Income Tax Appellate Tribunal - Kolkata
M/S. Patrex Vyapar Ltd., Kolkata vs Ito, Ward-5(2), Kolkata, Kolkata on 2 January, 2019
ITA No. 1921/KOL/2017
A.Y. 2008-2009
M/s. Patrex Vyapar Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri S.S. Viswanethra Ravi, Judicial Member
I.T .A. No. 1921/KOL/2017
Assessment Year: 2008-2009
M/s. Patrex Vyap ar Limited,.........................................................Appellant
23B, N.S. Road, 1 s t Floor, Room No. 112,
Kolkata-700 001
[PAN: AABCP 9991 P]
-Vs.-
Income Tax Officer,........................................................................Respondent
Ward-5 (2), Kolk ata,
Aayakar Bhawan,
P-7, Chowringhee Square,
Kolkata-700 069
Appearances by:
Shri S. Jh ajh aria, FCA, for the Appellant
Shri Soumyajit Dasgupta, Addl. CIT, Sr. D.R , for the Respondent
Date of concluding th e hearing : January 02, 2019
Date of pronouncing the order : January 02, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President (KZ):-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Kolkata dated 05.06.2017 and the grounds raised by the assessee therein read as under:-
"1. Fo r th at in view o f the facts and circumstances of th e case the Ld. CIT (A) was wh olly wrong and unjust ified in not deleting the arbit rary and baseless disallowance of expenses of Rs.8 ,81,839/- u/s. 14 A of th e Act/ Rule 8 D(2)(i)(ii) & (iii) of the I. Tax Rules made in the assessment against the small dividend income of Rs.72,000/- earned on shares entirely held as stock-in-t rade in business in respect of which Rule 8D(2) is not applicable.
2. For th at in view o f the facts and circumstances of th e case the Ld. C IT(A) was wholly wro ng and unjustified in issuing a direct ion to the AO, based on a judgment of the Hon'ble ITAT, Kolkata in the case of Teenlok Adviso ry Services (P) Lt d. to 1 ITA No. 1921/KOL/2017 A.Y. 2008-2009 M/s. Patrex Vyapar Limited recalculate the disallowance of expenses by considering onl y those sh ares wh ether held as " Invest ment" or as " Stock-in- trade" which have yielded the exempt dividend income, without at all considering t he assessee's written submission citing various Court and T ribunal decisions applicable in the case.
3. For th at in view o f the facts and circumstances of th e case the Ld. C IT(A) was wholly wrong and unjustified in not considering the fact s that (i) there was no share hel d by the assessee under the pro -folio of "Investment" rendering Rule 8D(2)(i)(ii) & (iii) inapplicable and (ii) such Rules cannot al so be applied for disallo wance of expense in respect of th e exempt dividend income incident ally earned on trading shares h eld as "Stock-in-t rade" as t he shares were traded only for earning business profit with least intent ion to earn divide nd income coming as a windfall.
4. For th at in view o f the facts and circumstances of th e case the Ld. C IT(A) was wholly wrong and unjustified in not considering th e facts emerging fro m the Audited a/cs that the shares held as "Stock-in-trade" were acquired/purchased by the assessee excl usively out of its own funds co mprised of sh are capit al and reserve & surplus and not out of any loan (the loans borrowed utilized in advancing lo an) and as such no interest expense can be disall owed under Rule 8 D(2)(i) & (ii) of the I. Tax Rules and Rule 8 D(2)(iii), which is linked with invest ment in sh ares, is also not applicable as the assessee had no such share hel d as " Invest ment" .
5. For th at in view o f the facts and circumstances of th e case the Ld. C IT(A) was wholly wrong and unjustified in not considering th e facts that no satisfacto ry note was reco rded by the AO to just ify th e applicabilit y of Section 14A/Rule 8D(2) fo r disallowing any expense against the exempt dividend inco me incidentally received on trading shares.
6. For th at in view o f the facts and circumstances of th e case the Ld. C IT(A) was wholly wro ng and unjustified in upholding the AO's decision that the loss of Rs.19,02,6 78/- suffered in the share t rading business was a deemed speculation loss in terms of the Explanatio n to Section 73 of the Act without considering the fact s th at the assessee being a RBI registered NBFC carrying on the business of granting loans and advances and earning substantial interest inco me the Explanation to Section 73 does not at all apply in the case.
7. For that in view of the facts and circumstances of the case the Ld. C IT(A) was wholly wrong and unjustified in not considering the fact s that the amendment made w.e.f A.Y 2015- 16 in the Explanatio n to Sect ion 73 by Finance (No.2) Act , 2014, specifically excluding th e applicatio n of Expl anat ion to Section 73 in a case where the principal business of a company 2 ITA No. 1921/KOL/2017 A.Y. 2008-2009 M/s. Patrex Vyapar Limited is trading in sh ares, is curative and classificatory in nat ure and as such the amendment can be applied ret rospectively from the original dat e of insertion of the Explanat ion to Section 13 o n 01.04.1977 in keeping with the Hon 'ble Apex Court judgment in the case of CIT v. Alom Ext rusions Ltd. (2009) 319 ITR 306 (SC) and also ITAT , A-Bench, Kol's judgment dt 2 4.8.2016 in the case of Jalan Cement Wo rk s v. C IT ( ITA No. 1112/Kol/2013)".
2. At the time of hearing before the Tribunal, the ld. Counsel for the assessee has not pressed Grounds No. 6 & 7 raised by the assessee in this appeal. The same are accordingly dismissed as not pressed.
3. As regards the common issue involved in Grounds No. 1 to 5 relating to the disallowance of Rs.8,81,839/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A read with Rule 8D, the limited relief sought by the ld. Counsel for the assessee is that the exempt dividend income actually earned by the assessee during the year under consideration being only Rs.72,000/-, the disallowance under section 14A read with Rule 8D on account of expense s incurred in relation to the said exempt income cannot exceed Rs.72,000/- being the amount of dividend income actually earned. Since this issue is squarely covered by the decision of the Hon'ble Delhi High Court in the case of Joint Investments Pvt. Limited -vs.- CIT (372 ITR 694), wherein it was held that the disallowance under section 14A cannot exceed the actual amount of exempt income earned by the assessee, we allow the limited relief claimed on behalf of the assessee and restrict the disallowance of Rs.8,81,839/- made under section 14A read with Rule 8D to Rs.72,000/-.
4. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on January 02, 2019.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 2 n d day of January, 2019
3
ITA No. 1921/KOL/2017
A.Y. 2008-2009
M/s. Patrex Vyapar Limited
Copies to : (1) M/s. Patrex Vyap ar Limited,
23B, N.S. Road, 1 s t Floor, Room No. 112,
Kolkata-700 001
(2 ) Income Tax Officer,
Ward-5 (2), Kolk ata,
Aayakar Bhawan,
P-7, Chowringhee Square, Kolkata-700 069 (3) Commissioner of Inco me T ax (Appeals)-2, Kolkata, (4) Commissio ner of Income Tax- , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 4