Hyundai Steel India Pvt Ltd., Kancheepuram V. DCIT Corporate Circle 2(2), CHENNAI

ITA 1529/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0039 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 07-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SUBASHRI
• Assessee Lawyers: TAXATION; K RAJU G M LEGAL
• Keywords: Opportunity of being heard; Earning of tax free income; Reason to believe; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 1266/CHNY/2018 / ASSESSMENT YEAR :2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), ROOM NO. 512, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G. ROAD, CHENNAI 600 034. VS. M/S. HYUNDAI STEEL INDIA PVT. LTD. [FORMERLY M/S. HYSCO STEEL INDIA PVT. LTD.], NO. 49, SENGODU VILLAGE, SRIPERUMBUDUR, KANCHIPURAM 602 002. [PAN:AABCH7074D] ( /APPELLANT ) ( / RESPONDENT) ./ I T.A. NO. 1529/CHNY/2018 / ASSESSMENT YEAR :2012-13 M/S. HYUNDAI STEEL INDIA PVT. LTD., NO. 49, SENGODU VILLAGE, SRIPERUMBUDUR, KANCHIPURAM 602 002. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI 600 034. ( /APPELLANT ) ( / RESPONDENT) DEPARTMENT BY : MS. M. SUBASHRI, JCIT ASSESSEE BY : SHRI K. RAJU, G.M. LEGAL & TAXATION / DATE OF HEARING : 26.02.2019 /DATE OF PRONOUNCEMENT : 27.03.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 6, CHENNAI DATED 30.01.2018 RELEVANT TO THE ASSESSMENT YEAR 2013-14. THE ONLY EFFECTIVE GROUND RAISED IN I.T.A. NOS. 1266 & 1529/CHNY/18 2 THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ACT IN SHORT]. THE ASSESSEE ALSO FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) 6, CHENNAI DATED 30.01.2018 RELEVANT TO THE ASSESSMENT YEAR 2012-13 CHALLENGING THE EX-PARTE ORDER WITHOUT DECIDING THE ISSUE ON MERITS. I.T.A. NO. 1266/CHNY/2018 [AY 2013-14] 2. AGAINST THE DELETION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT R.W. RULE 8D, THE LD. DR HAS SUBMITTED THAT THE LD. CIT(A) ERRONEOUSLY DELETED THE DISALLOWANCE AS THERE IS NO EXEMPT INCOME, WHEN THERE IS NO SUCH EXCEPTION PROVIDED IN RULE 8D. IT WAS THE SUBMISSION THAT THE CBDT HAS CLARIFIED THAT DISALLOWANCE UNDER SECTION 14A R.W.R. 8D HAS TO BE MADE EVEN IF THE ASSESSEE IN A PARTICULAR YEAR NOT EARNED ANY EXEMPT INCOME. IT WAS FURTHER SUBMISSION THAT THE INVESTMENT MADE BY THE ASSESSEE AS PER THE JOINT VENTURE AGREEMENT WITH THE JAPANESE COMPANY TO HOLD 55% SHARES, YIELDING ONLY DIVIDEND INCOME WHICH IS EXEMPT FROM INCOME TAX AND HENCE PROVISIONS OF SECTION 14A OF THE ACT ARE APPLICABLE. 3. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN THE RELEVANT ASSESSMENT YEAR AND THEREFORE, NO DISALLOWANCE UNDER SECTION 14A R.W.R. 8D IS WARRANTED AND PRAYED FOR CONFIRMING THE APPELLATE ORDER. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON I.T.A. NOS. 1266 & 1529/CHNY/18 3 RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN .55,00,00,000/- AS INVESTMENT YIELDING EXEMPTED INCOME. UNDER THE PROVISIONS OF THE SECTION 14A OF THE ACT, NO EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING AN EXEMPT INCOME SHALL BE ALLOWED AGAINST THE TAXABLE PROFITS. THUS, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE ASSESSEE HAS TO INCUR SOME EXPENDITURE EMBEDDED IN THE INDIRECT EXPENDITURE OF THE ASSESSEE TOWARDS MAINTAINING THESE INVESTMENTS. WHEN IT WAS POINTED OUT TO THE ASSESSEE, VIDE LETTER DATED 29.02.2016, THE AR OF THE ASSESSEE HAS SUBMITTED THAT HYUNDAI STEEL INDIA HELD MAJORITY STAKE IN AUTOMOTIVE STEEL PIPE INDIA PVT. LTD. [ASPI]. THIS INVESTMENT IS A STRATEGIC INVESTMENT AND HAS BEEN MADE OUT BUSINESS EXPEDIENCY AND NOT WITH AN INTENTION OF EARNING ANY DIVIDEND INCOME. IT WAS FURTHER SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME FROM ASPI. HOWEVER, THE ASSESSING OFFICER HAS OBSERVED THAT THE INVESTMENT MADE BY THE ASSESSEE IS NOT AN INVEST-AND-FORGET ACTIVITY AND REQUIRES MONITORING. SINCE THE ASSESSEE DOES NOT HAVE A DEDICATED DIVISION OR PERSONNEL FOR THIS WORK, THE EXISTING PERSONAL WILL HAVE TO BE DEPLOYED FOR THIS WORK. THEREFORE, SOME PORTION OF THE RESOURCES OF THE COMPANY WOULD HAVE TO BE DIVERTED FOR THIS PURPOSE. THEREFORE, AFTER RECORDING THE REASONS, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME UNDER RULE 8D AND MADE DISALLOWANCE AT .3,14,33,694/-. ON I.T.A. NOS. 1266 & 1529/CHNY/18 4 APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD. V. ADDL. CIT 392 ITR 633, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. ADMITTEDLY, SINCE, THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE LD. CIT(A) RIGHTLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD. V. ADDL. CIT (SUPRA) AND DIRECTED TO DELETE THE ADDITION. THE LD. DR COULD NOT CONTROVERT THE ABOVE JUDGEMENT. THUS, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. I.T.A.NO. 1529/CHNY/2018 [A.Y. 2012-13] 5. THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13 IS DELAYED BY 13 DAYS, FOR WHICH, THE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF THE DELAY IN SUPPORT OF AN AFFIDAVIT, TO WHICH; THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, THE DELAY OF 13 DAYS IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 6. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE EX-PARTE ORDER PASSED BY THE LD. CIT(A) WITHOUT AFFORDING ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE WAS A DELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A) SINCE THE ASSESSEES I.T.A. NOS. 1266 & 1529/CHNY/18 5 AUTHORIZED SIGNATORY WAS NOT AVAILABLE DUE TO HIS BUSINESS VISIT AND THEREBY THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE AND PRAYED FOR CONDONING THE DELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A). THE LD. DR HAS NOT SERIOUSLY OBJECTED TO THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND SUBMITTED THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY OF BEING HEARD FOR PRESENTING ITS CASE BEFORE THE LD. CIT(A). ON PERUSAL OF THE APPELLATE ORDER, WE FIND THAT THE LD. CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. SINCE THE LD. DR HAS NOT SERIOUSLY OBJECTED TO THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, BY CONDONING THE DELAY IN FILING THE APPEAL BEFORE THE LD. CIT(A), WE DIRECT THE LD. CIT(A) TO ADJUDICATE THE ISSUE ON MERITS AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO PRESENT ITS CASE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 27 TH MARCH, 2019 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 27.03.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.