DCIT Corporate Circle 2(1), CHENNAI V. Easun Reyrolle Limited, CHENNAI

ITA 2086/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4336 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 28-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBASHRI
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , ., # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2086/CHNY/2017 '' /ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1), CHENNAI-600 034. VS M/S. EASUNREYROLLE LTD., 672, ANNA SALAI, 6 TH FLOOR, TEMPLE TOWER, CHENNAI-600 035. PAN:AAACE2032P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS.SUBASHRI, JCIT /RESPONDENT BY : NONE /DATE OF HEARING : 11.02.2019 /DATE OF PRONOUNCEMENT : 12.02.2019 / O R D E R PER S.JAYARAMAN, AM: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, CHENNAI IN ITA NO. 35/CIT(A)-9/2010-11 DATED 15.05.2017 FOR THE ASSE SSMENT YEAR 2008- 09. 2. M/S. EASUN REYROLLE LIMITED, THE ASSESSEE, IS EN GAGED IN THE BUSINESS OF MANUFACTURE OF POWER PROTECTION EQUIPME NTS SUCH AS RELAYS AND CONTROL PANELS, ENERGY METERS ,WIND MILLS ETC. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2008-09, THE ASS ESSING OFFICER, NOTICED , INTER-ALIA, THAT THE ASSESSEE HAD MADE IN VESTMENTS TO THE TUNE 2 ITA NO.2086/CHNY/2017 OF 210.71 CRORES DURING THE YEAR, OBTAINED INTEREST B EARING UNSECURED LOAN OF RS.140.66 CRORES ALTHOUGH IT HAS SHOWN 74,53,000/- AS UNSECURED LOAN. SINCE THE ASSESSEE HAD RECEIVED 89,78,053/- AS DIVIDEND INCOME, BY INVOKING THE PROVISIONS OF SEC TION 14A READ WITH RULE 8D , THE ASSESSING OFFICER DISALLOWED 2,68,67,244/-. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). TH E LD.CIT(A) FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN THE CASE O F JOINT INVESTMENT PVT. LTD. (372 ITR 694), THE DECISION OF THE PUNJAB & HA RYANA HIGH COURT IN THE CASE OF EMPIRE PACKAGE PVT. LTD IN ITA NO,415 OF 2015 DATED 12.01.2016 AND JURISDICTIONAL ITAT DECISIONS IN TH E CASE OF AMBATTUR CLOTHING LTD. VS. JCIT IN ITA NO.1643/MDS/2014 & IT A NO,910/MDS/2015 DATED 28.12.2015, DIRECTED THE ASS ESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A TO THE EXTENT OF DIVIDEND INCOME EARNED AT RS.89,78,053/- . AGGRIEVED, THE RE VENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO E LAW AND FACTS OF THE CAS E. 2. THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE MADE U/S 14A R.W.R.8D TO THE EXTENT OF EXEMPT INCOME EARNED WHEN THE PROVISIONS OF THE SAID SECTION AS WELL AS RULE 8D DOES NOT PRO VIDE FOR ANY SUCH EXCEPTION? 2.2 THE CIT (A) FAILED TO APPRECIATE THAT AS PER C BDT CIRCULAR NO. 5/2014 DATED 11.02.2014, DISALLOWANCE U/S 14A IS EL IGIBLE EVEN WHEN THERE IS NO EXEMPT INCOME EARNED DURING THAT THE RELEVANT PREVIOUS YEAR. 2.3 THE CIT(A) FAILED TO CONSIDER THE FACT THAT TH E ASSESSEE HAS MADE AFRESH INVESTMENT TO THE TUNE OF RS.210.71 CRO RES WHICH YIELD 3 ITA NO.2086/CHNY/2017 ONLY DIVIDEND INCOME WHICH IS EXEMPT FROM INCOME TA X AND HENCE PROVISIONS OF SEC.14A ARE APPLICABLE. 3. SIMILAR DECISION OF THE APPELLATE FORUM IN VA RIOUS CASES HAVE NOT BEEN ACCEPTED AND FURTHER APPEAL IS PENDING BEF ORE THE HONBLE HIGH COURT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUC ED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER BE RESTORED. 3. THE LD. DR PRESENTED THE CASE ON THE LINES OF GR OUNDS OF APPEAL AND ARGUED THE CASE. NONE WAS PRESENT FOR THE ASSE SSEE. 4. WE HAVE HEARD THE LD.DR AND GONE THROUGH THE RE LEVANT MATERIAL. SINCE THE LD.CIT(A) FOLLOWED THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF INVESTMENT PVT. LTD. (372 ITR 694) AND DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE MADE UNDER SECTION 14A TO THE EXTENT OF DIVIDEND INCOME EARNED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND HENCE UPHOLD IT. THUS, THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON 12 TH FEBRUARY, 2019 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER /CHENNAI, $ /DATED 12 TH FEBRUARY, 2019 SOMU 4 ITA NO.2086/CHNY/2017 () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF