GOVIND COMMERCIAL CO. LTD.,KOLKATA vs. THE DCIT, CIR-7, KOLKATA, KOLKATA

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ITA 60/KOL/2016Status: DisposedITAT Kolkata08 November 2017AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the AO to recalculate the disallowance under Rule 8D(2)(iii) considering only dividend-bearing investments. The AO was also instructed to reduce the already disallowed administrative expenses.

What were the facts?

The assessee, a Non-Banking Financial Company, received dividend income and claimed a partial disallowance under Section 14A. The Assessing Officer (AO) made a higher disallowance using Rule 8D, which was upheld by the CIT(A).

What were the issues?

Whether the disallowance under Section 14A read with Rule 8D was correctly calculated by the AO and confirmed by the CIT(A), and whether only dividend-bearing investments should be considered for disallowance.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA

Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]

Hearing: 08.11.2017Pronounced: 08.11.2017

ORDER Per M.Balaganesh, AM

1.

This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-11, Kolkata [in short the ld CIT(A)] in Appeal No. 559/CIT(A)- 11/CIR-7(1)/14-15/Kol dated 26.11.2015 against the order passed by the DCIT, Circle- 7, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 18.01.2013 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 confirming the disallowance of Rs. 31,44,117/- u/s 14A of the Act, in the facts and circumstances of the case.

3.

The brief fact of this issue is that the assessee is a Non-Banking Financial Company and had filed its return of income for the assessment year 2010-11 electronically on 27.09.2010 disclosing the total income of Rs. 4,02,16,360/-. The assessee was in receipt

Govind Commercial Co. Ltd. A.Yr.2010-11 of dividend income of Rs. 49,68,757/-which was claimed as exempt. The assessee made a disallowance of Rs. 1,84,552/- u/s 14A of the Act as under:- (i) Disallowance of direct expenses on account of Demat Charges Rs.14705/- (ii) Disallowance of security transaction tax Rs.121734/- (iii) Disallowance of administrative expenses Rs.48113/- Total Rs. 1,84,552/- The Ld. AO invoked the provision of Rule 8D and made disallowance under the third limb thereon at 0.5% of average value of investment and accordingly arrived at the disallowance figure of Rs. 31,92,230/-. The Ld. AO reduced a sum of Rs. 48,113/- already disallowed by the assessee on account of administrative expenses and accordingly, disallowed the remaining sum of Rs. 31,44,117/- u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules. This action of the Ld. AO was upheld by the Ld. CIT(A). Aggrieved, the assessee is in appeal before us on the following grounds:

1.A. That the CIT (Appeal) has erred in law and on facts of the case while confirming disallowance under Section 14A of the Income Tax Act, 1961.

1.B. That the appellant itself having correctly disallowed a sum of Rs. 1,84,552/- under Section 14A. But CIT(Appeal) ignored that fact.

1.C. As the learned CIT(Appeal) has erred in law and on facts in confirming the disallowance of Rs. 31,44,117.00 under Section 14A of the Income Tax Act, 1961 which is not in conformity with legal provisions.

2.

That the appellant craves leave to add or amend other or further grounds of appeal on or before the date of hearing.

3. We have heard the rival submissions. During the course of hearing, the Ld. AR submitted the list of investments which had yielded the dividend to the assessee during the year under appeal and prayed for consideration of the same for making disallowance under Rule 8D(2)(iii) in accordance with the decision of Co-ordinate Bench of this Tribunal in the case of REI Agro Ltd. reported in 144 ITD 141 (Kol-Tribunal). We find 2

Govind Commercial Co. Ltd. A.Yr.2010-11 lot of force in the argument of the Ld. AR in this regard and accordingly direct the Ld. AO to make disallowance under Rule 8D(2)(iii) by considering only dividend bearing investments thereon. The Ld. AO is also directed to reduce the sum of Rs. 48,113/- already disallowed by the assessee on account of administrative expenses. Accordingly, the grounds raised by the assessee are partly allowed.

4.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the Court on 08.11.2017

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