DCIT Corporate Circle 3(2) , CHENNAI V. XS Real Properties P Ltd., CHENNAI

ITA 1805/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1448 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARJUN RAJ N CA SHRI S SRIDHAR
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.1805/CHNY/2017 ! ' / ASSESSMENT YEAR : 2012-2013. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2) CHENNAI 600 034. VS. M/S. XS REAL PROPERTIES P. LTD, NO.12, SOUTH MADA STREET, SRI NAGAR COLONY, SAIDAPET, CHENNAI 600 015. [PAN AAACX 0030G] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. AR.V. SREENIVASAN, IRS, JCIT. &' # $ % /RESPONDENT BY : SHRI. ARJUN RAJ. N. CA FOR SHRI. S. SRIDHAR, ADVOCATE ( ) $ * /DATE OF HEARING : 06-06-2019 +,'! $ * /DATE OF PRONOUNCEMENT : 10-06-2019 / O R D E R PER INTURI RAMA RAO , ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 1, CHENNAI (CIT(A) FOR SHORT) DATED 31.03.2017 FOR THE ASSES SMENT YEAR (AY) 2012-2013. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO.1805/2017 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE ID.CIT(A) ERRED IN RESTRICTING THE DISALLOW ANCE U/S 14A TO THE EXTENT OF EXEMPT INCOME OF RS.1,14,134/- EAR NED BY THE ASSESSEE THOUGH THERE IS NO SUCH PROVISION IN SECTI ON 14A OF THE INCOME TAX ACT, 1961. 2.2 THE ID.CIT(A) ERRED IN RELYING ON THE FOLLOWING DECISIONS AS THE FACTS OF RELIED ON DECISIONS ARE NOT SQUARELY A PPLICABLE TO THE FACTS OF THE CASE AS THERE WAS NO DIVIDEND INCO ME DECLARED IN THE RELIED ON DECISIONS AND HENCE THE O RDER OF THE CIT(A) IS PERVERSE TO FACTS OF THE PRESENT CASE. 2.3 THE ID.CIT(A) OUGHT TO HAVE FOLLOWED THE DECIS ION OF HON'BLE KARNATAKA HIGH COURT IN UNITED BREWERIES LI MITED VS. ACIT (KAR) 229 TAXMAN 113 AND HON'BLE BOMBAY HIGH C OURT IN THE CASE GODREJ & BOYCE MANUFACTURING CO. LTD (B OM.) 328 ITR 81 WHEREIN IT WAS RULED THAT THE AO IS DUTY BOU ND TO CALCULATE THE DISALLOWANCE U/S 14A APPLYING RULE SD IF THE AO IS SATISFIED WITH THE ASSESSEE'S CLAIM THAT NO EXPE NDITURE IS INCURRED FOR EARNING EXEMPT INCOME. 2.4 THE LEARNED CIT(A) ERRED IN ACCEPTING THE GROUN DS OF THE ASSESSEE THAT THE STRATEGIC INVESTMENT IN ASSESSEE' S SISTER CONCERN IS TO BE EXCLUDED FROM RULE 8D CALCULATION EVEN THOUGH THE INCOME TAX ACT OR RULE HAS NOT PROVIDED SUCH EXCLUSION. 2.5 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE STRATEGIC INVESTMENTS IN SISTER CONCERNS WILL ALSO FETCH INCO ME EXEMPTED FROM TAX WHICH IS LIABLE FOR DISALLOWANCE U/S 14A A PPLYING RULE 8D. 2.6 THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSEE COMPANY IS SYSTEMATICALLY MAKING INVES TMENTS EVERY YEAR WHICH REQUIRES HUGE ADMINISTRATIVE AND F INANCIAL EXPENDITURES AND CIT(A) HAS NOT CONSIDERED THE FACT THAT THE ASSESSEE COMPANY HAS MADE FRESH INVESTMENTS IN MUTU AL FUNDS TO THE TUNE OF RS.11,05,95,983/- AND IN THE S HARES TO THE TUNE OF RS. 3,20,72,670;- DURING THE FINANCIAL YEAR RELEVANT TO AY 2012-13. 2.7 THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE CBDT'S CIRCULAR NO.5 OF 2014, WHEREIN THE AO HAS TO CALCUL ATE THE ITA NO.1805/2017 :- 3 -: DISALLOWANCE U/S 14A IF THE ASSESSEE HAS INVESTMENT S FETCHING EXEMPT INCOME EVEN IF NO EXEMPT INCOME IS DECLARED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 3. REVENUE FILED THIS APPEAL WITH DELAY OF FORTY ON E DAYS. DELAY IS CONDONED. APPEAL IS ADMITTED. 4. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT ASSESSEE NAMELY M/S. XS REAL PRO PERTIES P. LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF PROP ERTY DEVELOPMENT. THE RETURN OF INCOME FOR THE ASSESSMENT 2012-13 WA S FILED ON 29.09.2012 DISCLOSING TOTAL INCOME OF RS. 3,42,17,1 90/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 23.03.20 15 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 4,97,44,231/-. WHILE DOING SO, THE AO MADE A DISALLOWANCE OF F1,55,27,041/- U/S.14A R.W.R.8D OF THE ACT REJECTI NG THE CONTENTION OF THE RESPONDENT- ASSESSEE THAT NO EXPENDITURE WAS A CTUALLY INCURRED IN MAKING INVESTMENTS AND THERE WAS NO DIVIDEND INC OME, HENCE RESORT TO PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE MADE. ITA NO.1805/2017 :- 4 -: 5. BEING AGGRIEVED BY THE ABOVE ADDITION, AN APPEAL WA S FILED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WHO VIDE IMPUGNED ORDER DIRECTED THE ASSESSING OFFICER TO RE STRICT THE AMOUNT OF DISALLOWANCE U/S.14A OF THE ACT TO THE EXTENT OF ACTUAL DIVIDEND INCOME EARNED OF F1,14,134/-. THUS, THE APPEAL OF THE ASSESSEE CAME TO BE PARTLY ALLOWED. 6. BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFO RE US CHALLENGING THE CORRECTNESS OF THE ORDER OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS). THE SR. DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT ONCE THERE IS AN EXEMPT INCOME, PROVISIONS OF SECTION 14 A OF THE ACT HAS TO BE INVOKED AND THE AMOUNT OF DISALLOWANCE HAS TO B E CALCULATED IN ACCORDANCE WITH RULE 8D. IN THIS CONNECTION, HE PL ACED RELIANCE ON THE DECISIONS OF HONBLE KARNATAKA HIGH COURT IN THE CA SE OF UNITED BREWERIES LTD VS. ACIT, 229 TAXMAN 113 AND HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD, 328 ITR 81. 7. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY PLACED RELIANCE ON THE ORDER OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS). 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE SHORT ISSUE INVOLVED IN THIS PRESENT AP PEAL IS THAT WHETHER OR NOT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS JUSTIFIED IN ITA NO.1805/2017 :- 5 -: RESTRICTING THE AMOUNT OF DISALLOWANCE U/S.14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME. THIS ISSUE STANDS CONCLUDED BY T HE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F PRINCIPAL COMMISSIONER OF INCOME TAX VS. STATE BANK OF PATIAL A, (2017) 393 ITR 476 AND 99 TAXMANN.COM 286 , WHEREIN IT WAS HELD THAT THE AMOUNT OF DISALLOWANCE U/S. 14A CANNOT EXCEED EXEMPT INCOM E AND THIS DECISION WAS CONFIRMED BY HONBLE SUPREME COURT BY DISMISSAL OF THE SLP IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. STATE BANK OF PATIALA, 99 TAXMANN.COM 286. IN THE LIGHT O F THE ABOVE LEGAL POSITIONS, WE UPHOLD THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON 10TH DAY OF JUNE, 2019, AT C HENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER -) / CHENNAI . / DATED:10TH JUNE, 2019. KV /0 $0& *12032'* / COPY TO: 0 1 . # / APPELLANT 3. 0 ( 4*056 / CIT(A) 5. 278 0& * 9 / DR 2. &' # / RESPONDENT 4. 0 ( 4* / CIT 6. 8:0;) / GF