Shiva Distilleries Limited, Coimbatore V. Additional CIT, CHENNAI

ITA 1765/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64539 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS A DDL
• Assessee Lawyers: R VE NKATANARAYANAN
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.1765(MDS)/2011 ASSESSMENT YEAR : 2008-09 M/S.SHIVA DISTILLERIES LTD., 1212, TRICHY ROAD, COIMBATORE-641 018. PAN AACCS7199B. VS. THE ADDITIONAL COMMISSION- ER OF INCOME-TAX, RANGE-I, COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.VENKATANARAYANAN , ADVOCATE RESPONDENT BY : SHRI SHAJI P JACOB, IRS, AD DL.CIT DATE OF HEARING : 8 TH NOVEMBER, 2012 DATE OF PRONOUNCEMENT : 8 TH NOVEMBER, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2008-09. THE APPEAL IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT COIMBATORE, DATED 2-8-2011 AND ARISES OUT OF THE AS SESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. - - ITA 1765 OF 2011 2 2. THE ASSESSEE COMPANY HAS INVESTMENTS IN EQUITY SHARES OF VARIOUS COMPANIES, TOTALLING TO SIX. THE ASSESSEE HAS RECEIVED A DIVIDEND INCOME OF ` 5,66,31,976/- IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE DIVIDEND INCOME DERIVED BY THE ASSESSEE WAS CLAIMED AS EXEMPT FROM TAX UNDER SECTION 10(34) OF THE ACT. 3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NO T CLAIMED ANY EXPENDITURE IN EARNING THE ABOVE STATED DIVIDEN D INCOME. HE, THEREFORE, FOUND THAT SECTION 14A(2), READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962, APPLIES TO THE ASSESSEE S CASE. IT WAS THE CASE OF THE ASSESSEE THAT NO EXPENDITURE WA S INCURRED DIRECTLY TO EARN THE DIVIDEND INCOME. EVEN IN SUCH CASES, THE ASSESSING OFFICER FOUND THAT RULE 8D(2)(III) WOULD APPLY AND ACCORDINGLY HE WORKED OUT ` 18,11,582/- AS INCOME CORRESPONDING TO THE DIVIDEND INCOME. ACCORDINGLY, THAT MUCH OF ` 18,11,582/- WAS ADDED TO THE INCOME OF THE ASSESSE E COMPANY. THIS ADDITION HAS BEEN CONFIRMED IN FIRST APPEAL BY THE COMMISSIONER OF INCOME-TAX(APPEALS). IT IS AGA INST THE ABOVE THAT THE ASSESSEE HAS COME IN SECOND APPEAL B EFORE US. - - ITA 1765 OF 2011 3 4. THE GROUNDS RAISED BY THE ASSESSEE COMPANY READ AS BELOW:- 1. THE LEARNED COMMISSIONER OF INCOME- TAX(APPEALS)-I, COIMBATORE ERRED IN LAW AND ON FACT S TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER FOR DEEMED EXPENSES INCURRED AGAINST EXEMPTED INCOME, BY INVOKING THE PROVISIONS OF SECTION 14A(2) OF THE INCOME-TAX ACT, READ WITH RUL E 8D(2)(III). 2. THE APPELLANT FURTHER SUBMIT THAT THE LEARNED CIT(APPEALS)-I, COIMBATORE HAS ERRED IN LAW AND ON FACTS TO SUSTAIN THE ADDITION MADE BY THE ASSESSING OFFICER AS EXPENDITURE DEEMED TO HAVE BEEN INCURRED TOWARDS EXEMPTED INCOME, WHILE THE ASSESSING OFFICER HAS NOT ESTABLISHED BY FACTS AND FIGURES AS TO HOW THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MADE BY THE APPELLANT. - - ITA 1765 OF 2011 4 3. THE APPELLANT FURTHER SUBMIT THAT THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(APPEALS)-I, BOTH HAVE FAILED TO APPRECIATE THAT AS PER DETAILS OF EXPENDITURE PRODUCED BEFORE THE ASSESSING OFFICER, NONE OF THE EXPENDITURE INCURRED WERE ATTRIBUTABLE TO THE INCOME EXEMPTED FROM TAX (I.E. DIVIDEND INCOME) AND HENCE THE PROVISIONS OF SECTION 14A(2) READ WITH RULE 8D(2)(III) CAN BE INVOKED MECHANICALLY AN D WITHOUT APPRECIATING THE FACTS OF THE CASE. 5. WE HEARD BOTH THE SIDES IN DETAIL. WE FIND THA T THE ASSESSMENT YEAR INVOLVED IN THE PRESENT APPEAL IS 2 008-09 AND, THEREFORE, THE ASSESSEE IS BOUND BY SECTION 14A INT RODUCED WITH EFFECT FROM 1 ST APRIL, 2007 BY VIRTUE OF THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2006. THE ASSESSING OFFICER HA S APPLIED THE CORRECT RULE STATED IN RULE 8D(2)(III). IN THESE C IRCUMSTANCES WE DO NOT FIND ANY MERIT IN THE CONTENTIONS RAISED BY THE ASSESSEE. 6. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. - - ITA 1765 OF 2011 5 ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON THURSDAY, THE 8 TH OF NOVEMBER, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) ( DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 8TH NOVEMBER, 2012. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.