Tamilnadu Industrial Development Corporation Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1267/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7640 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 26-05-2015
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Earning of tax free income; Tangible material; Difference of opinion; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 1267/MDS/2015 / ASSESSMENT YEAR : 2008-09 M/S. TAMILNADU INDUSTRIAL DEVELOPMENT CORPORATION LTD., NO.19A, RUKMANI LAKSHMIPATHY SALAI, EGMORE, CHENNAI 8. PAN AAACT3409P APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-3(1), CHENNAI 34. RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI M.M.BHUSARI, CIT ! / DATE OF HEARING : 02.03.2016 '# ! / DATE OF PRONOUNCEMENT: 30.03.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 19 .3.2015 FOR THE ASSESSMENT YEAR 2008-09. ITA 1267/15 2 2. THE FIRST GROUND FOR OUR CONSIDERATION IN THIS A PPEAL IS WITH REGARD TO REOPENING OF ASSESSMENT. 3. THE LD. AR SUBMITTED THAT THE COMMISSIONER OF IN COME- TAX(APPEALS) ERRED IN CONFIRMING THE REOPENING OF T HE ASSESSMENT U/S.147 AS THE ASSESSEE HAD FURNISHED ALL THE MATER IALS AND PARTICULARS FULLY AND TRULY WHILE COMPLETING THE AS SESSMENT U/S.143(3). FURTHER, THE LD. AR SUBMITTED THAT TH E ASSESSING OFFICER HAS NO REASON TO BELIEVE OR NO EVIDENCE OR ANY INFORMATION TO SHOW THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED. HENCE, REOPENING OF THE ASSESSMENT U/S.148 CANNOT BE INVOK ED, WHICH IS ONLY MERE CHANGE OF OPINION. REOPENING OF ASSESSME NT ON THE SAME SET OF FACTS AND WITHOUT ANY TANGIBLE MATERIAL WOULD AMOUNT TO CHANGE OF OPINION, CIT V. KELVINATOR INDIA LTD. 321 ITR 566(SC). THE LD. AR FURTHER SUBMITTED THAT THE COM MISSIONER OF INCOME-TAX(APPEALS) ERRED IN ADJUDICATING THE ISSUE WHICH WAS NOT AN ISSUE IN THE REASON FOR REOPENING THE ASSESSMENT . THE ASSESSING OFFICER REOPENS THE ASSESSMENT TO TREAT C APITAL GRANTS RECEIVED UNDER ASIDE SCHEME AS REVENUE RECEIPT, A S AGAINST THE CLAIM OF THE ASSESSEE AS CAPITAL RECEIPT BUT HE HAS NOT MADE ANY DISALLOWANCE ON THE REASON HE REOPENED THE ASSE SSMENT. HE ITA 1267/15 3 ERRED IN DISALLOWING U/S.14A BY APPLYING RULE 8D, W HICH THE AO WAS ALREADY DISALLOWED U/S.14A WHILE COMPLETING ASSESSMENT U/S.143(3) DATED 16.9.2010. THE LD. AR FURTHER SUBMITTED THAT UNLESS THE ASSESSING OFFICER ASSESSE S THE INCOME WITH REFERENCE TO WHICH HE HAD FORMED A REASON TO B ELIEVE WITHIN THE MEANING OF SECTION 147, IT WOULD NOT BE OPEN TO HIM TO ASSESS OR REASSESS ANY OTHER INCOME CHARGEABLE TO TAX WHIC H HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SU BSEQUENTLY IN THE COURSE OF THE PROCEEDINGS. ASSESSEE RELIES ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD. REPORTED IN 331 ITR 236. 4. THE LD. DR SUBMITTED THAT THERE IS NO ISSUE BEFO RE THE COMMISSIONER OF INCOME-TAX(APPEALS) WITH REGARD TO REOPENING OF ASSESSMENT AND IT CANNOT BE CONSIDERED AT THIS STAG E. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. FURTHER, THE KARNATAKA HIGH COURT IN THE C ASE OF N. GOVINDARAJU V. ITO AND ANOTHER (377 ITR 243), HELD THAT IN VIEW OF EXPLANATION 3 TO SEC.147 OF THE ACT, THE ASSESSI NG OFFICER IS EMPOWERED TO MAKE ADDITION EVEN ON GROUND ON WHICH REASSESSMENT NOTICE MIGHT NOT HAVE BEEN ISSUED, THE REFORE, IF ITA 1267/15 4 NOTICE U/S.148(2) IS FOUND TO BE VALID THEN ADDITI ON CAN BE MADE ON ALL GROUNDS OF ISSUES WHICH MAY COME TO THE NOTI CE OF THE AO, SUBSEQUENTLY, DURING THE COURSE OF PROCEEDINGS U/S. 147, EVEN THOUGH REASON FOR NOTICE FOR SUCH INCOME WHICH MA Y HAVE ESCAPED ASSESSMENT, MAY NOT SURVIVE. IN VIEW OF TH IS, IN OUR OPINION, IF THE AO CONSIDERED THE ISSUE AFRESH IN T HE REASSESSMENT PROCEEDINGS REGARDING DISALLOWANCE U/S .14A R.W. RULE 8D OF THE I.T. RULES, IT CANNOT BE SAID THAT T HE AO EXCEEDS HIS JURISDICTION. ACCORDINGLY, WE UPHOLD THE REASS ESSMENT. 6. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD SE C.14A R.W. RULE 8D OF THE I.T. RULES. 7. THE CONTENTION OF THE LD. AR IS THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF PROMOTION OF INDUSTRIES IN THE STATE OF TAMILNADU. THE LD. AR SUBMITTED THAT THE ASSESSEE INCURRED PROJECT EXPENSES TOWARDS PURSUE ITS OBJECTS WHICH I S FINANCED AND PROMOTED INDUSTRIAL DEVELOPMENT THROUGH PARTNERSHIP WITH PRIVATE ENTERPRISES. IN THE COURSE OF CARRYING ON THE BUSI NESS, THE ASSESSEE GOT ALLOTTED SHARES ON WHICH THE ASSESSEE EARNED EXEMPT INCOME. ACCORDING TO THE LD. AR, THIS STRAT EGIC INVESTMENT ITA 1267/15 5 MADE BY THE ASSESSEE CANNOT BE CONSIDERED FOR DISAL LOWANCE U/S.14A R.W. RULE 8D. 8. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE RE IS A BINDING DECISION OF THE TRIBUNAL, CHENNAI BENCH IN THE CASE OF M/S. LAKSHMI RING TRAVELLERS V. ACIT IN ITA NO.2083 /MDS/2011 DATED 2.3.2012, WHEREIN IT WAS HELD THAT IRRESPECT IVE OF WHETHER EXPENDITURE INCURRED OR NOT, THE SAME IS LIABLE TO BE DISALLOWED AS PER THE PROVISIONS OF SEC.14A R.W.R 8D. THE RELEVA NT PORTION OF THE ORDER OF THE TRIBUNAL CITED SUPRA IS AS UNDER : RULE 8D HAS ALREADY BEEN PRESCRIBED. SUB- SEC.(3) FURTHER PROVIDES THAT EVEN IN A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED, THE ASSESSING AUTHORITY HAS TO PRESUME THE INCURRING OF SUCH EXPENDITURE AS PROVIDED UNDER SUB-SEC.(2) READ WITH RULE PRESCRIBED. THEREFORE, IT BECOMES CLEAR THAT EVEN IN A CASE WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS SO INCURRED, THE STATUTE HAS PROVIDED FOR A PRESUMPTIV E EXPENDITURE WHICH HAS TO BE DISALLOWED BY FORCE OF THE STATUTE. IN A DISTANT MANNER, LITERALLY SPEAK ING, IT MAY EVEN BE CONSIDERED FOR THE PURPOSE OF CONVENIENCE AS A DEEMING PROVISION. WHEN SUCH DEEMING PROVISION IS MADE ON THE BASIS OF STATUTORY PRESUMPTION, THE REQUIREMENT OF FACTUAL EVIDENCE IS REPLACED BY STATUTORY PRESUMPTION AND THE ASSESSING OFFICER HAS TO FOLLOW THE CONSEQUENCES STATED IN THE STATUTE. IT MEANS THAT EVEN IN A CAS E WHERE NO EXPENDITURE IS STATED TO HAVE BEEN INCURRED, THE ASSESSING AUTHORITY HAS TO APPLY RULE 8D. ITA 1267/15 6 FOLLOWING THE AFORESAID DECISION, THE CIT(APPEALS) DISMISSED THE GROUNDS TAKEN BY THE ASSESSEE. AGAINST THIS, THE A SSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THE MAIN PLEA OF THE LD. AR IS THAT THE ASSESSEE IN THE COURSE OF CARRYING ON ITS BUSINESS, GOT ALLOTTED SHARES FROM THE PRIVATE ENTERPRISES ON WHICH THE AS SESSEE EARNED INCOME AND THIS CANNOT BE CONSIDERED FOR DIS ALLOWANCE U/S.14A R.W.R 8D AS STRATEGIC INVESTMENT. WE FIND THAT THE CONTENTION OF THE ASSESSEE HAS TO BE UPHELD AS IT W AS SUBMITTED THAT THE SAME VIEW HAS BEEN TAKEN BY THE TRIBUNAL I N THE CASE OF SHRIRAM CAPITAL LTD. IN ITA NOS.512 & 513/MDS/2016 DATED 5.6.2015, WHEREIN IT WAS HELD THAT STRATEGIC INVES TMENT SHALL NOT BE CONSIDERED FOR DISALLOWANCE U/S.14A R.W.R 8D. HOWEVER, WE MAKE IT CLEAR THAT OTHER THAN STRATEGIC INVESTMENT MADE WHICH ARE NOT RELATING TO THE DEVELOPMENT OF INDUSTRIES T O BE CONSIDERED FOR DISALLOWANCE U/S.14A R.W.R 8D. ACCORDINGLY, TH E AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE U/S.14A R.W. RULE 8D AND THIS ISSUE IS PARTLY ALLOWED. ITA 1267/15 7 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 30 TH OF MARCH, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 30 TH MARCH, 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.