AADYASHREE HOLDINGS PVT. LTD.,KOLKATA vs. ITO, WATD - 4(3), KOLKATA, KOLKATA

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ITA 944/KOL/2018Status: DisposedITAT Kolkata24 August 2018AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed that the disallowance under Section 14A be restricted to the quantum of dividend earned. Regarding the addition under Section 68, the Tribunal held that the opening balance carried forward from the previous year could not be added as a cash credit and deleted the addition after the assessee proved the genuineness of transactions.

What were the facts?

The assessee's appeal concerned disallowance under Section 14A and an addition made under Section 68. The disallowance related to expenditure incurred in relation to tax-exempt income, while the addition pertained to a closing stock balance reflected in a ledger account with another company.

What were the issues?

Whether disallowance under Section 14A should be restricted to dividend income, and whether an opening balance in a running account can be treated as a cash credit under Section 68.

Which sections of the Income-tax Act were involved?

Section 14A,Section 68

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

Before: Sri J. Sudhakar Reddy

Assessment Year: 2012-13 Aadyashree Holdings Pvt. Ltd……………..………………..…………………………………..……….……..Appellant 2, Lal Bazar Street 5th Floor Kolkata – 700 001 [PAN : AADCA 6193 N] Income Tax Officer, Ward-4(3), Kolkata…………………………………………...…….……….......Respondent Appearances by: Shri A.K. Tibrewal, FCA, appeared on behalf of the assessee. Shri Alok Nag, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : August 1st , 2018 Date of pronouncing the order : August 24th, 2018 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-2, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 10/04/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2012-13.

2.

Although the assessee has raised 8 Grounds of appeal

, altogether, before us, only two issues arise for our consideration

3. The first issues is disallowance made u/s 14A r.w.r. 8D. After hearing rival contentions, we direct the Assessing Officer to restrict the disallowance u/s 14A to the quantum of dividend earned by the assessee during the year i.e., Rs.3,268/-. This would be in line with the proposition of law laid down by the Hon’ble Delhi High Court in the case of [2015] 372 ITR 694 (Delhi) Joint Investments (P.) Ltd. v. Commissioner of Income-tax, wherein it was held as follows:- “By no stretch of imagination can Section 14A or rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in section 14A and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.”

Assessment Year: 2012-13 Aadyashree Holdings Pvt. Ltd 3.1. In the result, this ground of the assessee is allowed in part.

4.

The second issue in dispute is from Ground Nos. 3 to 7. The Assessing Officer made an addition of Rs.29,11,799/-, u/s 68 of the Act. We find that this amount is the closing stock balance reflected in the ledger account of M/s. Jeevandarshi Marketing Pvt. Ltd.. The assessee has a running account with M/s. Jeevandarshi Marketing Pvt. Ltd. The opening balance of this account on 01/04/2011 i.e. at the beginning of the Financial Year relevant to the impugned Assessment Year, was Rs.49,81,750/-. During the year an amount of Rs.6,00,000/- was received. The assessee repaid an amount of Rs.30,36,672/-, during the year. Interest of Rs.3,66,721/-, was charged during the year. The balance amount was added u/s 68. After hearing rival contentions, I am of the opinion that such addition cannot be sustained in law. The opening balance that has been carried forward from the previous year cannot be added as a cash credit during the year u/s 68 of the Act.

5.

Be it as it may, the assessee has furnished before the Assessing Officer copy of the annual accounts of M/s. Jeevandarshi Marketing Pvt. Ltd, the certificates of registration issue by the ROC and the certificate issued by the RBI registering M/s. Jeevandarshi Marketing Pvt. Ltd. as a NBFC, copy of PAN card and copy of the return of income and confirmation of accounts from M/s Jeevandarshi Marketing Pvt. Ltd, in support of the genuineness of the transactions. As the identity, creditworthiness and genuineness of the transactions have been duly proved by the assessee, the addition in question is hereby deleted. Accordingly, the grounds of appeal

raised by the assessee involving this issue are allowed. 6. Ground No. 1 is dismissed as not pressed. 7. In the result, appeal of the assessee is allowed in part.

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