ACIT, CHENNAI V. Good Leather Shoes (P) Ltd., CHENNAI

ITA 184/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9326 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.184/MDS/2016 ' (' / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI - 600 034. V. M/S GOOD LEATHER SHOES (P) LTD., 47, THIRUVENGADAM STREET, 1 ST FLOOR, PERIAMET, CHENNAI - 600 003. PAN : AAACG 8998 G (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. P. RADHAKRISHNAN, JCIT ,-*+ . / / RESPONDENT BY : SH. M. KARUNAKARAN, ADVOCATE 0 . 1$ / DATE OF HEARING : 23.03.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 19.05.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI , DATED 10.12.2015 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.184/MDS/16 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SH. P. RADHAKRISHNAN, THE LD. DEPARTMENTAL REPRE SENTATIVE, SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HOLDS INVESTMENTS IN EQUITY SHARES IN THE SUBSIDIAR Y COMPANIES. HOWEVER, THE ASSESSING OFFICER FOUND THAT EVEN THOU GH NO INCOME WAS EARNED DURING THE YEAR UNDER CONSIDERATION, DIS ALLOWANCE HAS TO BE MADE UNDER SECTION 14A OF THE ACT. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND THAT THE INVES TMENT MADE BY THE ASSESSEE-COMPANY IN SUBSIDIARY COMPANIES ARE NO T FOR EARNING THE DIVIDEND INCOME, BUT, FOR COMMERCIAL EXPEDIENCY , THEREFORE, IT CANNOT BE CONSTRUED FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT IN VIEW OF THE DECISION OF THIS TRIBUNAL IN ACIT V. MR. M. BASKARAN IN I.T.A. NO. 1717/MDS/2013 DATED 31.07.2014. ACCORDI NG TO THE LD. D.R., DISALLOWANCE HAS TO BE MADE EVEN THOUGH THE A SSESSEE HAS NOT EARNED ANY INCOME. 4. ON THE CONTRARY, SHRI M. KARUNAKARAN, THE LD.COU NSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE INVESTED IN S ISTER CONCERNS OF THE ASSESSEE FOR COMMERCIAL EXPEDIENCY, THEREFOR E, IT IS NOT 3 I.T.A. NO.184/MDS/16 INVESTMENT FOR EARNING ANY EXEMPTED INCOME. THE AS SESSEE MADE THE INVESTMENTS WITH AN INTENTION TO DO BUSINESS. THEREFORE, ACCORDING TO THE LD. COUNSEL, THERE CANNOT BE ANY D ISALLOWANCE IN VIEW OF THE JUDGMENT OF APEX COURT IN S.A. BUILDERS LTD. V. CIT (2007) 288 ITR 1. IN FACT, ACCORDING TO THE LD. CO UNSEL, THE CIT(APPEALS) BY PLACING RELIANCE ON THE DECISION OF THIS BENCH IN MR. M. BASKARAN (SUPRA) ALLOWED THE APPEAL OF THE A SSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. INVESTMENTS MADE BY THE ASSESSEE IN SUBSIDIARY COMPANIES ARE FO R COMMERCIAL EXPEDIENCY WITH AN INTENTION TO CARRY ON THE BUSINE SS. SUCH INVESTMENTS IN SUBSIDIARY COMPANIES CANNOT BE CONSI DERED TO BE FOR EARNING THE EXEMPTED INCOME. IN FACT, THE APEX COU RT IN S.A. BUILDERS LTD. (SUPRA) EXAMINED THE ISSUE ELABORATEL Y AND FOUND THAT WHEN THE BORROWED FUNDS WERE INVESTED IN SUBSIDIARY COMPANIES, NO PORTION OF INTEREST CAN BE DISALLOWED ON THE GRO UND THAT THE BORROWED FUNDS WERE DIVERTED OTHER THAN THE BUSINES S OF THE ASSESSEE-COMPANY. THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE SAME WOULD EQUALLY APPLICABLE WHEN THE INVESTME NTS WERE 4 I.T.A. NO.184/MDS/16 MADE IN SISTER CONCERNS. THEREFORE, THE CIT(APPEAL S) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO BELA TED DEPOSIT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND A ND ESI. THE CIT(APPEALS) BY PLACING RELIANCE ON THE JUDGMENT OF APEX COURT IN CIT V. ALOM EXTRUSIONS LIMITED (319 ITR 306) AND TH E JUDGMENT OF MADRAS HIGH COURT IN CIT V. INDUSTRIAL SECURITY & I NTELLIGENCE INDIA PVT. LTD. IN 585 AND 586 OF 2015 DATED 24.07.2015, ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT WHEN THE ASSESSE E HAS DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AND ESI BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT, THE SAME HAS TO BE ALLOWED. THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE CIT(APPEALS) A LLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF JUDGMENT OF A PEX COURT AND JUDGMENT OF MADRAS HIGH COURT, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 5 I.T.A. NO.184/MDS/16 ORDER PRONOUNCED ON 19 TH MAY, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 19 TH MAY, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT-2, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.