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Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: Sri S.S. Godara& Sri M. Balaganesh]
Income Tax Officer, Ward-35(2), Kolkata...……….…………….…………….….……………….…......Respondent Appearances by: Shri K.K. Chhapari, FCA & Nirav Sheth, ACA, appeared on behalf of the assessee. Shri A. Bhattacharya, Addl. CIT, DR appearing on behalf of the Revenue. Date of concluding the hearing : June 14th,2018 Date of pronouncing the order : July ,2018 ORDER Per S.S. Godara, JM :- This assessee’s appeal for the assessment year 2013-14 challenges the correctness of the Commissioner of Income Tax (Appeals) – 10, Kolkata’s order dated 28/11/2016 upholding the assessing officer’s action making disallowance of Rs.1,51,79,897/- u/s14A r.w.r 8D of the Income Tax Act, 1961 (in short the ‘Act’) in the assessment order dt. 28/03/2016 involving proceedings u/s 143(3) of the Act.
Heard both the parties. Case file perused.
The sole question that invites our apt adjudication in the instant appeal is that of correctness of Section 14A r.w.r. 8D disallowance of Rs.1,51,79,897/- made in the course of assessment as affirmed in lower appellate proceedings. Relevant facts involved are in very narrow compass. There is no dispute about the assessee to have been earned dividend of Rs.24,87,418.40/- from different equities apart from income from trading in shares, interest and management fee. There is further no quarrel that we are in assessment year 2013-14 wherein the corresponding
Assessment Year: 2013-14 Narnolia & Associates LLP disallowance relevant thereto has to be computed as per Rule 8D(2)(i) to (iii) of the Income Tax Rules, 1962 (hereinafter the ‘Rules’) in the nature of direct, proportionate interest and administrative expenditure expressly stipulated therein. Both the lower authorities applied the said computation formula in assessee’s case to arrive at the disallowance figure in question of Rs.1,51,79,897/-.
It emerges from the instant case file that the relevant direct expenditure incurred as per the Assessing Officer comes to Rs.1,619/-. The same goes undisputed from the assessee’s side. We therefore confirm this first component of the impugned disallowance.
Next comes the impugned proportionate interest expenditure. Learned Counsel at this stage seeks to highlight the fact that the assessee had held the impugned investments as stock in trade and therefore Section 14A r.w.r. 8D does not apply in the facts and circumstances of the case. We find no merit in the instant legal arguments as the hon’ble apex court’s recent judgment in Maxopp Investment Ltd. v. Commissioner of Income Tax, New Delhi Civil Appeal Nos. 104- 109 of 2015 & Ors, decided on FEBRUARY 12, 2018, has concluded this very issue in Revenue’s favour by holding that “such a purpose test does not exclude operation of the impugned statutory provision”. The assessee’s instant legal plea stands rejected therefore. We stay back on proportionate and administrative expenditure for a while more. Learned counsel for the assessee quoted hon’ble jurisdictional high court’s judgement in Principal Commissioner Of Income Tax vs Rasoi Limited being GA No. 633/2016, IAT No. 109/2016, dt. 15/02/2017, rejecting Revenue’s argument that an assessee’s exempt income in case of non interest bearing funds to be more than exempt investments does not attract proportionate interest as the presumption in such an instance is of utilization of interest free funds only. Next comes the tribunal’s decision in Deputy Commissioner of Income-tax, Central Circle-XXVII, Kolkata v. REI Agro Ltd. [2013] 144 ITD 141 (Kolkata - Trib.), wherein it has been held that only dividend yielding investments have to be considered for the purpose of computation of administrative expenditure. Our attention is invited to the fact that assessee has interest bearing funds and exempt investments of Rs.21,19,26,043/- and adjusted latter sum of Rs.22,05,18,438/-; respectively.
Assessment Year: 2013-14 Narnolia & Associates LLP 4.1. Learned department representative fails to rebut the fact that neither of the authority below has considered the said legal position whilst computing the impugned disallowance under these two latter heads of proportionate & administrative expenditure. We therefore restore the instant computation issue under these two latter heads back to the Assessing Officer for fresh computation to be finalised as per law after affording adequate opportunity for hearing to the assessee.
This assessee’s appeal is partly allowed for statistical purposes.
Kolkata, the 18th day of July, 2018.