Tamilnadu Power Finance & Infrastructure Development Corpn Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1036/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7575 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1036/MDS/2015 ( )( / ASSESSMENT YEAR : 2011-12 M/S TAMILNADU POWER FINANCE & INFRASTRUCTURE DEVELOPMENT CORPORATION LTD., TUFIDCO POWERFIN TOWER, 490, MOUNT ROAD, NANDANAM, CHENNAI - 600 035. PAN : AAACT 2840 A V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. SAROJ KUMAR PARIDA, ADVOCATE -.+, / 0 / RESPONDENT BY : SH. SASIKUMAR, JCIT 1 / 2% / DATE OF HEARING : 23.02.2016 3') / 2% / DATE OF PRONOUNCEMENT : 24.03.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNA I, DATED 21.01.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2 I.T.A. NO.1036/MDS/15 2. SH. SAROJ KUMAR PARIDA, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER RULE 8D OF INCOME-TAX RULES, 1962. ACCORDING TO LD. COUNSEL , THE ASSESSEE HAD SURPLUS FUNDS TO THE EXTENT OF ` 64,04,90,000/- AND INTEREST EARNED ON THE INVESTMENT MADE WAS ` 18,17,910/-. ACCORDING TO THE LD. COUNSEL, NO BORROWED FUNDS WERE USED TO EARN AN Y EXEMPT INCOME. THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2010-11 IN I.T.A. NO. 1813/MDS/201 4 FOUND THAT ONLY 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT, I NCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME AS APPEARI NG IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR, HAS TO BE ALLOWED AS EXPENDITURE FOR EARNING THE INCOME BY APPLYING THIRD LIMB RULE 8D(2). IN VIEW OF THE ABOVE, ACCORDING TO THE LD. COUNSEL , ONLY 0.5% OF THE AVE RAGE INVESTMENT HAS TO BE DISALLOWED. 3. WE HEARD SHRI SASIKUMAR, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO. ACCORDING TO THE LD. D.R., TH ERE IS NO NEXUS BETWEEN THE INVESTMENT AND THE AVAILABLE FUNDS. IF THE ASSESSEE CLAIMS THAT THE SURPLUS FUNDS WERE USED FOR MAKING INVESTMENT FOR 3 I.T.A. NO.1036/MDS/15 EARNING EXEMPTED INCOME, IT IS FOR THE ASSESSEE TO ESTABLISH THE SAME IN THE ABSENCE OF ANY MATERIAL AVAILABLE ON RE CORD. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY MADE DISALLOWANCE BY APPLYING SECOND LIMB OF RULE 8D(2). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING. FOR THE ASSESSMEN T YEAR 2010- 11 IN I.T.A. NO. 1813/MDS/2014, THE SAME ISSUE CAME BEFORE THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE. THIS TRIBUNAL AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD HAS OB SERVED AS FOLLOWS:- 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF RULE 8D OF THE INCOME-TAX RULES, 1962, WHICH READS AS FO LLOWS:- (1) WHERE THE ASSESSING OFFICER HAVING REGARD TO TH E ACCOUNTS OF THE ASSESSEE OF THE PREVIOUS YEAR, IS N OT SATISFIED WITH- (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE ; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITU RE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHA LL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO S UCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB-RUL E (2). 4 I.T.A. NO.1036/MDS/15 (2) THE EXPENDITURE IN RELATION TO INCOME WHICH DOE S NOT FORM PART OF THE TOTAL INCOME SHALL BE THE AGGREG ATE OF FOLLOWING AMOUNTS, NAMELY:- (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO I NCOME WHICH DOES NOT FORM PART OF TOTAL INCOME ; (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPEN DITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR IS NOT DIR ECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, A N AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY :- B A X--- C WHERE A =AMOUNT OF EXPENDITURE BY WAY OF INTEREST OT HER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I) INCURRED DURING THE PREVIOUS YEAR ; B =THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM W HICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE-SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR ; C =THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE- SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAS T DAY OF THE PREVIOUS YEAR ; (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT. OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE- SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAS T DAY OF THE PREVIOUS YEAR. 3. FOR THE PURPOSES OF THIS RULE, THE 'TOTAL ASSET S' SHALL MEAN, TOTAL ASSETS AS APPEARING IN THE BALANCE-S HEET EXCLUDING THE INCREASE ON ACCOUNT OF REVALUATION O F ASSETS BUT INCLUDING THE DECREASE ON ACCOUNT OF REVALUAT ION OF ASSETS. 5 I.T.A. NO.1036/MDS/15 RULE 8D WAS INTRODUCED WITH EFFECT FROM 24.03.2008 . THEREFORE, THE SAME IS VERY MUCH APPLICABLE FOR THE YEAR UNDER CONSIDERATION. WHEN THE ASSESSING OFFICER IS NOT S ATISFIED ABOUT THE CORRECTNESS OF THE CLAIM OF EXPENDITURE O R THE ASSESSEES CLAIM THAT NO EXPENDITURE WAS INCURRED, THEN THE ASSESSING OFFICER SHALL RECOMPUTE THE EXPENDITURE B Y APPLYING THE PROCEDURE LAID DOWN IN RULE 8D(2). AS PER SUB- RULE (2) OF RULE 8D, THE AGGREGATE OF THE THREE LIMBS PROVIDED THEREIN HAS TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF C OMPUTING THE EXPENDITURE. IN THE CASE BEFORE US, THE ASSESSEE A DMITTEDLY UTILIZED THE RESERVE AVAILABLE TO THE EXTENT OF ` 54,54,90,000/-. THEREFORE, NO DIRECT EXPENDITURE WAS INCURRED FOR E ARNING THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. T HE ASSESSEE ALSO HAS NOT INCURRED ANY EXPENDITURE BY WAY OF INT EREST. THEREFORE, THE SECOND LIMB OF THE RULE 8D(2) IS NOT APPLICABLE. NOW COMING TO THE THIRD LIMB, THE AMOUNT EQUAL TO 0 .5% OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, HAS TO BE TAKEN INTO CONSIDERATION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE THIRD LIMB OF RULE 8D(2) HAS TO BE APPLIED. THEREFORE, THE COMPUTATION MADE BY THE ASSESSING OFFICER BY ADOPTING SECOND LIMB OF RULE 8 D(2) MAY NOT BE CORRECT. ACCORDINGLY, THE ORDERS OF THE LOWE R AUTHORITIES ARE MODIFIED AND THE ASSESSING OFFICER IS DIRECTED TO TAKE 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME AS APPEA RING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, AS EXPENDITURE FOR EARNING IN COME. 5. THE FACTS REMAIN SAME AS THAT OF THE ASSESSMENT YEAR 2010- 11. THEREFORE, THIS TRIBUNAL CANNOT TAKE A DIFFERE NT VIEW. THEREFORE, BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE ASSE SSEE'S OWN CASE FOR ASSESSMENT YEAR 2010-11 IN I.T.A. NO. 1813/MDS/2014 DATED 19 TH FEBRUARY, 2016, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO TAKE 0.5% OF T HE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME AS EXPENDITURE IN THE BALANCE SHEE T OF THE 6 I.T.A. NO.1036/MDS/15 ASSESSEE ON THE FIRST DAY AND LAST DAY OF THE PREVI OUS YEAR TO BE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 24 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 24 TH MARCH, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-11, CHENNAI 4. 1 92 /CIT, CHENNAI-3, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.