Shriram Chits Tamilnadu Pvt. Limited, CHENNAI V. ACIT, Chengalput

ITA 1182/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58169 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 24-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: R SIVARAMAN
• Keywords: Depreciation; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 37; 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1182/MDS/2011 ASSESSMENT YEAR: 2008-09 SHRIRAM CHITS TAMILNADU PVT. LTD., 149, GREAMS ROAD, CHENNAI 600 006. [PAN:AABCS0167N] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI (2), CHENNAI. (APPELLANT) (RESPONDENT) I.T.A. NO. 1297/MDS/2011 ASSESSMENT YEAR: 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI (2), CHENNAI. VS. SHRIRAM CHITS TAMILNADU PVT. LTD., 149, GREAMS ROAD, CHENNAI 600 006. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE REVENUE BY : SHRI ANIRUDH RAI, CIT DATE OF HEARING : 15.03.2012 DATE OF PRONOUNCEMENT : 30.03.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THESE CROSS APPEALS, ONE BY THE ASSESSEE AND THE OT HER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A ) V, CHENNAI DATED 26.04.2011 IN ITA NO. 163/10-11 FOR THE ASSESSMENT YEAR 2008-09. SHRI R. SIVARAMAN, ADVOCATE REPRESENTED ON BEHALF OF THE AS SESSEE AND SHRI ANIRUDH RAI, CIT REPRESENTED ON BEHALF OF THE REVEN UE. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 2 2. IN ASSESSEES APPEAL, THERE ARE TWO GROUNDS AND THE FIRST GROUND IS AGAINST TREATING FOREMANS DIVIDEND OF ` .3,32,50,750/- AS INCOME OF THE ASSESSEE. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CHIT FUND, FILED ITS RETURN OF INCOME ON 29.09.2008 SHOWING TOTAL INCOME AT NIL AN D BOOK PROFIT AT ` .40,70,038/-. THE ASSESSMENT WAS COMPLETED UNDER SE CTION 143(3) OF THE ACT ON 14.12.2010 DETERMINING INCOME AT ` .23,82,39,440/-. 4. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER BROUGHT TO TAX FOREMANS DIVIDEND OF ` .3,32,50,750/- ON THE GROUND THAT FOREMAN COMMISSION IS INCOME IN THE HANDS OF THE ASSESSEE A ND THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL FOR EARLIER YEARS HOLDI NG THAT THE FOREMANS DIVIDEND IS ASSESSABLE TO TAX IN THE ASSESSEES OWN CASE. 5. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION MA DE BY THE ASSESSING OFFICER. 6. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE S UBMITTED THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 1661/MDS/ 2010 DATED 15.03.2011. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE OR DER OF THIS TRIBUNAL AND FIND THAT THIS ISSUE IS SQUARELY COVERED AGAINS T THE ASSESSEE BY THE ORDER OF THIS TRIBUNAL, WHEREIN IT WAS HELD AS UNDE R: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 3 3. NOW BEFORE US, LD. AR FAIRLY ADMITTED THAT THE ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUN AL FOR THE EARLIER ASSESSMENT YEARS. 07. IN ITS DECISION DATED 03.12.2010 IN ITA NO. 51 7/MDS/10, IT WAS HELD BY THE TRIBUNAL AS UNDER: 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE APPELLANT, A COMPANY, IS ENGAGED IN CHIT FUND BUSINESS. THE ON LY ISSUE INVOLVED IN THIS APPEAL IS REGARDING TAXING OF FORE MANS DIVIDEND AMOUNTING TO `.3,35,37,414/-. THE APPELLAN T COMPANY SUBSCRIBED TO CHITS CONDUCTED BY ITSELF AND ALSO RE CEIVED DIVIDEND, BUT WHILE COMPUTING ITS TOTAL INCOME, DIV IDEND RECEIVED WAS CLAIMED AS EXEMPT FROM TAX IN TERMS OF PRINCIPLES OF MUTUALITY, BUT THIS CLAIM OF THE ASSESSEE COULD NOT BE ALLOWED IN VIEW OF THE DECISION OF THE CHENNAI BENCH OF THI S TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1997-98 IN ITA NO. 45/ MDS/2001 DATED 17.02.2006. AGGRIEVED, THE ASSESSEE WENT BEFO RE THE CIT(A), WHO ALSO DID NOT GIVE ANY RELIEF TO THE ASS ESSEE. HENCE ASSESSEE IS IN APPEAL BEFORE US. 3. BEFORE US, IT HAS BEEN AGAIN PLEADED THAT ASSES SEE IS ENTITLED TO EXEMPTION OF TAX ON FOREMANS DIVIDEND BUT THIS BENCH HAS BEEN TAKING CONSISTENT VIEW IN ASSESSEES OWN CASE THAT SUCH DIVIDEND EARNED WHEN COMPANY HAS SUBSCRIB ED TO CHITS CONDUCTED BY ITSELF AND HAS ALSO RECEIVED DIVIDEND, THE SAME IS NOT EXEMPT FROM TAX. THEREFORE, BY FOLLOWING THE CO NSISTENT VIEW TAKEN BY THIS BENCH, WE CANNOT ALLOW THIS GROUND OF THE ASSESSEE. RESPECTFULLY FOLLOWING THIS DECISION, WE DISMISS TH E APPEAL OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR ALSO. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE D ISMISS THIS GROUND OF APPEAL OF THE ASSESSEE ON THIS ISSUE. 9. THE SECOND ISSUE IN ASSESSEES APPEAL IS AGAINS T CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE E XTENT OF ` .5,13,800/- BY APPLYING RULE 8D R.W.S. 14A OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 4 10. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OF FICER THAT IT HAD NOT INCURRED ANY EXPENDITURE IN EARNING DIVIDEND INCOME OF ` .5,13,800/- FOR MAKING INVESTMENT IN EQUITY SHARES OF CITY UNION BA NK LTD. IT WAS SUBMITTED THAT THESE INVESTMENTS WERE MADE LONG BACK FROM ITS OWN FUNDS AND FURTHER IT HAD RECEIVED DIVIDEND BY WAY OF ONE DIVIDEND WAR RANT. HENCE, ADMINISTRATIVE EXPENDITURE FOR DEPOSITING THE DIVID END WARRANT WOULD BE MINIMAL AND SUBMITTED THAT IT IS FAIR AND PROPER TO RESTRICT THIS DISALLOWANCE TO ` .5,000/- ONLY AT THE MOST. HOWEVER, THE ASSESSING O FFICER WHILE COMPLETING THE ASSESSMENT, APPLIED RULE 8 D R.W.S. 14A(2) AND COMPUTED THE EXPENDITURE ATTRIBUTABLE TO EARNING DIVIDEND INCOME , WHICH IS EXEMPT FROM TAX AT ` .19,81,900/-. SINCE THE ASSESSEE RECEIVED ONLY ` .5,13,800/- DIVIDEND, HE RESTRICTED THE DISALLOWANCE TO ` .5,13,800/-. 11. THE CIT(A) CONFIRMED THE DISALLOWANCE STATING THAT THE ASSESSEE COULD NOT ABLE TO JUSTIFY AS TO HOW THIS DISALLOWAN CE IS RESTRICTED TO ` .5,000/- WHILE THE ASSESSING OFFICER HAS GIVEN PROPER REASON ING FOR THE DISALLOWANCE. 12. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIALS PLACED ON RECORD. WE FIND NO REASON TO INTERFERE WITH THE ORD ER OF THE CIT(A) ON THIS ISSUE AND CONFIRM THE ORDER OF THE CIT(A) ON THIS I SSUE. ACCORDINGLY, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. I.T.A. NO. 1297/MDS/11: 13. THE FIRST ISSUE IN THE APPEAL OF THE DEPARTMEN T IS AGAINST DELETING DISALLOWANCE OF BAD DEBTS OF ` .21,45,81,730/- BY CIT(A). I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 5 14. THE ASSESSING OFFICER WHILE COMPLETING THE ASS ESSMENT DISALLOWED BAD DEBTS OF ` .21,45,81,730/- CLAIMED BY THE ASSESSEE. 15. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT THIS ISSUE WAS ALREADY ADJUDICATED BY THIS TRIBUNAL IN I.T.A. NO. 1632/MDS/2003 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000-01 . 16. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 17. WE HAVE GONE THROUGH THE ORDER OF THIS TRIBUNA L IN ASSESSEES OWN CASE IN I.T.A. NO. 1512/MDS/2010 DATED 24.06.2011 F OR THE ASSESSMENT YEAR 2003-04, WHEREIN SIMILAR ISSUE WAS DECIDED IN FAVOU R OF THE ASSESSEE AND AGAINST THE DEPARTMENT. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUNAL, WE DISMISS THIS GROUND OF APPEAL OF THE DEPARTMENT ON THIS ISSUE. 18. THE SECOND ISSUE IN THE APPEAL OF THE REVENUE IS AGAINST CIT(A) ORDER DELETING THE ADDITION OF ` .64,36,466/- MADE TOWARDS ROYALTY BY THE ASSESSING OFFICER. 19. THE ASSESSING OFFICER, WHILE COMPLETING THE AS SESSMENT, TREATED THE ROYALTY OF ` .85,81,955/- PAID BY THE ASSESSEE TO ITS HOLDING CO MPANY M/S. SHRIRAM CHITS AND INVESTMENTS PVT. LTD. AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION ON SUCH ROYALTY AS AGAINST ASSESSEES CLAIM FOR ALLOWING ROYALTY AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 6 20. THE CIT(A), BY FOLLOWING THIS TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR EARLIER YEARS ALLOWED THE APPEAL OF THE ASSESSE E HOLDING THAT THE ROYALTY PAID BY THE ASSESSEE IS REVENUE EXPENDITURE. 21. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ITS ORDER I N I.T.A. NO. 1512/MDS/2010 DATED 24.06.2011, WHEREIN THIS TRIBUN AL HELD THAT THE ROYALTY PAYMENT IS REVENUE EXPENDITURE. 22. WE HAVE GONE THROUGH THE ORDER OF THIS TRIBUNA L AND FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL AT PARA 7 OF ITS ORDER, WHICH READS AS UNDER: 7. IN GROUNDS 5.1 & 5.2 THE REVENUE HAS CHALLENGE D THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF ROYALTY. AT THE TIME OF HEARING IT WAS FAIRLY AGREED BY BOTH THE SIDES T HAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF M/S. SHRIRAM TRANSPORT FIN ANCE CO. LTD. AND M/S. SHRIRAM CITY UNION FINANCE CO. LTD. IN ITA NOS . 725 & 726/MDS/2010 DATED 16.12.2010 WHEREIN THE TRIBUNAL HAD HELD THAT THE PAYMENT MADE FOR THE USE OF THE LOGO IS REVENUE IN NATURE BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF JONAS WOODHEAD AND SONS (INDIA) LTD. V. CIT REPORTED IN 2 24 ITR 342 (SC). IN THE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL, THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 23. RESPECTFULLY FOLLOWING THE ORDER OF THIS TRIBUN AL IN ASSESSEES OWN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 1182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 182 & 1297/M/11 7 CASE FOR EARLIER YEARS, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE ON THIS ISSUE. 24. IN THE RESULT, BOTH THE APPEAL OF ASSESSEE IN I.T.A. NO. 1182/MDS/2011 AND THE APPEAL OF THE REVENUE IN I.T.A. NO. 1297/MD S/2011 ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30.03.2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 30.03.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.