ACIT, CIRCLE - 8(2), KOLKATA, KOLKATA vs. M/S. RUSSELL CREDIT LIMITED, KOLKATA

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ITA 2419/KOL/2017Status: DisposedITAT Kolkata16 October 2018AY 2010-113 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was justified in directing the AO to recompute the disallowance under Rule 8D(2)(iii) by considering only those investments that had yielded dividend income. This decision followed a previous ruling in the assessee's own case for a subsequent assessment year.

What were the facts?

The assessee, engaged in financial services, earned tax-exempt dividend income and long-term capital gains. The Assessing Officer (AO) disallowed a significant amount under Section 14A read with Rule 8D, exceeding the assessee's suo moto disallowance. The CIT(A) directed the AO to recompute the disallowance considering only investments yielding dividend income.

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D should be computed only on investments yielding exempt income, or on all investments.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH : KOLKATA

Before: Hon’ble Shri A T Varkey, JM, & Shri M.Balaganesh, AM]

Hearing: 11.10.2018Pronounced: 16.10.2018
1.

This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-22, Kolkata [in short the ld CIT(A)] in Appeal No. 45/CIT(A)- 22/Kol/10-11/17-18 dated 30.10.2017 against the order passed by the ACIT, Circle-8, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 29.03.2013 for the Assessment Year 2010-11.

2.

The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in directing the ld AO to rework the disallowance to be made u/s 14A of the Act read with Rule 8D of the Rules, in the facts and circumstances of the case.

M/s Russel Credit Ltd. A.Yr. 2010-11 3. The brief facts of this issue is that the assessee is engaged in the business of investment, financing. Leasing and other financial services. The return of income for assessment year 2010-11 was filed on 30.9.2010 declaring total income of Rs. 19,34,55,362/-. The assessee also filed a revised return on 29.03.2012 declaring total income of Rs. 19,23,93,827/- under normal provisions of the Act and book profit u/s 115JB of the Act of Rs. 30,39,73,591/-. The assessee earned tax exempt dividend income of Rs. 18,61,00,400/- from its investment in units of mutual funds and shares of other companies. It has earned exempt long term capital gains of Rs. 9,25,75,057/- on sale of shares. The assessee offered suo moto disallowance of Rs. 31,392/- u/s 14A as expenditure incurred for the purpose of earning the aforesaid exempt income towards proportionate management expenses. The ld. AO however proceeded to compute the disallowance u/s 14A of the Act by applying the third limb of Rule 8D(2) of the Rules in the sum of Rs. 1,20,31,315/-, over and above the disallowance already made by the assessee in the sum of Rs. 31,392/-, both under normal provisions of the Act as well as in the computation of book profits u /s 115JB of the Act.

4.

The Ld. CIT(A) directed the ld. AO to recompute the disallowance under Rule 8D(2)(iii) of the Rules only by taking into account that those investments which had yielded dividend income. Aggrieved the revenue is in appeal before us.

5.

We have heard the rival submissions. At the time of hearing, the ld. AR stated that similar issue had cropped up before this Tribunal in assessee’s own case for assessment year 2011-12 i.e. subsequent year and the same has been disposed off in favour of the assessee in dated 08.06.2018. We find that this Tribunal had held thereon as under: “3. Learned Departmental Representative vehemently contends during the course of hearing that the CIT(A) has erred in law as well as on facts in partly deleting u/s 14A r.w. 8D disallowance. We find no merit in Revenue’s sole investments which have not yielded any exempt income in the relevant previous year. The question as to whether such investments are to be excluded or included stand answered in hon’ble 2

M/s Russel Credit Ltd. A.Yr. 2010-11 jurisdictional high court’s decision in the case of REI Agro Ltd. vs. DCIT in assessee’s favour as reiterated in their lordships subsequent judgment (supra). The Revenue’s instant sole substantive ground is rejected accordingly.”

Respectfully following the same, we hold that the order of the ld CITA had been rightly passed which requires no interference. Accordingly, grounds raised by the revenue are dismissed.

6.

In the result, the appeal of the revenue is dismissed.

Order pronounced in the Court on 16.10.2018

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