DCIT, CIR-10(1), KOLKATA, KOLKATA vs. M/S. LUCKY GOLD STAR COMPANY LTD., KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri N.V.Vasudevan, Judicial Member and Shri Waseem Ahmed, Accountant Member ITA No.1381-1382/Kol/2016 Assessment Years :2012-13 & 2013-14 DCIT, Circle-10(1), V/s. M/s Lucky Gold Star Co. P-7, Chowringhee Ltd., 19, R.N.Mukherjee Square, 3rd Floor, Road, Kolkata-001 Kolkata [PAN No.AAACL 5626 N] .. अपीलाथ� /Appellant ��यथ�/Respondent Shri Manish Tiwari, FCA आवेदक क� ओर से/By Assessee Shri S. Dasgupta, Addl. CIT-DR राज�व क� ओर से/By Respondent 22-02-2018 सुनवाई क� तार�ख/Date of Hearing 20-04-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- These two appeals by the Revenue are directed against the different order of Commissioner of Income Tax (Appeals)-4, Kolkata of even date i.e., 26.04.2016. Assessments were framed by DCIT, Circle-10(1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his orders dated 26.03.2016 & 2.02.2016 respectively for assessment years 2012-13 & 2013-14. Shri S. Dasgupta, Ld. Departmental Representative appeared on behalf of Revenue and Shri Manish Tiwari, Ld. Authorized Representative appeared on behalf of assessee. First we take up ITA No.1381/Kol/2016 for A.Y. 12-13. 2. Revenue has raised the following grounds:-

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 2 “i. That on the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.2,81,91,249/- on a wrong appreciation of facts ignoring the provisions of section 37 & sections 40A(2). ii. That on the fact and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.56,352/- on a wrong appreciation of facts ignoring the provisions of section 2(24)(x) read with section 36(1)(va) in the case of employees contribution and overrule the judicial pronouncement of the Hon'ble Gujarat High Court in the case of CIT vs. GSRTC which was concluded after considering the ratio judgment in the case of Alom Extrustion Ltd. iii. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.”

From the above the AO determined the loss from its silk business for Rs.1,15,17,214.00 only. The AO determined the loss from the said business without including the direct cost and indirect cost which has been incurred on

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 3 the consumption of raw materials of Rupees 23,38,84,928/- only. The AO further determined the loss from silk fabric business of the assessee after including the direct and indirect cost at Rs. 2,81,91,249/- only.

4.1 The AO during the assessment proceedings also observed that the assessee has made purchases of finished goods during the year worth of Rs.12,56,44,789/- only. Out of the total purchases, goods worth of Rs.7,87,12,837/- only were purchased from the parties which are known/ related and located at the same address of the assessee. The details of such parties stand as under:- Assessee purchased finished goods of Rs.7,87,12,837/- Sl.no Name of parties Purchase Amount Remarks 1 Eastern Silk Industries Ltd Finished goods 6,21,05,334/- Parties are know/related and 2 P.K. Textiles Pvt. Ltd. -do- 44,22,503 located at 19, R.N. Mukherjee Road, 3 Tarun Fabrics Pvt. & -do- 91,67,500 Kolkta-700001 Vikramsila Fabrics Pvt.

Similarly the AO also observed that the major sales have been made by the assessee to the parties known/ related and located at the address of the assessee out of the total sales claimed by it. The details of the parties to whom the sales were made by the assessee stand as under:- Sl.No. Name of party Sale amount 1 Eastern Silk Industries Ltd. 43,69,30,775 2 Ethics Commercials Ltd. 10,28,635 3 P.K. Textiles Ltd 66,49,444 4 Vikramsila Fabrics Pvt Ltd 1,67,460 5 Gemini Overseas Ltd 16,52,46,414 6 Universal Overseas Ltd. 1,57,29,364

In view of above the AO was of the view that business loss of Rs.2,81,91,249.00 from the business of silk fabric is the result of circular trading among the known/ related parties which are located at the same address of the assessee. Accordingly the AO issued show cause notice vide

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 4 letter dated 13.03.2015 to justify the impugned business loss. In compliance thereto the assessee failed to offer any explanation. Therefore the AO treated the aforesaid loss as bogus and held that the same is disallowable either u/s40A(2) or section 37(1) of the Act. Accordingly the AO disallowed the impugned loss and added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal to Ld CIT(A). The assessee before the Ld CIT(A) submitted that the trading account prepared by the AO is based on wrong assumption of facts. The assessee accordingly filed the fresh trading account after incorporating the manufacturing expenses which is reproduced as under:- Trading Account for the year ended 31.03.12(Silk Business) Particulars Amount Amount Particulars Amount Amount To opening By sales 4,53,46,782 stock Raw material 18,43,11,429 Finished goods 40,57,25,097 59,00,36,526 By closing stock Raw material 8,61,050 To purchase Finished goods 6,69,52,825 6,78,131,875 Finished goods 12,57,02,400 Raw material 4,15,470 12,61,17,870 Manufacturing 51,81,570 By gross loss 81,35,309 expenses 71,61,54,396 71,61,54,396

The assessee submitted that the AO has taken the sale of Rs.10,06,800/- as part of sales of the fabrics though the same represents as sale of shares. The assessee also submitted that the AO has not given any reasons for making the disallowance of the business loss u/s 40A(2) of the Act. The amount of direct expenses was only incurred with the related parties. All the necessary details as desired by the AO during the assessment proceedings were duly furnished by the assessee therefore the finding of the AO that the assessee failed to furnish necessary details is wrong. The assessee also submitted that it incurred loss of Rs.46,697.00 on account of sale purchase of shares during the year and similarly the loss of Rs.92,67,733/- was incurred due to fluctuation in the market price of the shares. The Ld CIT(A) after considering

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 5 the submission of the assessee deleted the addition made by the AO by observing as under:- “5.1 I have considered the submissions of the AR of the appellant in the backdrop of the assessment order. I find that the activities of business of the appellant including modus operandi remains the same as discussed while dealing similar disallowance in AY 2013-14 (IT No.1472/CIT(A)-4/15- 16/KOL.). A perusal of the observations and findings recorded in the present appeal however, shows that AO has disallowed the manufacturing-cum- trading loss on silk fabrics including direct and indirect expenses of the aggregate amount of ₹2,81,91,249/- by referring to section 40A(2)(b) and 37 of Income Tax Act, 1961. I agree with the contention of the AR that gross loss from trading in silk fabrics arrived at ₹1,15,17,214/- at par 2.1 of the order suffers from irregularities. It is clear from Note 16 of audited accounts that sale of products consists of sale of silks fabrics as well as trading in shares. AO has considered the entire sale consideration as relatable to business of silk fabrics which is wrong. Moreover, the direct and indirect cost considered for disallowance is also wrong and excessive. The direct cost i.e. manufacturing expenses as per Note 24 of audited accounts amounts to ₹51,81,570/-. The scrutiny and examination of trading A/c from silk fabrics submitted by the AR at item 5 reveals gross loss from this business including direct expenses (mfg. Expenses) amounts to ₹81,35,309/- only and not ₹1,15,17,214/-. 5.2 As regards applicability of the provisions of section 40A(2)((b) and section 37 of the Act for disallowance of gross business loss on silks fabrics, I have already given my findings while deciding appeal for assessment year 2013- 14. For similar reason the disallowance u/s. 40A(2)(b) and 37 of the Act is considered as inapplicable to the facts of the present case so far as it relates to mfg-cum-trading in silk business. 5.3 I also fully agree with the contentions of the AR that the assessment order does not indicate any cogent reason for denying Employee’s benefit expenses (Note 21), Finance Cost 9(Note 22), Depreciation etc (Note 23) and Administrative & Selling & Distribution expenses (Note 24) which aggregates to ₹2,06,51,871/-. As such, the disallowance of indirect expenses aggregating to ₹2,06,51,871/- as per Note 21 to 24 is not sustainable being unfounded. As regards the application of the provisions of section 37 of Income Tax Act, 1961 I find that AO has drawn averse inference on mere suspicion and surmises that the office of the appellant company as well as the parties to whom silk fabrics were sold happened to be in the same premises. It is true that the appellant company as well as exporter companies to whom goods were sold belong to the same group. However, the mere fact that both purchaser and seller belong to same group or having office at the same premises does not suggest disallowance of loss without causing any enquiry to delete irregularities and / or fraud or collusion etc. considering the totality of facts explained above and the fact that such business activities with associated / related parties were accepted in earlier years. I have no hesitation to hold that disallowance of entire business loss on trading in silk fabrics is not proper. The disallowance of gross loss of ₹81,35,309/- from manufacturing cum trading in silk fabrics as well as disallowance of indirect

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 6 expenses of ₹2,06,51,871/- on such business activities are directed to be deleted. 5.4 I may now proceed to deal with loss resulting from purchase and sale of shares. The trading account of such activity of business as furnished by the AR reveals that there is no purchase of share in the current year. Two scripts held as opening stock sold during the years resulted in loss of ₹46,697/- as under:- Name of script No of shares Stock price on Sale price loss 01.04.11 Tata Skyline & 6100 53,497/- 6,800/- (46,697/-) Health Forms Ltd. (quoted) P.K. Regency (P) 100000 110,00,000/- 10,00,000/- Nil Ltd (unquoted) 46,697/-) In addition to the above the assessee suffered loss of ₹92,67,733/- due to fluctuation of market value and the method of valuation adopted. Thus the aggregate loss from this business amounts to ₹93,14,430/-. The AR has not accepted the application of Explanation to Section 73 of the Act so far as loss of ₹46,697/- is concerned. He has also vehemently objected against application of Explanation to section 73 of the Act in respect of loss on valuation due to market fluctuation. The same issue has already been decided by me while dealing with the same issue for AY 2013-14 by following the decision of ITAT Kolkata Bench. Respectfully following the said decision, I direct the AO to treat the aggregate loss of ₹93,14,430/- on share trading activity a speculative in nature as per Explanation to section 73 of Income Tax Act, 1961. AO is also directed to allow carry forward of such speculation loss for setting off against future speculative profit. This ground is allowed accordingly.” Being aggrieved by the order of Ld CIT(A) Revenue is in appeal before us.

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 7 same is either remanufactured or rectified or sold at loss depending upon the defects in the final product. In the year under consideration the assessee failed to provide the product to the exporter company as per the specifications therefore such goods were sold at loss. The learned AR also reiterated the submissions as made before the Ld CIT(A). The ld. AR also submitted that the activity of the assessee being trading of silk fabrics as well as dealing in shares and securities were accepted by the Department in all the earlier years and no disallowance of whatsoever was made by the Revenue. The AR also submitted that the activities of the assessee in the assessment year 2013-14 were duly accepted and therefore no disallowance in the year under consideration can be made. The AO also failed to present the correct figures of loss and it has not brought on record the actual direct expenses as well as indirect expenses incurred by the assessee which were duly reflected in the financial statements and the same were in the possession of the AO. The learned AR also submitted that the provisions of section 40A(2) of the Act cannot be applied to the case on hand as the AO has not brought anything on record i.e. the comparable cases suggesting that the assessee has made purchases and sales at a price lower than the market price or vice versa with a view to incur the loss. The AO has not pointed out any defects in the financial statements prepared by the assessee which was available before him during the assessment proceedings. The learned AR vehemently supported the order of Ld CIT(A).

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 8 “[Expenses or payments not deductible in certain circumstances. 39 40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head “Profits and gains of business or profession”. 40 (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person41 referred to in clause (b) of this sub-section, and the 42 [Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.”

The provisions of section 40A(2) of the Act requires that the disallowances of the expenses can be made if found by the AO that the expenses incurred by the assessee are excessive or unreasonable in comparison to the market rate. Thus to invoke the provisions of section 40A of the Act the AO has to fulfill the following conditions 1. There has to be relationship between the assessee and the associated parties as specified under clause (b) to section 40A(2) of the Act. 2. The assessee incurred the expenses and the payment for the same is made to the associated parties. The comparable cases are suggesting that the assessee has incurred cost excessive or unreasonable.

At the threshold, we observed that the AO has not brought anything on record suggesting that the transactions were made by the assessee with the Associated Enterprises. On this count, we find that the order of the AO is non- speaking and it failed to bring on record the necessary details as required under the provisions of section 40A of the Act. Similarly the AO was to bring on record the comparable cases suggesting that the assessee has incurred excessive cost or unreasonable cost but no such cases has been brought on record by the AO. Even assuming that the assessee has made sales to the associated parties but yet the provisions of Section 40A of the Act cannot be applied. It is

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 9 because this provision of section speaks for the expenses incurred by the assessee and it does speak for the sale made to the associated party. Therefore the sales made by the assessee to ESIL cannot be governed under the provisions of section 40A of the Act. It was also observed that similar transactions as made by the assessee and discussed above were accepted by the Revenue in the earlier years and no disallowance of whatsoever was made. We also observe that the amounts of the loss shown by the assessing officer in its re-casted trading account are not matching with the figures shown by the assessee in its audited financial statements. It was also observed that the indirect cost and direct cost has been incurred by the assessee in its silk business but the order of the AO on this aspect is silent. Therefore an inference can be drawn that there was not any involvement of the related parties in case of direct and indirect cost incurred by the assessee. 7.1 On specific question raised from the bench to the learned DR about the transactions made by the assessee with the related parties, the learned DR failed to bring anything on record contrary to the finding of learned CIT-A as well as arguments advanced by the learned AR. In view of above we hold that no disallowance u/s 40A of the Act can be made in the given facts & circumstances. Similarly, we also observed the AO has made the disallowance of the impugned loss u/s 37(1) of the Act without bringing any defects in the books of accounts and the expenses claimed by the assessee. The AO has the re- casted the trading account of the assessee which proves that the necessary information were available with the AO on the basis of which the trading account was prepared. Therefore the allegation of the AO that the assessee failed to furnish the necessary information does not hold good. In view of above we hold that there was no infirmity in the order of learned CIT-A. Hence the ground of appeal of the Revenue is dismissed.

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 10 8. Next issue raised by Revenue in ground (ii) is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹56,352/- on account of non- payment of employees’ contribution towards Provident Fund. 9. The assessee during the year has shown receipts of ₹56,352/- form its employees’ which was to be deposited in PF account within due date prescribed under the PF Act. But assessee failed to do so. The necessary details of employees’ contribution towards PF and due date of its payment and actual date of payment stand at under:- Moth Amount received Due date of payment Actual date of payment May, 2011 47,262.00 20.06.2011 22.06.2011 March, 2012 9,090.00 20.04.2012 02.06.2012 Total 56,352.00

During the course of assessment proceedings, AO treated the above amount of employees’ contribution as income of assessee u/s 2(24)(x) of the Act and disallowed the same under the provision of Sec. 36(1)(va) of the Act. Thus, the amount was disallowed and added to the total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- “6.1 The similar issue is covered by the decision of the jurisdictional Hon'ble High Court of Calcutta in the case of CIT vs. Vijay Shree Ltd. ITA No.2456 of 2011 wherein it was held that as long as the said deposits were made before the filing of return u/s. 139(1), the same would stand allowable for deduction. Respectfully following the decision of the Hon'ble High Court of Calcutta in the matter, the addition made by the AO in this regard is directed to be deleted. These ground stand allowed.” The Revenue being aggrieved by this order of Ld. CIT(A) is in appeal before us. 11 Before us both parties relied on the order of Authorities Below as favorable to them. 12. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute that the payment for the employee provident fund was made before the due date of furnishing the

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 11 return of income as specified u/s 139(1) of the Act. Thus the same cannot be added to the total income of the assessee in view of judgment of Hon'ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited vide ITAT No. 245 of 2011 in GA No.2607 of 2011 dated 7th September, 2011, wherein it has been held as under:- “After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees’ contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal.” As the issue is squarely covered in favour of assessee and against the Revenue by the jurisdictional High Court in the case of M/s Vijay Shree Limited (supra), hence, respectfully following the same, we dismissed Revenue’s ground of appeal. 13. In the result, Revenue’s appeal is dismissed. Coming to ITA No.1382/Kol/2016 for A.Y 13-14. 14. Revenue has raised the following grounds:- “i. That on the fact and circumstance of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.76,48,385/- on a wrong appreciation of facts ignoring the provisions of section 37 & sections 40A(2). ii. That on the fact and circumstance of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.46,80,089/- on account of wrong appreciation of facts ignoring the provisions of section 73. iii. That on the fact and circumstance of the case, the Ld. CIT(A) erred in law in deleting the addition of Rs.23,75,795/- u/s. 14A under Rule 8D and overrule the judicial pronouncement of the Bombay High Court in the case of Godrej & Boyce Mfg Co. Ltd. vs. DCIT Range 10(2) Mumbai [2010] 194 taxman 203 Bombay. iii. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.”

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 12 15. First issue raised by Revenue in ground No.(i) is that Ld. CIT(A) erred in deleting the addition made by the Assessing Officer for ₹76,48,385/- on account of bogus loss.

During the course of assessment proceedings, AO treated the impugned loss as speculation loss in pursuance to provision of Explanation to Section 73 of the Act and accordingly held that it shall not be allowed to be set off against any other income of the assessee. 19. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed that the impugned loss is speculation loss by observing as under:- “6.1 I have considered the submissions of the AR of the appellant. I find that ITT Kolkata Bench in the case of Paharpur Cooling Tower Ltd. vs. DCIT

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 13 reported in 85 ITD 745 (Kol) decided similar dispute in favour of Revenue and against the taxpayer at para 17 of the order. It was held that thrust of the provisions under Explanation to Section 73 was on the nature of business rather than nature of transactions. It is thus immaterial as to whether profit arose on account of sale and purchase of shares but to the extent it arose out of business including purchase and sale of the same. In this respect, provisions of Explanation to section 73 would come into play. I find no infirmity in the Assessing Officer's order in so far as this loss of ₹46,80,089/- is considered as speculative in nature….” 20. Before us both parties relied on the order of Authorities Below as favorable to them. 21. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, it was observed that the AO has treated the impugned loss of ₹46,80,089/- as speculation loss as per the provision of Explanation to Sec. 73 of the Act. The view of the AO was subsequently confirmed by Ld. CIT(A). Therefore there is no grievance to the Revenue. Accordingly, the ground filed by the Revenue is infructuous and liable to be dismissed. Thus, ground of Revenue is dismissed. 22. Last issue raised by Revenue in ground No.(iii) is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹23,75,795/- u/s. 14A r.w.r. 8D of the Income Tax Rule, 1962. 23. The assessee during the year has shown dividend income of ₹15,375/- only which was claimed as exempted income u/s 10(34) of the Act. The assessee in its return of income disallowed the sum of ₹ 2307/- only voluntarily being Demat charges in pursuance to the clause (i) sub-rule 2 of Rule 8D of IT Rules, 1962. The assessee during the assessment proceedings submitted that it deals in shares business therefore no disallowance can be made. However, the AO disregarded the contention of assessee and invoked the provision of Rule 8D of IT Rules. Accordingly AO made the following the disallowance:- i) Direct expense Rule 8D(2)(ii) ₹ 2,307/- ii) Interest expense Rule 8D(2)(i) ₹3,12,820/- iii) Administrative expenses Rule 8D(22)(iii) ₹ 33,265/-

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 14 ₹3,46,085/- Thus, the AO made the disallowance of the aforesaid expenses and added to the total income of the assessee. 24. Aggrieved assessee preferred in appeal before Ld. CIT(A) who partly deleted the addition made by AO by observing as under:- “7.1 I have considered the assessment order as well as the submissions filed by the app. The AO has disallowed a sum of ₹3,46,085/- u/s. 14A read with rule 8D. I find that the similar issue has already been decided by the Hon'ble Delhi High Court and thus following the judgment of the said High Court in the case of Joint Investments Pvt Ltd. vs. CIT (ITA No.117/2015). I hold that disallowance u/s. 14A read with Rule 8D cannot exceed the exempt income. I agree with the contentions of the appellant that the disallowance u/s. 14A read with rule 8D cannot exceed the exempt income as in the foregoing. In the instant case there is no dispute that the appellant has earned exempt income of ₹15,375/-, thus, the AO is directed to restrict the disallowance us/s. 14A read with rule 8D to the extent of ₹15,375/-. In view of this, the appellant gets relief of ₹3,30,710/- (₹3,46,085 minus ₹15375). Accordingly, this ground of appeal is allowed a discussed supra.” The Revenue, being aggrieved by this order of Ld. CIT(A) is in appeal before us. 25. Before us both parties relied on the order of Authorities Below as favorable to them. 26. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case we find that it is undisputed fact that assessee is dealing in shares and securities and all the investments in shares and securities have been classified as stock-in-trade. The Hon'ble jurisdictional High Court in the case of CIT vs. G.K.K. Capital Markets (P) Ltd. reported in 392 ITR 196 (Cal) has held that if the assessee is into the trading business of shares / securities then no disallowance can be made under the provision of Section 14A r.w.r. 8D of IT Rules. The relevant extract is reproduced below:- “9. In Dhanuka & Sons case (supra) it was found there was no dispute that part of the income of the assessee from its business was from dividend whereas the assessee was unable to produce any material before the authority below showing the source from which such shares were acquired. That decision is distinguishable on facts as not applicable to this case. We also do not find the Revenue had urged that the expenditure being disallowed

ITA No.1381-82/Kol/2016 A.Ys 21-13 & 13-14 DCIT, Cir-10(1), Kol. Vs. M/s Lucky Godl Star Co. Ltd. Page 15 was in relation to exempt income not arising in the previous year for application of the said circular to be considered. The Assessing Officer had accepted the correctness of the disallowable expenditure offered by the assessee on its claim of Rs.25,68,04,353/- as long term capital gain. He did not allow the claim itself treating the said amount as business income to thereafter disallow the offered expenditure. 10. In view of the clear finding of fact regarding the exempt income claimed treated to be business income and the shares held by the assessee having been treated as stock in trade, we do not find the case involves a substantial question of law. The application and appeal are thus dismissed.” As the principle laid down by Hon'ble jurisdictional High Court is squarely applicable to the instant facts of the case, we find no reason to interfere in the order of ld. CIT-A. Thus, AO is directed to delete the addition made under the provision of Section 14A r.w.r. 8D of the IT Rules, 1962. Hence, this ground of Revenue’s appeal is dismissed. 27. In the result, Revenue’s appeal is dismissed. 28. In combine result, both the appeal of Revenue stand dismissed. Order pronounced in the open court 20/04/2018 Sd/- Sd/- (�या'यक सद�य) (लेखा सद�य) (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp, Sr.P.S )दनांकः- 20/04/2018 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-M/s Lucky Gold Star Co. Ltd. 19, R.N.Mukherjee Road,Kolkata-001 2. राज�व/Revenue-DCIT, Circle-10(1), P-7, Chowringhee Square, 3rd Floor,Kolkata-69 3. संबं4धत आयकर आयु5त / Concerned CIT Kolkata 4. आयकर आयु5त- अपील / CIT (A) Kolkata 5. 8वभागीय �'त'न4ध, आयकर अपील�य अ4धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड= फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ4धकरण, कोलकाता ।