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Income Tax Appellate Tribunal, Kolkata Bench, KOLKATA
Before: SHRI N. V. VASUDEVAN & SHRI M. BALAGANESH,
ORDER Per M. BALAGANESH, AM
This is an appeal preferred by the Revenue against the order of Commissioner of Income Tax (Appeals) -I, Kolkata, (hereinafter referred to as the “Ld. CIT(A)”), dated 14.02.2014, arising out the assessment order of the Assessing Officer (hereinafter referred to as the “Ld. AO”), dt. 30.12.2011, passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), relating to Assessment Year (A.Y.) 2009-10.
2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the disallowance of Rs.31,82,453/-, made by the Ld. AO u/s 14A r.w. Rule 8D of the Income Tax Rules,1962 (hereinafter the “Rules”) and restricting the disallowance to Rs.50,280/- in the facts and circumstances of the case.
3. The brief facts of this issue is that the Ld. AO observed that the assessee during the Financial Year (F.Y.) 2008-09, had incurred loss in business, dealing in shares and securities and earned dividend income from other sources. The assessee also earned dividend income of Rs.20,42,437/-, which was claimed as exempt. In response to the show cause notice for applicability of Section 14A of the Act, the assessee replied that he had paid interest of Rs.23,06,615/-, to his secured creditors, who had provided margin funding to the assessee and that all the borrowings from the secured creditors were used by the assessee to trade in shares and securities. It was pleaded that in respect of interest paid to unsecured loan creditors to the tune of Rs.50,116/-, the same was also utilized for the purpose of business and none of the expenses were incurred for the purpose of earning dividend. However, the assessee remitted, suo moto, considered a sum of Rs.50,280/- as expenses related to earning of dividend income and the same was offered for disallowance in the course of assessment proceedings. The Ld. AO, however, applied provisions of Rule 8D of the Rules and by applying the second and thirds limb of Rule 8D(2) of the Rules, he made disallowance of Rs.31,82,453/-, u/s 14A of the Act and determined the assessed loss at Rs.17,51,73,745/- as against the returned loss of Rs.17,83,55,698/-. The Ld. CIT(A) deleted the disallowance u/s 14A of the Act by following the co-ordinate bench decision of this Tribunal in the case of REI Agro Ltd. vs. DCIT reported in (2013) 144 ITD 141 (Kolkata) in the Kolkata Tribunal wherein it was held that disallowance under rule 8D is to be computed only on shares held as investments on which exempt dividend has been earned. He further held that since the assessee had already offered suo moto disallowance of Rs.50,280/-, u/s 14A of the Act, the Ld. AO is accordingly directed to work out the disallowance under Rule 8D as per above directions. He further held that the total disallowance would be restricted to the amount of Rs.50,280/-, if there is no disallowance under Rule 8D, over and above this amount.
4. Aggrieved the Revenue is in appeal before us on the following grounds: 1. The Ld. CIT (Appeals) I, Kolkata was not justified in deleting the addition of Rs.31,32,173/- relying only on judicial rulings in the case of REI Agro Ltd. Vs DClT (ITAT Kolkata) and Rainy investment Pvt Ltd (ITAT Mumbai), by observing that disallowance u/R 8D is to be computed only on shares held as investments on which exempt dividend income has been earned and shares held as stock in trade, share application money, advances etc. are not to be considered.
The Ld. CIT ( Appeals) I, Kolkata was not justified in deleting the addition of Rs.31,32,173 /- which included interest disallowed u/R 8D relying only on judicial rulings in the case of CIT vs Smt Leena Ramachandran.
The Ld. CIT (Appeals) I, Kolkata was not justified in restricting the disallowance to only Rs.50,280/- out of the total disallowance of Rs.31,82,453/- without considering the facts of the case.
4. That the appellant craves leave to add, alter, amend and withdraw any ground or grounds of appeal before or at the time of hearing.
The Ld. DR, vehemently relied on the order of the Ld. AO. None appeared on behalf of the assessee. The Ld. Counsel for the assessee had preferred adjournment on the ground of preparation of paper book. Since this is a covered matter, the Bench proceeded with the hearing and to dispose of the appeal after hearing the Ld. DR.
We have heard the Ld. DR. We find that the issue under dispute is squarely covered by the decision of the co-ordinate bench of this Tribunal in the case of REI Agro Ltd. Vs DCIT (supra), is rightly pointed out by the Ld. CIT(A). The Ld. CIT(A) also place reliance on the decision of the Hon’ble Kerala High Court in the case of CIT vs. Smt. Leena Ramachandran reported in 339 ITR 296 (Kerala), which held that the assessee would be entitled for deduction of interest u/s 36(1)(iii) of the Act on borrowed funds utilized for the acquisition of shares if those shares are held as stock in trade and if the assessee is engaged in trading of shares. Facts of the said case and the ratio laid down thereon, is squarely applicable to the facts of the instant case. In view of the categorical finding recorded by the Ld. CIT(A) by following the judicial precedents stated (supra), We do not find any justifiable reason to interfere with the order of the Ld. CIT(A). Accordingly, the grounds raised
by the Revenue are dismissed.
5. In the result, the appeal of the Revenue is dismissed.