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TMI Blog2020 (11) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... g into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii), which is issue in the assessee's appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case. Hon ble Jurisdictional High Court in CIT vs. M/s Ashika Global Securities Ltd [ 2018 (7) TMI 1425 - CALCUTTA HIGH COURT ] and also the judgement passed by the Coordinate Bench and respectfully relying upon the same we find no infirmity in the order passed by the Ld CIT(A) in deleting the addition made under section 14A r.w.r.8D so as to warrant interference. Appeal of the Revenue is dismissed. - Shri J. Sudhakar Reddy, AM And Ms. Madhumita Roy, JM For the Appellant : Shri Subash Agarwal, Advocate For the Respondent : Shri Supriyo Paul, Addl. CIT ORDER PER MS. MADHUMITA ROY: The instant appeal filed by the Revenue is directed against the order dated 18.07.2019 passed by the Commissioner of Income Tax (Appeals)-20, Kolkata arising out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical with the facts and circumstances of the case in hand. We also find that the Co-ordinate Bench, ITAT, D Bench, Kolkata in the case of supra discussed the issue thoroughly with various facts of various case laws. Relevant portion of said order dt. 10-01-2018 is reproduced herein below for the sake of clarity:- 16. As far as the decision of the Hon'ble Delhi High Court in the case of Time Incorporated (supra) cited by the ld. DR before us is concerned that was the case of a suit for permanent injunction and damages, filed against the defendant for a passing off action and in the course of it's judgement the Hon'ble court made a reference regarding purpose of awarding punitive damages. The said decision is not of any application whatsoever be the present case. The decision of the Hon'ble Karnataka High Court in the case of Mamta Enterprises(supra) is again a case where the criminal offence was compounded and the compounding fees was claimed as deduction. In the present case there is no offence whatsoever and there is no compounding fee paid and claimed as deduction. As far as the decision of the Hon'ble Supreme Court in the case of Haji Aziz Brothers (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loading station and the goods were loaded by estimate, then overloading of wagons cannot possibly by avoided and such overloading being apparently common is actually permitted by the railways on overloading charges termed in its terminology as 'punitive charges. I therefore find merit in the contention of the Ld AR that the punitive charges are compensatory in nature for transporting goods beyond .permissible carrying capacity and such charges may in the terminology of the railways be called punitive charges but in commercial parlance it is not in the nature of penalty for infraction of ]aw. The overloading charges paid to the railways may in its terminology be termed as punitive charges but such payments appeal to be routine payments in the nature of additional freight charges for overloading of wagons and such payments are made in accordance with ]aw as provided in the Notification dated the 23rd December 2005 issued by the Ministry of Railways. It also appears from the Notification of the Ministry of Railways that there is no provision for criminal action or prosecution or con6lscation of goods for overloading of wagons. I am of the considered view that the activities of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant because such activities of railways are of commercial in nature and freights are fixed on commercial basis. If we look the issue in its perspective, then, what emerges is that if there were private carriers also and if the assesse would have paid identical charges to them, the same would have been allowed as a normal business expenditure especially when there is no dispute that these expenses have been incurred in the course of business operations and, therefore, merely because the railways is a government owned Institution and works under an Act of Parliament, and nature of overloading charges which are essentially of commercial nature cannot be characterized as of penal nature irrespective of nomenclature given to such charges by the railways. Further, it is not in dispute that the quantity treated as overloading has been unloaded by the railways nor it has been a case of violation of safety rules/norms, hence, the overloading so incurred cannot be equated with travelling without ticket, hence, the said contentions of the Ld DR are rejected. It is also noted that such overloading is not correct due to a deliberate act on the part of the assesse but due to lack of infrast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) so as to warrant interference. Hence in the absence of any merit found in the appeal preferred by the revenue, the same is hereby dismissed. 5. The Ground No.2 relates to addition u/s 14A r.w.r 8D to the tune of ₹ 69,66,774/- out of total additions of ₹ 70,35,166/-. The said issue is also covered in assessee s own case in ITA No.1531/Kol/2017 as submitted by the Ld. AR. He further relied upon the judgment passed by Hon ble Jurisdictional High Court in the case of CIT vs. M/s Ashika Global Securities Ltd. in GA 2122 of 2014 which is in favour of the assessee s contention that the only those investments needs to be considered from which dividend has been received during the year. In fact in the case in hand, the assessee earned dividend which does not form part of the total income; the assessee has not offered any loan as expenditure in relation to income not includible in the total income. However, the indirect expenses disallowance to the tune of ₹ 70,35,166/- was added to the total income of the assessee by the Ld. A.O u/s 14A r.w.r 8D(iii). Relying upon the ratio laid down by the jurisdictional High Court and also the Mumbai High Court in the case of HDFC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 14A, more specifically subsection (2), shows that if the AO is not satisfied with the correctness of the claim of the assessee, then the AO shall determine the ITA No.1331 1423/Kol/2011 Assessment Year: 2008-09 amount of expenditure incurred in relation to such income, which does not form part of total income under the Act. For this the method is prescribed in rule 8D. The provision of section 14A, sub-section (3) specifies the provision of 14A(2) would also apply where the assessee makes a claim that there is no expenditure incurred. This is because if the assessee does not make a disallowance under section 14A in its computation of total income, when filing the return, then if sub- section (3) was not available, the AO might not be able to make a disallowance under section 14A. Thus, where the assessee makes a claim that only a particular amount is to be disallowed under section 14A or where the assessee does not make a disallowance under section 14A, if the AO proposes to invoke the section 14A, he is to record a satisfaction on that issue. This satisfaction cannot be a plain satisfaction or a simple note. It is to be done with regard to accounts of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, under the ambit of rule 8D(2)(ii) it will have to be shown by the AO that the said interest is not directly attributable to any particular income or receipt. Why we say here that it is to be shown by the AO is on account of the words in Rule 8D(1) being where the Assessing Officer, ...... is not satisfied with. (a) ........ (b) ........ in relation to income......., he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). In the assessee's case, admittedly, the assessee has substantial capital. The increase in the capital itself is to an extent of ₹ 4 crores and in respect of reserves and surplus, the increase is ₹ 112 crores. The loans taken during the year admittedly are for the letters of credit and the assessee is bound to provide the bank stock ITA No.1331 1423/Kol/2011 Assessment Year: 2008-09 statement and other details to show the utilization of the loans. No bank would permit the loan given for one purpose to be used for making any investment in shares. The ld. CIT(A), it is noticed that after considering these facts that the assessee had not used any of its borrowings for purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D(2)(ii) of the Act. 8.1 Thus, not all investments become the subject-matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii), which is issue in the assessee's appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14Aread with rule 8D(2)(i) and (ii) can be made in this case. 20. Respectfully following the above, we find no infirmity in the order of CIT-A and it is justified. Ground no. 5 raised by the revenue is dismissed. 21. Ground no. 6 raised by the revenue is general in nature and requires no adjudication and as such it is dismissed . 7. We have further considered by the judgment passed by the Hon ble Jurisdictional High Court in the case of CIT vs. M/s Ashika Global Securities Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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