Shriram Industrial Finance (Firm), CHENNAI V. DCIT Non Corporate Circle 2, CHENNAI

ITA 2007/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3700 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS VIJAPRABHA
• Assessee Lawyers: R SRINIVASAN
• Keywords: Earning of tax free income; Question of law; Rule 8D
• Section: 143(3); 14A; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , ! ' # , $ %& BEFORE SHRI MAHAVIR SINGH , VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBE R ./ ITA NO.2007/CHNY/2018 ' ( )( /ASSESSMENT YEAR: 2014-15 M/S. SHRIRAM INDUSTRIAL FINANCE (FIRM), MOOKAMBIKA COMPLEX, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. VS. THE DY. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, CHENNAI. [PAN : AACFS 1682A ] ( *+ /APPELLANT) ( ,-*+ /RESPONDENT) *+ . / / APPELLANT BY : SHRI R. SRINIVASAN, ADVOCATE ,-*+ . / /RESPONDENT BY : MRS. VIJAPRABHA, JCIT 0 . 1$ /DATE OF HEARING : 24.02.2020 23) . 1$ / DATE OF PRONOUNCEMENT : 24.02.2020 %# / O R D E R PER SHRI MAHAVIR SINGH, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE O RDER OF CIT(A)- 2, CHENNAI, IN ITA NO.212/2016-17/A.Y.2014-15/CIT(A )-2 DATED 18.04.2018. THE ASSESSMENT WAS FRAMED BY DCIT, NON- CORPORATE CIRCLE-2, CHENNAI FOR THE RELEVANT A.Y. 2014-15 VID E ORDER DATED 14.07.2016 U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). ITA NO.2007/CHNY/2018 (A.Y 2014-15) M/S. SHRIRAM INDUSTRIAL FINANCE (FIRM) :- 2 -: 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF FINANCE. THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA S EARNED EXEMPT INCOME OF RS. 47,500/- AND THE ASSESSEE HAS CLAIMED THIS AS EXEMPT. HE IS ALSO NOTED THAT THE ASSESSEES OWN F UNDS INVESTED IS ONLY TO THE EXTENT OF RS. 2,000/-, WHEREAS INVESTME NT IN SHARES IS AT RS. 32,91,108/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE OF INTEREST EXPENSES AND ADMINISTRATIVE EXPENSES U/S. 14A OF THE ACT R/W RULE 8D(2)(II) AND RULE 8D(2)(III) OF THE RULES TO BE INVOKED. THE ASSESSEE CLAIMED THAT THE EXPENDITURE IS SUO MOTO DISALLOWED FOR A SUM OF RS. 2,91,470/- BEF ORE THE ASSESSING OFFICER BUT, ACCORDING TO ASSESSING OFFICER, THE AS SESSEES INVESTMENT IN SHARES AT RS. 32,91,108/- AND HENCE THE SAME IS TO BE COMPUTED FOR DISALLOWANCE OF INTEREST. HENCE, THE ASSESSING OFFI CER INVOKING RULE 8D(2)(II) OF THE RULES MADE DISALLOWANCE OF INTERES T AMOUNTING TO RS. 11,08,826/- AS AGAINST THE DISALLOWANCE MADE ASSESS EE AT RS. 2,91,470/-. THE ASSESSING OFFICER THEREBY MADE NET DISALLOWANCE OF RS. 8,17,356/-. THE CIT(A) ALSO CONFIRMED THE ACTI ON OF THE ASSESSING OFFICER. 3. AGGRIEVED, THE ASSESSEE CAME IN APPEAL BEFORE TH E TRIBUNAL. BEFORE THE TRIBUNAL. ITA NO.2007/CHNY/2018 (A.Y 2014-15) M/S. SHRIRAM INDUSTRIAL FINANCE (FIRM) :- 3 -: 4. THE ASSESSEE RAISED ONLY ONE ISSUE THAT THE CIT( A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OFFIC ER BY INVOKING THE PROVISIONS OF S. 14A OF THE ACT R/W RULE 8D(2)( II) OF THE RULES AMOUNTING TO RS. 8,17,356/-. THE ASSESSEE RAISED T HE FOLLOWING THREE EFFECTIVE GROUNDS NO.2 TO 4 WHICH READS AS UNDER: 2. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER U/S. 14A R/W RULE 8D(2)(I) OF RS. 8,17,356/-. 3. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE APPELLANT HAS ALREADY DISALLOWED RS. 2,91,470/- U/S. 14A (RS. 2,70,300/- UNDER RULE 8D(2)(II) AND RS. 21,170/- UNDER RULE 8D(2)(II I). 4. THE CIT(A) ERRED IN OVERLOOKING THE FACT THAT T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS MORE THAN THE DIV IDEND INCOME. IN THIS CONNECTION THE APPELLANT RELIES ON THE DELH I HIGH COURT DECISION IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT (372 ITR 694). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE . THE ADMITTED FACTS ARE THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 47,500/- A ND CLAIMED THE SAME AS EXEMPT. THE ASSESSEE SUO MOTO DISALLOWED A SUM OF RS. 2,70,300/- UNDER RULE 8D(2)(II) OF THE RULES AND A SUM OF RS. 21,170/- UNDER RULE 8D(2)(III) OF THE RULES THEREBY MAKING T OTAL DISALLOWANCE AT RS. 2,91,470/-. THE LD. COUNSEL FOR THE ASSESSEE BE FORE US STATED THAT NOW THE ISSUE IS SQUARELY COVERED BY THE DECISION O F HONBLE APEX COURT IN THE CASE OF PCIT VS. STATE BANK OF PATIALA [2018] 99 TAXMANN.COM 286 (SC), WHEREIN SLP WAS DISMISSED AND THE DECISION ITA NO.2007/CHNY/2018 (A.Y 2014-15) M/S. SHRIRAM INDUSTRIAL FINANCE (FIRM) :- 4 -: OF HONBLE PUNJAB AND HARYANA IN THE CASE OF PCIT V S. STATE BANK OF PATIALA [2018] 99 TAXMANN.COM 285, WHEREIN IT IS HE LD AS UNDER: 4. IT IS NOT DISPUTED BY THE LEARNED COUNSEL FOR THE APPELLANT- REVENUE THAT THE ISSUE INVOLVED IN THE PRESENT CASE STANDS CONCLUDED AGAINST THE REVENUE IN ITA NO.270 OF 2016, PR. CIT V. STATE BANK OF PATIALA [2017] 393 ITR 476/88 TAXMANN.COM 667 (PUNJ . & HAR.) DECIDED ON 27.02.2017 WHEREIN AFTER CONSIDERING THE RELEVANT PROVISION AND THE CASE LAW ON THE POINT, IT WAS REC ORDED AS UNDER:- AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE NOTICE THAT THE ISSUE ON MERITS HAS BEEN DECIDED IN FAVOUR OF T HE ASSESSEE IN STATE BANK OF PATIALAS CASE (SUPRA) [(2017) 78 TAX MAN.COM 3]. THE AMOUNT OF DISALLOWANCE UNDER SECTION 14A WAS RE STRICTED TO THE AMOUNT OF EXEMPT INCOME ONLY AND NOT AT A HIGHE R FIGURE. ONCE THAT WAS SO, WE DO NOT CONSIDER IT APPROPRIATE TO DISCUSS THE SCOPE OF SECTION 263 OF THE ACT AS THE SAME HAS BEE N RENDERED ACADEMIC IN VIEW OF THE ISSUE BEING ANSWERED IN FAV OUR OF THE ASSESSEE ON MERITS. THUS, NO SUBSTANTIAL QUESTION OF LAW ARISES. CONSEQUENTLY, THE APPEAL STANDS DISMISSED. SIMILAR DECISION WAS TAKEN BY THIS COURT IN ITA NO. 193 OF 2017, PR. CIT V. STATE BANK OF PATIALA DECIDED ON 22.05.2 017. 6. WHEN THIS WAS CONFRONTED BY THE LD. SR. DR MRS. VIJAYAPRABHA, JCIT SHE STATED THAT THE ASSESSING OFFICER AS WELL AS CIT(A) HAS RIGHTLY COMPUTED THE DISALLOWANCE IN VIEW OF THE FO RMULA GIVEN UNDER RULE 8D(2)(III) AND THEREBY NO FAULT CAN BE FOUND W ITH THE ORDERS OF THE LOWER AUTHORITIES. WE NOTED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME TO THE TUNE OF RS. 47,500/- BUT, AS THE LD. COUNSEL FOR THE ASSESSEE FAIRLY AGREED THAT SUO MOTO DISALLOWANCE M ADE BY ASSESSING OFFICER AT RS. 2,91,470/- CAN BE CONSIDERED FOR DIS ALLOWANCE AND FOR THIS HE HAS NO OBJECTION. IN VIEW OF THE ABOVE, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS. 2,91,470/- AS ITA NO.2007/CHNY/2018 (A.Y 2014-15) M/S. SHRIRAM INDUSTRIAL FINANCE (FIRM) :- 5 -: AGAINST THE DISALLOWANCE COMPUTED BY THE ASSESSING OFFICER AT RS. 11,08,826/-. HENCE, THIS APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 24 TH DAY OF FEBRUARY, 2020 IN CHENNAI. SD/- SD/- ) (M. BALAGANESH) /ACCOUNTANT MEMBER ( ) (MAHAVIR SINGH) /VICE PRESIDENT /CHENNAI, 4% /DATED: 24 TH FEBRUARY, 2020 . EDN, SR. P.S %# . ,'15 65)1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 71 ( )/CIT(A) 4. 0 71 /CIT 5. 58' ,'1' /DR 6. '9( : /GF