Chettinad Logistics (P) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1388/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9215 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS VIJAYALAKSHMI IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Search and seizure; Earning of tax free income; Revised return
• Section: 142(1); 14A

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.1388/MDS/2015 $ & !'& / ASSESSMENT YEAR : 2010-11 M/S. CHETTINAD LOGISTICS (P)LTD, 5 TH FLOOR, RANI SEETHA HALL, 603, ANNA SALAI, CHENNAI 600 006. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI. ./ I.T.A. NO.1647/MDS/2015 $ & !'& / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF M/S. CHET TINAD LOGISTICS (P)LTD, INCOME TAX, VS 5 TH FLOOR, RANI SEETHA HALL CORPORATE CIRCLE I(2), A NNA SALAI CHENNAI 600 034 C HENNAI 600 006. ( PAN NO.AABCC4551C) /APPELLANT ) ( /RESPONDENT ) ASSESSEE BY : SHRI. S. SRIDHAR, ADVOCATE. DEPARTMENT BY : MRS. VIJAYALAKSHMI, IRS, CIT. ' ! ( ) / DATE OF HEARING : 10-03-2016 *+' ( ) / DATE OF PRONOUNCEMENT : 07-06-2016 ITA NO.1388 & 1647/2015. :- 2 -: / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THESE CROSS-APPEALS FILED BY THE REVENUE AND ASSES SEE RESPECTIVELY, IS DIRECTED AGAINST ORDER OF THE COM MISSIONER OF INCOME- TAX (APPEALS)-1, CHENNAI IN ITA NO.283/13-14/A.1, DT 27.03.2015 FOR THE ASSESSMENT YEAR 2010-2011 PASSED U/S.143(3) AN D 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. FIRST WE TAKE UP ASSESSEE APPEAL IN ITA NO.1388/MD S/2015 OF ASSESSMENT YEAR 2010-2011 FOR ADJUDICATION:-. TH E ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDINGS OF THE L D. ASSESSING OFFICER IN REJECTING SALE OF TRANSFER OF WINDMILL DIVISION WITHOUT APPRECIATING PROVISIONS OF SEC. 2(42C) R.WS. 2(19AA) OF THE ACT WHICH WERE WRONGLY INTERPRETED AND FURTHER COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE COMPUTATION OF LONG TERM CAPITAL GAIN S ON LAND AND SHORT TERM CAPITAL GAINS ON TRANSFER OF WIND MILL WITHOUT APPRECIATING THE FACTS AND LAW. 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CLEARING, FORWARDING, MANUFACTURING , TRADING AND SHIP MANGEMENT SERVICES AND FILED RETURN OF INCOME ON 1 5.10.2010 WITH TOTAL INCOME OF =18,68,93,580/-. SUBSEQUENTLY FILED REVISED RETURN ON ITA NO.1388 & 1647/2015. :- 3 -: 28.02.2011 WITH TOTAL INCOME OF =27,44,14,678/- AND THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143 (2) AND 142(1) OF THE ACT DATED 25.08.2011 WAS ISSUED. IN COMPLIANC E TO NOTICES, THE LD. AUTHORISED REPRESENTATIVE APPEARED FROM TIME TO TIME AND SUBMITTED DETAILS. THE LD. ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS OFFERED LON G TERM CAPITAL GAINS ON SALE OF ASSET =10,49,12,310/- BEING DIFFE RENCE IN VALUE OF SALE CONSIDERATION =12,96,00,000/- AND NET WORTH OF ASSETS TRANSFERRED =2,46,87,690/-. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AS PER MEMORANDUM OF UNDERSTANDING (MOU) WITH CLARION WIND FARM PVT. LTD THE SALE OF PROJECT ASSETS, BEING LA ND AND WINDMILL FOR A LUMPSUM AMOUNT OF =12,96,00,000/- AND FOR THE PURPO SE OF CALCULATING NET WORTH, THE ASSESSEE ALSO CONSIDERED LIABILITIES AND SUPPORTED WITH THE MOU DATED 11.12.2009 FOR CLAIM OF SLUMP SALE U/ S.50B OF THE ACT. THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE COM PUTATION OF NET WORTH AS PER FORM 3CEA. THE LD. ASSESSING OFFICER PERUSED THE MOU WITH CLARION WIND FARM PVT. LTD AND VERIFIED THE CLAUSES REFERRED AT PAGE 3 OF HIS ORDER AND CAME TO A CONCLUSION THAT A SSETS OF THE ASSESSEE ARE ONLY PROJECT ASSETS WITH 24 NOS. O F WIND ENERGY GENERATORS AND LAND MEASURING 97.58 ACRES AND THE MOU DOES NOT SPECIFY ANY INFORMATION OF ANY OTHER ASSET. THE A SSESSEE HAS CALCULATED NET WORTH BASED ON VALUE MOVABLE ASSETS WHICH THE LD. ITA NO.1388 & 1647/2015. :- 4 -: ASSESSING OFFICER HAS DISPUTED AND SENT LETTER DATE D 14.03.2013 AND IN COMPLIANCE THE REPLY WAS FILED ON THE QUERY OF THE FIXED DEPOSIT, BANK BALANCES AND OTHER AND ASSESSEE HAS REFERRED TO P ROVISIONS OF SEC. 2(42C) OF THE ACT AS UNDER:- AS PER SECTION 2(42C) SLUMP SALE MEANS THE TRANSFER OF ONE OR MORE UNDERTAKING AS A RESULT OF SALE FOR A LUMP SUM CONSIDERATION WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALE. AND ALSO EXPLANATION 1 TO CLAUSE (19AA) STATES THAT UNDERTAKING SHALL INCLUDE ANY PART OF THE UNDERTAKING OR A UNIT OR DI VISION OF UNDERTAKING OR A BUSINESS ACTIVITY AS A WHOLE. WE HAVE TRANS FERRED OUR MAIN BUSINESS ACTIVITY ASSETS VIZ LAND AND WINDMILL FOR A LUMPSUM CONSIDERATION WITHOUT ASSIGNING ANY VALUES TO INDIV IDUAL ASSETS. HENCE, THIS TRANSACTION IS SLUMP SALE AS PER SECTIO N 2(42C) .THE LD. AUTHORISED REPRESENTATIVE EXPLAINED THE MODE OF COM PUTATION OF NET WORTH AS PER THE PROVISIONS OF SEC. 50B OF THE ACT. CONSIDERING THE ASSESSEES CALCULATION STATEMENTS AND MOU, THE L D. ASSESSING OFFICER IS OF THE OPINION THAT THE ASSESSEE HAS ONLY SOLD PROJECT ASSETS BEING 24 NOS. OF WINDMILLS AND LAND AND THE SLUMP SALE I S NOTHING BUT TRANSFER OF WHOLE OR PART OF BUSINESS CONCERN AS A GOING CONCERN AS LOCK, STOCK AND BARREL. AS PER THE PROVISIONS OF I NCOME TAX ACT, ITA NO.1388 & 1647/2015. :- 5 -: FURTHER THE TRANSFER SHALL BE THE ENTIRE UNDERTAKIN G INCLUDING THE ASSETS AND LIABILITIES OF SUCH UNDERTAKING WITHOUT ASSIGNI NG ANY VALUE TO THE INDIVIDUAL ASSETS AND SOLD FOR A LUMP SUM CONSIDERA TION. THE LD. ASSESSING OFFICER EXAMINED THE AUDIT REPORT FORM 3 CEA AND UNDERSTOOD THAT THE NET WORTH OF UNDERTAKING SHALL BE THE VALUE OF ASSET TRANSFERRED BY WAY OF SLUMP AT WRITTEN DOWN VALUE OR BOOK VALUE. BUT, THE ASSESSEE HAS SOLD THE PROJECT ASSET S BEING ONLY LAND AND WINDMILL AND NOT ENTIRE UNDERTAKING AND WRONGLY CALCULATED COMPUTATION OF THE NET WORTH BASED ON MOU WITH M/S . CLARION WIND FARM P. LTD AND THE SALE WAS REGISTERED IN FAVOUR OF OTHERS. THE LD. ASSESSING OFFICER WITH THESE FINDINGS AND OBSERVATI ONS HAS CALCULATED SEPARATELY LONG TERM CAPITAL GAINS ON SALE OF LAND =11,94,569/- AND SHORT TERM CAPITAL GAINS =11,77,17,195/- ON TRANSFE R OF WIND MILLS CONSIDERING THE WRITTEN DOWN VALUE OF WIND MILLS AND ASSESSED INCOME AND PASSED ORDER U/S.143(3) OF THE ACT DATED 27.03.2013. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEA L BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS AND EXPLAINED TH E FACTS AND THE PROVISIONS OF SLUMP SALE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS, GROUNDS AND T HE FINDINGS OF THE LD. ASSESSING OFFICER AND DEALT ON THE PROVISIONS O F SEC.50B OF THE ACT ITA NO.1388 & 1647/2015. :- 6 -: AND THE METHODOLOGY OF CALCULATION OF LONG TERM GA IN GAINS ON LAND =11,94,569/- AND SHORT TERM CAPITAL GAINS ON WINDMI LLS =11,77,17,195/- REFERRED AT PAGE 4 OF HIS ORDER AN D RELIED ON THE DEFINITION OF PROVISIONS OF SEC.50B AND SEC.2(42C) OF THE ACT ON SLUMP SALE AT PAGE 5 OF HIS ORDER AS UNDER:- SEC. 2(42C) SLUMP SALE MEANS THE TRANSFER O F ONE OR MORE UNDERTAKINGS AS A RESULT OF THE SALE FOR A LUM P SUM CONSIDERATION, WITHOUT VALUES BEING ASSIGNED TO THE INDIVIDUAL ASSETS AND LIABILITIES IN SUCH SALES. EXPLANATIONS: 1. FOR THE PURPOSES OF THIS CLAUSE, UNDERTAKING S HALL HAVE THE MEANING ASSIGNED TO IT IN EXPLANATION 1 TO CLAUSE (19AA). 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE DETERMINATION OF THE VALUE OF AN ASSET OR LIABILITY FOR THE SOLE PURPOSE OF PAYMENT OF STAMP DUTY, REGISTRATION FEES OR OTHER SIMILAR TAXES OR FEES SHALL NOT BE REGARDE D AS ASSIGNMENT OF VALUES TO INDIVIDUAL ASSETS OR LIABIL ITIES . THE DEFINITION OF UNDERTAKING AS PER EXPLANATION 1 TO CLAUSE 19AA IS AS UNDER:- EXPLANATIONS : 1. FOR THE PURPOSES OF THIS CLAUSE, UNDERTAKING SHALL INCLUDE ANY PART OF AN UNDERTAK ING, OR A UNIT OR DIVISION OF AN UNDERTAKING OR A BUSINESS ACTIVITY TAKEN AS A WHOLE, BUT DOES NOT INCLUDE INDIVIDUAL A SSETS OR LIABILITIES OR ANY COMBINATION THEREOF NOT CONST ITUTING A BUSINESS ACTIVITY . AS SEEN FROM THE ABOVE PROVISIONS, THE SLUMP SALE W OULD MEAN THE TRANSFER OF ENTIRE UNDERTAKING OR DIVISION BUT NOT ITA NO.1388 & 1647/2015. :- 7 -: INDIVIDUAL ASSETS/LIABILITIES. ASSESSING OFFICER I S RIGHT IN HOLDING THAT THE APPELLANT HAS TRANSFERRED ONLY THE WINDMILL AND THE LAND APPURTENANT THERETO BUT NOT THE ENTIRE ASS ETS AND LIABILITIES OF THE UNDERTAKING OR DIVISION, THEREFO RE, THE APPELLANT IS NOT ENTITLED TO CLAIM SLUMP SALE BENEFIT U/S.50B . I FULLY AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER AND TH E REWORKING OF THE CAPITAL GAINS OF LAND AND WINDMILL FOR THE P URPOSE OF TAXATION. THE GROUND IS DISMISSED. AND UPHELD THE ORDER OF THE ASSESSING OFFICER. AGG RIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASS ESSEE FILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE IN THE ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. THE ONLY PO INT OF DISPUTE IS WHETHER SLUMP SALE HAS TO BE CONSIDERED FOR INDIV IDUAL ASSETS OR UNDERTAKING. THE LD. AUTHORISED REPRESENTATIVE SUB MITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE FINDINGS OF THE LD. ASSESSING OFFICER IN REJECTING THE CLAIM OF COMPUTATION OF SLUMP SALE U/S.50B OF THE ACT WEREAS THE ASSESSEE HAS C LAIMED SLUMP SALE AS PER PROVISIONS OF SEC. 2(42C) R.W.S. 2(19AA) OF THE ACT WHICH THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS WRONGLY IN TERPRETED. THE LD. ASSESSING OFFICER CALCULATED LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS SEPARATELY WHICH IS NOT IN ACCORDANC E OF LAW. THE LD. ITA NO.1388 & 1647/2015. :- 8 -: AUTHORISED REPRESENTATIVE FILED PAPER BOOK TO EXPL AIN THE FACTS AND A SUPPORT HIS SUBMISSIONS. THE WINDMILLS ARE TRANSFE RRED AS LOT AND CALCULATION OF NET WORTH BASED ON THE ASSET AND LIA BILITIES IS IN ACCORDANCE WITH LAW. THE NAME CHANGE IN TRANSACTIO N AFTER MOU IS SUPPORTED BY THE EVIDENCE IN THE PAPER BOOK. WITH THESE SUBMISSIONS, THE LD. AUTHORISED REPRESENTATIVE PRAYED FOR ALLOWI NG THE APPEAL. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS ) AND ASSESSING OFFICER AND THE CALCULATION OF NET WORTH BY THE ASS ESSEE RELYING ON THE MOVABLE ASSETS CANNOT BE CONSIDERED AS SLUMP SALE, UNDER TRANSACTION OF SLUMP SALE TOTAL UNDERTAKING SHOULD BE SOLD AN D TRANSFERRED AS LOCK, STOCK AND BARREL BUT THE ASSESSEE COMPANY HA S SOLD INDIVIDUAL ASSETS. THE LD. ASSESSING OFFICER HAS MADE ELABORAT E DISCUSSIONS AND CALCULATIONS IN ASSESSMENT ORDER AND DISALLOWED TH E CLAIM AND PRAYED FOR DISMISSING THE ASSESSEE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE LD. AUTHORISED REPRESENTATIVE CONTENTI ON THAT AS PER MOU WITH M/S. CLARION WIND FARM P. LD, THE ASSESSEE HAS TO SELL THE WIND FARM WITH 24 NOS OF WEGS INCLUDING LAND MEASURING 9 7.58 ACRES ITA NO.1388 & 1647/2015. :- 9 -: REFERRED AS PROJECTS ASSET AND ALSO NO OTHER LI ABILITIES SHALL BE TAKEN OVER. THE LD. AUTHORISED REPRESENTATIVE REFERRED TO THE PAGE 122 OF PAPER BOOK AND EXPLAINED THE TERMS AND CONDITIONS I N RESPECT OF TRANSFER OF UNDERTAKING AND THE METHODOLOGY OF CAL CULATION OF NET WORTH AS PER FORM 3CEA OF THE CHARTERED ACCOUNTANT S REPORT. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT NET WORTH OF THE UNDERTAKING IS AGGREGATE VALUE OF ASSETS AND REDUCED BY THE LI ABILITIES AND AS PER THE PROVISIONS OF SEC. 2(42C) OF THE ACT AND EXPLAN ATION 1 TO CLAUSE 2 (19AA). THE LD. AUTHORISED REPRESENTATIVE EXPLAINE D THE UNDERTAKING SHALL INCLUDE ANY PART OF UNDERTAKING OR UNIT OR DI VISION OF UNDERTAKING OR A BUSINESS ACTIVITY AS A WHOLE LAND AND WINDMI LLS AND SUPPORTED WITH THE LETTER OF TAMIL NADU ELECTRICITY BOARD TO M/S. SHRIRAM EPC LTD FOR TRANSFER OF WINDMILLS. THE LD. AUTHORISED REPR ESENTATIVE ARGUED ON THE TRANSFER OF WIND MILLS TO M/S. SHRIRAM EPC LT D AS THE BUSINESS UNDERSTANDING AND MOU WERE M/S. CLARION WIND FAR P. LTD DIRECTING THE ASSESSEE COMPANY TO RAISE PROFORMA INVOICE IN T HE NAME OF M/S. SHRIRAM EPC LTD AS ASSIGNEE. THE LD. AR DEMONSTRAT ED THE VALUE AND CALCULATION OF SLUMP SALE WHICH THE ASSESSING OFFIC ER HAS CONSIDERED IN THE ASSESSMENT ORDER AND TO SUBSTANTIATE THE CLAIM REFERRED TO THE ANNUAL REPORT FOR THE YEAR 2006-07, 2007-08 AND 200 8-2009. ON PERUSAL OF THE BALANCE SHEET AS ON 31.03.2009 UNDER FIXED ASSET SCHEDULE V, THE ASSESSEE COMPANY HAS SHOWN THE LAND AND ITA NO.1388 & 1647/2015. :- 10 -: WINDMILLS DIVISION IN THE BALANCE SHEET AND OTHER ASSETS IN THE FIXED ASSET SCHEDULE ARE EXCLUDED FROM SLUMP SALE. PRIME FACE AS PER THE MEMORANDUM OF ASSOCIATION THE ASSESSEES MAIN OBJE CT IS AS UNDER:- 1)TO OPERATE AND PLAN MOVEMENT OF GOODS AND VEHIC LES AND TO ENTER INTO CONTRACT FOR CARRIAGE OF MAILS, PASSENG ERS, GOODS AND CARGO OF ANY KIND BY ANY MEANS AND EITHER BY ITS OW N VEHICLES OR CHARTERED OR THROUGH RAILWAYS AND OTHER CONVEYANCES . 2) TO ESTABLISH, MAINTAIN AND OPERATE SHIPPING AIR TRANSPORT AND SURFACE TRANSPORT SERVICES AND ALL ANCILLARY SERVICES EITHER AS INDEPENDENT UNDERTAKINGS OR TO P URCHASE, TO TAKE ON LEASE CHARTER, HIRE, CONSTRUCT OR OTHERWISE ACQUIRE AND TO WORK, MANAGE AND TRADE . 3) TO UNDERTAKE TECHNICAL MANAGEMENT AND CREWING O F ALL TYPES OF SHIPS, TUGS AND BARGES. 4) TO UNDERTAKE AND CARRY ON ALL OR ANY OF THE TRAD E WITH SHIPPERS, SHIP OWNERS, SHIP SURVEYORS, MANAGERS, SH IP BROKERS, SHIPPING AGENTS AND INSURANCE BROKERS, MARINE AVERA GE ADJUSTERS, ARBITRATORS, LOADING BROKERS, FREIGHT CO NTRACTORS ARID CLEARING AND FORWARDING AGENTS, STEVEDORES, COLLECT ION AND DELIVERY OF ANY TYPE OF SHIPS AND VESSELS FROM ANY PART OF THE WORLD, SALVAGE, TOWAGE, STORAGE AND OTHER ASSOCIATE D TECHNICAL SERVICES AS WOULD BE NECESSARY AND CARRIERS BY LAND , AIR AND WATER AND TO CARRY 'ON THE SAID BUSINESS EITHER AS PRINCIPALS OR AGENTS OR COMMISSION OR OTHER WISE. * INSERTED BY SPECIAL RESOLUTION PASSED AT THE EXTRAORDINARY GENERAL MEETING OFTHE COMPANY HELD ON 30TH DECEMBER, 2013 5) TO OPERATE, PLAN MOVEMENT, PURCHASE, SELL, IMPOR T, EXPORT, DEAL AND TRADE IN TEXTILES, COTTON FABRICS YARNS, T HREADS FOR TEXTILE USE, TEXTILES AND TEXTILE GOODS, BED AND TABLE COVE RS, LACE AND EMBROIDERY, RIBANDS AND BRAID, BUTTONS PRESS BUTTON S, HOOKS AND EYES, PIN AND NEEDLESS, ARTIFICIAL FLOWERS, CARPET, RUGS, MATS AND MATTING, LINOLEUMS AND OTHER MATERIALS FOR COVERING EXISTING FLOORS, WALL HANGINGS (NON TEXTILE) ROPES, STRINGS, NET, TENTS, AWNING, TARPAULINS, SAILS, SACKS AND BAGS, PASSING AND STUFFING COAL, LIMESTONE, GYPSUM, SILICA, UNWROUGHT AND PART LY WROUGHT COMMON METALS AND THEIR OLLYS, METAL BUILDING MATER IALS, TRANSPORTABLE BUILDINGS OF METAL, MATERIALS OF META L FOR RAILWAY TRACKS, NON ELECTRIC CABLES AND WIRES OF COMMON MET AL, ITA NO.1388 & 1647/2015. :- 11 -: IRONMONGERY, SMALL ITEMS OF METAL HARDWARE, PIPES A ND TUBES OF METALS, SAFES, GOODS OF COMMON METAL AND ORES, PREC IOUS METALS AND THEIR ALLOYS AND GOODS IN PRECIOUS METALS OR CO ATED THEREWITH (EXCEPT CUTLERY, FORKS AND SPOONS) JEWELLERY, PRECI OUS STORIES, HOROLOGICAL, CHRONOMETRIC INSTRUMENTS, MINERALS AND ALL OTHER GOODS. THE CONTENTION OF THE LD. DR THAT IT IS A SALE OF INDIVIDUAL ASSET CONSISTING OF LAND AND WINDMILLS. AFTER SALE THE A SSESSEE COMPANY STILL HOLDS ASSETS AND THE SALE WAS ONLY RESTRICTED TO WIND MILLS AND LAND AND THE ONLY DISPUTE WHETHER SLUMP SALE HAS TO BE C ONSIDERED FOR INDIVIDUAL ASSETS OR UNDERTAKING. THE LD. AUTHORIS ED REPRESENTATIVE RELIED ON TRIBUNAL DECISION IS IN RESPECT OF SOFTWA RE COMPANY WERE THE INTANGIBLE ASSETS AS GOING CONCERN ARE CONSIDERED, WE ARE NOT CONCEIVED WITH THE ARGUMENTS OF THE LD. AR AS THE ASSESSEE COULD FUNCTION ON TANGIBLE ASSETS AND TRANSFER OF WINDMI LLS AND LAND IS SUFFICIENT TO CONTINUE OPERATIONS. THE CONSIDERATI ON SPECIFIED IN THE AGREEMENT FOR TRANSFER OF PROJECT ASSETS HAS BE EN SPLIT INTO WINDMILLS AND LAND BUT STILL THE COMPANY HOLDS ASSETS IN THE BALANCE SHEET WEREAS THE SLUMP SALE IS DEFINED UNDER SEC. 2(42C) OF THE ACT BEING SALE FOR LUMP SUM CONSIDERATION WITHOUT ASSIGNING A NY VALUES TO THE INDIVIDUAL ASSETS AND LIABILITIES. THE ASSESSEES C OMPANY FIXED DEPOSITS AND CURRENT ASSETS STILL EXIST IN THE BALANCE SHEE T AND LIABILITIES ARE NOT TRANSFERRED ALONGWITH UNDERTAKING BUT ONLY TRANSFER OF PROJECT ASSETS. THE MOU WITH M/S. CLARION WIND FARM P. LTD EXCLUD E FIXED DEPOSITS, ITA NO.1388 & 1647/2015. :- 12 -: RECEIVABLES AND OTHER CURRENT ASSETS AND NOT SALE B Y A LOCK, STOCK AND BARREL BUT INDIVIDUAL ASSETS . CONSIDERING THE AP PARENT FACTS, JUDICIAL DECISIONS, FINDINGS OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS), ANNUAL REPORTS AND PAPER BOOK, WE ARE OF THE OPINIO N THAT TRANSACTION DOES NOT FIT IN THE CATEGORY OF SLUMP SALE AND IT I S IN THE NATURE OF SALE OF INDIVIDUAL ASSET THOUGH PROJECTED AS PROJECT A SSET IN THE MOU. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) WHO HAS DEALT EXHAUSTIVELY ON THE FACTS AND THE PROVISIONS AND FINDINGS OF THE ASSESSING OFFICER AND WE UPHOLD THE SAME. THIS GROUND OF THE ASSESSEE IS DISMISSED. 8. THE NEXT GROUND RAISED BY THE ASSESSEE ON DISALLOWA NCE U/S.14A OF THE ACT. THE ASSESSEE HAS MADE INVESTME NTS IN SHARES AND LISTED GROUP COMPANIES AND INCURRED INTEREST EXPENS ES OF =20,20,495/- IN THE FINANCIAL YEAR 2009-2010. THE ASSESSEE HAS NOT DISALLOWED ANY EXPENSES AS NO DIVIDEND WAS RECEIVED DURING TH E FINANCIAL YEAR 2009-2010 AND WEREAS FOR THE FINANCIAL YEAR 2008-2 009, DIVIDEND INCOME RECEIVED WAS =8,61,500/-. THE ASSESSEE COMP ANY INVESTMENTS AS ON 31.03.2010 ARE =173,20,05,925/- AND THESE IN VESTMENTS INCLUDES GROUP COMPANIES WERE THE ASSESSEE COMPAN Y HAS SUBSTANTIAL EQUITY SHARES IN DURANDEL FOOD PVT. LTD . IN COMPLIANCE TO THE LETTER OF THE ASSESSING OFFICER, THE ASSESSEE COMPANY EXPLAINED ITA NO.1388 & 1647/2015. :- 13 -: THAT COMPANY HAS NOT RECEIVED ANY DIVIDEND INCOME A ND THEREFORE PROVISIONS OF SEC. 14A OF THE ACT ARE NOT APPLICABL E. THE LD. ASSESSING OFFICER CONSIDERED THE SUBMISSIONS AND FOUND THAT T HE ASSESSEE COMPANY HAS CLAIMED SUBSTANTIAL ADMINISTRATIVE AND PERSONAL EXPENSES IN THE PROFIT AND LOSS ACCOUNT AND ALSO UNDER OTHER HEADS OF EXPENDITURE, BEING BANK CHARGES, PRINTING & STATIO NERY, TRAVELLING EXPENSES, AUDIT FEES WHICH ARE INCIDENTAL TO THE A DMINISTRATION OF THE COMPANY. THE SUBMISSIONS OF THE ASSESSEE THAT IT H AS NOT INCURRED ANY EXPENDITURE DOES NOT HAVE RATIONALITY AS THE IN VESTMENTS ARE IN LISTED COMPANIES AND GROUP COMPANIES. CONSIDERING THE PROVISIONS OF SEC. 14A R.W.R. 8D. THE LD. ASSESSING OFFICER MADE DISALLOWANCE OF =82,71,382/-. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 9. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE HAS ARGUED THE GROUNDS AND SUBMITTE D THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE AND THE PROVISIONS INVOKING DISALLOWANCE U/S.14A R.W.RULE 8D ARE INAPPLICABLE AND EXPLAINED THE FACTS AND FILED OBJECTIONS AS REFERRED BY THE COMMI SSIONER OF INCOME TAX (APPEALS) AT PAGE 11 OF HIS ORDER WITH JUDICIAL DECISIONS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS EXHAUSTIVE LY DEALT ON THE APPLICABILITY OF PROVISIONS OF SEC. 14A OF THE ACT, FINANCE ACT, TRIBUNAL ITA NO.1388 & 1647/2015. :- 14 -: AND HIGH COURT DECISION FROM PAGE NO. 12 TO 16 OF H IS ORDER AND DISTINGUISHED THE DECISIONS RELIED BY THE ASSESSEE AND RELIED ON THE JURISDICTIONAL HIGH COURT DECISION AND CONFIRMED TH E APPLICABILITY OF PROVISIONS OF SEC. 14A R.W.RULE 8D AND PARTIALLY GR ANTED RELIEF TO EXCLUDE INVESTMENTS IN SUBSIDIARY COMPANIES FOR CAL CULATION OF RULE 8D AND OBSERVED AT PAGE 18 OF HIS ORDER AS UNDER:- IT IS ALSO TO BE NOTED THAT INVESTMENT IN SUBSIDI ARIES ALSO WILL NOT MAKE MUCH DIFFERENCE WHEN IT IS THE QUESTION OF INT EREST DISALLOWANCE SO LONG AS THERE WAS EXPENDITURE INVOL VED WHILE EARNING SUCH EXEMPT INCOME. AS WAS ALREADY POINT OU T 14A PROVISIONS ARE DISALLOWANCE PROVISIONS AND SO LONG AS THERE IS AN INVESTMENT IN EXEMPT INCOME EARNING AVENUES THE EXP ENDITURE NEED TO BE DISALLOWED IRRESPECTIVE OF WHETHER THE I NVESTMENT IS IN SUBSIDIARIES OR OTHER CONCERNS AND WHETHER THERE WAS AN INTENTION TO EARN DIVIDENDS OR NOT. IT IS ALSO IMMA TERIAL WHETHER SUCH DIVIDENDS WERE DERIVED DURING THE YEAR OR NOT. (IV) WITH REGARD TO APPLICABILITY OF LIMB (III) OF RULE 80(2) THE DECISION IN THE CASE OF ESCORTS LTD, 102 TT J 522, THE ITAT DELHI HAS CLEARLY HELD THAT INDIRECT MANAGEMEN T AND ADMINISTRATION EXPENSES QUALIFY FOR DISALLOWANCE U/ S 14A AND THERE IS NO DECISION SO FAR BY ANY SIMILAR FORUM CO NTRADICTING THE ABOVE FINDINGS. SIMILAR VIEW WAS ALSO TAKEN BY ITAT CHENNAI IN THE CASE OF SOUTHERN PETROCHEMICAL INDUSTRIES (93 T T J 161) AS UNDER: '.WHETHER TO INVEST OR NOT TO INVEST AND WHETHER TO RETAIN THE INVESTMENTS OR TO LIQUIDATE THE SAME ARE ITA NO.1388 & 1647/2015. :- 15 -: VERY STRATEGIC DECISIONS WHICH THE MANAGEMENT IS CALLED UPON TO TAKE. THESE ARE MIND-BOGGLING DECISIONS AND TOP MANAGEMENT IS INVOLVED IN TAKING THESE DECISIONS. THIS DECISION-MAKING PROCESS IS VE RY COMPLICATED AND REQUIRES VERY CAREFUL ANALYSIS. MOREOVER, THE ASSESSEE HAD TO KEEP TRACK OF VARIOUS DIVIDEND INCOMES DECLARED BY THE INVESTEE COMPANIES AND ALSO TO KEEP TRACK OF THE DIVIDEND INCOME HAVIN G BEEN REGULARLY RECEIVED BY THE ASSESSEE. THAT ACTIV ITY ITSELF CALLED FOR CONSIDERABLE MANAGEMENT ATTENTION AND COULD NOT BE LEFT TO A JUNIOR CLERK. THIS VIEW HAS BEEN FURTHER SUPPORTED BY THE DECISIO N OF HON'BLE KERALA HIGH COURT IN THE CASE OF SMT. LEENA RAMACHA NDRAN (2011) (339 ITR 293) (KERALA HC). 6.2.4 IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSIN G OFFICER IS RIGHT IN INVOKING THE PROVISIONS OF S.14A AND WORKI NG OF DISALLOWANCE AS PER RULE 80. HOWEVER, AS PART OF TH E INVESTMENT MADE IS IN THE SUBSIDIARIES, THE ASSESSING OFFICER IS DIRECTED TO ELIMINATE THE INVESTMENT MADE IN SUCH SUBSIDIARIES WHILE WORKING OUT AVERAGE INVESTMENT AS PER RULE 80(2)(II) AND (I II) IN VIEW OF THE DECISION OF THE JURISDICTIONAL IT AT IN THE CAS E OF EIH ASSOCIATED HOTELS LTD (SUPRA). THE GROUND IS PARTLY ALLOWED. AND PARTLY ALLOWED THE GROUND. AGGRIEVED BY THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASS ESSEE HAS ASSAILED AN APPEAL BEFORE TRIBUNAL. 10. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS AND THE ASSESSEE COMPANY HAS NOT RECEIVED EXEMPTED INCOME AND LOWER AUTHORITIES RELIED ON THE PROVISI ONS OF SEC.14A ITA NO.1388 & 1647/2015. :- 16 -: R.W.RULE 8D WHICH ARE NOT APPLICABLE TO THE ASSESSE E AND REITERATED THE SUBMISSIONS MADE IN THE ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. THE MAIN CONTENTION OF THE AUTHORISED REPRESENTATIVE THAT ASSESSEE HAS NOT INCURRED ANY EXPENDITURE AND IF ANY DISALLOWANCE AS THE PROVISIONS SHOULD BE RESTRICTE D TO EXEMPTED INCOME AND THE LD. COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING THE ADDITION AND PRAYED FOR DELETING THE ADDITION. 11. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND OPPOSED TO THE GROUNDS. 12. . WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE CRUX OF THE ISSUE BEING APPLICABILITY O F PROVISIONS OF SEC. 14A R.W.RULE 8D. AS PER THE AMENDMENT OF FINANCE AC T, 2008 W.E.F. 24.03.2008 AND APPLICABLE JUDICIAL DECISIONS, THE DISALLOWANCE UNDER SEC. 14A OF THE ACT HAS BECOME MANDATORY FOR THE ASSESSING OFFICER TO APPLY THREE LIMBS UNDER RULE 8D. ON PERUSAL OF THE FINANCIAL STATEMENTS, THE ASSESSEE COMPANY HAS MADE SUBSTANTI AL INVESTMENTS IN SUBSIDIARY AND GROUP COMPANIES AND CLAIMED EXPE NDITURE TOWARDS PERSONAL, ADMINISTRATIVE OVERHEADS IN THE PROFIT AN D LOSS ACCOUNT THOUGH INDIRECTLY RELATED TO THE INVESTMENTS AS MA NAGEMENT OF THE COMPANY HAS TAKEN POLICY AND STRATEGIC DECISIONS O N INVESTMENTS. THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE AS NO EXPENDITURE ITA NO.1388 & 1647/2015. :- 17 -: INCURRED IS RULED OUT AS INDIRECTLY INCLUDED IN THE FINANCIAL STATEMENTS AND ASSESSEE COMPANY HAS NOT IDENTIFIED DIRECT EXP ENDITURE. THE LD. ASSESSING OFFICER CONSIDERED THE APPLICABILITY AND HAS DEALT ON THE PROVISIONS AND CALCULATED AS PER LAW. THE LD. COM MISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE APPLICABILITY OF PR OVISIONS OF SEC. 14A R.W.RULE 8D. WE PERUSED THE ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS) FOUND THAT LD. CIT(A) HAS EXHAUSTIVEL Y DEALT ON THE PROVISIONS OF APPLICABILITY JUDICIAL DECISIONS AND DIRECTED THE ASSESSING OFFICER TO ELIMINATE THE INVESTMENTS IN SUBSIDIARY COMPANIES RELYING ON THE JUDICIAL DECISIONS FOR CALCULATION OF AVERA GE INVESTMENTS UNDER RULE 8D. THE ASSESSEE HAS INVESTED IN GROUP COMPANI ES NOT TO EARN EXEMPTED INCOME. CONSIDERING APPARENT FACTS, THE IN VESTMENTS PATTERN, JUDICIAL DECISIONS AND FINDINGS OF THE LD . COMMISSIONER OF INCOME TAX (APPEALS) AND NATURE OF EXPENDITURE CLA IMED AS PER AUDITED FINANCIAL STATEMENTS, WE ARE OF THE OPINION THAT THE MATTER HAS TO RE-EXAMINED AND DIRECT THE ASSESSING OFFICE R TO VERIFY THE INVESTMENTS IN GROUP SUBSIDIARIES ON COMMERCIAL EXP EDIENCY AND EXPENDITURE ATTRIBUTABLE TO INVESTMENTS AND APPLY THE PROVISIONS OF SEC. 14A R.W. RULE 8D, WE REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. THIS GROUND OF T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.1388 & 1647/2015. :- 18 -: 13. NOW, WE ADJUDICATE THE DEPARTMENT APPEAL ITA NO.1647/MDS/2015 OF ASSESSMENT YEAR 2010-2011. AT T HE TIME OF HEARING, THE LD. DEPARTMENTAL REPRESENTATIVE HAS N OT PRESSED GROUND 2.1 TO 2.3 AND SAME IS TREATED AS DISMISSED. 14. THE NEXT GROUND RAISED BY THE DEPARTMENT IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIREC TING TO ELIMINATE THE INVESTMENTS MADE IN SUBSIDIARIES WHILE WORKING OUT DISALLOWANCE UNDER RULE 8D(2) OF THE ACT. 15. WE HAVE ELABORATELY DISCUSSED ON THE WORKING STRATE GY AND APPLICABILITY OF PROVISIONS AND REMITED THE ISSUE T O THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. THEREFORE THE GRO UND OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSE. 16. THE LAST GROUND RAISED BY THE LD. DEPARTMENTAL REPRESENTATIVE IS THAT THE LD. COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN ALLOWING 60% DEPRECIATION ON UPS AS PART O F BLOCK COMPUTERS INSTEAD OF 15% ALLOWED BY ASSESSING OFFICER AND UPS FALLS INTO THE CATEGORY OF OFFICE EQUIPMENT ON NOT COMPUTER PARTS. 17. THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE O F 60% ON UPS AS THE INTEGRAL PART OF COMPUTER BLOCK. BUT THE L D. ASSESSING OFFICER ITA NO.1388 & 1647/2015. :- 19 -: OBSERVED THAT UPS SHOULD BE INCLUDED IN THE BLOCK O F OFFICE EQUIPMENTS AND ALLOWED DEPRECATION @15% . AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 18. IN THE APPELLATE PROCEEDINGS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSE SSEE BY PLACING RELIANCE ON CO-ORDINATE BENCH DECISION OF TRIBUNAL IN THE CASE OF SUNDARAM ASSET MANAGEMENT CO. LTD IN ITA NO.1774/M DS/2012 DATED 19.07.2013. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE REVENUE HAS ASSAILED AN APPEAL BEFORE TR IBUNAL. 19. BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE RELIED O N THE GROUNDS AND ARGUED THAT UPS CANNOT BE CONSIDERED AS INTEGRAL PART OF COMPUTER TO BE INCLUDED IN OFFICE EQUIPMENT AND EL IGIBLE FOR DEPRECATION @15% ONLY. 20. CONTRA, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND OPPOSED T O THE GROUNDS OF THE REVENUE. 21. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISION CITED. THE ASSESSEE COMPANY CONSIDERED UPS PART OF COMPUTER BLOCK AND CLAIMED THE DEPRECATION. THE FACT THAT ITA NO.1388 & 1647/2015. :- 20 -: COMPUTER ALONE CANNOT WORK WITHOUT THE SUPPORT OF U PS AND REGULATING THE VOLTAGE STABILITY OF THE ELECTRICITY . IF THERE IS POWER FLUCTUATION WITHOUT UPS, THE COMPUTER WILL MALFUNCT ION AND THE DATA WILL BE LOST. SO, CONSIDERING THE USAGE AND ESSENT IALITY OF THE PRODUCT BEING INTEGRAL PART OF COMPUTER, WE UPHELD THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECATION @60% AND DISMISS THE GROUND OF THE REVE NUE. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND REVEN UE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 7TH DAY OF JUNE, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' # ) (G. PAVAN KUMAR) / JUDICIAL MEMBER / CHENNAI - / DATED: 07.06.2016 KV . ( /$)01 21') / COPY TO: 1 . 34 / APPELLANT 3. ' 5) () / CIT(A) 5. 1!89 /$)$ / DR 2. /:34 / RESPONDENT 4. ' 5) / CIT 6. 9;& < / GF