DCIT Corporate Circle 2(1) , CHENNAI V. Ennore Tank Terminals Pvt. Ltd. , CHENNAI

ITA 2089/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5858 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 28-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS S VIJAYA PRABHA
• Assessee Lawyers: P RANGA RAMANUJAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , , $ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NOS. 2088 & 2089/MDS/2017 / ASSESSMENT YEARS : 2011-12 & 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4, CHENNAI 600 034. VS. M/S. ENNORE TANK TERMINALS PVT. LTD., NELLADRI, 3 RD FLOOR, NO. 9, CENOTAPH ROAD, ALWARPET, CHENNAI 600 018. [PAN: AABCE 3918K] ( / APPELLANT) ( / RESPONDENT) &' / APPELLANT BY : MRS. S. VIJAYAPRABHA, JCIT *+&' / RESPONDENT BY : SHRI. P. RANGA RAMANUJAM, CA ' /DATE OF HEARING : 07.11.2017 ' /DATE OF PRONOUNCEMENT : 08.11.2017 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, CHENNAI IN ITA NOS. 65 & :-2-: ITA NOS. 2088 & 2089/MDS/2017 66/(2014-15)/CIT(A)-9 DATED 30.05.2017 FOR AYS 2011 -12 AND 2012-13, RESPECTIVELY. 2. M/S. ENNORE TANK TERMINALS PVT. LTD., THE ASSESS EE IS IN THE BUSINESS OF OWNING, OPERATING AND MAINTAINING THE JETTY AND BACK UP STORAGE AND HANDLING OF THIRD PARTY BULK LIQUID CARGO CATERING TO THE REQUIREMENTS OF IMPORTERS AND EXPORTERS THROUGH ENNORE PORT. WHILE MAKING THE ASSESSMENT FOR AYS 2011-12 & 2012-13, THE AO NOTICE D THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME AT RS. 73,03,908/- & RS. 1,77,92,834/- IN THE RESPECTIVE ASSESSMENT YEARS AND CLAIMED IT AS EXEMP T INCOME U/S. 10(34). THE AO OBSERVED THAT THE EXPENDITURE ATTRIBUTABLE T O EARNING OF THESE EXEMPT INCOME OUGHT TO BE DISALLOWED U/S. 14A R.W.R . 8D. THE ASSESSEE STATED THAT THE INVESTMENTS WERE MADE OUT OF MIXED FUNDS I.E., BOTH FROM SHARE CAPITAL AS WELL AS FROM THE TERM LOAN. THE A O BY RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ BOYCE MFG. CO. LTD., 328 ITR 81 AND INVOKING PROVISIONS O F SECTION 14A R.W.R. 8D WORKED OUT THE EXPENDITURE ATTRIBUTABLE TO THE EARN ING OF EXEMPT INCOME UNDER RULE 8D(2)(II) & 8D(2)(III) AT RS. 1,79,99,52 5/- & RS. 1,81,31,202/- FOR AYS 2011-12 & 2012-13, RESPECTIVELY. AGGRIEVED , THE ASSESSEE FILED APPEALS BEFORE THE CIT(A). :-3-: ITA NOS. 2088 & 2089/MDS/2017 3. THE CIT(A) UPHELD THE DISALLOWANCES MADE U/S. 8D (2)(II) & 8D(2)(III) FOR BOTH THE AYS 2011-12 & 2012-13 HOWEVER, HE FOU ND THAT THE ASSESSEE EARNED EXEMPT INCOME OF RS. 73,03,908/- & RS. 1,77, 92,834/- FOR AYS 2011-12 & 2012-13, RESPECTIVELY. HOWEVER, THE AO D ISALLOWED RS. 1,79,99,525/- & RS. 1,81,31,202/-. RELYING ON THE DELHI HIGH COURT DECISION IN THE CASE OF JOINT INVESTMENT PVT. LTD., 372 ITR 694, THE PUNJAB & HARYANA HIGH COURT DECISION IN THE CASE OF EMPIRE PACKAGE PVT. LTD., ITA NO. 425 OF 2015 DATED 12.01.2016, THE JURISDICTIONA L ITAT DECISION IN THE CASE OF AMBATTUR CLOTHING LTD., IN ITA NO. 1643/MDS /2014 AND ITA NO. 910/MDS/2014 DATED 28.12.2015 FOLLOWING THE DECISIO N OF MUMBAI BENCH OF TRIBUNAL IN THE CASE OF M/S. DAGA GLOBAL CHEMICALS PVT. LTD., IN ITA NO. 5592/MUM/2012 DATED 01.01.2015, THE CIT(A) HELD TH AT THE DISALLOWANCES MADE U/S. 14A CANNOT EXCEED THE EXEMPT INCOME AND H ENCE, DIRECTED THE AO TO RESTRICT THE DISALLOWANCES U/S. 14A TO THE EX TENT OF EXEMPT INCOME EARNED OF RS. 73,09,908/- & 1,77,95,834/- FOR AYS 2 011-12 & 2012-13, RESPECTIVELY. HE DELETED THE BALANCE DISALLOWANCES IN THE RESPECTIVE ASSESSMENT YEARS. 4. AGGRIEVED, THE REVENUE FILED THE COMMON GROUNDS OF APPEAL WHICH IS EXTRACTED AS UNDER: 2.1 THE CIT(A) ERRED IN RESTRICTING THE DISAL LOWANCE MADE U/S. 14A R.W.R. 8D TO THE EXTENT OF EXEMPT INCOME EARNED WHE N THE PROVISIONS OF :-4-: ITA NOS. 2088 & 2089/MDS/2017 THE SAID SECTION AS WELL AS RULE 8D DOES NOT PROVID E FOR ANY SUCH EXCEPTION. 2.2 THE CIT(A) FAILED TO APPRECIATE THAT AS PE R CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014, DISALLOWANCE U/S. 14A IS E LIGIBLE EVEN WHEN THERE IS NO EXEMPT INCOME EARNED DURING THAT THE RE LEVANT PREVIOUS YEAR. 2.3 THE CIT(A) FAILED TO CONSIDER THE FACT THA T WHEN ASSESSEE HAD MIXED BAG OF FUNDS I.E., BOTH FROM THE SHARE CAPITA L AND ALSO FROM THE TERM LOAN AND HUGE INVESTMENTS WERE MADE IN ASSETS YIELDING EXEMPT INCOME. 3. SIMILAR DECISION OF THE APPELLATE FORUM IN VARIOUS CASES HAVE NOT BEEN ACCEPTED AND FURTHER APPEAL IS PENDING BEFORE THE HONBLE HIGH COURT. THE DR PLACING RELIANCE ON THE CBDT CIRCULAR NO. 5/ 2014 DATED 11.02.2014, SUBMITTED THAT THE DISALLOWANCES HAVE T O BE MADE UNDER RULE 8D(2) OF THE INCOME TAX RULES, 1962. THEREFORE, TH E CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCES TO THE E XTENT OF THE EXEMPTED INCOME EARNED BY THE ASSESSEE. 5. ON THE CONTRARY, SHRI P. RANGA RAMANUJAM, THE AU THORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN SOUTHERN P ETROCHEMICAL INDUSTRIES V. DCIT (993 TTJ 161), THE JUDGEMENT OF DELHI HIGH COURT IN JOINT INVESTMENTS PVT. LTD V. CICT (2015) 372 ITR 694 AND THE JUDGEMENT OF PUNJAB & HARYANA HIGH COURT IN EMPIRE PACKAGE PVT. LTD., IN ITA NO. 415 :-5-: ITA NOS. 2088 & 2089/MDS/2017 OF 2015 DATED 12.01.2016, FOUND THAT THE DISALLOWAN CES HAVE TO BE RESTRICTED TO THE EXTENT OF EXEMPTED INCOME EARNED BY THE ASSESSEE. FURTHER, THE AR RELIED ON THE DECISION OF THIS TRIB UNAL IN THE ASSESSEES OWN CASE IN ITA NO. 1047/MDS/2017 DATED 18.09.2017. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE R ELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER COMPUTE D THE DISALLOWANCES BY APPLYING RULE 8D(2)(II) & 8D(2)(III) AT RS. 1799952 5 (1699982+999543) AND RS. 18131202 (16738269+1392932) FOR AYS 2011-1 2 & 2012-13, RESPECTIVELY. THE CIT(A) BY FOLLOWING THE JUDGEMEN T OF DELHI HIGH COURT IN JOINT INVESTMENTS PVT. LTD., (SUPRA) AND JUDGEMENT OF PUNJAB & HARYANA HIGH COURT IN EMPIRE PACKAGE PVT. LTD., (SUPRA) AND THE ORDER OF THIS TRIBUNAL IN AMBATTUR CLOTHING LTD, IN ITA NO. 1643/ MDS/2014 DATED 28.12.2015 DIRECTED THE ASSESSING OFFICER TO RESTRI CT THE DISALLOWANCES TO THE EXTENT OF EXEMPTED INCOME EARNED BY THE ASSESSE E. THIS TRIBUNAL ON SIMILAR FACTS IN THE ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2010-11 DID NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND DISMISSED THE REVENUES APPEAL IN ITA NO. 1047/MDS/ 2017 DATED 18.09.2017. SINCE, THERE IS NO CHANGE IN FACT AND IN LAW, BY FOLLOWING THE ABOVE DECISIONS, THE REVENUES APPEALS ARE DISMISSE D. :-6-: ITA NOS. 2088 & 2089/MDS/2017 7. IN THE RESULT, REVENUES APPEAL IN ITA NOS 2088/ MDS/2017 & 2089/MDS/2017 ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 08 TH DAY OF NOVEMBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 08 TH NOVEMBER, 2017 JPV '*2343 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3* /DR 6. 7 /GF