DCIT, CIR-6, KOLKATA, KOLKATA vs. WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LTD., KOLKATA
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the disallowance under Section 14A read with Rule 8D should be computed by considering only those investments which have actually given rise to exempt income during the relevant year.
What were the facts?
The assessee, a Non-Banking Financial Corporation, claimed dividend income as exempt and offered disallowance under Section 14A. The Assessing Officer increased the disallowance by considering all investments capable of earning exempt income, not just those that yielded income in the relevant year.
What were the issues?
Whether disallowance under Section 14A and Rule 8D should be based on all investments capable of earning exempt income or only those that actually yielded exempt income.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(2)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- REI Agro Ltd. v. DCIT346 citing144 ITD 141 · 2013 · ITAT
- DCIT v. Teenlok Advisory Services (P) Ltd.9 citing159 ITD 991 · 2016 · ITAT
Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri K. Narasimha Chary
Per Shri P.M. Jagtap: This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-VI, Kolkata dated 29.11.2013 and the solitary ground raised therein reads as under:- “That on the facts and circumstances of the case, the CIT(A) erred in holding that for computing disallowance u/s 8D(2)(iii), only investment which given rise to tax free income should be taken into consideration, ignoring the legal provisions of Rule 8D which defines that for calculation of disallowance ./2014 Assessment year: 2010-2011 Page 2 of 4
under Rule 8D, the average value of investment, income generated from which does not of shall not form part of total income to be taken into account”.
The assessee in the present case is a Non-Banking Financial Corporation. The return of income for the year under consideration was filed by it on 09.10.2010 declaring total income of Rs.69,83,55,790/-. In the said return, dividend income of Rs.16,56,840/- earned by the assessee was claimed to be exempt from tax. The disallowance of Rs.1,22,86,000/- was also offered by the assessee under section 14A on account of interest expenditure incurred in relation to the earning of the exempt dividend income. While computing the said disallowance as per Rule 8D of the Income Tax Rules, 1962, the investment made in shares which had yielded the exempt dividend income alone was taken into consideration by the assessee. According to the Assessing Officer, the entire investment made by the assessee in shares, which was capable of earning exempt dividend income was liable to be taken into consideration while computing the disallowance under section 14A as per Rule 8D. He accordingly recomputed the disallowance to be made under section 14A read with Rule 8D on account of interest at Rs.15,51,91,837/-. He also made a further disallowance on account of other expenses as per Rule 8D(2)(iii) on the same basis at Rs.1,18,50,188/-. Accordingly, the total disallowance under section 14A read with Rule 8D was made by the Assessing Officer at Rs.16,70,42,025/- as against Rs.1,22,86,000/- offered by the assessee.
The disallowance under section 14A read with Rule 8D as computed by the Assessing Officer was challenged by the assessee in the appeal filed before the ld. CIT(Appeals), who held by relying on the decision of the Tribunal in the case of REI Agro Limited, Kolkata –vs.- DCIT in reported in 144 ITD 141 (Calcutta) that the disallowance under section 14A by applying Rule 8D has to be worked out by taking into consideration not all the investments but only those investments, which have given rise to exempt income during the relevant year. Accordingly, he directed the Assessing Officer to re-compute the ./2014 Assessment year: 2010-2011 Page 3 of 4 disallowance under section 14A read with Rule 8D(2) by taking into account only those investments which had given rise to the exempt income during the year under consideration. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. D.R. has relied on the decision of the Coordinate Bench of this Tribunal in the case of West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR (Trib.) 285, wherein a similar issue as involved in the present case was decided by the Tribunal in favour of the assessee, it is observed that the decision rendered by the Tribunal earlier in the case of REI Agro Limited on the similar issue in favour of the assessee was not brought to the notice of the Tribunal in the case of West Bengal Infrastructure Development Finance Corporation. Moreover, the fact that the appeal filed by the Revenue against the order of the Tribunal in the case of REI Agro Limited has already been dismissed by the Hon’ble Calcutta High Court was also not brought to the notice of the Tribunal in the said case. In the case of DCIT –vs.- Teenlok Advisory Services (P) Limited reported in 159 ITD 991 (Kolkata-Trib.) decided subsequently on 08.06.2016 , both these aspects, however, were clearly brought to the notice of the Tribunal and taking note of the same, the Tribunal directed the Assessing Officer to compute the disallowance under section 14A as per Rule 8D by taking into consideration only those shares, which had yielded dividend income in the relevant year. In our opinion, the issue involved in this appeal of the Revenue thus is squarely covered in favour of the assessee by the decision of the Tribunal in the case of REI Agro Limited, which has been affirmed by the Hon’ble Calcutta High Court and followed by the Tribunal in the latest decision rendered in the case of Teenlok Advisory Services (P) Limited (supra). Respectfully following the same, we uphold the impugned order of the ld. CIT(Appeals) directing the Assessing Officer to compute the disallowance under section 14A as per Rule 8D(2) by taking ./2014 Assessment year: 2010-2011 Page 4 of 4 into consideration only those investments, which have given rise to tax- free income and dismiss this appeal of the Revenue.
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