Ita/131/2019 Haldia Petrochemicals Limited v. Commissioner Of Income Tax Kolkata Iv

O 147 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITA/131/2019 HALDIA PETROCHEMICALS LIMITED VS. COMMISSIONER OF INCOME TAX KOLKATA IV BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAM AndTHE HON’BLE JUSTICE SUPRATIM BHATTACHARYADate : SEPTEMBER 26, 2022. Appearance:Mr. Ajoy Gaggar, Adv.Mr. Hiranmay Gangopadhyay, Adv.… for appellantMr. Soumen Bhattacharjee, Adv.…for respondent The Court :- We have heard Mr. Ajoy Gaggar, learned standing Counsel with Mr.Gangopadhyay, learned Advocate for the appellant and Mr. Soumen Bhattacharjee,learned Advocate for the respondent. This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961(the Act) is directed against the order dated 6[th] July, 2018 passed by the Income TaxAppellate Tribunal “A” Bench, Kolkata (Tribunal) in ITA No.1533/Kol/2015 for theassessment year 2004-2005. The appeal was admitted on August 22, 2019 to decide thefollowing substantial questions of law:- (a)For that the Tribunal was not justified in law in directing disallowance of 1% ofthe appellant’s dividend income under Section 14A of the Income Tax Act,1961 (hereinafter referred to as “the Act”) when the appellant’s case was thatno expenditure was incurred by it in relation to the dividend income and itspurported findings in that behalf are arbitrary, unreasonable and perverse.the appellant’s dividend income under Section 14A of the Income Tax Act,1961 (hereinafter referred to as “the Act”) when the appellant’s case was thatno expenditure was incurred by it in relation to the dividend income and itspurported findings in that behalf are arbitrary, unreasonable and perverse. (b) For that the Tribunal failed to consider the appellant’s case that noexpenditure was incurred in relation to the dividend income and no amount onaccount thereof was to be disallowed in computing its taxable income.expenditure was incurred in relation to the dividend income and no amount onaccount thereof was to be disallowed in computing its taxable income. (c)For that the Tribunal was not justified in law in not allowing deduction ofexpenditure of Rs.15,46,24,405/- for the assessment year 2004-05 claimed bythe appellant as deferred revenue expenditure.expenditure of Rs.15,46,24,405/- for the assessment year 2004-05 claimed bythe appellant as deferred revenue expenditure. (d)For that the Tribunal failed to consider that allowance of revenue expenditureon a deferred basis was well recognized by this Hon’ble Court as also by theHon’ble Supreme Court and the Tribunal should have directed the AssessingOfficer to allow the appellant’s claim.on a deferred basis was well recognized by this Hon’ble Court as also by theHon’ble Supreme Court and the Tribunal should have directed the AssessingOfficer to allow the appellant’s claim. (e)For that the said order dated July 06, 2018 in so far as adverse to theappellant is otherwise erroneous on facts and/or in law.appellant is otherwise erroneous on facts and/or in law. We have heard Mr. Ajoy Gaggar, learned standing Counsel with Mr.Gangopadhyay, learned Advocate for the appellant and Mr. Soumen Bhattacharjee,learned Advocate for the respondent. The legal issue involved in the instant case is squarely covered by the decision ofthe Hon’ble Supreme Court in the case of South Indian Bank Ltd. Vs. Commissioner ofIncome Tax, 2021 10 SCC 153. The Hon’ble Supreme Court held proportionatedisallowance of interest is not warranted under Section 14A of the Act for investmentmade in tax free bonds/security which yield tax free dividends and interest to assessee’sand in those situations where the interest free own funds available with the assesseeexceeds their investment. The Hon’ble Supreme Court relying upon various decisions concluded thatproportionate disallowance of interest is not warranted. The revenue cannot dispute the above legal position and several decisions have been rendered by the Hon’ble Court andthis Court even thereafter. The legal issue involved in the instant case is squarely covered by the decision ofthe Hon’ble Supreme Court in the case of South Indian Bank Ltd. Vs. Commissioner ofIncome Tax, 2021 10 SCC 153. The Hon’ble Supreme Court held proportionatedisallowance of interest is not warranted under Section 14A of the Act for investmentmade in tax free bonds/security which yield tax free dividends and interest to assessee’sand in those situations where the interest free own funds available with the assesseeexceeds their investment. The Hon’ble Supreme Court relying upon various decisions concluded thatproportionate disallowance of interest is not warranted. The revenue cannot dispute the above legal position and several decisions have been rendered by the Hon’ble Court andthis Court even thereafter. Thus following the said decision, the appeal filed by the assessee is allowed andthe substantial questions of law are answered in favour of the assessee. (T.S. SIVAGNANAM, J.) (SUPRATIM BHATTACHARYA, J.) Pkd/GH