St. John Freight Systems Ltd., CHENNAI V. DCIT, Madurai

ITA 1124/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7793 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D N KAR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Opportunity of being heard; Earning of tax free income; Reasonable cause; Commercial expediency; Condonation of delay; Reassessment proceedings
• Section: 14A; 80IB; 148; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.1124/MDS/2015 # % &% / ASSESSMENT YEAR : 2011-2012 M/S. ST. JOHN FREIGHT SYSTEMS LTD, NO. C-98, SIPCOT COMPLEX, HARBOUR, TUTICORIN 628 008. [PAN AAACS 4697N] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, MADURAI. ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADV +,'( ) * /RESPONDENT BY : SHRI. D.N. KAR, CIT ! ) - / DATE OF HEARING : 14-01-2016 ./& ) - / DATE OF PRONOUNCEMENT : 17-03-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-19, CHE NNAI IN ITA NO.359/14-15, DT 30.01.2015 FOR THE ASSESSMENT YEAR 2011-2012 ITA NO.1124/MDS/2015 :- 2 -: PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS (I) THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE DENIAL OF DEDUCTION U/S.80IA OF THE ACT BY THE ASSESSING OFFI CER ON THE TECHNICAL GROUNDS AS RETURN OF INCOME WAS FILED AFT ER DUE DATE U/S.139(1) OF THE ACT (II) THE COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF =17,19,907/ - AS EXPENDITURE U/S.14A R.W.R. 8D. 3. THE BRIEF FACTS OF THE CASE, THE ASSESSES COMPANY I S IN THE BUSINESS OF LETTING OUT HEAVY EQUIPMENTS ON HIRE, G OODS TRANSPORTATION AND VESSEL CHARTERING AT TUTICORIN. THE ASSESSEE H AS FILED RETURN OF INCOME ELECTRONICALLY ON 31.03.2013 WITH TOTAL INC OME OF =5,31,75,204/- AND WAS PROCESSED U/S.143(1) OF THE ACT ON 13.03.2014 UNDER SCRUTINY NORMS, NOTICE U/S.143(2) OF THE ACT WAS ISSUED AND IN COMPLIANCE TO NOTICE, THE LD. AUTHORI SED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILE D DETAILS AND EXPLANATIONS. THE ASSESSING OFFICER HAD CONSIDERED THE SUBMISSIONS AND THE FINANCIAL STATEMENTS AND FOUND THAT ASSESS EE HAS CLAIMED DEDUCTION U/S.80IA =4,44,77,323/- BUT AS PER THE PR OVISIONS OF SEC. 80AC OF THE ACT DEDUCTION SHALL BE ALLOWED ON FILIN G RETURN OF INCOME WITHIN DUE TIME U/S.139(1) OF THE ACT. ON APPLICA TION OF THE ABOVE ITA NO.1124/MDS/2015 :- 3 -: PROVISIONS DUE DATE APPLICABLE TO THE ASSESSEE COMP ANY IS 30.09.2011 WHEREAS ASSESSEE FILED RETURN OF INCOME BELATEDLY O N 31.03.2013. THE LD. AUTHORISED REPRESENTATIVE SUBSTANTIATED THE DEL AY OCCURRED DUE TO TECHNICAL ISSUES AND RELIED ON THE DECISION OF BANG ALORE BENCH OF ITAT IN THE CASE OF M/S. VANSHEE BUILDERS AND DEVELOPERS P. LTD IN ITA NO.286/BAN/2012, DATED 07.012.2012 AND ARGUED THAT THE PROVISIONS OF SEC. 80AC ARE ONLY DIRECTORY AND NOT MANDATORY PROVIDED THE ASSESSEE EXPLAIN REASONABLE CAUSE FOR FILING RETURN OF INCOME BELATEDLY U/S.139(4) OF THE ACT. THE LD. AUTHORISED REPRESEN TATIVE FILED EXPLANATION ON REASONABLE CAUSE FOR DELAY THROUGH L ETTER DATED 27.03.2014 PAGE 2 OF ASSESSING OFFICER ORDER :- 1. THE COMPANY HAS 15 BRANCHES ALL OVER INDIA. 2. A SEARCH WAS CONDUCTED ON 01.10.09 AND THE SEARCH ASSESSMENTS WERE COMPLETED IN DECEMBER,2011. ONLY A FTER COMPLETION OF SEARCH ASSESSMENTS, THE ACCOUNTS FOR THE F. Y. 2010-11 WAS TAKEN UP AND THE OPENING BALANCES HAVE BEEN BROUGHT FORWARD AFTER CHECKING CERTAIN IMPOUNDED RECORDS. 3. THE COMPANY HAS ABOUT 700 CUSTOMERS THROUGH OUT INDIA AND TDS QUANTUM FOR A.Y. 2011-12 IS =1,86,95,887. RECONCILIATION OF TDS WITH ACCOUNTS AND FORM 16AS A ND FROM 16AS WITH 26AS CREDITS TOOK CONSIDERABLE TIME AND H ENCE RETURN OF INCOME WAS FILED BELATEDLY AFTER COMPARIN G THE TDS IN FORM 16AS WITH CREDITS IN FORM 26AS. 4. AFTER COMPLETION OF THE AUDIT OF ACCOUNTS, THE DGM, FINANCE WHO HANDLED THE ACCOUNTS, LEFT THE COMPANY ABRUPTLY DUE TO FAMILY PROBLEM AS AND ALSO LEFT TUTICORIN. IT TOOK TIME FOR THE NEW INCUMBENT TO VERIFY THE CORRECTNESS OF TDS AND OTHER STATUTORY DISCLOSURES. ITA NO.1124/MDS/2015 :- 4 -: 5. FOR DEVELOPMENT OF THE COMPANY'S BUSINESS, THE MANA GING DIRECTOR OF THE COMPANY WAS FREQUENTLY ON BUSINESS TOUR AND HENCE CANNOT GIVE PROPER ATTENTION IN THE MATTER OF FILING RETURN OF INCOME. THE LD. ASSESSING OFFICER ACCEPTED THE INFORMATION BUT DISTINGUISHED THE FACTS OF THE CASE WITH THE DECISIONS RELIED BY THE ASSESSEE. FURTHER DELAY OF 18 MONTHS IS SUBSTANTIAL AND THERE IS NO REASONABLE CAUSE AND CIRCUMSTANCES WHICH PREVENTED THE ASSESSEE FOR NOT FILING RETURN OF INCOME ON OR BEFORE DUE DATE U/S.139(1) OF THE ACT. THE LD. ASSESSING OFFICER MADE A FINDING THAT CBDT HAS POWE R UNDER PROVISIONS OF SEC.119(2)(B) OF THE ACT TO CONDONE T HE DELAY IN FILING THE RETURN OF INCOME. FURTHER THE EXPLANATIONS ARE VER Y CLEAR FOR CLAIM OF DEDUCTION U/S.80IA OF THE ACT UNLESS ASSESSEE FILE S RETURN OF INCOME ON OR BEFORE DUE DATE U/S.139(1) OF THE ACT, NO DED UCTION IS ALLOWED AND ALSO OBSERVED THAT ASSESSEE HAS NOT MADE ANY CO NDONATION PETITION BEFORE CBDT TILL THE COMPLETION OF ASSESSM ENT AND DENIED DEDUCTION U/S.80IA OF THE ACT. AGGRIEVED BY THE OR DER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME T AX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE SUBSTANTIATED HIS ARGUMENTS ON THE F ACTS AND THE REASONS FOR DELAY IN FILING RETURN AND ALSO REITERA TED THE BUSINESS OPERATIONS OF THE ASSESSEE ON THE MANAGEMENT DECISI ON TO DE-MERGE ITA NO.1124/MDS/2015 :- 5 -: CERTAIN OPERATIONS FOR BETTER CONTROL AND MANAGEMEN T OF THE COMPANY. THE ASSESSEE COMPANY HAS FILED COMPANY APPLICATION ON 12.7.2010 IN THE HIGH COURT OF JUDICATURE AT MADRAS C.A. NOS.1 177 TO 1183 OF 2010. THE DE-MERGER OF THE OPERATIONS ARE TO BE EF FECTIVE RETROSPECTIVELY FROM 1 ST APRIL, 2009 BUT DUE TO VARIOUS REASONS, MANAGEMENT OF THE COMPANY DECIDED NOT TO PERUSE THE APPLICATIONS AND HONBLE HIGH COURT HAS PASSED ORDER PERMITTING THE WITHDRAWAL ON 08.06.2011. AND DUE TO SEARCH OPERATIONS U/S.132 OF THE ACT IN COMPANY ON 30.09.2009 THERE WAS CONFUSION IN LOOKIN G AFTER THE ACCOUNTS OF THE COMPANY AND WITH THE HELP OF ACCOUN TANT AND AUDITOR ULTIMATELY RETURN OF INCOME WAS FILED ON 31.03.201 3. THE COMPANY HAS FILED STATUTORY AUDIT REPORT WITH REGISTRAR OF COMPANIES ON 11.12.2013 AND THE LD. AUTHORISED REPRESENTATIVE PL EADED AS REASONABLE CAUSE FOR FILING RETURN OF INCOME BELATE DLY AND FURTHER RELIED ON JUDICIAL DECISIONS SUPPORTING REASONABLE CAUSE AND THE DIRECTIONS U/S.139(1) ARE ONLY DIRECTORY AND NOT MA NDATORY. THE LD. AUTHORISED REPRESENTATIVE EMPHASIZED ON JURISDICTI ONAL HIGH COURT AND APEX COURT DECISIONS THAT THE ASSESSEE COMPAN Y WAS PREVENTED FROM REASONABLE CAUSE FOR FILING RETURN OF INCOME W ITH THE DUE DATE U/SEC. 139(1) OF THE ACT AND SAME WAS FILED U/S.13 9(4) OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSID ERED THE GROUNDS, SUBMISSIONS, FACTS OF THE CASE, FINDINGS OF THE ASSESSING ITA NO.1124/MDS/2015 :- 6 -: OFFICER AND EXAMINED THE PROVISIONS OF SEC. 80AC OF THE ACT AND RELIED ON THE SPECIAL BENCH DECISION OF SAFFIRE GARMENTS VS. ITO (2012) 28 TAXMANN.COM 27 (RAJKOT) WERE TRIBUNAL HAS HELD THE PROVISIONS OF SEC.10A(1A) OF THE ACT ARE SIMILAR TO THE PROVISION S OF SEC.80AC AND DECISIONS OF APEX COURT AND HIGH COURTS WAS REFERRE D AND CONCLUDED THAT THE PROVISIONS OF SEC.139(1) OF THE ACT FOR FI LING OF RETURNS OF INCOME IS MANDATORY AND NO DEDUCTION WILL BE ALLO WED IF RETURN IS NOT FILED WITHIN THE TIME ALLOWED U/S.139(1) OF THE ACT . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO RELIED ON THE RECENT DECISION OF ITAT, CHANDIGARH BENCH IN THE CASE OF M /S. LAKSHMI ENERGY & FOODS LTD. VS. ACIT, (2014) 44 TAXMANN.COM 248 AND CONCLUDED THAT ASSESSEE COMPANY HAS NOT FILED RETU RN WITHIN STIPULATED TIME UNDER PROVISIONS OF SEC. 139(1) OF THE ACT HENCE NOT ENTITLED FOR DEDUCTION U/S.80IA OF THE ACT AND UPHO LD THE ORDER OF THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE CO MMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE FILED AN APPEAL B EFORE THE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE REITER ATED HIS SUBMISSIONS MADE BEFORE ASSESSING OFFICER AND FIRS T APPELLATE PROCEEDINGS. THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) RELIED ON THE SPECIAL BENCH DECISION AND NOT CONSIDERED SUFFI CIENT REASONABLE CAUSE OF NOT FILING RETURN OF INCOME U/S.139(1) OF THE ACT. THE ITA NO.1124/MDS/2015 :- 7 -: ASSESSEE COMPANY PAID SELF ASSESSMENT TAX AND FILED THE RETURN OF INCOME BELATEDLY U/S.139(4) OF THE ACT ON 31.03.20 13. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELIED ON SPEC IAL BENCH DECISION OF SAFFIRE GARMENTS (SUPRA) AND DISTINGUISHED THE CO-ORDINATE BENCH DECISIONS APPLICABLE TO THE ASSESSEE. FURTHER , THE LD. AUTHORISED REPRESENTATIVE SUPPORTED THE ARGUMENTS W ITH THE HYDERABAD BENCH TRIBUNAL DECISION IN THE CASE OF ITO VS. S. VENKATAIAH IN ITA NO.984/HYD/2011, DATED 31.05.2012 WHERE THE BENCH OBSERVED AT PAGE NO.13 OF ORDER. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THIS CASE ADMITTEDLY, THE AS SESSEE FILED THE RETURN OF INCOME ON 23.12.2008. THE DUE D ATE FOR FILING THE RETURN OF INCOME U/S. 139(1) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE CASE OF THE ASSESSEE IS 31.10.2008. AS SUCH THE RETURN FILED BY THE ASSESSEE IS BELATED. IN THIS THE ASSESSEE CLAIMED DEDUCTION U/S. 80IC OF THE ACT WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AS THE RETURN OF THE ASSESSEE WAS NOT FILED WITHIN THE TIME AS PRESCRIBED U/S. 139(1) OF THE ACT. THE ASSESSEE HAS GIVEN REASONS FOR DELAY IN FILING THE RETURN OF INCOME THAT THE ASSESSEE WAS PREPARING IT S ACCOUNTS THROUGH COMPUTER AND THE COMPUTER GOT CORRUPTED DUE TO VIRUSES AND IN SPITE OF CONTINUOUS EFFORTS BY THE COMPUTER TECHNICAL PERSONNEL TO RETRIEVE THE DATA IN TIME FOR FILING THE RETURN OF INCOME, PROBLEM PERSI STED IN THE SYSTEM. BY TRYING TO RETRIEVE THE DATA FOR 4 DAYS T HE REQUIRED DATA COULD NOT BE RETRIEVED AND THE BACKED UP DATA WERE AVAILABLE ONLY UP TO 31ST JANUARY, 2008 I N THE CD AND THE ENTIRE DATA FOR THE TWO MONTHS PERIOD, FEBRUARY AND MARCH, 2008, HAD TO BE RE-ENTERED INTO THE COMPUTER SYSTEM AGAIN. ON PREPARATION OF THE FINAL ACCOUNTS AND FINALISING OF STATUTORY AUDIT IT TOOK A LITTLE EXTRA TIME THAT RESULTED IN BELATED FILING OF RETURN OF I NCOME. THUS THERE WAS A DELAY OF 74 DAYS IN FILING THE RETURN O F INCOME WHICH IS BEYOND THE CONTROL OF ASSESSEE. THIS WAS A LSO CONFIRMED BY THE STATUTORY AUDITOR VIDE HIS LETTER DATED ITA NO.1124/MDS/2015 :- 8 -: 20.3.2011. BEING SO, IN OUR OPINION THERE IS A REAS ONABLE CAUSE FOR FILING THE RETURN OF INCOME BELATEDLY AND THIS IS BEYOND THE CONTROL OF THE ASSESSEE. WHEN THE SUBSTA NTIAL QUESTION OF JUSTICE INVOLVED TECHNICALITIES SHOULD BE IGNORED. FURTHER, WE ARE SUPPORTED BY THE ORDER OF THE TRIBUNAL IN ITA NOS. 1231 & 1199/HYD/2010 IN THE CA SE OF DCIT VS. M/SVEGA CONVEYORS & AUTOMATION LTD. ORDER DATED 31ST DECEMBER, 2010 WHEREIN IN PARA 5 OF THE ORDER THE TRIBUNAL HELD AS FOLLOWS: '5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES, AND OT HER MATERIAL AVAILABLE ON RECORD, INCLUDING THE CASE-LA W RELIED UPON BY THE PARTIES. IT IS AN UNDISPUTED FAC T THAT THE ASSESSEE IN THE PRESENT CASE HAS FILED THE AUDI T REPORT IN FORM LOCCB DURING THE COURSE OF REASSESSMENT PROCEEDINGS. THE ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER S. 80IB ON THE GROUND THAT THE AUDI T REPORT IN FORM 10CCB WAS NOT FILED ALONG WITH THE RETURN OF INCOME; OR WHETHER THE CIT(A) WAS CORRECT IN PROCEEDING ON THE BASIS OF FORM 10CCB FILED DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS AND DIRECTI NG THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASS ESSEE FOR DEDUCTION UNDER S. 80IB OF THE ACT. IT IS SETTL ED POSITION OF LAW, AS CONSISTENTLY HELD BY VARIOUS BE NCHES OF THIS TRIBUNAL AND AS HELD IN VARIOUS DECISIONS REFERRED TO BY THE CIT(A) IN THE IMPUGNED ORDER, TH AT THOUGH FILING OF AUDIT REPORT IN FORM 10CCB IS MANDATORY AND PREREQUISITE FOR DEDUCTION UNDER S. 80IB, NON-FILING OF THE SAME ALONG WITH THE RETURN OF INCOME IS ONLY A CURABLE DEFECT, AND ASSESSEE'S CLA IM FOR DEDUCTION HAS TO BE CONSIDERED ON ITS MERITS AS AND WHEN THE DEFECT IS CURED BY FILING FORM 10CCB. WE A RE FORTIFIED IN THIS BEHALF BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HEMSONS INDUSTRIES (SUPRA), RELIED UPON BY THE LEARNED COUN SEL FOR THE ASSESSEE. IT IS CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE'S CLA IM FOR DEDUCTION UNDER S. 80IB CAN BE ENTERTAINED AND EXAMINED ON MERITS, WHEN THE AUDIT REPORT IS FILED BEFORE THE COMPLETION OF ASSESSMENT, WHICH HAS NOT BEEN DONE IN THE PRESENT CASE, SINCE THE AUDIT REPO RT WAS FILED ONLY DURING THE COURSE OF REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER, WHI CH CANNOT END UP GIVING ADDITIONAL DEDUCTIONS/BENEFITS TO THE ASSESSEE. WE DO NOT FIND MERIT EVEN IN THIS CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE. ITA NO.1124/MDS/2015 :- 9 -: IN THE CASE OF HEMSONS INDUSTRIES (SUPRA), BEFORE T HE JURISDICTIONAL HIGH COURT, FOR ONE OF THE YEARS UND ER APPEAL BEFORE HONBLE HIGH COURT, VIZ., ASSESSMENT YEAR 1979-80, AUDIT REPORT WAS FILED DURING THE COU RSE OF RE-ASSESSMENT PROCEEDINGS AND IN RESPONSE TO THE SHOW-CAUSE NOTICE UNDER S. 148 ISSUED BY THE ASSESS ING OFFICER. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT CITED ABOVE, AMONG OTHERS, WE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). WE ACCORDIN GLY UPHOLD THE SAME AND REJECT THE GROUNDS OF THE REVEN UE IN THIS APPEAL. THE LD. AUTHORISED REPRESENTATIVE ALSO RELIED ON TH E DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF G. LAXMI DEVI VS. ACIT IN ITA NO.294/HYD/2012 AND EXPLAINED THAT THE REVENUE HAS FILED AN APPEAL AGAINST THE ITAT ORDER OF S. VENKATAIAH (SUPRA ) IN THE HIGH COURT OF ANDHRA PRADESH AND THE LORDSHIP HAVE CONFIRMED THE ORDER OF THE TRIBUNAL IN I.T..T.A. NO.114 OF 2013 A ND OBSERVED AS UNDER:- THE LEARNED TRIBUNAL ON FACT-FINDING HELD THAT TH ERE IS A REASONABLE CAUSE FOR FILING THE RETURN ON INCOME BELATEDLY AND THIS IS BEYOND THE CONTROL OF THE ASS ESSEE. ON THIS FACT-FINDING THE LEARNED TRIBUNAL HAS DISMI SSED THE APPEAL FILED BY THE REVENUE. THERE IS NO ELEME NT OF LAW INVOLVED IN THE APPEAL AND THE FACT-FINDING CAN NOT BE APPRECIATED BY THIS COURT. MOREOVER, THE TRIBUNAL HAS FOLLOWED ITS EARLIER ORDER IN ITA NO.1231 & 1199/HYD/2010 DATED 31.12.2010 IN THE CASE OF DCIT VS M/S. VEGA CONVEYORS & AUTOMATION LIMITED . FURTHER, THE ASSESSEE COMPANY TO SUBSTANTIATE ITS B ONAFIDE OF REASONABLE CAUSE BASED ON THE DIRECTIONS OF THE AS SESSING OFFICER FILED AN APPLICATION FOR CONDONATION OF DELAY IN FILING RETURN OF INCOME ITA NO.1124/MDS/2015 :- 10 -: BEFORE CBDT U/S.119(2)(B) OF THE ACT ON 03.07.20 14 AND PRAYED FOR ALLOWING THE DEDUCTION. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF LOWER AUTHORITIES AND DISTINGUISHED THE DECISION OF HIGH COURT OF ANDHRA PRADESH AND SPECIAL BENCH TRIBUNAL DECISION AND RELIED ON THE DECISION OF BOMBAY HIGH COURT CIT VS. SMT. GODAVARIDEVI SARAF 113 ITR 589 AND VEHEMENTLY OPPOSED TO THE GROUND OF THE ASSESSEE. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD, JUDICIAL DECISIONS CITED. THE LD. AUTHORIS ED REPRESENTATIVE ARGUED THAT THE RETURN OF INCOME COULD NOT FILED W ITHIN DUE DATE AND FILED DETAILED SUBMISSIONS IN ASSESSMENT AND APPELL ATE PROCEEDINGS RELYING ON THE DECISIONS OF CO-ORDINATE BENCH OF TH E TRIBUNAL. BUT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE DECISION OF SPECIAL BENCH IN THE CASE SAFFIRE GARMENTS(SUPRA) AND OVER RULED THE ASSESSEES OBJECTIONS AND OBSERVED FILING RETURN OF INCOME U/S.139(1) OF THE ACT IS MANDATORY. THE LD. AUTHORISED REPRES ENTATIVE DREW ATTENTION TO THE DECISION OF HYDERABAD BENCH, TRIBU NAL IN THE CASE OF S. VENKATAIAH (SUPRA) WERE DELAY IN FILING RETURN OF INCOME WAS CONDONED DUE TO TECHNICALITIES. SUBSEQUENTLY, ON A PPEAL BY REVENUE U/S.260A OF THE ACT THE HONBLE ANDHRA PRADESH HIGH COURT HAS ITA NO.1124/MDS/2015 :- 11 -: CONFIRMED THE ORDER OF THE TRIBUNAL IN I.T.T.A NO.1 14 OF 2013, DATED 26.06.2013. THE ANDHRA PRADESH HIGH COURT CONSIDER ED THE TECHNICALITIES AND CIRCUMSTANCES WERE THE ASSESSEE COULD NOT FILE THE RETURN. THE ASSESSEE COMPANY HAS MADE A APPLICATION ON 3.07.2014 WITH CBDT U/S.119(2)(B) OF THE ACT FOR CONDONOTION OF DELAY IN FILING RETURN OF INCOME. THE ASSESSEE DEMONSTRATED THE SUB MISSIONS MADE BEFORE THE CBDT. CONSIDERING THE FACTUAL ASPECTS, EVIDENCE, PROVISIONS OF LAW AND DECISIONS OF HIGH COURT AND T RIBUNAL RELIED BY THE ASSESSEE, WE ARE INCLINED TO REMIT THE ISSUE IN DISPUTE TO THE FILE OF ASSESSING OFFICER AS THE APPLICATION U/SEC. 119(2) (B) OF THE ACT IS PENDING WITH THE CBDT. THE ASSESSING OFFICER HAS TO PASS THE ORDER BASED ON THE DIRECTIONS FROM CBDT AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS G ROUND OF THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. THE NEXT GROUND RAISED BY THE ASSESSEE THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF =17,19,907/- U/S.14A R.W.R. 8D BY THE ASSESSING OFFICER. 9. THE ASSESSING OFFICER ON PERUSING THE FINANCIAL STA TEMENTS OF THE ASSESSEE COMPANY FOUND THAT ASSESSEE COMPANY HA S MADE ITA NO.1124/MDS/2015 :- 12 -: INVESTMENTS IN THE SHARES OF ITS SUBSIDIARY COMPANI ES. AND COULD NOT DISTINGUISH THE EXPENSES INCURRED FOR EARNING EXEMP T INCOME FROM INVESTMENTS AND CALCULATED DISALLOWANCE AS PER PROV ISIONS OF SEC. 14A R.W. RULE 8D =17,19,907/-. AGGRIEVED BY THE ADDITI ON, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME T AX (APPEALS). 10. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE REITERATED HIS SUBMISSIONS ON DISAL LOWANCE THAT THE ASSESSEE COMPANY MADE INVESTMENTS IN ASSOCIATE COM PANIES IN SAME LINE OF OPERATIONS FOR THE PURPOSE OF BUSINESS AN D PREDICTED FAVOURABLE FACTORS OF RELATIVELY HIGHER INCOME IN S UCCEEDING YEARS. THE ASSESSING OFFICER FAILED TO CONSIDER THE INCOME BEING EARNED IN FUTURE BY SUBSIDIARY COMPANIES. THE LD. COMMISSION ER OF INCOME TAX (APPEALS) HAS ACCEPTED THAT THE ASSESSEE COMPANY HAS MADE HUGE INVESTMENTS IN SUBSIDIARY COMPANIES AND WILL YIELD GOOD INCOME. THE LEGISLATIVE INTENT THAT THE EXPENSES INCURRED IN C ONNECTION WITH EARNING OF EXEMPTED INCOME CANNOT BE ALLOWED AND R ELIED ON THE DECISIONS OF APEX COURT AND JURISDICTIONAL HIGH CO URT AND CO-ORDINATE BENCH OF ITAT IN THE SOUTHERN PETRO CHEMICAL INDUSTRIES VS. DCIT 93 TTJ 161 THAT THE PROVISIONS OF SEC. 14A AND RULE 8D ARE AP PLICABLE AND IT WILL BE PROPER TO MAKE DISALLOWANCE OF PROPORTIO NATE MANAGEMENT ITA NO.1124/MDS/2015 :- 13 -: EXPENSES AND SUPPORTED THE DISALLOWANCE WITH THE D ECISION OF CHEMINVEST LTD VS. ITO 121 ITR 318(SB) WERE THE DIS ALLOWANCE UNDER PROVISIONS OF SEC. 14A SHALL APPLY IRRESPECTIVE OF ANY EXEMPTED INCOME IS RECEIVED OR EARNED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) CONCURRED WITH THE OBSERVATIO NS OF THE ASSESSING OFFICER AND CONFIRMED THE ORDER OF THE AS SESSING OFFICER. AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS), THE ASSESSEE ASSAILED AN APPEAL BEFORE THE TRIBUNAL . 11. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) ON THE FACTUAL ASPECTS AND PROVISIONS AND EXPENDITURE DISALLOWED. THE LD. AUT HORISED REPRESENTATIVE ACCEPTS THE PROVISIONS OF SEC.14A R .W. RULE 8D ARE APPLICABLE TO THE ASSESSEE COMPANY BUT THE DISALLOW ANCE IN RESPECT OF EXEMPTED INCOME IS ON A HIGHER SIDE COMPARED TO THE INVESTMENTS MADE OUT OF OWN FUNDS IN THE SUBSIDIARY COMPANIES. FURTHER NO EXPENDITURE WAS INCURRED FOR EARNING SUCH EXEMPTED INCOME. THE LD. ASSESSING OFFICER CALCULATED DISALLOWANCE U/SEC. 14 A R.W.RULE 8D WITHOUT GIVING PROPER REASONS FOR REJECTING THE AS SESSEES EXPLANATIONS AND THE PROVISIONS OF RULE 8D(2) SHALL APPLY ONLY WITH EXPENDITURE HAVING DIRECT NEXUS TO THE INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. FURTHER SUPPORTE D THE ARGUMENTS ITA NO.1124/MDS/2015 :- 14 -: WITH THE DECISION OF HIGH COURT OF PUNJAB AND HARYA NA IN THE CASE OF CIT VS. HERO CYCLES 323 ITR 518 AND DECISION OF DELHI TRIBUNAL IN THE CASES OF ACIT VS SUN INVESTMENTS 8 ITR(TRI) 33 AND DLF LTD VS. CIT WERE UNLESS ASSESSING OFFICER ESTABLISHES SPECIFIC EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME, NO DISAL LOWANCE CAN BE MADE. THE ASSESSEE COMPANY MADE INVESTMENTS IN SUBS IDIARY COMPANIES AND ALSO THE ASSESSEE COMPANY SHARE CAPIT AL, RESERVES AND SURPLUS AND DEPOSITS ARE MORE THAN THE INVESTMENTS MADE IN THE TAX FREE SECURITIES. THEREFORE, NO DISALLOWANCE U/S.14 A OF THE ACT IS WARRANTED SUPPORTED THE CASE WITH THE DECISIONS OF CIT VS. HDFC BANK (2014) 89 CCH 0185 (MUM), CIT VS. RELIANCE UTILITIE S 313 ITR 340(BOM) AND CIT VS. HOTEL SAVERA 239 ITR 795 (MAD) . THE RULE 8D (2) CALCULATION SHALL EXCLUDE THE INVESTMENTS MADE IN THE SUBSIDIARIES COMPANIES AND ALSO THE INTEREST ON BANK LOAN OF SPE CIFIC PROJECTS BE EXCLUDED FOR DISALLOWANCE. THE LD. AUTHORISED REPR ESENTATIVE SUBMITTED AUDITED FINANCIAL STATEMENTS AND DREW ATT ENTION TO THE INVESTMENTS SCHEDULE AND EXPENDITURE. FURTHER DEMO NSTRATED THAT THE INVESTMENT IN SUBSIDIARY COMPANIES ARE OUT OF INTER EST FREE FUNDS AND SAME SHALL BE EXCLUDED FOR THE PURPOSE OF DISALLOWA NCE UNDER RULE 8D AND PRAYED FOR ALLOWING THE APPEAL. ITA NO.1124/MDS/2015 :- 15 -: 12. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND JUDICIAL DECISI ONS SUPPORTING THE DISALLOWANCE AND OPPOSED TO THE GROUNDS OF THE ASSE SSEE. 13. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTHO RISED REPRESENTATIVE ARGUED THAT THE INVESTMENT IN SUBSIDIARY COMPANIES ARE MADE OUT OF INTEREST FREE FUNDS AND INVESTMENT WILL EARN FUTUR E BUSINESS AND PROFIT TO THE ASSESSEE COMPANY. THE ASSESSEE MADE SUBSTA NTIAL INVESTMENT IN SHARES OF SUBSIDIARY COMPANIES NOT TO EARN EXEMP TED INCOME BUT BECAUSE OF COMMERCIAL EXPEDIENCY. WE ON PERUSAL OF THE FINANCIAL STATEMENTS AS PER OF SCHEDULE 6 TO THE BALANCE SHEE T, THERE IS AN INCREASE OF INVESTMENTS IN SHARES AND GOVERNMENT SE CURITIES OF =90 CRORES COMPARED TO EARLIER YEAR AND ALSO AS PER TH E NOTE 2 TO THE ACCOUNTS, THE INVESTMENTS ARE MADE IN THE SUBSIDIAR Y COMPANIES IN FOREIGN COUNTRIES. THE INCOME FROM SUBSIDIARY COMP ANIES HAS TO BE CONSIDERED ON DOUBLE TAXATION AVOIDANCE AGREEMENTS (DTAA) BETWEEN COUNTRIES. AND PRIME FACIE THERE IS NO IN FORMATION OF ANY INCOME RECEIVED BY THE ASSESSEE COMPANY FROM THE FO REIGN SUBSIDIARIES AND ASSESSING OFFICER HAS NOT REFERRED THE WORKING SHEET OF CALCULATION OF DISALLOWANCE WERE SUCH FOREIGN IN VESTMENTS ARE KEPT OUTSIDE THE SCOPE OF PROVISIONS OF SEC. 14A OF THE ACT. THEREFORE, ITA NO.1124/MDS/2015 :- 16 -: CONSIDERING THE APPARENT FACTS AND INVESTMENT PATTE RN, WE SET ASIDE THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFF ICER TO VERIFY THE APPLICATION OF PROVISIONS TO FOREIGN SUBSIDIARY COM PANY AND SHALL PASS THE ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 17TH DAY OF MAR CH, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI. 0 / DATED: 17.03.2016 KV 1 ) +#-23 43&- / COPY TO: 1 . '( / APPELLANT 3. ! 5- () / CIT(A) 5. 3 89 +#-# / DR 2. +,'( / RESPONDENT 4. ! 5- / CIT 6. 9:% ; / GF