Agile Electric Sub Assembly Pvt. Ltd., CHENNAI V. JCIT, CHENNAI

ITA 1896/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9532 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: T BANUSEKAR
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , . , ! [ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./ I.T.A.NO.1896/MDS/2014 # # / ASSESSMENT YEAR : 2009-10 M/S AGILE ELECTRIC SUB ASSEMBLY PVT. LTD [FORMERLY AGILE ELECTRIC DRIVES TECHNOLOGIES AND HOLDINGS PVT. LTD] A-33-36, PHASE I, MEPZ, TAMBARAM CHENNAI 600 045 VS. THE JOINT COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(1) CHENNAI [PAN AABCI 1820 Q ] ( / APPELLANT) ( /RESPONDENT) & ' / APPELLANT BY : SHRI T. BANUSEKAR, CA )*& ' /RESPONDENT BY : DR. B. NISCHAL, JCIT ' - / DATE OF HEARING : 28 - 04 - 201 6 ' - / DATE OF PRONOUNCEMENT : 02 - 05 - 2016 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, CHENNAI, DATED 18.3.2014 IN I.T.A. NO. 451/11-12/A-I FOR THE ASSES SMENT YEAR 2009- 10. ITA NO.1896/14 :- 2 -: 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS DISALLOWA NCE OF ` 2,30,93,735/- U/S 14A R.W. RULE 8D. 3. AT THE OUTSET, THE LEARNED A.R SUBMITTED THAT ON TH E IDENTICAL ISSUE IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2010-11, THIS BENCH OF THE TRIBUNAL IN I.T.A.NO.1272/MDS/2015 VID E ORDER DATED 27.11.2015 HAS HELD THAT THAT PROVISIONS OF SECTION 14A READ WITH RULE 8D WILL NOT BE APPLICABLE IN REGARD TO THE INVESTME NTS MADE FOR ACQUIRING SHARES OF THE ASSESSEES SISTER CONCERNS AND THEREBY CONFIRMED THE ORDER OF THE LEARNED CIT(A). THE LEA RNED A.R FURTHER SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL FO R THE RELEVANT ASSESSMENT YEAR 2009-10 IS IDENTICAL, HOWEVER THE L EARNED CIT(A) HAS HELD THE MATTER AGAINST THE ASSESSEE BY HOLDING THA T THE LEARNED ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVISION S OF SECTION 14A READ WITH RULE 8D. THE LEARNED A.R FURTHER ARGUED BEFOR E US BY STATING THAT, SINCE THIS BENCH OF THE TRIBUNAL HAS HELD IN THE ASSESSEES OWN CASE FOR THE SUCCEEDING ASSESSMENT YEAR THAT PROVIS IONS OF SECTION 14A READ WITH RULE 8D WILL NOT BE APPLICABLE WHERE THE ASSESSEE HAS INVESTED FOR ACQUIRING SHARES OF ITS SISTER CONCERN S BECAUSE OF STRATEGICAL REASONS, THE SAME DECISION MAY BE FOLLO WED FOR THIS APPEAL FOR THE RELEVANT ASSESSMENT YEAR 2009-10 ALSO. THOU GH THE LD. DR VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE R EVENUE, HE COULD NOT SUCCESSFULLY CONTROVERT TO THE SUBMISSIONS OF T HE LEARNED A.R. ITA NO.1896/14 :- 3 -: HOWEVER, HE PLEADED THAT IT MAY BE VERIFIED WHETH ER ASSESSEE HAD INVESTED IN ITS SISTER CONCERNS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY P ERUSED THE MATERIALS ON RECORD. WE FIND MERIT ON THE CONT ENTIONS OF THE LEARNED A.R. IN THE SUCCEEDING ASSESSMENT YEAR, TH IS BENCH OF THE TRIBUNAL HAS HELD THE ISSUE IN FAVOUR OF THE ASSESS EE BY HOLDING THAT THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WIL L NOT BE APPLICABLE WHERE THE ASSESSEE HAD MADE INVESTMENT IN ACQUIRING THE SHARES OF ITS SISTER CONCERNS. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 7.2 IN REGARD TO APPLICABILITY OF SECTION 14A OF T HE ACT READ WITH RULE 8D ALSO; THE ABOVE VIEW WILL BE APPLICABLE. MOREOVER IN THE CASE EIH ASSOCIATED HOTELS LTD V. DCIT REPORTED IN 2013 (9) TMI 604 IN ITA NO.1503, 1624/MDS/2012 DATED 17 TH JULY, 2013, IT HAS BEEN HELD BY THE CHENNAI BENCH OF THE TRIBUNAL AS FOLLOWS:- DISALLOWANCE U/S. 14A RW RULE 8D CIT UPHELD DISAL LOWANCE HELD THAT INVESTMENTS MADE BY THE ASSESSEE IN T HE SUBSIDIARY COMPANY ARE NOT ON ACCOUNT OF INVESTMENT FOR EARNING CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOTEL INDUSTRY. A PERUSAL OF THE ORDER OF THE CIT (APPEALS) SHOWS THAT OUT OF TOTAL INVESTMENT OF RS.64,18,19,775/-, RS.63,31,25,715/- IS INVESTED IN WHOLLY OWNED SUBSI DIARY. THIS ITA NO.1896/14 :- 4 -: FACT SUPPORTS THE CASE OF THE ASSESSEE THAT THE ASS ESSEE IS NOT INTO THE BUSINESS OF INVESTMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXPEDIENCY. AN Y DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIAR Y COMPANY IS PURELY INCIDENTAL. THEREFORE, THE INVESTMENTS M ADE BY THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED F OR DISALLOWANCE U/S. 14A R.W.R. 8D. THE ASSESSING OFF ICER IS DIRECTED TO RE-COMPUTE THE AVERAGE VALUE OF INVESTM ENT UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVESTMENT S MADE BY THE ASSESSEE IN SUBSIDIARY COMPANY DECIDED IN FAVOUR OF ASSESSEE. FOR THE ABOVE SAID REASONS, WE HEREBY HOLD THAT IN THE CASE OF THE ASSESSEE THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WILL NOT BE APPLICABLE IN REGARD TO INVESTMENTS MADE FOR ACQUIRING THE SHARES OF THE ASSESSEES SISTER CONCERNS. ACCORDINGLY WE RESTRAIN OURSELVES FROM INTERFERING WITH THE ORDER OF THE LD.CIT(A) ON THIS REGARD. 5. SINCE WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE ON THE EARLIER OCCASION IN THE ASSESSEES OWN CASE FOR THE SUCCEEDING ASSESSMENT YEAR, FOR THIS YEAR ALSO WE HOLD THE SAM E. HOWEVER, TO REMOVE APPREHENSIONS OF THE LD. DR, WE HEREBY DIREC T THE LEARNED ASSESSING OFFICER TO VERIFY WHETHER THE ASSESSEE HA S MADE THE INVESTMENT FOR ACQUIRING SHARES OF ITS SISTER CONCE RNS AND IF FOUND SO, DELETE THE ADDITION MADE ON ACCOUNT OF INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. ITA NO.1896/14 :- 5 -: 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES AS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 2 ND MAY, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( DUVVURU RL REDDY ) / JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER / CHENNAI 2 / DATED: 2 ND MAY, 2016 RD ' )45 65 / COPY TO: 1 . & / APPELLANT 4. 7 / CIT 2. )*& / RESPONDENT 5. 5 ): / DR 3. 7 () / CIT(A) 6. # / GF