M/s. A.V. Enterprises v. Assistant Commissioner of Income-tax, Circle-34, Kolkata
[Citation -2016-LL-1004-70]

Citation 2016-LL-1004-70
Appellant Name M/s. A.V. Enterprises
Respondent Name Assistant Commissioner of Income-tax, Circle-34, Kolkata
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 04/10/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags shares held as stock-in-trade • interest expenditure • business of trading • exempted income
Bot Summary: CIT(Appeals) under section14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962. In the assessment originally completed under section 143(3) vide an order dated 11.12.2009, the loss as returned by the assessee was accepted by the Assessing Officer. CIT, proceedings under section 143(3) read with section 263 were initiated by the Assessing Officer. According to him, disallowance under section 14A read with Rule 8D was required to be made in the case of the assessee. These submissions of the assessee were not found acceptable by the Assessing Officer and relying on the decision of the Delhi, Special Bench of ITAT in the case of Cheminvest Limited vs.- ITO 121 ITD 318, he held that disallowance under section 14A was attracted even where there was no exempt income actually earned by the assessee. Counsel for the assessee, Rule 8D introduced with effect from 24.03.2008 is applicable only from A.Y. 2008-09 and the same cannot be applied to the year under consideration, i.e. A.Y. 2007-08 to compute the disallowance to be made under section 14A. Moreover, the decision of I. T. A. N o. 1 9 1 9 / KO L. / 2 0 1 4 Assessment year: 2007-2008 Page 3 of 3 Delhi, Special Bench of ITAT in the case of Cheminvest Limited relied upon by the Assessing Officer has been subsequently overruled by the Hon ble Delhi High Court by holding that the disallowance under section 14A cannot be made where the assessee has not earned any income, which is exempt from tax. In the present case, no income exempt from tax was actually earned by the assessee during the year under consideration and this being so, I hold that the disallowance made by the Assessing Officer under section 14A and confirmed by the ld.


I . T. . N o. 1 9 1 9 / KO L . / 2 0 1 4 Assessment year: 2007-2008 Page 1 of 3 IN INCOME TAX APPELLATE TRIBUNAL, KOLKATA C(SMC) BENCH, KOLKATA Before Shri P.M. Jagtap, Accountant Member I.T .A. No. 1919/KOL/ 2014 Assessment Year: 2007-2008 M/s. A.V. Enterprises ,...........................................................Appellant 51, Ezra Street, 2 n d Floor, Kolkata-700 001 [PAN: AAIFA 5269 K] -Vs.- Assistant Commissioner of Income Tax,.... ........................Respondent Circle-34, Ko lkata, Aayakar Bhawan Po orva, 110, Shanti Pally, Kolkata-700 107 Appearances by: Shri Manish Tiwari, FCA, fo r assessee Shri Dinbandhu Naskar, JCIT, D.R., for Department Date of concluding th e hearing : Au gust 03, 2016 Date of pronouncing order : October 04, 2016 O R D E R This appeal filed by assessee is directed against order of ld. Commissioner of Income Tax (Appeals)-XX, Kolkata dated 11.08.2014 and solitary issue involved therein relates to disallowance of Rs.39,23,448/- made by Assessing Officer and confirmed by ld. CIT(Appeals) under section14A of Income Tax Act, 1961 read with Rule 8D of Income Tax Rules, 1962. 2. assessee in present case is partnership firm, which is engaged in business of trading in shares. return of income for year under consideration was filed by it on 25.10.2007 declaring loss of Rs.15,28,670/-. In assessment originally completed under section 143(3) vide order dated 11.12.2009, loss as returned by assessee was accepted by Assessing Officer. said assessment, however, was subsequently set aside by concerned ld. CIT by I . T. . N o. 1 9 1 9 / KO L . / 2 0 1 4 Assessment year: 2007-2008 Page 2 of 3 exercising powers conferred upon him under section 263 with direction to Assessing Officer to do same afresh. As per direction of ld. CIT, proceedings under section 143(3) read with section 263 were initiated by Assessing Officer. During course of said proceedings, it was noticed by Assessing Officer that investment made by assessee in shares held as stock-in-trade was capable of earning exempt income either in form of dividend or long- term capital gain. He also noticed that substantial interest expenditure incurred by assessee during year under consideration was claimed as deduction. According to him, disallowance under section 14A read with Rule 8D, therefore, was required to be made in case of assessee. In this regard, it was submitted by assessee that Rule 8D introduced with effect from 24.03.2008 had no application to year under consideration. It was also submitted by assessee that there being no exempt income actually earned by it during year under consideration, disallowance under section 14A was not warranted. These submissions of assessee were not found acceptable by Assessing Officer and relying on decision of Delhi, Special Bench of ITAT in case of Cheminvest Limited vs.- ITO [121 ITD 318], he held that disallowance under section 14A was attracted even where there was no exempt income actually earned by assessee. He, therefore, proceeded to compute expenses incurred by assessee in relation to earning of exempt income at Rs.39,23,448/- by applying Rule 8D and made disallowance to that extent under section 14A. On appeal, ld. CIT(Appeals) confirmed said disallowance made by Assessing Officer. 3. I have heard arguments of both sides and also perused relevant material available on record. As rightly submitted by ld. counsel for assessee, Rule 8D introduced with effect from 24.03.2008 is applicable only from A.Y. 2008-09 and same, therefore, cannot be applied to year under consideration, i.e. A.Y. 2007-08 to compute disallowance to be made under section 14A. Moreover, decision of I . T. . N o. 1 9 1 9 / KO L . / 2 0 1 4 Assessment year: 2007-2008 Page 3 of 3 Delhi, Special Bench of ITAT in case of Cheminvest Limited (supra) relied upon by Assessing Officer has been subsequently overruled by Hon ble Delhi High Court by holding that disallowance under section 14A cannot be made where assessee has not earned any income, which is exempt from tax. In present case, no income exempt from tax was actually earned by assessee during year under consideration and this being so, I hold that disallowance made by Assessing Officer under section 14A and confirmed by ld. CIT(Appeals) is not sustainable. same is, therefore, deleted allowing this appeal filed by assessee. 4. In result, appeal of assessee is allowed. Order pronounced in open Court on October 04, 2016. Sd/- (P.M. Jagtap) Accountant Member Kolkata, 4 t h day of October, 2016 Copies to : (1) M/s. A.V. Enterprises , 51, Ezra Street, 2 n d Floor, Kolkata-700 001 (2 ) Assistant Commissioner of Income Tax, Circle-34, Ko lkata, Aayakar Bhawan Po orva, 110, Shanti Pally, Kolkata-700 107 (3) Commissioner of Income Tax(Appeals)-XX, Kolkata; (4) Commissio ner of Income Tax- , (5) Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. M/s. A.V. Enterprises v. Assistant Commissioner of Income-tax, Circle-34, Kolkata
Report Error