Deputy Commissioner of Income-tax, Circle-6, Kolkata v. West Bengal Infrastructure Development Finance Corporation Limited
[Citation -2016-LL-1004-83]

Citation 2016-LL-1004-83
Appellant Name Deputy Commissioner of Income-tax, Circle-6, Kolkata
Respondent Name West Bengal Infrastructure Development Finance Corporation Limited
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 04/10/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags infrastructure development • interest expenditure • tax free income • gross dividend income • disallowance of interest
Bot Summary: Commissioner of Income Tax-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 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 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/-. 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/-. CIT(Appeals), who held by relying on the decision of the Tribunal in the case of REI Agro Limited, Kolkata vs.- DCIT in ITA No. 1331/KOL/2011 reported in 144 ITD 141 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. In the case of DCIT vs.- Teenlok Advisory Services Limited reported in 159 ITD 991 decided subsequently on 08.06.2016 , both these aspects 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.


Assessment year: 2010-2011 Page 1 of 4 IN INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH, KOLKATA Before Shri P.M. Jagtap, Accountant Member and Shri K. Narasimha Chary, Judicial Member I.T .A. No. 296/KOL/ 2014 Assessment Year: 2010-2011 Deputy Commissioner of Income Tax,Appellant Circle-6, Ko lkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700 069 -Vs.- West Bengal Infras tructure Development Finance Corporation Limited,.Respondent Magnum Building, Block-A, 24, Hemanta Basu Sarani, Kolkata-700 001 [PAN : AAACW 3432 D] Appearances by: Shri Sallong Yaden, Addl. CIT, D.R., for Department Shri J.P. Kh aitan, Sr. Counsel and Shri Ananda Sen, Advocate, for assessee Date of concluding th e hearing : September 21, 2016 Date of pronouncing order : October 04, 2016 O R D E R Per Shri P.M. Jagtap: This appeal is preferred by Revenue against order of ld. Commissioner of Income Tax (Appeals)-VI, Kolkata dated 29.11.2013 and solitary ground raised therein reads as under:- That on facts and circumstances of case, 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 legal provisions of Rule 8D which defines that for calculation of disallowance Assessment year: 2010-2011 Page 2 of 4 under Rule 8D, average value of investment, income generated from which does not of shall not form part of total income to be taken into account . 2. assessee in present case is Non-Banking Financial Corporation. return of income for year under consideration was filed by it on 09.10.2010 declaring total income of Rs.69,83,55,790/-. In said return, dividend income of Rs.16,56,840/- earned by assessee was claimed to be exempt from tax. disallowance of Rs.1,22,86,000/- was also offered by assessee under section 14A on account of interest expenditure incurred in relation to earning of exempt dividend income. While computing said disallowance as per Rule 8D of Income Tax Rules, 1962, investment made in shares which had yielded exempt dividend income alone was taken into consideration by assessee. According to Assessing Officer, entire investment made by assessee in shares, which was capable of earning exempt dividend income was liable to be taken into consideration while computing disallowance under section 14A as per Rule 8D. He accordingly recomputed disallowance to be made under section 14A read with Rule 8D on account of interest at Rs.15,51,91,837/-. He also made further disallowance on account of other expenses as per Rule 8D(2)(iii) on same basis at Rs.1,18,50,188/-. Accordingly, total disallowance under section 14A read with Rule 8D was made by Assessing Officer at Rs.16,70,42,025/- as against Rs.1,22,86,000/- offered by assessee. 3. disallowance under section 14A read with Rule 8D as computed by Assessing Officer was challenged by assessee in appeal filed before ld. CIT(Appeals), who held by relying on decision of Tribunal in case of REI Agro Limited, Kolkata vs.- DCIT in ITA No. 1331/KOL/2011 reported in 144 ITD 141 (Calcutta) that disallowance under section 14A by applying Rule 8D has to be worked out by taking into consideration not all investments but only those investments, which have given rise to exempt income during relevant year. Accordingly, he directed Assessing Officer to re-compute 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 exempt income during year under consideration. Aggrieved by order of ld. CIT(Appeals), Revenue has preferred this appeal before Tribunal. 4. We have heard arguments of both sides and also perused relevant material available on record. Although ld. D.R. has relied on decision of Coordinate Bench of this Tribunal in case of West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR (Trib.) 285, wherein similar issue as involved in present case was decided by Tribunal in favour of assessee, it is observed that decision rendered by Tribunal earlier in case of REI Agro Limited on similar issue in favour of assessee was not brought to notice of Tribunal in case of West Bengal Infrastructure Development Finance Corporation. Moreover, fact that appeal filed by Revenue against order of Tribunal in case of REI Agro Limited has already been dismissed by Hon ble Calcutta High Court was also not brought to notice of Tribunal in said case. In 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 notice of Tribunal and taking note of same, Tribunal directed Assessing Officer to compute disallowance under section 14A as per Rule 8D by taking into consideration only those shares, which had yielded dividend income in relevant year. In our opinion, issue involved in this appeal of Revenue thus is squarely covered in favour of assessee by decision of Tribunal in case of REI Agro Limited, which has been affirmed by Hon ble Calcutta High Court and followed by Tribunal in latest decision rendered in case of Teenlok Advisory Services (P) Limited (supra). Respectfully following same, we uphold impugned order of ld. CIT(Appeals) directing Assessing Officer to compute disallowance under section 14A as per Rule 8D(2) by taking 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 Revenue. 5. In result, appeal of Revenue is dismissed. Order pronounced in open Court on October 04, 2016. Sd/- Sd/- (K. Narasimha Chary) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, 4 t h day of October, 2016 Copies to : (1) Deputy Commissioner of Income Tax, Circle-6, Ko lkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700 069 (2) West Bengal Infras tructure Development Finance Corporation Limited, Magnum Building, Block-A, 24, Hemanta B asu Sarani, Kolkata-700 001 (3) Commissioner of Income Tax (Appeals)-VI, 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. Deputy Commissioner of Income-tax, Circle-6, Kolkata v. West Bengal Infrastructure Development Finance Corporation Limited
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