CHAKIAT AGENCIES PRIVATE LIMITED, CHENNAI V. ACIT COMPANY CIRCLE 1 (3), CHENNAI

ITA 1550/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8193 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SUBHASHRI
• Assessee Lawyers: P M VEERAMANI
• Keywords: Depreciation; Earning of tax free income; Source of fund; Rule 8D
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.1550, 1551 & 1552/CHNY/2018 & '& /ASSESSMENT YEARS: 2009-10, 2011-12 & 2014-15 M/S. CHAKIAT AGENCIES PVT. LTD., 40, RAJAJI SALAI, 3 RD FLOOR, P.B NO.1880, CHENNAI 600 001. VS. ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-1(2), CHENNAI. [PAN: AABCC 6281F] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI P.M. VEERAMANI, CA *+() , - /RESPONDENT BY : MS. M. SUBHASHRI, JCIT . , / $ /DATE OF HEARING : 05.03.2019 01' , /$ / DATE OF PRONOUNCEMENT : 27.03.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE THREE APPEALS FILED BY THE ASSESSEE-COMPANY DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS)-1, CHENNAI (HEREINAFTER CALLED AS CIT(A) ) DATED 28.08.2018 FOR THE ASSESSMENT YEARS (AYS) 2009-10, 2011-12 & 2 014-15. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLV ED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS COMMON ORD ER. ITA NOS.1550, 1551 & 1552/CHNY/2018 (AYS: 2009-10, 2011-12 & 2014-15) :- 2 -: 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACT S RELEVANT FOR THE AY 2014-15 IN ITA NO.1552/CHNY/2018 ARE STATED HERE IN. 4. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL IN ITA NO.1552/CHNY/2018 FOR AY 2014-15: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS AGAINST FACTS AND LAW 2. THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8 D TO THE EXTENT OF INTEREST ON RS.3 CRORES. THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HER DECISION THAT INV ESTMENT OF RS.3 CRORE HAD COME OUT OF BORROWED FUNDS SINCE THE INVESTMENT IN ASSESSMENT YEAR 2007-08 WAS LESS THAN THE PROFIT FOR THAT YEAR . THE COMMISSIONER OF INCOME TAX ( APPEALS) FAILED TO APPRECIATE THAT APPELLANT HAD SUFFICIENT OWN FUNDS IN THE FORM OF S HARE CAPITAL AND RESERVES REPRESENTING RETAINED PROFITS WHICH WAS FA R IN EXCESS OF THE INVESTMENTS EARNING TAX FREE INCOME EVEN IN THE ASS ESSMENT YEAR 2007-08. FURTHER, EVEN FOR ARGUMENT SAKE, THE INVES TMENT IN AY 2007-08 WAS LESS THAN THE PROFIT FOR THAT YEAR, IT CANNOT RESULT IN A DISALLOWANCE IN ASSESSMENT YEAR 2014-15. THE ASSESS MENT OF EACH YEARS ARE DISTINCT AND SEPARATE. THE CAPITAL AND RE SERVES, REPRESENTING OWN FUNDS DURING THE YEAR WAS FAR IN E XCESS OF THE INVESTMENTS CAPABLE OF EARNING TAX FREE INCOME. PRAYER FOR THESE AND SUCH OTHER REASONS WHICH MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DISALLOWANCE UNDER S ECTION 14A BE DELETED. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSIN ESS OF FREIGHT FORWARDING. THE RETURN OF INCOME FOR THE AY 2014-15 WAS FILED ON 30.09.2014 DISCLOSING TOTAL INCOME OF RS.6,31,83,29 0/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASST. CIT, ITA NOS.1550, 1551 & 1552/CHNY/2018 (AYS: 2009-10, 2011-12 & 2014-15) :- 3 -: CORPORATE CIRCLE-1(2), CHENNAI (HEREINAFTER CALLED AS AO) VIDE ORDER DATED 05.10.2016 PASSED U/S. 143(3) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 6,86,04,080 /- AFTER MAKING THE FOLLOWING DISALLOWANCES: 1. DISALLOWANCE OF DEPRECIATION ON TRAILOR/LORRY R S. 20,03,827/- 2. DISALLOWANCE OF DEPRECIATION OF PRINTER RS. 95,126/- 3. DISALLOWANCE U/S. 14A RS. 33,21,840/- 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THERE WAS INCREASE IN THE COST OF INVESTMENTS AND T HE APPELLANT HAS EARNED DIVIDEND INCOME OF RS. 85,11,249/- AND THERE FORE, THE AO HAD INVOKED THE PROVISIONS OF S. 14A OF THE ACT AND MAD E A DISALLOWANCE OF RS. 33,21,840/-. 7. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER GRANTED PART RELIEF IN RESPECT OF ADDITION U/S. 14A OF THE ACT AFTER ANALYZING THE MOVEMENT OF THE INVESTM ENTS AND SOURCES FOR THE INVESTMENTS, BY DIRECTING THE AO TO CONSIDER ON LY SUM OF RS. 3 CRORES AGAINST RS. 15.16 CRORES AS THE BORROWED FUNDS UTIL IZED FOR THE PURPOSE OF MAKING INVESTMENTS AND FURTHER, DIRECTED THE AO WHILE COMPUTING THE DISALLOWANCE UNDER CLAUSE (III) RULE 8D OF THE INCO ME TAX RULES TO CONSIDER ONLY THE INVESTMENTS WHICHEVER YIELDED THE EXEMPT INCOME BASED ON THE DECISION OF SPL. BENCH OF ITAT, DELHI IN THE CASES OF ACIT V. VIREET INTRNATIONAL P. LTD. [2017] 165 ITD 27 (D ELHI TRIB.)(SB) / [2017] ITA NOS.1550, 1551 & 1552/CHNY/2018 (AYS: 2009-10, 2011-12 & 2014-15) :- 4 -: 82 TAXMANN.COM 415 (DELHI TRIB.(SB) INFORMATION FURNISHED BY THE APPELLANT. BEING AGGRIEVED, THE APPELLANT IS IN A PPEAL BEFORE US IN THE PRESENT APPEAL. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ONLY ISSUE THAT ARISES FOR THE CONSIDER ATION FOR THE PRESENT APPEAL WHETHER OR NOT THE PROVISIONS OF S. 14A OF T HE ACT CAN BE INVOKED IN THE PRESENT CASE. THE LD. CIT(A) HAD ANALYZED T HE SOURCE OF FUNDS FOR MAKING INVESTMENTS AND MOVEMENT OF THE INVESTMENTS. THE FINDING OF THE LD. CIT(A) IS BASED ON THE PROPER APPRECIATION OF THE FACTS AND THE LAW AND THEREFORE, WE DO NOT FIND ANY FALLACY IN TH E REASONING OF THE LD. CIT(A) AND THEREFORE, WE DO FIND ANY MERIT IN THE A PPEALS FILED BY THE ASSESSEE. HENCE, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NOS.1550 & 1551/CHNY/2018 FOR AYS 2009-10 & 201 1-12 : 9. SINCE, THE FACTS IN ITA NOS.1550 & 1551/CHNY/201 8 FOR AYS 2011- 12 & 2009-10 ARE IDENTICAL TO THE FACTS IN ITA NO.1 552/CHNY/2018 FOR AY 2014-15 FOR THE REASONS MENTIONED THEREIN, WE DISMI SS THE ASSESSEES APPEAL. HENCE, THE ABOVE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ITA NOS.1550, 1551 & 1552/CHNY/2018 (AYS: 2009-10, 2011-12 & 2014-15) :- 5 -: 10. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 27 TH DAY OF MARCH, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 27 TH MARCH, 2019. EDN, SR. P.S , */34 54'/ /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT 5. 47 */ /DR 6. & 8 /GF