Kikani Exports P. Ltd., Coimbatore V. DCIT, Coimbatore

ITA 205/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4764 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-01-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 23-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH, CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ I.T.A.NO.205/CHNY/2017 ( [ [ / ASSESSMENT YEAR: 2013-14) M/S. KIKANI EXPORTS P LTD., 104, WEST PALANISAMY ROAD, R.S. PURAM, COIMBATORE 641 002. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, COIMBATORE PAN: AABCK4784H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI AR. V. SREENIVASAN, JCIT /DATE OF HEARING : 01.08.2019 /DATE OF PRONOUNCEMENT : 08.08.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE, (IN SHORT CIT(A)) DATED 23.11.2016 FOR THE ASSESSMENT YEAR 2013- 14. 2 I.T.A. NO. 205/CHNY/2017 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. KIKANI EXPORTS PVT. LTD., IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF EXPORT OF COTTON YARN. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 WAS FILED ELECTRONICALLY ON 29.09.2013 DISCLOSING A TOTAL INCOME OF RS.13,54,35,420/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, COIMBATORE (HEREINAFTER REFERRED AS AO') VIDE ORDER DATED 25.01.2016 PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS.14,33,81,245/- AFTER MAKING ADDITION OF RS.32,84,467/- U/S.14A OF THE ACT AND DISALLOWING THE CLAIM OF DEDUCTION OF RS. 22,17,051/- U/S.80IA OF THE ACT. 3. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL WAS PREFERRED BEFORE LD.CIT(A), WHO VIDE IMPUGNED ORDER HAS PARTLY ALLOWED THE APPEAL, BY DIRECTING THE AO TO ALLOW DEDUCTION U/S.80IA OF THE ACT, BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT, TIRUPUR VS. VELAYUDHASWAMY SPINNING MILLS P. LTD., SLP(C) NO.33475/2012, THE DECISIONS OF THE HONBLE MADRAS 3 I.T.A. NO. 205/CHNY/2017 HIGH COURT IN THE CASE OF CIT VS. VELAYUTHASAMY SPINNING MILLS (P) LTD., REPORTED IN 21 TAXMANN 95 (2012) AND M/S. EASTMAN EXPORTS GLOBAL CLOTHING (P) LTD., REPORTED IN 54 TAXMANN 408 (2015) AND WITH REGARD TO THE DISALLOWANCE U/S.14A OF THE ACT, THE LD.CIT(A) CONSIDERED THE WORKING OF COMPUTATION OF DISALLOWANCE MADE BY THE AO. CONSIDERING THE FACT THAT THE DISALLOWANCE IS COMPUTED IN ACCORDANCE WITH RULE 8D(2)(II) AND 8D(2)(III) OF THE ACT, THE LD.CIT(A) CONFIRMED THE ADDITION. BEING AGGRIEVED BY THIS, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 4. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 14A OF THE ACT, HAS NO APPLICATION TO THE FACTS OF THE CASE, AS NO EXPENDITURE WAS INCURRED BY THE ASSESSEE TO EARN EXEMPT INCOME AND THE AO OUGHT NOT TO HAVE MADE RESORT TO THE PROVISIONS OF SECTION 14A OF THE ACT, WITHOUT RECORDING SATISFACTION AS TO HOW THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME IS CORRECT. HE FURTHER SUBMITTED THAT THE INVESTMENTS YIELDING EXEMPT INCOME WAS MADE OUT OF THE OWN FUNDS AND THEREFORE NO DISALLOWANCE U/S.8D(2)(II) OF THE ACT IS WARRANTED. 4 I.T.A. NO. 205/CHNY/2017 ON THE OTHER HAND, THE SENIOR DR PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE ISSUE INVOLVED IN THE PRESENT GROUNDS OF APPEAL IS APPLICABILITY OF PROVISIONS OF SECTION 14A OF THE ACT. THE INDISPUTABLY THE APPELLANT EARNED EXEMPT INCOME IN THE FORM OF DIVIDEND OF RS.43,12,221/-. THE AO HAD RECORDED HIS SATISFACTION VIDE PARA NO.5.2 OF THE ASSESSMENT ORDER THAT THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME IS INCORRECT BY OBSERVING THAT THE INVESTMENTS ARE MADE OUT OF THE OWN BANK ACCOUNT, WHERE THE LOAN PROCEEDS WERE CREDITED TO THE LOAN ACCOUNT AND INCURRING OF EXPENDITURE ON MANAGERIAL PERSONNEL WHO ARE EXPERTS IN ADVISING THE INVESTMENTS CANNOT BE RULED OUT. THUS THE CONTENTION OF THE LD.AR THAT NO SATISFACTION RECORDED WAS RECORDED BY THE AO AS TO HOW THE CLAIM OF THE APPELLANT THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME IS CONTRADICTORY TO THE FACTS ON RECORD AND CANNOT BE ACCEPTED. AS REGARDS TO OTHER CONTENTION OF THE APPELLANT THAT THE INVESTMENTS ARE MADE OUT OF THE OWN FUNDS NOT OUT OF THE BORROWED FUNDS, THIS PLEA WAS NOT TAKEN BEFORE THE LOWER 5 I.T.A. NO. 205/CHNY/2017 AUTHORITIES BY LEAVING THE NECESSARY EVIDENCE ON RECORD. HENCE, AS IT IS A QUESTION OF FACT, THIS NEW PLEA CANNOT BE ACCEPTED AT THIS STAGE. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE AND DISMISSED THE APPEAL. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 8 TH AUGUST, 2019 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 8 TH AUGUST, 2019. RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. [ /GF