M/s. MRF Limited, CHENNAI V. DCIT, CHENNAI

ITA 1746/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57884 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 147; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NOS. 1746, 1747 & 1748/MDS/2011 (ASSESSMENT YEARS : 2003-04, 2005-06 & 2008-09) M/S MRF LIMITED, NO.124, GREAMS ROAD, CHENNAI - 600 006. PAN : AAACM4154G (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT, CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE RESPONDENT BY : SHRI ANIRUDH RAI, CIT- DR DATE OF HEARING : 18.01.2012 DATE OF PRONOUNCEMENT : 18.01.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST OR DERS DATED 27.9.2011 FOR ASSESSMENT YEARS 2003-04 AND 2005-06 AND ORDER DATED 23.9.2011 FOR ASSESSMENT YEAR 2008-09 OF COMM ISSIONER OF INCOME TAX (APPEALS), LARGE TAXPAYER UNIT, CHENNAI. I.T.A. NOS.1746, 1747 & 1748/MDS/11 2 2. IN ITS APPEAL FOR ASSESSMENT YEAR 2003-04, ASSES SEE HAS QUESTIONED THE REOPENING MADE UNDER SECTION 147 OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') WHEN THE ORIGINAL A SSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AFTER FOU R YEARS FROM THE END OF THE ASSESSMENT YEAR, EXCLUSION OF DEPB CREDI T ENTITLEMENT WHILE COMPUTING 80-HHC DEDUCTION, NOT ALLOWING THE 80-IA DEDUCTION CLAIMED AND DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE FOR MRF PACE FOUNDATION. 3. WHEN THE MATTER CAME UP BEFORE US, LEARNED A.R. WAS FAIR ENOUGH TO ADMIT THAT SIMILAR ISSUES STOOD DECIDED A GAINST THE ASSESSEE IN ITS APPEALS AND CROSS APPEALS OF THE RE VENUE FOR ASSESSMENT YEARS 2002-03, 2004-05, 2006-07 AND 2007 -08 IN I.T.A. NOS. 1374 TO 1377/MDS/2010 AND I.T.A. NOS. 1676 TO 1679/MDS/2010 VIDE ORDER DATED 11.3.2011 OF THIS TRIBUNAL. 4. LEARNED D.R. SUPPORTED THE ORDER OF LD. CIT(APP EALS) AND SUBMITTED THAT THE ISSUES HAD TO BE DECIDED AGAINST ASSESSEE. I.T.A. NOS.1746, 1747 & 1748/MDS/11 3 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. INSOFAR AS THE ISSUE OF REOPENING IS CONCERNED, IN SIMILAR SITUATION, IT WAS HELD BY THIS TRIBUNAL, IN ASSESSEES APPEALS FO R ASSESSMENT YEARS 2002-03 AND 2004-05, AT PARA 19 OF ITS ORDER DATED 11 TH MARCH, 2011, TO WHICH ONE OF US WAS A PARTY, THAT RE-ASSES SMENT PROCEEDINGS INITIATED WERE VALID, SINCE ASSESSEE HA D FAILED OR NOT DISCLOSED THE FACTS NECESSARY FOR THE ASSESSMENT FU LLY AND TRULY BEFORE THE ASSESSING OFFICER IN RESPECT OF ITS CLAI M FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT AND IN RESPECT OF IT S CLAIM FOR EXPENDITURE INCURRED IN PROMOTING MRF PACE FOUNDATI ON. 6. INSOFAR AS EXCLUSION OF DEPB CREDIT ENTITLEMENT IS CONCERNED, IT WAS HELD IN THE SAME ORDER MENTIONED SUPRA, AT PARA 21 THAT THE ISSUE STOOD COVERED BY THE DECISION OF TOPMAN EXPOR TS V. ITO (2009) 33 SOT 337 IN FAVOUR OF THE REVENUE AND HENCE, ASSE SSEES GROUND COULD NOT BE ALLOWED. 7. INSOFAR AS THE CLAIM OF DEDUCTION UNDER SECTION 80-IA IS CONCERNED, AT PARA 23 OF THE TRIBUNAL ORDER MENTION ED SUPRA, IT WAS HELD THAT CROWN CORKS, OR OTHER FITTINGS OF CORK, R UBBER, POLYETHYLENE OR I.T.A. NOS.1746, 1747 & 1748/MDS/11 4 ANY OTHER MATERIAL WERE CLEARLY FELL UNDER ITEM 27 OF ELEVENTH SCHEDULE AND THEREFORE, ASSESSEE WAS NOT ELIGIBLE F OR CLAIM OF DEDUCTION UNDER SECTION 80-IA OF THE ACT. 8. INSOFAR AS EXPENDITURE INCURRED ON MRF PACE FOUN DATION IS CONCERNED, IT WAS HELD IN PARA 4 OF THE ORDER OF TH E TRIBUNAL MENTIONED SUPRA THAT EXPENDITURE INCURRED FOR THE S AID FOUNDATION FOR TRAINING INDIVIDUALS IN CRICKET GAME COULD NOT BE H ELD AS A BUSINESS ACTIVITY OF THE ASSESSEE AND THEREFORE, THE CLAIM F OR SUCH ALLOWANCE WAS NOT ALLOWABLE UNDER SECTION 37 OF THE ACT. 9. THUS, VIDE EARLIER ORDER OF THIS TRIBUNAL IN I.T .A. NOS. 1374 TO 1377/MDS/2010 AND I.T.A. NOS. 1676 TO 1679/MDS/2010 DATED 11.3.2011, ALL THE ISSUES RAISED BY THE ASSESSEE GO AGAINST ASSESSEE. 10. NOW TAKING UP APPEAL FOR ASSESSMENT YEAR 2005-0 6, THERE ARE TWO ISSUES RAISED THEREIN. FIRST ONE ASSAILS REOPE NING DONE AFTER FOUR YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEAR DESPITE THE ORIGINAL ASSESSMENT HAVING BEEN COMPLETED UNDER SEC TION 143(3) OF THE ACT. SECOND ISSUE IS REGARDING DISALLOWANCE OF EXPENDITURE I.T.A. NOS.1746, 1747 & 1748/MDS/11 5 INCURRED IN MRF PACE FOUNDATION. ON BOTH THESE ISS UES, IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2003-04, WE H AVE ALREADY HELD AGAINST ASSESSEE, RELYING ON THE ORDER OF THIS TRIBUNAL IN I.T.A. NOS. 1374 TO 1377/MDS/2010 AND I.T.A. NOS. 1676 TO 1679/MDS/2010 DATED 11.3.2011. 11. COMING TO THE LAST APPEAL WHICH IS FOR ASSESSME NT YEAR 2008- 09, THERE ARE THREE ISSUES RAISED BY ASSESSEE. FIR ST IS REGARDING AMORTIZATION OF LEASE CHARGES PAID IN RESPECT OF LE ASEHOLD LANDS. SECOND IS REGARDING DISALLOWANCE OF EXPENDITURE UND ER SECTION 14A OF THE ACT BY APPLYING RULE 8D OF INCOME-TAX RULES, 1962 AND THIRD ONE IS REGARDING DISALLOWANCE OF EXPENDITURE INCURR ED AT MRF PACE FOUNDATION. 12. LEARNED A.R. FAIRLY ADMITTED THAT FIRST AND LA ST ISSUES, HAVE ALREADY BEEN HELD AGAINST ASSESSEE BY THIS TRIBUNAL IN ITS ORDER IN I.T.A. NOS. 1849 AND 2230/MDS/2004 DATED 13.10.2006 AND ORDER DATED 11.3.2011 IN I.T.A. NOS. 1676 TO 1679/MDS/201 0. THEREFORE, GROUNDS ON THESE TWO ISSUES STAND DISMISSED. I.T.A. NOS.1746, 1747 & 1748/MDS/11 6 13. THIS LEAVES US WITH THE SECOND GROUND, WHICH IS REGARDING DISALLOWANCE UNDER SECTION 14A. LEARNED A.R. SUBMI TTED THAT UNDER SECTION 14A OF THE ACT, ONLY ACTUAL EXPENSES INCURR ED FOR THE PURPOSE OF EARNING EXEMPT INCOME COULD BE DISALLOWED. ACCO RDING TO HIM, ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR THE D IVIDEND INCOME OF ` 33.16 LAKHS RECEIVED BY IT. RELIANCE WAS PLACED ON THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. H ERO CYCLES (323 ITR 518). 14. PER CONTRA, LEARNED D.R. SUBMITTED THAT LD. CIT (APPEALS) HAD RIGHTLY FOUND THAT THE ASSESSEE ITSELF HAS DISALLOW ED 2% OF EXEMPT INCOME AND THEREFORE, IT CANNOT BE HEARD TO ARGUE T HAT NO EXPENDITURE WAS INCURRED IN RELATION TO THE EARNING OF EXEMPT I NCOME. THEREFORE, ACCORDING TO HIM, THE DECISION OF LD. CIT(APPEALS) THAT % OF INVESTMENT AMOUNT YIELDING EXEMPT INCOME COULD BE C ONSIDERED FOR DISALLOWANCE WAS JUSTIFIED. 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD V. DCIT (328 ITR 81) HAS HELD THAT RULE 8D IS A PPLICABLE FROM I.T.A. NOS.1746, 1747 & 1748/MDS/11 7 ASSESSMENT YEAR 2008-09. NO DOUBT, HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HERO CYCLES (SUPRA) HAS H ELD THAT IT COULD NOT BE TAKEN AS A RULE THAT SOME EXPENDITURE WAS AL WAYS INCURRED IN RESPECT OF THE EXEMPT INCOME EARNED. HERE, HOWEVER , WE NOTE THAT THE ASSESSEE ITSELF HAD MADE A DISALLOWANCE OF ` 66,312/-. THEREFORE, WE ARE OF THE OPINION THAT IT CANNOT NOW TURN AROUND AND SAY THAT NO EXPENDITURE WHATSOEVER WAS INCURRED FOR EARNING THE EXEMPT INCOME. AS ALREADY MENTIONED, RULE 8D IS AP PLICABLE FOR IMPUGNED ASSESSMENT YEAR. THIS BEING THE CASE, WE ARE OF THE OPINION THAT THE MATTER REQUIRES A FRESH LOOK BY TH E A.O. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF A.O. FOR CONSIDERATION AF RESH IN ACCORDANCE WITH LAW. GROUND NO.3 OF THE ASSESSEE IS, THEREFOR E, ALLOWED FOR STATISTICAL PURPOSE. 16. TO SUMMARISE THE RESULT, APPEALS OF THE ASSESSE E FOR ASSESSMENT YEARS 2003-04 AND 2005-06 ARE DISMISSED, WHEREAS, THAT FOR ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. I.T.A. NOS.1746, 1747 & 1748/MDS/11 8 ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 18 TH JANUARY, 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH JANUARY, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-III, CHENNAI (4) CIT, CHENNAI-I, CHENNAI (5) D.R. (6) GUARD FILE