Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad V. Shalivahana Green Energy Limited , Secunderabad

ITA 1990/Hyd/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1560 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: S RAMA RAO
• Keywords: Rule 8D
• Section: 143(3); 14A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1990/HYD/2018 ASSESSMENT YEAR: 2013 - 14 DCIT, CIRCLE - 3(1), HYDERABAD. VS. M/S. SHALIVAHANA GREEN ENERGY LIMITED, SECUNDERABAD. PAN: AALCS 2217 B (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI S. RAMA RAO REVENUE BY: SHRI Y.V.S.T. SAI, CIT - DR DATE OF HEARING: 02/02/2021 DATE OF PRONOUNCEMENT: 15 /02/2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT (A) - 3, HYDERABAD IN APPEAL NO. 0120/DCIT - 3(1)/HYD/CIT(A) - 3/2016 - 17, DATED 30/07/2018 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE AY: 2013 - 14. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.A O U/S. 14A OF THE ACT R.W.R 8D OF THE RULES AMOUNTING TO RS. 8,82,13,511/ - . 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF GENERATING POWER FILED ITS RETURN OF INCOME ON 28/9/2013 ADMITTING LOSS OF RS. 42,86,27,875/ - . THER EAFTER THE APPEAL WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 29/3/2016 WHEREIN THE LD. AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT R.W ., RULE 8D OF THE RULES AND DISALLOWED AN AMOUNT OF RS. 8,82,13,511/ - . ON APPEAL, THE LD. CIT (A) DELETED THE ADDITION BY OBSERVING AS FOLLOWS: - VIII) GROUND NOS.2 AND 3 IN APPEAL RELATES TO APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT. FACTS OF THE CASE, GROUNDS OF APPEAL, ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT WERE PERUSED. IT IS SEEN FROM THE ACCOUNTS OF THE APPELLANT, THE APPELLANT DID NOT CLAIM ANY EXEMPTION FOR INCOME DERIVED. HENCE, THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT DO NOT HAVE ANY APPLIC ATION. THE APPELLANT RELIED ON CERTAIN JUDICIAL DECISIONS SUCH S: 1. MADRAS HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD., VS. ADDL. CIT REPORT IN 392 ITR 633. 2. THE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. FS ENERGY DEVELOPMENT CO. LTD REPORTED IN 297 C TR 452. 3. MUMBAI ITAT ORDER IN THE CASE OF DISH TV INDIA LTD. VS. ACIT REPORTED IN 167 ITD 412. 4. THE SPECIAL BENCH DECISION IN THE CASE OF ACIT VS. VIREET INVESTMEN TS PVT LTD REPORTED IN 165 ITD 27. THE APPELLANT FURTHER SUBMITTED THAT THE LONG TERM BORROWINGS ARE ALL TERM LOANS WHICH HAS SPECIFIC AGAINST THE ACQUISITION OF THE PROPERTIES AND THAT NO PART OF THE INTEREST CAN BE SAID TO BE RELATING TO THE MONEY BORROWED. THE APPELLANT CONTENDED THAT T HE APPELLANT WAS IN POSSESSION OF SUBSTANTIAL CAPITAL FOR INVESTMENT. CONSIDERING THE FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE CANONS OF JUDICIAL DISCIPLINE AND PROPRIETY, GROUND NOS.2 AND 3 IN APPEAL ARE ALLOWED. 3.1. A GGRIEVED BY THE ORD ER OF THE LD. CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. 3 4. THE LD. DR VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LD. AO AND PLEADED FOR REINSTATING HIS ORDER. 5. T HE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD INVESTED IN EQUITY SHARES AMOUNTING TO RS. 137,17, 57,480/ - AS ON 31/3/2013 IN ITS SISTER CONCERN S OUT OF ITS NON - INTEREST BEARING FUNDS SUCH AS ITS EQUITY SHARE CAPITAL AND RESERVES. THE LD. AR FURTHER SUBMITTED THAT IN THIS SITUATION THERE IS NO SCOPE FOR ANY EXPENDITURE TO BE INCURRED TOWARDS INTEREST FOR MAKING SUCH INVESTMENT . HOWEVER, THE LD. AO ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D OF THE RULE S AND DETERMINED THE DISALLOWANCE OF EXPENDITURE AT RS. 8,82,13,511/ - . THE LD. AR FURTHER ARGUED THAT O N APPEAL, THE LD. CIT (A) DELETED THE ADDITION BY HOLDING THAT SINCE THE ASSESSEE HAD MADE THE ENTIRE INVESTMENT OUT OF ITS NON - INTEREST - BEARING FUND, NO INTEREST EXPENDITURE CAN BE ATTRIBUTED FOR MAKING THE INVESTMENT WHICH IS JUSTIFIABLE AND APPROPRIATE . IT WAS THEREFORE PLEADED THAT T HE DIRECTIONS OF THE LD. CIT (A) TO DELETE THE ADDITION MAY BE UPHELD. 6. WE HAVE HEARD THE R IVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. F ACTUALLY F OR MAKING ANY INVESTMENT IN EQ UITY SHARES BY ANY ENTITY ONLY THE FOLLOWING CATEGORIES OF EXPENDITURE WILL BE ATTRIBUTABLE: - 4 (I) INTEREST ON INTEREST BEARING FUNDS THAT IS UTILISED FOR THE PURPOSE OF MAKING SUCH INVESTMENT. (II) DIRECT AND INDIRECT EXPENSES ATTRIBUTABLE TO THE PROCESS OF MAKING SUCH INVESTMENT SUCH AS EXPENDITURE INCURRED FOR DUE DILIGENCE, MANAGERIAL EXPENDITURE, CLERIC AL EXPENSE , STATIONARY EXPENDITURE AND PORTFOLIO MANAGEMENT EXPENDITURE . 7. THERE CANNOT BE ANY OTHER EXPENDITURE OTHER THAN THE EXPENDITURE MENTIONED HEREIN ABOVE THAT CAN BE INCURRED BY AN ENTITY WHICH WILL BE ATTRIBUTABLE TO WARDS INVESTMENT S MADE IN EQUITY SHARES OF OTHER COMPANIES. IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS INVESTED IN ITS OWN SUBSIDIARY COMPAN IES OUT OF ITS NON - INTEREST - BEARING FUNDS SUCH AS OWN SHARE CAPITAL AND RESERVES AND THIS IS NOT IN DISPUTE . SINCE IN THE CASE OF THE ASSESSEE THE ASSESSEE COMPANY HAS UTILISED ONLY ITS NON - INTEREST - BEARING FUNDS F OR MAKING INVESTMENT IN IT S OWN SUBSIDIARY COMPANY, NO INTEREST COST CAN BE ATTRIBUTABLE TO THE SAM E BECAUSE , THERE IS NO INTEREST COST TO THE ASSESSEE , AS IT CAN BE TREATED THAT THE ASSESSEE HAS WITHDRAWN FROM ITS CAPITAL AND RESERVES WHICH ARE ASSESS E ES INTEREST FREE FUNDS FOR MAKING SUCH INVESTMENT . FURTHER, FOR MAKING INVESTMENT IN ITS OWN COMPANY THERE CANNOT BE ANY COST ATTRIBUTABLE WITH RESPECT TO D IRECT AND INDIRECT EXPENSES TOWARDS THE P ROCESS OF DE CISION MAKING , DUE DILIGENCE, MANAGERIAL EXPENDITURE AND PORTFOLIO MANAGEMENT EXPENDITURE BECAUSE NO SUCH COST CAN ARISE FOR MAKING INVESTMENT IN ONES OWN ENTITY . FURTHER, O NLY MEAGRE EXPENSES 5 CAN BE ATTRIBUTABLE WITH RESPECT TO CLERICAL AND STATIONARY EXPENSES WHICH IS NEGLIGIBLE AND THAT IS DESERVED TO BE I GNORED . THEREFORE, FACTUALLY THERE CAN NOT BE ANY EXPENDITURE ATTRIBUTABLE TO THE INVESTMENT MADE IN SISTER COMPANY WHEN THE INVESTMENT IS OUT OF ITS OWN INTEREST FREE FUND. WHEN THE ABOVE FACTS WERE POINTED OUT TO THE LD. DR , HE COULD NOT CONTROVERT TO THE SAME HOWEVER , HE RELIED ON THE ORDER OF THE LD. AO. CONSIDERING THESE FACT UAL ASPE CTS OF THE ISSUE , W E ARE OF THE VIEW THAT THE ORDER OF THE LD. CIT (A) DELETING THE DISALLOWANCE OF EXPENDITURE MADE BY THE LD. AO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES DOES NOT CALL FOR INTERFERENCE. HENCE, WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE FIFTEENTH OF FEBRUARY , 2021. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 15 TH FEBRUARY , 2021. OKK 6 COPY TO: - 1. M/S. SHALIVAHAN A GREEN ENERGY LIMITED, 7 TH FLOOR, MINERVA COMPLEX, SD ROAD, SECUNDERABAD 500 003. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 3(1), R.NO. 714, 7 TH FLOOR, SIGNATURE TOWERS, OPP. BOTANICAL GARDEN, KONDAPUR, HYDERABAD. 3. THE CIT (A) - 3, HYDERABAD. 4. THE PRINCIPAL COMMISSIONER OF INCOME TAX - 3, HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. 6. GUARD FILE