DCIT, CHENNAI V. TAFE Motor & Tractors Ltd., CHENNAI

ITA 2082/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8224 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SAHADEVAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . !' , # $% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2082/MDS/2016 & '& /ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. V. M/S.TAFE MOTORS & TRACTORS LIMITED, NO.35, POTTIPATTI PLAZA, NUNGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 600 034. PAN: AACCT 2459B ( () /APPELLANT) ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI B.SAHADEVAN, JCIT *+(),- /RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOC ATE ,.# /DATE OF HEARING : 27.09.2016 /0' ,.# /DATE OF PRONOUNCEMENT : 28.10.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-11, CHENNAI DATED 17.03.2016 AND PERTAINS TO ASSESSMEN T YEAR 2009-10. 2 I.T.A. NO.2082/MDS/2016 2. SHRI B.SAHADEVAN, THE LEARNED DEPARTMENT REPRESE NTATIVE SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFI CER DISALLOWED THE EXPENDITURE FOR EARNING THE EXEMPTED INCOME AT 5%. THE ASSESSING OFFICER HAS NOT APPLIED THE PROVISIONS OF RULE 8D(2) OF THE INC OME TAX RULES. THEREFORE, THE ASSESSMENT WAS RE-OPENED BY ISSUING NOTICE UNDE R SECTION 148. AFTER RE- OPENING THE ASSESSMENT, THE ASSESSING OFFICER COMPU TED THE DISALLOWANCE UNDER RULE 8D(2) OF THE INCOME TAX RULES. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT THE INVESTMENT WAS MADE IN SUBSIDIARY COMPANIES. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS DELETED. REFERRING TO RULE 8D(2), THE DEPARTMENT RE PRESENTATIVE SUBMITTED THAT RULE 8D(2) DOES NOT DISTINGUISH THE INVESTMENT MADE BY THE ASSESSEE FOR EARNING HE EXEMPTED INCOME EITHER IN THE SUBSIDIARY COMPANY OR IN THE OTHER COMPANIES. IRRESPECTIVE OF COMPANY IN WHICH THE ASS ESSEE INVESTED THE FUNDS ACCORDING TO THE LEARNED REPRESENTATIVE, THE DISALL OWANCE HAS TO BE COMPUTED UNDER RULE 8D(2) OF THE INCOME TAX, SINCE THE INCOM E OF SUCH INVESTMENT WOULD NOT FORM PART OF THE TOTAL INCOME OF THE ASSE SSEE FOR TAXATION. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM O F THE ASSESSEE. 3. ON THE CONTRARY, SHRI SAROJ KUMAR PARIDA, THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE MADE INVESTMEN T IN THE SUBSIDIARY COMPANIES FOR THE PURPOSE OF BUSINESS. THEREFORE, T HE PROVISIONS OF RULE 8D IS NOT APPLICABLE AT ALL. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED HIS RELIANCE 3 I.T.A. NO.2082/MDS/2016 ON THIS TRIBUNALS DECISION IN THE CASE OF EIH ASSO CIATED HOTELS LTD. VS. DCIT REPORTED IN ITA NO.1503/MDS/2013 DATED 17.07.2013. 4. ON A QUERY FROM THE BENCH, HOW THE COMPANIES IN WHICH THE INVESTMENT WAS MADE BY THE ASSESSEE IS THE SUBSIDIA RY COMPANY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FACTS O F THE CASE ARE EXAMINED BY BOTH THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WHEN THE ASSESSEE EARNED EXEMPTED INCOME, THE DISALLOWANCE FOR EARNING SUCH EXEMPTED INCOME HAS TO BE COMPUTED UNDER RULE 8D(2) OF THE INCOME TAX RULES. THE ASSESSEE CLAIMS THAT THE INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANY F OR THE PURPOSE OF BUSINESS. HOWEVER, NO MATERIAL IS AVAILABLE ON RECO RD TO SUGGEST THAT THE COMPANY IN WHICH INVESTMENT WAS MADE WAS SUBSIDIARY COMPANY OF THE ASSESSEE. IT IS ALSO NOT KNOWN, THE NATURE OF THE I NVESTMENT MADE BY THE ASSESSEE. HENCE, THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ENTIRE ISSUE ON DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A READ WITH RULE 8D IS REMITTED BACK TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH AND BRING ON RECORD THE NATURE OF THE COMPANIES IN WHICH THE INVESTMENT WAS SAID TO BE MA DE AND THE NATURE OF THE INVESTMENT MADE BY THE ASSESSEE AND THEREAFTER DECI DE THE ISSUE IN 4 I.T.A. NO.2082/MDS/2016 ACCORDANCE WITH LAW AND THERE AFTER GIVING REASONAB LE OPPORTUNITY TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 28 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( . . !' ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) # /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 1 /DATED, THE 28 TH OCTOBER, 2016. SP. , *.!2 32'. /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. 4. ( )/CIT(A) 4. 4. /CIT, 5. 25 *. /DR 6. & 6 /GF.