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2016 (5) TMI 754 - ITAT KOLKATA

2016 (5) TMI 754 - ITAT KOLKATA - TMI - Disallowance u/s 14A - Held that:- The Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that Rule 8D could not be considered as retrospective and the said Rule could be applied only with effect from the Assessment Year 2008-09. Further, the Bombay High Court also observed in the above-referred case that the Assessing Officer would first be required to check the concerned assesse .....

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s case for the Assessment Year 2006-07. Thus we hold that 1% of the exempt income alone should be disallowed u/s.14A of the Act.

MAT applicability - Held that:- provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - ITA.1460/Kol/2013 - Dated:- 6-4-2016 - Hon ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM For The Appellant : Shri B.K.Ghosh, FCA & Shri Piyush Dey,FCA For The Respondent : Shri Rajat Subra Biswas, CIT(DR) ORDER .....

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bank and is governed by the Banking Companies (A&T) Act 1970, Banking Regulation Act, 1949 and various rules and regulations made by RBI from time to time. The original assessment in the case of the Assessee was completed u/s.143(3) of the Act on 30.3.2006. One of the addition to the total income made in such assessment was the addition consequent to disallowance of a sum of ₹ 4,98.28,693/- to the total income of the Assessee u/s.14A of the Act. The order of the AO was confirmed by th .....

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e operation. 3. Pursuant to the order of the ITAT the AO examined the issue in the light of the directions of the ITAT. The exempt income of the Assessee was dividend on shares & units amounting to ₹ 10.07,38,161, interest on tax free bonds of ₹ 8,31,98,692/- and interest u/s.10(23G) of the Act amounting to ₹ 8,47,24,000/-. It is not in dispute that there was no interest expenditure incurred in making investments which yielded tax free income. The only question was disallow .....

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of Special Bench in the case of Daga Capital management Pvt.ltd (supra) and therefore applying the formula given in Rule 8D(2)(iii) of the rules, the AO disallowed a sum of ₹ 4,33,45,024/-. 4. Before CIT(A) the Assessee pointed out that the decision of the of Special Bench in the case of Daga Capital management Pvt.ltd (supra) holding application of Rule 8D of the Rules which came into effect only from 24.3.2008 as having retrospective application was no longer valid as the said decision w .....

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ssatisfaction, if any, the Assessing Officer could commute the amount to be disallowed in accordance with sub-section (2) of section 14A. The Assessee submitted that the above-referred subsection (2) of section 14A was inserted by the Finance Act, 2006, with effect from the Assessment Year 2007-08. It was pointed out that the present case of the Assessee s being one for the Assessment Year 2003-04, there cannot be any applicability of the above-referred sub-section (2) of section 14A of the Act .....

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e fact as to whether any such income has actually been received or not. It was submitted that as per the language of section 14A, the expense which has been incurred in relation to income which does not form part of the total income for the year, is disallowable. Hence, there is no scope of considering any income which has not actually been earned during the year, for the purposes of section 14A. It was pointed out that the Assessing Officer considered even those investments from which no income .....

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ue of investments was sound method of disallowance to be made in the case of the Assessee and thus upheld the addition made by the AO. 6. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.2 before the Tribunal. We have heard the rival submissions. The learned DR relied on the order of the CIT(A). The learned counsel for the Assessee relied on the submissions made before CIT(A) and submitted that ultimately the basis of disallowance done by the CIT(A) was by applying Rule 8D of t .....

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NHS Association vs. ACIT(ITA No.74/KoI/2008-AY.2004-05) Order Dated 19.02.2008. 3. I.T.O. vs. M/s S.P.S. Securities (P) Ltd. (ITA NO.123/KoI/2010- AY.2000-01 Order dated 19.08.2010 He further pointed out that the Hon ble Calcutta High Court in the case of CIT Vs. M/S.R.R.Sen & Brothers Pvt.Ltd. in GA No.3019 of 2012 in ITA No.243 of 2012 dated 4.1.2013 held that computation of 1% of exempt income as disallowance u/s.14A of the Act was proper. 7. We have considered the rival submissions. The .....

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sessing Officer could commute the amount to be disallowed in accordance with sub-section (2) of section 14A. The abovereferred subsection (2) of section 14A was inserted by the Finance Act, 2006, with effect from the Assessment Year 2007-08. The Assessee s case being for the Assessment Year 2003-04, there cannot be any applicability of the above-referred subsection (2) of section 14A or Rule 8D in the Assessee's case for the Assessment Year 2006-07. In the given circumstances, the quantum of .....

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in the case of M/S.R.R.Sen & Brothers Pvt.Ltd. (supra). Following those rulings, we hold that 1% of the exempt income alone should be disallowed u/s.14A of the Act. Gr.No.1 to 5 are thus partly allowed to the extent indicated. 8. Grounds No.6 & 7 raised by the Assessee reads as follows: 6. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeal) - VI, Kol has erred in confirming the application of provision of section 115JB of the Income Tax Act to the case of th .....

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Chennai (ITA No. 469 Md/2010 dt. 03.08.2011 ). 7. That, on facts as well as on law, the Learned Commissioner of Income Tax (Appeal) - VI, Kol has erred in disregarding the judgement of Hon'ble ITAT, Mumbai in the case of ICICI Lombard General Insurance Co. Ltd. vs ACIT (2012-TIOL-690-ITAT-MUM) in which it was held that provision of section 115JB will be applicable from assessment year 2013-14 to the banking company in view of the amendment made by the Finance Act, 2012. 9. We have already s .....

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ore CIT(A). To the extent the Assessee was not successful before CIT(A), the Assessee preferred further appeal before the Hon ble ITAT in ITA No.2486/Kol/2007. The grounds raised by the Assessee before ITAT was as follows: 8. That the Ld.CIT(A) was unjustified in confirming the addition made by the ld. A.O. of the following ascertained liabilities in computing the book profit for MAT purposes. Amount (Rs.) (i) Provision for Bad & Doubtful Debt 1,73,13,11,000 (ii) Provision for Standard asset .....

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ed that- (a) claim of ₹ 27 lakhs for legal expenses was actual expenses and it was wrongly mentioned as provision. (b) Wealth Tax ofRs.3 lakhs was actual liability of the assessee and it was not a provision; and (c) ₹ 16,96,86,145 was the provision for pension on actuarial basis though shown as provision and as such, it was an ascertained liability of the assessee. The learned AR of the assessee submitted that the above amounts should not be added to the book profit while computing p .....

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ored to the Assessing Officer to ascertain the exact nature of liabilities of the assessee though shown as provision by the assessee in the balance sheet. The learned AR of the assessee also submitted that the matter could be restored to the Assessing Officer. 19. Considering the above submissions of the learned Representatives of the parties, we restore the matter to the Assessing Officer to consider as to whether the above expenses as claimed by the assessee were actual and ascertained liabili .....

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as may be furnished before him. 11. In the proceedings before the AO pursuant to the order of the Tribunal, the AO again held that the liability towards legal expenses and other provisions, were not ascertained liability and therefore could not be reduced from the profit as per profit and loss account prepared in accordance with Companies Act, 1956 to ascertain book profit for the purpose of Sec.115JB of the Act. 12. Before CIT(A), the Assessee raised the following addition ground vide its lette .....

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1) Order dated 30.09.2010 in ITA No.3390/2009 passed by ITAT G Bench, Mumbai in the case of Krung Thai Bank wherein it was held that The provisions of Section 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Part II and I II of Schedule VI to the Companies Act . The starting point of computation of minimum alternate tax under section 115 JB is the result shown by such a profit and loss account. In the case of .....

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on Bank of India; and (3) Order dated 03.08.2011 in ITA No.469/2010 passed by the ITAT C Bench, Chennai in the case of Indian Bank, 14. The CIT(Appeals) after making a reference to the legislative history of the provisions of Sec.115JB of the Act was of the view that in the light of the purpose for which provisions of Sec.115JB of the Act were introduced, it cannot be said that the provisions of Sec.115JB of the Act are not applicable to banking companies. 15. Aggrieved by the order of the CIT(A .....

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on 115JB had no application to banks and insurance companies. It was so held by ITAT, Hyderabad in the case of State Bank of Hyderabad dated 07.09.2013 in ITA No. 578/Hyd/2010 and ITAT Mumbai in the case of ICICI Lombard General Insurance Co. Ltd. dated 10.10.2012 in ITA No.2398/Mum/2009. The learned DR relied on the order of the CIT(A). 16. We have considered the rival submissions of the ld. counsel for the assessee. We find that this issue was considered by the Mumbai Bench of the Tribunal in .....

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nted out that , in terms of the provisions of Section 115JB(2),every assessee is required to prepare its profit and loss account in terms of the provisions of Part II and II I of Schedule VI to the Companies Act . Unless the profit and loss is so prepared, the provisions of Section 115 JB cannot come into play at all. However, the assessee is a banking company and under proviso to Section 211 (2) of the Act , the assessee is exempted from preparing its books of accounts in terms of requirements .....

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ening the assessment are clearly wrong and insufficient . We are urged to quash the reassessment proceedings on this short ground. 6. Learned Departmental Representative, on the other hand, vehemently relies upon the orders of the authorities below and submits that there is no specific exclusion clause for the banking companies, and in the absence of such a clause, it is not open to us to infer the same. The submissions of the learned counsel, according to the departmental representative, are cl .....

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