DCIT, CHENNAI V. Auro Mira Energy Company Pvt Ltd., CHENNAI

ITA 1960/CHNY/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4970 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-01-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 29-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI, M. BALAGANESH ACCOUNTANT MEMBER ./ I.T.A.NO.1960/MDS./2016 / ASSESSMENT YEAR :2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(1), CHENNAI 600 034. VS. M/S.AURO MIRA ENERGY COMPANY PVT LTD ., ROOM NO.25,FIRST FLOOR, DORAN COMPLEX, 37, DAMODHARAN STREET, T.NAGAR, CHENNAI 600 017. [PAN AAFCA 4760 M ] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.AR.V.SREENIVASAN, JCIT, D.R /RESPONDENT BY : NONE /DATE OF HEARING : 17-01-2018 /DATE OF PRONOUNCEMENT : 18-01-2018 /O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNA I DATED 04.04.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. 2. AT THE OUTSET, THERE IS A DELAY OF 4 DAYS IN FI LING THE APPEAL BY THE REVENUE. THE REASON STATED FOR THE SAID DELAY I N THE CONDONATION PETITION HAS BEEN VERIFIED AND FOUND TO BE CONVINCI NG. HENCE WE ARE ITA NO.1960/MDS./2016 :- 2 -: INCLINED TO CONDONE THE DELAY AND ADMIT THE APPEAL OF THE REVENUE FOR ADJUDICATION. 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN RESTRICTING THE DISALLOWAN CE MADE U/S 14A OF THE ACT READ WITH RULE 8D OF THE RULES IN THE SUM O F ` 19,16,302/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF EXECUTING EPC CONTRACTS FOR POWER GENER ATION PLANTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.9.2011 FO R THE ASST YEAR 2011-12 ADMITTING TOTAL LOSS OF ` 34,38,720/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO OBSERVED THAT THE ASSESSEE HAD CLAIMED EXEMPT DIVIDEND INCOME TO THE TUNE OF ` 2,23,60,660/-. THE LD. AO SOUGHT TO MAKE DISALLOWANCE U/S 14A OF THE A CT READ WITH RULE 8D(2) (II) AND (III) OF THE RULES. THE SUBMISSION O F THE ASSESSEE THAT ONLY DIVIDEND BEARING INVESTMENTS SHOULD BE CONSIDE RED FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER SECOND AND THI RD LIMB OF RULE 8D(2) OF THE RULES, WAS IGNORED BY THE LD AO AND TO TAL DISALLOWANCE OF ` 68,00,206/- IN THE ASSESSMENT. BEFORE THE LD CITA, THE ASSESSEE SUBMITTED THAT IT HAS RECEIVED SHARE CAPITAL DURING THE YEAR TO THE TUNE OF ` 9,605.97 LAKHS WHICH WAS USED FOR INVESTMENT IN MU TUAL FUNDS FOR EARNING INCOME. THE ADDITIONAL INVESTMENT IN MUTUAL FUNDS DURING THE ITA NO.1960/MDS./2016 :- 3 -: YEAR WAS ONLY TO THE TUNE OF ` 6,553.87 LAKHS. FURTHER AS PER SCHEDULE 4 OF THE CURRENT INVESTMENTS, IT COULD BE OBSERVED THAT AN AMOUNT OF ` 3,01,21,221/- HAS BEEN ROLLED OVER TO OTHER SCHEMES AND THE FRESH INVESTMENT DURING THE YEAR OUT OF INTEREST FREE FUN DS WAS ` 65,53,87,293/- ONLY. THE LD CITA APPRECIATED THIS C ONTENTION OF THE ASSESSEE AND BY PLACING RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS UTI BANK LTD REPOR TED IN 32 TAXMANN.COM 370 (GUJ) AND DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD REPORTED IN 357 ITR 763 (MAD), DELETED THE DISALLOWANCE MADE UNDER SECOND LIMB OF RULE 8D(2) OF THE RULES. MOREOVER, IT WAS FURTHER PLEADED THAT THE INVESTMENT MADE IN SUBSIDI ARIES HAVE TO BE EXCLUDED CONSIDERING THE SAME AS STRATEGIC INVESTME NTS AND TO PROTECT THE BUSINESS INTEREST OF THE ASSESSEE COMPANY AND T HEY WERE NOT MADE WITH A VIEW TO EARN DIVIDEND INCOME. RELIANCE IN THIS REGARD WAS PLACED ON THE CO-ORDINATE BENCH DECISION OF CHENNAI TRIBUNAL IN THE CASE OF EIH HOTELS LTD VS DCIT IN ITA NO. 1503 & 16 24/MDS/2012 DATED 17.7.2013. ACCORDINGLY THE LD CITA ACCEPTED T HE WORKINGS OF DISALLOWANCE UNDER THIRD LIMB OF RULE 8D(2) OF THE RULES BY CONSIDERING THE AVERAGE VALUE OF INVESTMENTS (EXCLUDING INVESTM ENT IN SUBSIDIARIES) AND RESTRICTED THE DISALLOWANCE TO ` 19,16,302/-. ITA NO.1960/MDS./2016 :- 4 -: AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS:- 2.1 THE LD.CIT(A) ERRED IN DIRECTING THE AO TO RES TRICT THE DISALLOWANCE U/S.14A R.W.RULE 8D TO RS.19,16,302/- INSTEAD OF TH E ACTUAL DISALLOWANCE MADE BY THE AO TO THE TUNE OF RS.68,00 ,206/-. 2.2 THE LD.CIT(A) ERRED IN DIRECTING THE AO TO EXCL UDE THE INVESTMENTS MADE IN SUBSIDIARIES WHILE WORKING OUT THE COMPUTATION OF DISALLOWANCE U/S.14A R.W.RULE 8D IN TERMS OF THE RATIO LAID DOWN IN THE JURISDICTIONAL ITAT IN THE C ASE OF EIH HOTELS LTD., VS. DCIT IN ITA NO. 1503 & 1624/MDS/2012 DATE D 17.7.2013. 2.3 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF EIH HOTELS LTD., VS. DCIT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IS PENDING BEFORE THE HIGHER FORUM. 3.2. WE HAVE HEARD THE LD DR. NONE APPEARED ON BEHA LF OF THE ASSESSEE. WE FIND THAT THE LD CITA HAD RIGHTLY FOLL OWED THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF EIH HOTELS LTD SUPRA AND EXCLUDED THE INVESTMENT IN SUBSIDIARIES WHILE MAKIN G DISALLOWANCE UNDER THIRD LIMB OF RULE 8D(2) OF THE RULES. WE FUR THER HOLD THAT SINCE THE ASSESSEE WAS ABLE TO PROVE BEYOND DOUBT THAT IT HAD SUFFICIENT OWN FUNDS TO MAKE INVESTMENTS, NO DISALLOWANCE IS WARRA NTED TOWARDS INTEREST UNDER SECOND LIMB OF RULE 8D(2) OF THE RUL ES, WHICH HAS BEEN RIGHTLY DELETED BY THE LD CITA. HENCE WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD CITA WITH REGARD TO THE ISSUE O F DISALLOWANCE U/S ITA NO.1960/MDS./2016 :- 5 -: 14A OF THE ACT READ WITH RULE 8D OF THE RULES. ACCO RDINGLY, THE GROUNDS 2.1. TO 2.3. RAISED BY THE REVENUE ARE DISM ISSED. 4. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS 40,73,644/- MADE TOWARDS PROVISION FOR INVESTMENT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT IN THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE CLAIMED ` 40,73,644/- AS PROVISION FOR INVESTMENT DISALLOWED LAST YEAR TO BE ALLOWED CURRENT YEAR. THE ASSESSEE WAS ASKED TO FU RNISH EVIDENCE FOR THE DISALLOWANCE MADE LAST YEAR AND FOR THE ALLOWAB ILITY DURING THIS YEAR. THE LD AO PROCEEDED TO MAKE DISALLOWANCE OF T HE SAME IN THE ASSESSMENT. THE ASSESSEE EXPLAINED THAT IT HAD CLAI MED AN AMOUNT OF ` 40,73,644/- BEING THE DIMINUTION IN THE VALUE OF IN VESTMENTS AS AT 31.3.2010 AND IT HAD RIGHTLY DISALLOWED THE ENTIRE AMOUNT DURING THE ASST YEAR 2010-11. SINCE SUCH DIMINUTION AND THE LO SS IN THE VALUE OF INVESTMENTS HAS BEEN ABSORBED DURING THE ASST YEAR 2011-12, THE DISALLOWANCE MADE IN ASST YEAR 2010-11 WAS CLAIMED AS AN ALLOWABLE EXPENDITURE DURING ASST YEAR 2011-12. THE LD CITA O BSERVED THAT THE LD AO HAD NOT FURNISHED ANY EXPLANATION OR EVIDENCE S REGARDING THE ITA NO.1960/MDS./2016 :- 6 -: CLAIM WHILE MAKING THE DISALLOWANCE AND AGREED TO T HE EXPLANATION GIVEN BY THE ASSESSEE BEFORE HIM AND DELETED THE DI SALLOWANCE THEREON. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 3.1 THE LD.CIT(A) ERRED IN DIRECTING THE AO TO AL LOW THE PROVISION FOR INVESTMENT TO THE TUNE OF RS.40,73,644/- BEING DIMINUTION IN THE VALUE OF INVESTMENTS. 3.2 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSESSEE HAS FAILED TO PROVIDE EVIDENCES BEFORE THE AO ON TH E ACTUAL LOSS INCURRED ON SALE OF INVESTMENTS DURING THE ASSESSME NT PROCEEDINGS AND HENCE THE SAME WAS BROUGHT TO TAX. 3.3. THE LD.CIT(A) OUGHT TO HAVE CALLED FOR A REMAN D REPORT FROM AO UNDER RULE 46A OF TH I.T.RULES. 3.4. THE LD.CIT(A) ERRED IN NOT GIVING ANY FINDING IN THE APPELLATE ORDER ON THE NATURE AND ACTUAL LOSS INCURRED BY THE ASSESSEE. 4.2. WE HAVE HEARD THE LD DR. WE FIND THAT THE LD CITA HAD TAKEN DUE COGNIZANCE OF THE FACT THAT THE PROVISION FOR D IMINUTION IN INVESTMENTS WAS DISALLOWED IN ASST YEAR 2010-11 BY THE ASSESSEE AND SINCE THE LOSS ON INVESTMENTS HAD BEEN ABSORBED IN THE BOOKS DURING THE YEAR UNDER APPEAL, THE SAME WAS RIGHTLY ALLOWAB LE AS DEDUCTION. MOREOVER, WE FIND THAT THERE WAS NO ADDITIONAL / FR ESH EVIDENCE THAT WERE FILED BEFORE THE LD CITA BY THE ASSESSEE. THE LD DR WAS NOT ABLE TO BRING ON RECORD AS TO WHAT ADDITIONAL EVIDENCES WERE FILED BEFORE THE LD CITA BY THE ASSESSEE. HENCE THE GROUND RAISE D BY THE REVENUE ITA NO.1960/MDS./2016 :- 7 -: FOR RULE 46A VIOLATION IS FACTUALLY INCORRECT. FROM THE READING OF THE LD CITAS ORDER, WE FIND THAT THE ASSESSEE HAD ONLY AC CEPTED THE EXPLANATION OF THE ASSESSEE AND NO FRESH EVIDENCES WERE FILED THEREON. WE FIND THAT THE LD CITA HAD RIGHTLY DELETED THE DI SALLOWANCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA WITH REGARD T O THE ISSUE OF PROVISION FOR DIMINUTION IN INVESTMENTS. ACCORDINGL Y, THE GROUNDS 3.1 TO 3.4 RAISED BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 18 TH JANUARY, 2018 AT CHENNAI. SD/- SD/- ( ! . . ! . '# ) ( N.R.S. GANESAN) / JUDICIAL MEMBER ( !$ % & '# ) (M. BALAGANESH) ' / ACCOUNTANT MEMBER '( /CHENNAI, )* /DATED: 18 TH JANUARY, 2018 K S SUNDARAM *# +, -, /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. . ( ) /CIT(A) 4. . /CIT 5. ,/' 0 /DR 6. '1 2 /GF