Therefore, we direct the assessing officer to compute the disallowance under Rule 8D(2)(iii) of the Rules by taking into account dividend bearing securities, that is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments. Therefore, we allow this appeal for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this 05/10/2018. Sd/- Sd/- (S. S. Godara) (A. L. Saini) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; Dated:05/10/2018 RS, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant- M/s. Jagadhatri Commodities (P) Ltd. 1. ��यथ� / The Respondent.- ITO, Ward-8(4), Kolkata 2. आयकर आयु�त(अपील) / The CIT(A), 3. आयकर आयु�त / CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, 5. ITAT, Kolkata गाड� फाईल / Guard file. 6.