Coimbatore Hitech Infrastructure Private Limited, Coimbatore V. DCIT, Coimbatore

ITA 1091/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6249 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 02-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN JCIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 1091/MDS/2017 / ASSESSMENT YEARS : 2013-14 COIMBATORE HITECH INFRASTRUCTURE PRIVATE LIMITED, NO. 365, THUDKYALUR ROAD, SARAVANAMPATTI, COIMBATORE 641 035. [PAN: AACCC 5201G] VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -2, COIMBATORE 641 018. ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE )*%& / RESPONDENT BY : SHRI. V. SREENIVASAN, JCIT & /DATE OF HEARING : 28.06.2017 & /DATE OF PRONOUNCEMENT : 12.09.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE IN ITA NO. 30/16-17 DATED 27.02.2017. :-2-: I.T.A. N0. 1091/MDS/2017 2. COIMBATORE HITECH INFRASTRUCTURE PRIVATE LIMITED , THE ASSESSEE, IS IN THE BUSINESS OF DEVELOPING SECTOR SPECIFIC SPECIAL ECON OMIC ZONE, GOVERNED BY SEZ ACT. IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 20 13-14, THE AO FOUND THAT THE ASSESSEE HAD MADE AN INVESTMENT IN SHARES AT RS . 26,60,94,000/-. HE REQUIRED THE ASSESSE TO EXPLAIN AS TO WHY THE PROV ISIONS OF SECTION 14A R.W.R. 8D SHOULD NOT BE INVOKED. THE ASSESSEE RELYING ON THE DECISIONS OF GODREJ BOYCE MFG. CO. LTD. VS DCIT (328 ITR 81), MAXOPP INVESTME NTS LTD. VS. CIT ( 347 ITR 272), CIT VS HDFC BANK (366 ITR 502), CIT VS HERO C YCLES (323 ITR 518), CIT VS GLENMARK PHARMACEUTICALS LTD. (351 ITR 359), CHE MINVEST LTD. VS CIT (378 ITR 33), CIT VS OM PRAKASH KHAITAN (376 ITR 390) AN D CIT VS HOLCIM INDIA PRIVATE LTD. (ITA NO. 486/2014 & ITA NO. 299/2014) SUBMITTED THAT THE PROVISIONS OF SECTION 14A R.W.R. 8D ARE NOT ATTRACT ED IN ITS CASE. HOWEVER, THE AO HELD THAT IN ORDER TO MAKE SUCH INVESTMENTS AND TO RECEIVE DIVIDENDS IN FUTURE, DEFINITELY IN ALL PROBABILITY AND BUSINESS PRUDENCE , THE ASSESSEE REQUIRES EXPERTISE IN ADVISING, MANAGERIAL SUPERVISION, PERS ONS/PERSONNEL WHO ARE WELL SKILLED AND TRAINED IN SUCH INVESTMENTS, CONTINUOUS FOLLOW UP AND SERVICES OF THOSE PERSONNEL ARE ESSENTIAL. THESE PERSONNEL APA RT FROM THEIR MAIN JOB FOR WHICH THEY ARE RECRUITED WILL PERFORM THE ADDITIONA L ROLE OF ADVISING THE ASSESSEE AND PERIODICAL REVIEW IN MAKING WISE INVESTMENTS. THE EXPENDITURE INCURRED TOWARDS THESE INVESTMENTS AND OTHER RELATED CHARGES NEEDS TO BE NOTIONALLY DISALLOWED. HENCE, BY INVOKING THE PROVISIONS OF SE CTION 14A OF THE ACT, RULE 8D OF THE I.T. RULES, 1962 R.W. CBDT CIRCULAR NO. 5 OF 2014 DATED 11.02.2014, THE :-3-: I.T.A. N0. 1091/MDS/2017 AO DISALLOWED RS. 13,30,470/-. AGGRIEVED AGAINST T HAT ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO CON FIRMED THE DISALLOWANCE. 3. AGAINST THE APPEAL ORDER OF THE CIT(A), THE ASSE SSEE FILED THIS APPEAL PLEADING , INTER ALIA, THAT THE ASSESSEE HAS NOT AC TUALLY EARNED ANY DIVIDEND INCOME AND THEREFORE NO QUESTION OF THE ASSESSEE AC TUALLY DEBITING ANY PORTION OF EXPENDITURE EITHER IN EARNING THE DIVIDEND INCOME O R EXPENDITURE ATTRIBUTABLE TO EXEMPTED INVESTMENTS. THE LEARNED CIT(A) OUGHT TO H AVE APPRECIATED THE FACT THAT EACH AND EVERY ITEM OF EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT WHOLLY AND EXCLUSIVELY IN EARNING THE BUSINESS INCO ME ONLY AND ACTUALLY NO EXPENDITURE WHATEVER, HAS BEEN DEBITED IN PROFIT AN D LOSS ACCOUNT WHICH COULD BE RELATABLE TO EXEMPTED INVESTMENT IN SHARES. THE LD. CIT(A) HAS ERRED IN AGREEING WITH THE ASSESSING OFFICER ON THE ASSUMPTI ON THAT THE ASSESSE MIGHT HAVE INCURRED EXPENDITURE IN RELATION TO THE INVEST MENT IN SHARE THAT MAY YIELD EXEMPTED INCOME IN FUTURE AND THAT ON ESTIMATION A PORTION OF THE ADMINISTRATIVE EXPENDITURE ATTRIBUTABLE TO EXEMPTED INVESTMENT IS TO BE DISALLOWED FOLLOWING THE GUIDELINES GIVEN BY THE RULE 8D OF THE I.T. RULES. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE FIND (SIC) OU T THAT THE BINDING DECISION OF THE MADRAS HIGH COURT IN THE CASE OF REDINGTION (IN DIA) VS. ACIT (TCA NO. 520 OF 2016 DATED 23.12.2016) CLEARLY SUPPORTS ITS STAND A ND THE APPLYING THE RATIO OF THIS DECISION, THE CIT (A) OUGHT NOT TO HAVE CONFIR MED THE DISALLOWANCE, SINCE THE FACTS AND CIRCUMSTANCES OF ITS CASE ARE CLEARLY SIM ILAR TO THE CASE DECIDED BY THE HONBLE MADRAS HIGH COURT. IT IS PERTINENT TO MENT ION THAT IN ITS CASE FOR :-4-: I.T.A. N0. 1091/MDS/2017 ASSESSMENT YEAR 2014-15, THE LEARNED CIT(A) IN HIS ORDER IN ITA NO. 199/16-17 DT 31.03.2017 HAS DELETED SIMILAR DISALLOWANCE FOLL OWING THE FAVOURABLE DECISION OF THE MADRAS HIGH COURT. HENCE, IT IS CLEAR THAT THE APPELLATE ORDER PASSED BY THE LEARNED CIT (A) FOR THIS ASSESSMENT YEAR ON SI MILAR DISALLOWANCE IS CONTRARY TO THE JUDICIAL DECISION ETC. 4. THE AR SUBMITTED THAT THE ASSESSEE HAS NOT EARNE D ANY EXEMPTED INCOME AND HENCE THEDISALLOWANCE MADE U/S. 14A IS NOT SUST AINABLE ON THE BASIS OF THE JURISDICTIONAL HIGH COURT DECISIONS IN THE CASE OF M/S. REDINGTON (INDIA) LTD. VS ADDL CIT IN TCA NO. 520 OF 2016, DATED 23.12.2016 & CIT, CENTRAL 1, CHENNAI VS M/S. CHETTINAD LOGISTICS PVT. LTD.IN TCA NO. 24 OF 2017, DATED 13.03.2017. PER CONTRA, THE DR RELIED ON THE ORDER OF THE CIT(A). 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE COPIES OF THE JUDGEMENTS RELIED ON BY THE AR. THE QUESTION AROSE IN THE CASE OF CIT, CENTRAL 1, CHENNAI VS M/S. CHETTINAD LOGISTICS PVT. LTD IN TCA NO. 24 OF 2017, DATED 13.03.2017IS EXTRACTED AS UNDER: THE ONLY ISSUE, WHICH AROSE FOR CONSIDERATION, BEF ORE THE TRIBUNAL, WAS, WHETHER AN ADDITION MADE IN THE SUM OF RS. 86, 62,748/- QUA, THE ASSESSEE, BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, READ WITH, RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT, THE RUL ES) WAS VALID. 5.1 THE OPERATIVE PORTION OF THE JUDGMENT IS EXTRAC TED AS UNDER: 16. TO OUR MINDS, QUESTIONS OF LAW, WHICH COULD H AVE ARISEN ARE ALREADY COVERED BY THE JUDGEMENT OF A CO-ORDINATE B ENCH OF THIS COURT RENDERED IN M/S. REDINGTON (INDIA) LIMITED CASE. :-5-: I.T.A. N0. 1091/MDS/2017 5.2 THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF REDINGTON (INDIA) LTD. VS. ADDL CIT IN TCA NO. 520 OF 2016 DATED 23.12.2016 HE LD THAT IN CONCLUSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 14A R.W.R. 8D OF THE RULES CANNOT BE MADE APPLICABLE IN A VACUUM I.E. IN THE ABSENCE OF EXEMPT INCOME. SINCE IN THIS CASE, THERE IS NO EXEMPT INCOME, APPLYING THE RATIOS IN THE ABOVE JUDGEMENTS, THE IMPUGNED ADDITION IS DELETED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 12 TH DAY OF SEPTEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 12 TH SEPTEMBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF