APA Hotels Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1433/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95959 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 12-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: S RAMACHANDRA RAO
• Keywords: Earning of tax free income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , ! , ' #$ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1433/MDS/2015 / ASSESSMENT YEAR : 2011-2012 APA HOTELS PRIVATE LIMITED NO.115, THYARARAYA ROAD, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE IV(2), CHENNAI 600 034 [PAN AACCA 9045J] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI. S. RAMACHANDRA RAO, C.A /RESPONDENT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT / DATE OF HEARING : 05-08-2015 / DATE OF PRONOUNCEMENT : 28-08-2015 / 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)-18, CHENN AI, DATED 31.03.2015 FOR THE ASSESSMENT YEAR 2011-2012. 2. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE U/S.14A OF THE ACT. ITA NO.1433/MDS/2015 :- 2 -: 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECEI VED DIVIDEND INCOME OF A51,65,537/- FROM THE MUTUAL FUN DS AND THE ASSESSEE CLAIMED THE SAME AS AN EXEMPT INCOME . ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE MADE HUGE INVESTMEN TS IN THE MUTUAL FUNDS DURING THE YEAR AND THE ASSESSEE INCURRED THE EXPENDITURE TO EARN EXEMPT INCOME. THE ASSESSING OFFICER BY INVO KING PROVISION U/S.14A R.W. RULE 8D(2)(III) OF THE INCOME TAX RULE S, 1962 DISALLOWED A SUM OF A13,44,712/- AS EXPENDITURE INCURRED TOWA RDS EXEMPT INCOME. AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE ASSESSEE COUNSEL SUBMITTED THAT THE COMPANY IS NOT AN INVESTMENT COMPANY AND ALL THESE INVESTMENTS IN ASS OCIATE COMPANIES, HAVE BEEN MADE FOR COMMERCIAL CONSIDERATION. THE L D. AUTHORISED REPRESENTATIVE FOR ASSESSEE PLACED RELIANCE ON THE ORDER OF THE CO- ORDINATE BENCH, CHENNAI IN THE CASE OF EIH ASSOCIATED HOTELS LIMITED IN ITA NO.1503/MDS/2012, WHEREIN IT WAS HELD THAT INVESTMENT IN SUBSIDIARY IS NOT TO BE RECKONED FOR DISALLOWANCE U /S.14A RWR 8D AND SUBMITTED THAT THE SAME RATIO WOULD BE APPLICABLE T O THE ASSESSEES CASE AND THE INVESTMENT IN SUBSIDIARIES, SHOULD NOT BE RECKONED FOR DISALLOWANCE U/S.14A. THE LD. AUTHORISED REPRESENTA TIVE FOR ASSESSEE ITA NO.1433/MDS/2015 :- 3 -: CONTENDED THAT THE INVESTMENT IN SUBSIDIARIES SHOUL D BE OUTSIDE THE PURVIEW OF SECTION 14A, AS HELD BY THE CO-ORDINATE BENCH, CHENNAI IN THE CASE OF ACIT VS. M.BASKARAN 152 ITD 844 THAT INVESTMENTS AMOUNT ON WHICH NO INCOME HAS BEEN EARNED/RECEIVED SHOULD NOT BE CONSIDERED WHILE COMPUTING THE DISALLOWANCE U/S.14A . THE LD. AUTHORISED REPRESENTATIVE FURTHER CONTENDED THAT TH E ASSESSEE HAD NOT INCURRED ANY EXPENDITURE TO EARN ANY RETURN ON THESE INVESTMENTS. THE COMPANIES, MUTUAL FUNDS ETC ARE SEPARATE ENTITI ES HAVING THEIR OWN STAFF AND INFRASTRUCTURE AND THE ASSESSEE OR I TS REPRESENTATIVE ARE NOT ENTITLED TO INTERFERE IN THE AFFAIRS OF SUC H COMPANIES AND MUTUAL FUNDS. EVEN DIVIDENDS ARE SENT BY ELECTRONIC MODE TO THE BANK ACCOUNTS DIRECTLY AND HENCE THE ASSESSEE HAD NOT IN CURRED ANY EXPENDITURE ON EARNING THE TAX FREE INCOME. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. AS SEEN FROM THE DETAILS FILED BY THE ASSE SSEES COUNSEL BEFORE US, THE ASSESSEE MADE INVESTMENTS IN TOWER T RAVELS PVT. LTD AND RKR HOTELS PRIVATE LTD WHICH ARE SAID TO BE SUB SIDIARY COMPANIES OF THE ASSESSEE COMPANY. AS HELD BY THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS LIMITED IN ITA NO.1503/MDS/2012 F OR THE ITA NO.1433/MDS/2015 :- 4 -: ASSESSMENT YEAR 2008-2009 DATED 17.07.2013, THE INVESTMENT IN SUBSIDIARY IS NOT TO BE CONSIDERED FOR DISALLOWANCE U/S.14A R.W.R. 8D OF THE INCOME TAX RULES. SIMILARLY, THE TRIBUNAL HELD IN THE CASE OF ACIT VS. M. BASKARAN 152 ITD 844 THAT INVESTMENT WHICH YIELDS NO INCOME SHOULD NOT BE CONSIDERED FOR COMPUTING DISALLOWANCE U/S.14A OF THE ACT. IN VIEW OF THIS ORDER OF THE CO-ORDIANTE BENC H, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER FOR RECOMPUTING THE DISALLOWANCE ONLY TO CONSIDER OTHER THAN THESE TWO INVESTMENTS AND DECIDE ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.1433/MDS/2015 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, 28TH DAY OF AUGUST, 2015, AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:28.08.2015 KV %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 3. ' +',! / CIT(A) 5. )-.' / / DR 2. / RESPONDENT 4. ' + / CIT 6. .0'1 / GF