Sundaram Industries Private Limited, Madurai V. DCIT, Madurai

ITA 136/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6372 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 17-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S A BALASUBRAMANYAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.136/MDS/2017 ' (' / ASSESSMENT YEAR : 2007-08 M/S SUNDARAM INDUSTRIES PVT. LTD., CORPORATE OFFICE, 211, SOUTH VELI STREET, MADURAI 625 001. PAN : AABCS 5320 H V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI 625 002. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI S.A. BALASUBRAMANYAN, ADVOCAT E ,-*+ . / / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 0 . 1$ / DATE OF HEARING : 27.07.2017 2!( . 1$ / DATE OF PRONOUNCEMENT : 23.08.2017 / 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)-1, MADURAI , DATED 07.10.2016 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. SHRI S.A. BALASUBRAMANYAN, THE LD.COUNSEL FOR TH E ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER MADE AN ADDITION OF 2 I.T.A. NO.136/MDS/17 ` 37,09,480/- UNDER SECTION 14A OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. COUNSEL, TH E ASSESSEE HAS MADE INVESTMENT IN SUBSIDIARY COMPANIES AND SISTER CONCERN FOR THE PURPOSE OF BUSINESS. THE INVESTMENT WAS MADE IN TH E EARLIER ASSESSMENT YEARS AND NO EXPENDITURE WAS INCURRED. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE INVE STED ITS OWN SURPLUS FUNDS IN THE SUBSIDIARY COMPANIES AND SISTE R CONCERN AND RECEIVED DIVIDEND INCOME. SINCE NO EXPENDITURE WAS INCURRED, ACCORDING TO THE LD. COUNSEL, THERE CANNOT BE ANY D ISALLOWANCE EVEN ON ESTIMATE BASIS. THE LD.COUNSEL PLACED HIS RELIANCE ON THE JUDGMENT OF APEX COURT IN GODREJ & BOYCE MANUFACTUR ING CO. LTD. V. DCIT (2017) 394 ITR 449. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUN T FOR THE PURPOSE OF INVESTMENT MADE IN SUBSIDIARY COMPANIES. REFERRING TO THE JUDGMENT OF APEX COURT IN GODREJ & BOYCE MANUFA CTURING CO. LTD. (SUPRA), THE LD.COUNSEL SUBMITTED THAT THE ASS ESSING OFFICER HAS TO SATISFY HIMSELF WITH REGARD TO ACCOUNTS OF T HE ASSESSEE THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE. SUCH A SATISFACTION WAS NOT RECORDED BY THE ASSESSING OFFICER. SINCE T HE SURPLUS FUNDS WERE USED FOR INVESTMENT IN EARLIER ASSESSMENT YEAR S, THE 3 I.T.A. NO.136/MDS/17 CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ORD ER OF THE ASSESSING OFFICER . 3. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE HAS EARNED ` 18,54,74,008/- AS DIVIDEND INCOME. HOWEVER, THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE FOR EARNIN G DIVIDEND INCOME. THE LD. D.R. FURTHER SUBMITTED THAT THE CI T(APPEALS) BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN M /S SRI VISHNU SPINNING MILLS IN I.T.A. NO.1592/MDS/2004 DATED 10. 03.2006 CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS BEFORE THIS TRIBUNAL THAT NO BORROWED FUNDS WERE USED FOR MAKING INVESTMENT AND THE INVESTMENT WAS MADE ONLY IN SISTER CONCERN AND SUBSIDIARY COMPANIES. FROM THE MATERIA L AVAILABLE ON RECORD, IT APPEARS THAT THE ASSESSEE HAS BORROWED L OAN FROM THE BANKS / FINANCIAL INSTITUTIONS. THE JUDGMENT OF AP EX COURT IN GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) IS A RECENT ONE. BOTH THE AUTHORITIES BELOW HAD NO OCCASION TO CONSIDER THE S AME. SINCE THE ASSESSEE CLAIMS THAT ONLY SURPLUS FUNDS WERE USED I N MAKING INVESTMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE MATTER 4 I.T.A. NO.136/MDS/17 NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER TO FIND OUT WHAT WERE THE SURPLUS FUNDS AVAILABLE ON THE DATE OF INV ESTMENT MADE BY THE ASSESSEE. MOREOVER, THE JUDGMENT OF APEX COURT IN GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA) ALSO NEEDS TO BE CONSIDERED BY BOTH THE AUTHORITIES. ACCORDINGLY, THE ORDERS O F THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE DISALLOWANCE MAD E BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT IS R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL RE- EXAMINE THE MATTER AFRESH AND BRING ON RECORD THE A VAILABLE SURPLUS FUNDS WITH THE ASSESSEE ON THE DATE OF INVESTMENT A ND THE DETAILS OF THE LOAN BORROWED AND THEREAFTER DECIDE THE ISSUE I N ACCORDANCE WITH LAW IN THE LIGHT OF THE JUDGMENT OF APEX COURT IN GODREJ & BOYCE MANUFACTURING CO. LTD. (SUPRA). 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23 RD AUGUST, 2017 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 23 RD AUGUST, 2017. KRI. 5 I.T.A. NO.136/MDS/17 . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-1, MADURAI 4. PRINCIPAL CIT-1, MADURAI 5. 69 ,1 /DR 6. :' ; /GF.