SHRIRAM VENTURE LIMITED, CHENNAI V. DCIT CORPORATE CIRCLE-6(1), CHENNAI

ITA 1456/CHNY/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8866 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 08-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 13

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं ᮰ी जी. मंजुनाथ, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1456/CHNY/2019 िनधाᭅरण वषᭅ /Assessment Year: 2012-13 M/s. Shriram Venture Limited, (Subsequently amalgamated with Shriram Industrial Holdings Limited and presently known as SVL Limited), Shriram House, 1 st Floor, No.4, Burkit Road, T.Nagar, Chennai – 60 107. PAN: AAACS 9328J v. The DCIT, Corporate Circle 6(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri R. Sivaraman, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri G. Johnson, Addl. CIT स ु नवाई कȧ तारȣख/Date of Hearing : 02.02.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 15.02.2022 आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-15, Chennai in ITA No.65/2016-17/CIT(A)-15 dated 27.02.2019. The assessment was completed 13 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter 2 I.T.A. No.1456/Chny/2019 the ‘Act’) by the DCIT, Corporate Circle 6(1), Chennai for the assessment year 2012-13 ,vide order dated 16.02.2015. This matter was carried in appeal before CIT(A) originally and CIT(A) vide his order in ITA No.230/CIT(A)-15/2014-15 dated 24.09.2015 passed an order against which the Revenue filed appeal before ITAT and ITAT, ‘B’ Bench in ITA No.735/Mds/2016, order dated 29.07.2016 set aside the matter to reconsider the entire issue of disallowance u/s.14A of the Act back to the AO. In term of this, the DCIT, Corporate Circle 6(1), Chennai passed this order u/s.143(3) r.w.s.254 of the Act vide order dated 30.06.2017 (the impugned order). 2. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing the expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with rule 8D of the Income Tax Rules, 1962 (hereinafter the ‘Rules’). The disallowance of expenses are under Rule 8D(2)(i) at Rs.48,21,918/- and under Rule 8D(2)(ii) at ‘0’ and under Rule 8D(2)(iii) at Rs.1,57,13,756/-. 3. We have heard rival contentions and gone through facts and circumstances of the case. Admittedly, the assessee has earned 3 I.T.A. No.1456/Chny/2019 dividend income of Rs.9,73,29,490/-. The assessee before us claimed that now the disallowance is only on two limbs i.e., direct expenses under Rule 8D(2)(i) at Rs.48,21,918/- and under Rule 8D(2)(iii) at Rs.1,57,13,756/-. The CIT(A) restricted the above two disallowances and thereby created total disallowance at Rs.2,05,34,274/-. 4. The ld.counsel for the assessee before us filed the details of investment made in debenture and investments other than subsidiary companies which did not yield dividend income. He also filed details of investment in mutual funds from where the assessee has earned dividend of Rs.9,73,29,490/-. The assessee filed following details:- Name of the company Value of Shares as on 31.03.2012 Investments in Mutual Funds: ICICI Flexible Income Fund 170049612 IDFC Money Manager Fund 80415589 UTI Treasury Advantage Fund 219190361 Total 469655562 The ld.counsel stated that the AO has computed the disallowance on the total investments i.e., Rs.4,38,94,02,409/- but assessee has not earned any dividend on investment in subsidiary companies and other companies but dividend earned is only from the above 4 I.T.A. No.1456/Chny/2019 mentioned investments in mutual funds. The ld.counsel for the assessee also stated that the disallowance under Rule 8D(2)(iii) be restricted qua the investments made which gives raise to exempt income i.e., investments in mutual funds and rest of the investments which does not yield exempt income can be excluded for the purpose of computation of disallowance being average value of investments as on 31.03.2012. As regards to disallowance under Rule 8D(2)(i), the ld.counsel stated that there is no direct expenses and in case, AO has any doubt about direct expenses he can verify from the books of accounts and accordingly decide. When this proposition was put to ld. Senior DR, he fairly agreed that issue can be remitted back to the file of the AO with the above proposal. 5. After hearing both the sides and going through the case records, we are in agreement with the argument of the ld.counsel for the assessee that the AO will first examine the issue of direct expenses from the books of accounts i.e., profit & loss account. If any direct expense relatable to dividend income is found, disallowance can be made otherwise not. The second under Rule 8D(2)(iii) i.e., for computing average value of investment, the AO will only take the investments which are giving raise to exempt income and he can verify which investments are giving exempt 5 I.T.A. No.1456/Chny/2019 income. Accordingly, the AO will compute disallowance and decide the quantum of disallowance. 8. In the result, the appeal filed by the assessee is allowed as indicated above. Order pronounced in the court on 15 th February, 2022 at Chennai. Sd/- Sd/- (जी. मंजुनाथ) (G. MANJUNATHA) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 15 th February, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.