Sundaram Fasteners Limited, CHENNAI V. ACIT, CHENNAI

ITA 1409/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8826 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2001-2002
• Appeal Filed On: 20-05-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1409 & 1410/MDS/2016 / ASSESSMENT YEARS : 2001-02 & 2002-03 M/S SUNDARAM FASTENERS LTD [FORMERLY AUTOLEC INDUSTRIES LTD] 98-A 7 TH FLOOR, DR. RADHAKRISHNAN SALAI MYLAPORE, CHENNAI 600 004 VS . THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE VI(4) CHENNAI [PAN AAACS 8779 D] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA , ADVOCATE /RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 04 - 0 8 - 2016 ! / DATE OF PRONOUNCEMENT : 10 - 0 8 - 2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) -15, CHENNAI, BOTH DATED 15.2.2016 FOR ASSESSMENT YEARS 2001-02 A ND 2002-03. 2. THE ASSESSEE ASSAILS DISALLOWANCE MADE BY THE AS SESSING OFFICER U/S 14A R.W.R 8D OF ` 4,16,263/- FOR ASSESSMENT YEAR 2001-02 ITA NOS. 1409 & 1410/16 :- 2 -: AND ` 97,130/- FOR ASSESSMENT YEAR 2002-03. SUCH DISALL OWANCES WERE CONFIRMED BY THE CIT(A) ON THE APPEALS FILED BY THE ASSESSEE. 3. NOW BEFORE US, LD.AR STRONGLY ASSAILING THE ORDER O F THE CIT(A), SUBMITTED THAT DURING THE IMPUGNED ASSESSME NT YEARS RULE 8D WAS NOT IN THE STATUTE. ACCORDING TO HIM, IT WAS, THEREFORE, WRONG ON THE PART OF THE ASSESSING OFFICER AS WELL AS THE CI T(A) IN RELYING ON SUCH RULES FOR MAKING THE DISALLOWANCE U/S 14A. 4. PER CONTRA, LD. DR SUBMITTED THAT EVEN THOUGH RULE 8D MIGHT NOT HAVE BEEN IN THE STATUTE FOR THE RELEVANT ASSES SMENT YEARS, SEC. 14A WAS VERY MUCH IN THE ACT. ACCORDINGLY, BY VIRT UE OF SEC. 14A, DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME, HAS TO BE MADE. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTE D THAT RULE 8D WAS NOT IN THE STATUTE DURING THE IMPUGNED ASSESSMENT Y EARS. RULE 8D WAS INSERTED BY AMENDMENT TO INCOME TAX RULES THRO UGH IT(FIFTH AMENDMENT) RULES, 2008 WITH EFFECT FROM 24.3.2008. HOWEVER, WE FIND THAT THE ASSESSING OFFICER HAD, FOR BOTH THE A SSESSMENT YEARS, CALCULATED THE DISALLOWANCE RELYING ON RULE 8D. NE VERTHELESS, AS MENTIONED BY THE LD. DR, A DISALLOWANCE U/S 14A CO ULD BE MADE FOR EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DI D NOT FORM PART OF ITA NOS. 1409 & 1410/16 :- 3 -: THE TOTAL INCOME, DE HORS THE RULES. THE TRIBUNAL HAS BEEN TAKING A CONSISTENT VIEW THAT YEARS PRIOR TO INSERTION OF RU LE 8D, A FAIR DISALLOWANCE OF 2% COULD BE MADE TOWARDS EXPENDITUR E INCURRED. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO RESTRI CT THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME EARNED BY THE ASSESSEE. A CCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE MATTER REGARDING DISALLOWANCE U/S 14A IS REMITTED BACK TO THE ASSES SING OFFICER FOR CALCULATING THE DISALLOWANCE AS ABOVE. 6. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 10 TH AUGUST, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF