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Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM]
This appeal by the assessee is directed against the order of the Commissioner of Income Tax-(A)-17, Kolkata relating to A.Y. 2012-13.
In this appeal the assessee disputes the disallowance made u/s 14A r.w. Rule 8D(2) of IT Rules, 1962. The assessee has earned dividend income of Rs.14,47,622/- during the year. He disallowed in his return of income an amount of Rs.1,98,013/- u/s 14A of the Income Tax Act, 1961 (Act). The AO requested the assessee to justify the correctness of the claim of disallowance u/s 14A of the Act. The assessee confirmed that it had not maintained separate books of account to calculate expenditure relatable to the exempt income. The AO disallowed an amount of rs.23,17,673/- u/s 14A of the Act.
On appeal the First Appellate Authority held as follows :- a)there is no dispute on the disallowance made under Rule 8D(2)(i) of the IT Rules. The disallowance made under Rule 8D(2)(ii) of Rs.17,11,025/- is deleted. No submissions were made by the assessee on the disallowance under Rule 8D(2)(iiii) of the Rules. The AO has disallowed 0.5%of the total average investment of
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Rs.5,12,253/-. This disallowance is confirmed. The ld. CIT(A) confirmed a total disallowance of Rs.6,06,648/-. 4. Aggrieved the assessee is in appeal before us on the following grounds :- “ 1. For that the Order passed by the Commissioner of Income Tax (Appeals) u/s 250 of the Income Tax Act, 1961 ("the Act") confirming disallowance of Rs. 94,395/- under Rule 8D(2)(i) and Rs. 5,12,253 under Rule 8D(2)(iii) of the Income Tax Rules, 1962 ("the Rules") aggregating to Rs. 6,06,648/-under section 14A of the Act, is disputed, arbitrary and bad in law.
a) For that the Commissioner of Income Tax (Appeals) failed to appreciate the fact that the Appellant suo moto disallowed Securities Transaction Tax of Rs. 24,875/- and Rs. 1,98,023/- being part of expenses, aggregating to Rs. 2,22,898/- u/s 14A of the Act and no further disallowance can be made.
b)For that the disallowance as made under Rule 8D(2)(iii) of the Rules is beyond the disallowance permitted under Section 14A of the Act and no such disallowance could be made on a notional basis which is not with reference to any expenditure incurred whether directly or indirectly.
c) For that in no circumstances the disallowance of Rs. 6,06,648 under section 14A of the Act can be made on notional basis against aggregate total expenditure of Rs. 3,81,168/- incurred by the assessee.
d) For that the action of the Assessing Officer in disallowing Securities Transaction Tax of Rs. 24,875/- once under Rule 8D(2)(i) and thereafter considering the same once again while .,calculating Income from Business has resulted in double/excessive disallowance under section 14A of the Act.
e) Without prejudice to above, the Assessing Officer further erred in considering total investments as appearing in the Balance Sheet as on the first day and on the last day of the Previous Year instead of the average value of investment, income from which does not form part of the total income while calculating disallowance as per Rule 8D(2)(iii)
f) For that further and in any event the disallowance made by Assessing Officer under section 14A of the Act is arbitrary and excessive.
For that the Appellant craves leave to amend, add or delete any of the grounds mentioned above at any time before the final hearing of the appeal.”
In ground no.2 (c) the assessee claims that disallowances made under Rule 8D(2)(iii) of IT Rules was on notional basis. He further claims that the total aggregate
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expenditure incurred by the assessee was Rs.3,81,168/- and hence the disallowance of Rs..6,06,648/- is bad in law as it is over and above the aggregate total expenditure. On this issue I in principle agree with the contention of the ld. Counsel for the assessee that the disallowance u/s 14A of the Act cannot exceed the actual expenditure incurred by the assessee. The CIT(A) has placed reliance on the decision of ITAT, Kolkata in the case of M/s. Trade Apartment Ltd in ITA No.1277/Kol/2011, and he deleted the disallowance under Rule 8D(2)(ii) of the IT Rules. The same principle will apply in this issue also.
The claim of the assessee that aggregate total expenditure incurred by it was Rs.31,81,168/- requires verification. Under the circumstances I am of the considered opinion that the issue of disallowance to be made under Rule 8D(2)(iii) of the IT Rules should be restored to the file of the AO for fresh adjudication, in accordance with law.
The assessee claims that security Transaction Tax was considered under Rule 8D(2)(i) of IT Rules and thereafter once again while calculating the income from business resulting in double disallowance. The issue may also be re-examined by the AO and I set aside the issue.
In the result the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 31.10.2017.
Sd/- [ J.Sudhakar Reddy ] Accountant Member Dated : 31.10.2017. [RG Sr.PS]
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Copy of the order forwarded to: 1.JB Commercial Company Private Limited, 3A, Shakespeare Sarani, 5th Floor, Kolkata-700071. 2. I.T.O., Ward-8(4), Kolkata. 3. C.I.T.(A)- 17, Kolkata 4. C.I.T-6, Kolkata 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches