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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : KOLKATA [Before Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM] I.T.A No.596/Kol/2016 Assessment Year : 2006-07
Emerald Co.Ltd. -vs.- D.C.I.T., Circle-8, Kolkata Kolkata. [PAN : AAACL 2059 H] (Respondent) (Appellant) For the Appellant : Shri P.R.Kothari, FCA For the Respondent : Shri Arindam Bhattacharjee, Addl.CIT Date of Hearing : 23.11.2017. Date of Pronouncement : 29.11.2017. ORDER Per N.V.Vasudevan, JM
This is an appeal by the assessee against the order dated 12.01.2016 of CIT-(A)- 18 Kolkata relating to A.Y.2006-07. . 2. Grounds of appeal raised by the assessee read as follows :- “For that on the facts and circumstances of the case and in law, ld. Commissioner of Income Tax(Appeals) erred in confirming the disallowance made by the ld. Assessing Officer u/s 14A of the Income Tax Act 1961 amounting to Rs.600000/- paid as retainership fees treating the same as direct expenses in relation to earning of exempt income.”
The Assessee is a company. It is engaged in the business of trading in shares, securities, investments and financing. For A.Y.2006-07 the assessee filed return of income showing total income of Rs.67,16,678/- under the head “Capital gains”. The AO in an order of assessment dated 21.11.2008 u/s 143(3) of the Income Tax Act, 1961 (Act) determined the total income of the assessee at Rs.80,55,135/- after making disallowance of expenses of Rs.13,38,457/- u/s 14A of the Act namely expenditure incurred in earning income which does not form part of the total income under the Act.
2 ITA No.596/Kol/2016 Emerald Company Limited A.Y.2006-07 This addition was ultimately deleted by the Hon’ble ITAT in an appellate order dated 19.11.2010. The Hon’ble ITAT held that Rule 8D cannot be applied for A.Yrs. prior to A.Y.2007-08. The matter was set aside to the AO to make disallowance u/s 14A of the Act without resorting to the provision of Rule 8D of the Rules.
Pursuant to the order of the Tribunal he AO considered the quantum of disallowance to be made u/s 14A of the Act. The AO held that a sum of Rs.6,00,000/- paid to one Mr. Bangur as retainership fee for rendering advisory services for investments should be disallowed as expenses incurred in earning exempt income u/s 14A of the Act.
On appeal by the assessee the CIT(A) confirmed the order of the AO. It was the plea of the assessee that services of Mrs..Bangur were utilized for other purposes and not restricted to only earning of exempt income. This was not accepted by the revenue authorities for the reasons that there was no supporting evidence furnished.
Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal.
At the time of hearing of the appeal the ld. Counsel for the assessee filed before us copy of the order of ITAT Kolkata Bench in assessee’s own case for A.Y.2007-08 in ITA No.1096/Kol/2016 order dated 25.01.2017. On an identical disallowance of Rs.6,00,000/- paid to Mrs.Bangur as expenditure incurred to earn tax free income, the Tribunal held that internship fee paid to Mrs. Bangur cannot said to be an expenditure incurred for earning tax free income. The Tribunal also noticed that over and above retainership fee to Mrs. Bangur, the AO had disallowed 1% of the exempt income also as expenditure incurred in earning exempt income. The Tribunal therefore deleted the addition made while disallowing fees to Mrs. Bangur of Rs.6,00,000/- In the present 2
3 ITA No.596/Kol/2016 Emerald Company Limited A.Y.2006-07 assessment year also the facts remain the same. Over and above a sum of Rs.6,00,000/- which was fees paid to Mrs. Bangur which was disallowed as expenses incurred to earn tax free income u/s 14A of the Act, the AO had also disallowed 1% of the exempt income of Rs.5,36,77,242/-. The aforesaid disallowance of 1% of the exempt income would be sufficient and no disallowance of fees paid to Mrs. Bangur u/s 14A of the Act should be made. Respectfully following the decision of the Tribunal we direct that the addition of Rs.6,00,000/- u/s 14A of the Act be deleted. The appeal of the assessee is allowed.
In the result the appeal by the assessee is allowed.
Order pronounced in the Court on 29.11.2017.
Sd/- Sd/- [Dr.A.L.Saini] [ N.V.Vasudevan ] Accountant Member Judicial Member
Dated : 29.11.2017. [RG Sr.PS]
Copy of the order forwarded to: 1.Emerald Company Limited, 31, Chowringhee Road, Kolkata-700016. 3. D.C.I.T., Circle-8, Kolkata. 4. C.I.T. (A)-18, Kolkata. 4. C.I.T.-5, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.