Asst. Commissioner of Income Tax, Central Circle-3(1), Hyderabad V. Mytrah Energy (India) Private Limited, Hyderabad

ITA 2150/Hyd/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2266 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 03-12-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 15-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: T S AJAI
• Keywords: Opportunity of being heard; Earning of tax free income; Wholly owned subsidiary; Deemed dividend; Capital receipt; Rule 8D
• Section: 2(22)(e); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 2150/HYD/17 2012-13 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1), HYDERABAD MYTRAH ENERGY (INDIA) PVT. LTD., HYDERABAD [PAN: AADCC7989C] 2151/HYD/17 2013-14 2152/HYD/17 2014-15 2102/HYD/17 2013-14 MYTRAH ENERGY (INDIA) PVT. LTD., HYDERABAD [PAN: AADCC7989C] DY.COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD 2103/HYD/17 2014-15 FOR ASSESSEE : SHRI T.S.AJAI, AR FOR REVENUE : SHRI Y.V.S.T.SAI, CIT-DR DATE OF HEARING : 03-12-2019 DATE OF PRONOUNCEMENT : 04-12-2019 O R D E R PER D.KARUNAKARA RAO, A.M. : THERE ARE BUNCH OF FIVE APPEALS IN THIS GROUP, COVER ING AYS.2012-13 TO 2014-15. OUT OF THIS, ITA NOS.2102/HYD /2017 (AY.2013-14) & 2103/HYD/2017 (AY.2014-15) ARE THE AP PEALS OF ASSESSEE. REST OF THE THREE APPEALS ARE FILED BY THE REVENUE. WE SHALL NOW TAKE THE ASSESSEES APPEALS FOR ADJUDICA TION. MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 2 -: ASSESSEES APPEALS IN ITA NOS.2102/HYD/17 & 2103/ HYD/17: 2. REFERRING TO THE GROUNDS OF THESE TWO APPEALS, LD.C OUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE GROUNDS ARE IDENTICAL LY WORDED IN THESE TWO APPEALS AND THE CORE ISSUE RELATES TO THE ADDITION MADE BY THE AO U/S.2(22)(E) OF THE INCOME TAX ACT [ACT]. REF ERRING TO GROUND NO.2, LD.COUNSEL SUBMITTED THAT THE SAID CORE IS SUE ARISES IN THIS GROUND AND THE OTHER GROUNDS ARE ARGUMENTATIVE O NLY. THEREFORE, CONSIDERING THE SIGNIFICANCE OF THE GROUND NO.2, THE SAME IS REPRODUCED HEREUNDER: 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT THE AMOUNTS RECEIVED BY THE APPELLANT FROM ITS WHOLLY OWNED SUBSIDIARY C OMPANIES WERE PART OF THE COMMERCIAL TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS, THAT THE MONEYS HAVE BEEN DEPLOYED IN OTHER WHOLLY OWNED SUB SIDIARIES OF THE APPELLANT AS PER BUSINESS REQUIREMENTS, THAT NO PAR T OF THE AMOUNTS WERE PAID TO THE SHAREHOLDERS OF THE APPELLANT AND THERE FORE THE PROVISIONS OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT ARE NOT ATT RACTED TO THE TRANSACTIONS OF RECEIPT/PAYMENT OF MONEYS BETWEEN EH APPELLANT A ND ITS SUBSIDIARIES. THE ABOVE GROUND IS COMMON IN BOTH THE APPEALS. 3. BEFORE US, AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FACTS RELATING TO THE SAID ADDITION IN CLUDES THAT THE PAYMENTS WERE MADE TO THE RELATED COMPANY. REFERRING TO THE REASONS FOR AO FOR INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, LD.COUNSEL SUBMITTED THAT THE PAYMENTS MADE IN THE ORDINARY COURSE OF BUSINESS AND THEREFORE, ARE OUTSIDE THE SCO PE OF THESE PROVISIONS. DESPITE OF RAISING OF THIS OBJECTION BEF ORE THE AUTHORITIES BELOW, THE SAID ARGUMENT/SUBMISSION OF THE ASSESSEE W AS NEVER ATTENDED TO BY THE AO/CIT(A). TO THAT EXTENT, THE ORDER IS DEFICIENT AND CANNOT BE CONSIDERED AS A SPEAKING ORDER. EVERY APPEALABLE ORDER HAS TO CONTAIN THE REASONING FOR REJECTING THE A RGUMENTS OF THE MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 3 -: ASSESSEE. IN THIS BACKGROUND OF THE FACTS, LD.COUNSEL PRAYED FOR REMANDING THE ENTIRE ISSUE TO THE FILE OF AO FOR FRES H ADJUDICATION OF THE ENTIRE ISSUE. IN THIS REGARD, HE TOOK US THROUGH THE ORDER OF THE AO AS WELL AS THE CIT(A) TO DEMONSTRATE THE DEFICIENCY. 4. ON THE OTHER HAND, LD.DR HEAVILY RELIED ON THE ORDE RS OF THE AO AS WELL AS THE CIT(A) ON THIS LIMITED ISSUE. 5. WE HEARD BOTH THE PARTIES ON THIS LIMITED ISSUE OF TH E REQUIREMENT OF REMANDING THE ISSUE TO THE FILE OF AO FO R SECOND ROUND OF THE PROCEEDINGS. ON PERUSAL OF THE ASSESSEE S SUBMISSIONS MADE BEFORE THE AO, WE FIND THAT THERE EXISTS AN ARGUMEN T MADE BY THE ASSESSEE RELATING TO THE TRANSACTION IN THE ORDINARY COURSE OF THE BUSINESS. WE FIND THAT THE ORDERS OF THE AO AND THE CIT(A) DO NOT CONTAIN ANY REFERENCE TO THIS CORE ARGUMENT OF THE AS SESSEE. SIMPLY, THE PROVISIONS OF SECTION 2(22)(E) OF THE AC T WERE INVOKED AND THE ADDITION WAS MADE. LOT OF THEORY WAS DISCUSSED IN THE ORDERS OF THE LOWER AUTHORITIES LEAVING THE FACTS UNATTEN DED. 5.1. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT T HE PRAYER OF THE LD.COUNSEL FOR THE ASSESSEE SHOULD BE CONSIDERED AND ACCEPTED. EVENTUALLY ALL THESE ISSUES UNDER THE GROUNDS RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEALS ARE REQUIRED TO BE REMANDED TO THE FILE OF AO FOR FRESH ADJUDICATION. AO IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HENCE, THE GROUNDS BY ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 4 -: 6. IN THE RESULT, APPEALS OF ASSESSEE FOR BOTH THE ASSE SSMENT YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEALS IN ITA NOS.2150/HYD/17, 2151/HYD/ 17 & 2152/HYD/17: 7. IN THESE APPEALS, THE MAIN ISSUE RELATES TO THE DIS ALLOWANCE U/S.14A R.W.R.8D OF THE INCOME TAX RULES. THE LD.CIT (A) ALLOWED THE APPEAL OF ASSESSEE, STATING AS UNDER (ORDER OF THE CIT(A) FOR THE AY.2012-13): 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS PER THE AS SESSMENT ORDER THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.44,64,880 /- U/S.14A READ WITH RULE 8D OF THE ACT STATING THAT THE APPELLANT HAS S HOWN AN AMOUNT OF RS.22,91,40,135/- AS INVESTMENT. HOWEVER, THE APPEL LANT CONTENDED THAT IT HAS NOT EARNED ANY DIVIDEND INCOME OUT OF SUCH INVESTMENTS, NO DISALLOWANCE U/S 14A CAN BE MADE. WITH REGARD TO TH E ISSUE OF DISALLOWANCE U/S 14A OF THE ACT, THE HON'BLE ITAT, 'B' BENCH, HYDERABAD IN THE CASE OF PRATHISTA INDUSTRIES LTD., SECUNDERA BAD VS. THE DCIT, CIRCLE- 16(3), HYDERABAD IN ITA NO.1302/HYD/2015 DATED 29.0 4.2016 FOR THE A.Y. 2011-12 HELD AS UNDER: '6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT SECTION 14A CLEARLY STIPULATES THAT THE EXPENDITURE INCURRE D FOR EARNING OF ANY INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ALONE CAN BE DISALLOWED. IN THE CASE BEFORE US, WH EN THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, THER E CAN BE NO DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE HON'BLE DELHI HIGH COUR T IN THE CASE OF CHEMINVEST LTD., REPORTED IN (2015) 378 ITR 33 (DEL.) HAS HELD THAT SECTION 14A WILL NOT APPLY WHERE NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT ASSESSMENT YEAR' RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON'BL E ITAT IN THE CASE OF PRATHISTA INDUSTRIES, SINCE THE APPELLANT HAS NOT E ARNED ANY DIVIDEND DURING THE RELEVANT ASSESSMENT YEAR, THE PROVISIONS OF SECTION 14A R.W. RULE 8D ARE NOT APPLICABLE IN THIS CASE. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 8. IN THE RESULT, THE APPEAL IS ALLOWED. 7.1. SINCE THE LD.CIT(A) HAS FOLLOWED THE DECISION O F THE HON'BLE ITAT FOR THE EARLIER YEARS, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 5 -: PASSED BY THE LD.CIT(A). RESPECTFULLY FOLLOWING THE S AID DECISION OF THE CO-ORDINATE BENCH OF THE ITAT, WE, THEREFORE, DISM ISS THE APPEALS OF REVENUE FOR ALL THE ASSESSMENT YEARS. 8. IN ITA NO.2151/HYD/17 (AY.2013-14), VIDE GROUND NOS.5 TO 8 THE REVENUE HAS ALSO RAISED ISSUE RELATING TO LIQUIDA TED DAMAGES. AS FAR AS THIS ISSUE IS CONCERNED, THE LD.CIT(A) DELE TED THE ADDITIONS MADE BY THE AO, FOLLOWING THESE DECISIONS: I. KETTLEWELL BULLEN AND CO. LTD., VS. COMMISSIONER OF IN COME TAX, CALCUTTA AIR 1965 SC 65; II. COMMISSIONER OF INCOME TAX, GUJARAT VS. M/S.SAURASHTR A CEMENT LIMITED 2010 TIOL-49-SC-IT; FINALLY, THE LD.CIT(A) HELD AS UNDER: 7.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND SUBMISSIONS OF THE APPELLANT. ON GOING THROUGH THE SUBMISSIONS, IT IS NOTICED THAT THAT APPELLANT COMPANY HAS RECEIVED THE LIQUIDATED DAMAGES FOR CANCELLATION OF CONTRACT DUE TO DOWNSIZING OF PROJECT AT AGASAWADI, HENCE TO BE TREATED AS CAPITAL IN NATURE . THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO TREAT IT AS CAPITAL RECEIPT AND ALLO W ACCORDINGLY. 8. WITH REGARD TO GROUND NOS. 4 AND 5, THE APPELLAN T DID NOT PRESS FOR THE SAME, THEREFORE, THE SAME ARE NOT ADJUDICATED. 9. SINCE THE APPELLANT HAS SPECIFICALLY ADMITTED TH E INCOME UNDER THE MAT PROVISIONS AS PER THE RETURN OF INCOME, THE ASSESSI NG OFFICER IS DIRECTED TO VERIFY THE TAXABILITY INCOME UNDER MAT PROVISIONS A LSO, IF THE NORMAL INCOME IS LESS THAN THE MAT. 8.1. IN THE ABOVE CITED DECISIONS I.E., IN PARA 8 ABO VE, THE RECEIPTS RECEIVED ON TERMINATION OF THE CONTRACT IS HELD TO BE OF CAPITAL NATURE. THE CIT(A) RIGHTLY HELD COMPARISON IN THE SA ID CASES TO THE FACTS OF THE PRESENT CASE AND HELD THAT THE RECEIPTS EARNE D BY THE ASSESSEE FALLS IN THE CAPITAL FIELD. SINCE THE LD.CI T(A) HAS FOLLOWED MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 6 -: THE BINDING JUDGMENTS OF THE HON'BLE SUPREME COURT, WHE RE AS THE LD.DR FOR THE REVENUE RELIED ON THE DECISION OF THE HO N'BLE HIGH COURTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PAS SED BY THE LD.CIT(A). WE, THEREFORE, DISMISS THE GROUNDS OF APP EAL NOS.5 TO 8 OF REVENUE, RAISED IN THIS APPEAL. 9. TO SUM-UP, THE APPEALS OF ASSESSEE ARE ALLOWED F OR STATISTICAL PURPOSES AND THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2019 SD/- SD/- (V. DURGA RAO) (D. KARUNAKARA R AO) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 4 TH DECEMBER, 2019 TNMM MYTRAH ENERGY (INDIA) PRIVATE LIMITED (GROUP) :- 7 -: COPY TO : 1. DY.COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYD ERABAD. 2. ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 3(1), HYDERABAD. 3. MYTRAH ENERGY (INDIA) PRIVATE LIMITED, 8001, Q-C ITY, D.NO.109, NANAKRAMGUDA, GACHIBOWLI, HYDERABAD. 4. CIT(APPEALS)-4, HYDERABAD. 5. PR.CIT-4, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.