Principal Commissioner Of Income Tax, Kolkata – 2, Kolkata v. West Bengal Infrastructure Development Finance Corporation Limited

OD-19 ORDER SHEET IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE IA NO: GA/2/2018(Old No. GA/542/2018)INITAT/49/2018 PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA – 2, KOLKATAVS.WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCECORPORATION LIMITED BEFORE:The Hon'ble JUSTICE T. S. SIVAGNANAM ANDThe Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : December 17, 2021. [Via Video Conference] Appearance:Mr. Suniti Chatterjee, Advocate… for the appellantMr. J.P. Khaitan, Sr. AdvocateMr. Ananda Sen, Advocate… for the respondent The Court : This appeal by the revenue has been filed under Section260A of the Income Tax Act, 1961 (the ‘Act’ in brevity) challenging the orderdated 2[nd] June, 2017 passed by the Income Tax Appellate Tribunal “C”Bench, Kolkata in ITA 2209/Kol/2014 for the assessment year 2011-12. The revenue has raised the following substantial question of law forconsideration : a)Whether on the facts and in the circumstances of the casethe Learned Income Tax Appellate Tribunal, “C” BenchKolkata erred in law in holding that disallowance underSection 14A of Income Tax Act, 1961 read with Rule 8D ofIncome Tax Rules, 1962 should be restricted to only thoseinvestments which yielded dividend income, through whichCBDT Circular 5/2014 dated February 11, 2014 has beenheld to the illegal or ultravires?the Learned Income Tax Appellate Tribunal, “C” BenchKolkata erred in law in holding that disallowance underSection 14A of Income Tax Act, 1961 read with Rule 8D ofIncome Tax Rules, 1962 should be restricted to only thoseinvestments which yielded dividend income, through whichCBDT Circular 5/2014 dated February 11, 2014 has beenheld to the illegal or ultravires? We have heard Mr. Suniti Kumar Chatterjee, learned standing counselfor the appellant/revenue and Mr. J P Khaitan, learned senior counsel withMr. Ananda Sen, learned counsel appearing for the respondent. The short issue involved in this appeal is whether the Commissioner ofIncome Tax (Appeals) was right in upholding the disallowances made underSection 14A read with R.8D of the Income Tax Rules, 1962 only in respect ofinvestment which yielded and exempted, the Tribunal after considering thefacts and circumstances of the case and also noting the legal position thatthe assessing officer while making a disallowance under Section 14A readwith R.8D of the rules is bound to record his satisfaction to the correctness ofthe claim of disallowance in respect of exempted dividend income. We have perused the assessment order dated 29[th] January 2014 underSection 143(3) of the Act. The assessing officer notes that on perusal of the The short issue involved in this appeal is whether the Commissioner ofIncome Tax (Appeals) was right in upholding the disallowances made underSection 14A read with R.8D of the Income Tax Rules, 1962 only in respect ofinvestment which yielded and exempted, the Tribunal after considering thefacts and circumstances of the case and also noting the legal position thatthe assessing officer while making a disallowance under Section 14A readwith R.8D of the rules is bound to record his satisfaction to the correctness ofthe claim of disallowance in respect of exempted dividend income. We have perused the assessment order dated 29[th] January 2014 underSection 143(3) of the Act. The assessing officer notes that on perusal of the return of income filed by the assessee they have earned dividend net incometo the tune of Rs.1,46,349/- which is exempted from tax and assessee hasdisallowed Rs.33,32,576/- under Section 14A of the Act. The assessing officermerely states that the same is not convincing. This is not the manner inwhich suo motu disallowance made by the assessee should be decided for itscorrectness nor can it be treated to be recording of the satisfaction of theassessing officer. This aspect of the mater was rightly taken note by theCIT(A) as well as the Tribunal. On fact also the Tribunal has upheld theorder passed by CIT(A) wherein the CIT(A) has noted the submission made bythe assessee that by computing the average value of investment for thepurpose of R.8D income from which do not form part of the total incomenamely cumulative preference shares of Haldia Petro Chemical andinvestment in SBI–SDFS, Units Growth Mutual Fund from which no dividendincome had accrued to the assessee during the financial year 2010-2011corresponding to the assessment year 2011-12. This submission waselaborated by the assessee during the course of appeal by the CIT(A) andwhich has been extensively noted by the CIT(A). That apart identical issuewas the subject matter of consideration for the assessment year 2010-2011,wherein relief was granted to the assessee. This aspect was also noted by theCIT(A) while passing the order in the appeal and directing the assessingofficer to reduce the disallowance in terms of directions contained therein.The correctness of the order was tested by the Tribunal and in our viewrightly rejected the appeal filed by the revenue. Thus we find no reason tointerfere with the order passed by the Tribunal. RS/GH. Hence, the appeal filed by the revenue is dismissed.Consequently, the connected application stands dismissed. (T. S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)