Fixit Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1988/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8239 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . # , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.1988/MDS/2016 ( / ASSESSMENT YEAR: 2010-11) M/S. FIXIT PVT. LTD., 358, TTK ROAD, CHENNAI -600 018. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), CHENNAI-34. PAN: AAACF0484C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SAROJ KUMAR PARIDA, ADVOCATE /RESPONDENT BY : MR. A.V.SREEKANTH, JCIT /DATE OF HEARING : 29 TH SEPTEMBER, 2016 /DATE OF PRONOUNCEMENT : 26 TH OCTOBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 6, CHENNAI DATED 18.04.2016 IN ITA NO.27/CIT(A)-6/ 2012-13 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE AC T. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER WHO HAS TAKEN INTO CONSIDERATION OF THE INVESTMENT THE INCOME DERIVED FROM WHICH IS TAXABLE, FOR THE PURPOSE OF DISALLOWANCE OF EXPENDI TURE UNDER SECTION 14A R.W.R 8D OF THE RULES. 2 ITA NO.1988/MDS/2016 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DOMESTIC COMPANY ENGAGED IN MINING BUSINESS. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ELECTRONICA LLY ON 07.10.2010 ADMITTING INCOME OF RS.4,45,58,318/-. TH EREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) OF THE ACT WHEREIN T HE LEARNED ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND DISALLOWED THE EXPENDITURE INCUR RED FOR EARNING EXEMPT INCOME IN ACCORDANCE WITH 8D OF THE RULES. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESS ING OFFICER BY HOLDING AS UNDER:- 6.2 IN MY CONSIDERED OPINION, THE SECTION DOES NO T MAKE ANY SUCH FINE DISTINCTION SO AS TO IMPLY THAT ONLY THE INVESTMENTS THAT HAVE EARNED EXEMPT INCOME DURI NG THE YEAR ARE TO BE CONSIDERED FOR THE PURPOSES OF COMPUTATION OF DISALLOWANCE UNDER RULE 8D(2)(III) O F THE ACT. HAD IT BEEN THE INTENTION OF THE LEGISLATURE, THE SAME WOULD HAVE BEEN EXPLICITLY SPECIFIED IN THE STATUE. BESIDES, THE PROVISION USES THE TERMS INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME SIGNIFIES THAT THE AGGREGATE OF INVESTMEN TS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE IS T O BE TAKEN FOR THE COMPUTATION OF DISALLOWANCE. ACCORDIN GLY, I FIND NO INFIRMITY IN THE ACTION OF THE ASSESSING OF FICER IN COMPUTING THE DISALLOWANCE ON AGGREGATE OF ALL INVESTMENTS, WHICH IS IN COMPLIANCE WITH THE PROVIS IONS OF RULE 8D(2)(III) OF THE INCOME-TAX RULES. THE 3 ITA NO.1988/MDS/2016 DISALLOWANCE UNDER SECTION 14A OF THE ACT THEREFORE STANDS CONFIRMED. THE APPELLANTS APPEAL ON THESE GROUND FAIL. 5. AT THE OUTSET, BEFORE US THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE LEARNED ASSESSIN G OFFICER AS WELL AS THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS COMPUTED THE EXPENDITURE DISALLOWABLE IN ACCORDANCE WITH RULE 8D BY TAKING INTO CONSIDERATIO N OF THE INVESTMENTS THE INCOME DERIVED FROM WHICH IS TAXABL E. HE FURTHER SUBMITTED THAT FOR THE PURPOSE OF COMPUTATI ON AS PER RULE 8D THOSE INVESTMENTS HAVE TO BE EXCLUDED. THE LISTS OF SUCH INVESTMENTS ARE LISTED BY THE LEARNED AUTHORIZ ED REPRESENTATIVE AS FOLLOWS:- I) INVESTMENTS IN REC BOND RS.1,20,00,000 (YIELDING TAXABLE INTEREST INCOME. II) INVESTMENT IN UNITS IN DEBT FUND RS. 5,84,570 (TAXABLE UNDER THE HEAD CAPITAL GAIN ON REDEMPTION) III) INVESTMENT IN UNITS OF MUTUAL FUND RS.2,14,08,660 (ON WHICH CAPITAL GAIN IS PAID ON REDEMPTION DURING THE RELEVANT ASSESSMENT YEAR AND NOT EXEMPT UNDER SECTION 10(38) OF THE ACT. IV) INVESTMENT RS. 8,81,864 NOT YIELDED ANY DIVIDEND INCOME DURING THE ASSESSMENT YEAR 4 ITA NO.1988/MDS/2016 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED I N SUPPORT OF THE ORDER OF THE LEARNED ASSESSING OFFIC ER AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BY JUS TIFYING THEIR COMPUTATION MADE IN ACCORDANCE WITH RULE 8D O F THE RULES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. PROVISIO N OF SECTION 14A MAKES IT VERY CLEAR THAT THIS PROVISION CAN BE INVOKED ONLY WHERE THE ASSESSEE INCURRED EXPENDITUR E IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THEREFORE, THE PROVISIONS OF SECTION 14A AND RULE 8D CAN BE INVOKED ONLY WHEN THE EXPEN DITURE IS RELATED TO ANY INVESTMENT THE INCOME DERIVED FR OM WHICH IS NON-TAXABLE. THIS ASPECT IS REQUIRED TO BE VERIFIED WITH RESPECT TO EACH AND EVERY INVESTMENT MADE BY THE AS SESSEE BEFORE INVOKING THE PROVISIONS OF SECTION 14A AND R ULE 8D OF THE RULES. THEREFORE, WE HEREBY REMIT THE MATTER BA CK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO VERIFY AND EXCLUDE THE EXPENSES RELATED TO THOSE INVESTMENTS WHEREIN THE I NCOME 5 ITA NO.1988/MDS/2016 DERIVED IS TAXABLE WHILE INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE RULES. IT IS ORDERED ACCORDINGL Y. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES AS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH OCTOBER, 2016 SD/- SD/- ( ! ' . # ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 26 TH OCTOBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF