DCIT, CHENNAI V. India Pistons Limited, CHENNAI

ITA 1553/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8122 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMARJCIT
• Keywords: Earning of tax free income; Wholly owned subsidiary
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1553/MDS/2016 ( / ASSESSMENT YEAR: 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), WANAPARTHY BLOCK, R.NO.512, CHENNAI-34. VS M/S. INDIA PISTONS LTD., HUZUR GARNES SEMBIAM CHENNAI-600 011. PAN:AAACI1439E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. V.NANDA KUMAR,JCIT /RESPONDENT BY : MR. SAROJ KUMAR PARIDA,ADVOCATE /DATE OF HEARING : 17 TH AUGUST, 2016 /DATE OF PRONOUNCEMENT : 11 TH NOVEMBER , 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 6, CHENNAI DATED 23.03.2016 IN ITA NO.106/CIT(A)-6/ 2014- 15 PASSED UNDER SECTION 143(3) R.W.S 147 & 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE UNDER LIMB (II) OF RULE 8D AFTER 2 ITA NO.1553/MDS/2016 EXCLUDING THE INVESTMENTS MADE BY THE ASSESSEE IN ITS WHOLLY OWNED SUBSIDIARY COMPANIES. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN HOLDING THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST RELATING TO EXEMPT INCOME UNDER LIMB (II) OF RULE 8D IS CALLED FOR IN THE CASE OF THE ASSESSEE, IF BORROWED FUNDS HAVE NOT BEEN UTILIZED FOR MAKING FRESH INVESTMENTS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PISTON & PISTON ASSEMBLIES FILED ITS RETURN OF INCOME ON 30.09.200 8 ADMITTING INCOME OF ` 31,76,95,510/- WHICH WAS SUBSEQUENTLY REVISED TO ` 30,95,50,450/- . SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE ACT ON 27.03.2014 WHEREIN THE LEARNED ASSESS ING OFFICER DISALLOWED ` 2,11,57,766/- BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE ACT. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HELD THAT NO DISALLOWANCE ON ACCOUNT OF I NTEREST RELATING TO EXEMPT INCOME UNDER LIMB (II) OF RULE 8 D IS CALL FOR IN THE CASE OF THE ASSESSEE SUBJECT TO VERIFICATION BY THE AO 3 ITA NO.1553/MDS/2016 ON THE SOURCE OF FRESH INVESTMENT AND DETAILS OF IN TEREST AND ACCORDINGLY DELETE THE ADDITION BY FOLLOWING THE DE CISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. HO TEL SAVERA REPORTED 239 ITR 795. THE LEARNED CIT FURTHE R DIRECTED THE LD. A.O TO RE-COMPUTE THE DISALLOWANCE UNDER LIMP (III) OF RULE 8D AMOUNTING TO RS.16,43,097/- A FTER EXCLUDING THE INVESTMENTS MADE BY THE APPELLANT COM PANY IN WHOLLY OWNED SUBSIDY COMPANY BY FOLLOWING THE ORDER OF THE CHENNAI BENCHES OF THE TRIBUNAL IN THE CASE EIH AS SOCIATED HOTELS LTD., IN ITA NO.1503/MDS/2012. AGGRIEVED BY THE ORDER OF THE LD. CIT THE REVENUE IS IN APPEAL BEFOR E US. 5. BEFORE US THE LD. DR VEHEMENTLY ARGUED IN SUPPOR T ON THE ORDER OF THE LD. A.O WHEREAS THE LD. AR RELIED ON THE ORDER OF THE LD. CIT. THE LEARNED AR FURTHER SUBMI TTED THAT RULE 8D OF THE IT RULES CAME INTO EFFECT FROM 24.03 .2008 WHICH WAS INSERTED BY THE IT(FIFTH AMDT.) RULES 200 8. HENCE, IT WAS SUBMITTED THAT THE RULE 8D WILL BE AP PLICABLE ONLY FROM THE ASSESSMENT YEAR 2009-10 AND THE CASE OF THE ASSESSEE PERTAINS TO ASSESSMENT YEAR 2008-09 AND TH EREFORE 4 ITA NO.1553/MDS/2016 IT WILL NOT BE APPLICABLE FOR THE RELEVANT ASSESSME NT YEAR. HE FURTHER RELIED IN THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE TVS INVESTMENT LTD. VS. ACIT I N ITA NO.1609/MDS/2012 ORDER DATED 29.01.2013 WHEREIN IT WAS HELD THAT FOR THE PERIOD PRIOR TO THE COMMENCEMENT OF THE RULE 8D OF THE RULES, DISALLOWANCE UNDER SECTION 14 A OF THE ACT SHALL BE RESTRICTED TO 2% OF SUCH EXEMPT INCOME . IT WAS THEREFORE PLEADED THAT THE SAME DECISION MAY BE FOL LOWED IN THE CASE OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSE THE MATERIALS ON RECORD. SINCE THE ASSESSEE HAS NOT FILED ANY CROSS OBJECTION WE DO NOT FIND IT NECESSA RY TO CONSIDER THE ARGUMENTS ADVANCE BY HIM REGARDING RES TRICTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT TO, 2 % OF THE EXEMPT INCOME. FURTHER SINCE THE LD. CIT HAS ONLY F OLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL MADRAS H IGH COURT IN THE CASE OF CIT VS. HOTEL SAVERA AND THE DECISIO N OF THE CHENNAI BENCH OF THE TRIBUNAL EIH ASSOCIATED HOTELS LTD. VS. 5 ITA NO.1553/MDS/2016 DCIT CITED SUPRA WHILE ARRIVING AT HIS DECISION WE DO NOT FIND IT NECESSARY TO INTERFERE WITH HIS ORDER. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH NOVEMBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 11 TH NOVEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .