M/s. Chettinad Logistics P. :td., CHENNAI V. ACIT, CHENNAI

ITA 2165/CHNY/2013

• Counselvise Citation: 216521714 RSA 2013
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARI RAO
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Earning of tax free income
• Section: 14A; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , . . ! , ' # [BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMB ER AND SHRI S. S. GODARA, JUDICIAL MEMBER] ./ I.T.A.NO. 2165/MDS/2013 / ASSESSMENT YEAR : 2006-07 M/S CHETTINAD LOGISTICS P. LTD RANI SEETHAI HALL, V FLOOR NO.603, ANNA SALAI CHENNAI 600 006 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) CHENNAI [PAN AABCC 4551 C] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI HARI RAO, JCIT / DATE OF HEARING : 11-02-2014 ! / DATE OF PRONOUNCEMENT : 13-02-2014 ( / O R D E R PER S.S.GODARA, JUDICIAL MEMBER THIS APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME- TAX (APPEALS)-II CHENNAI, DATED 25.10.2013, PASSED IN APPEAL I.T.A.NO.2165/13 :- 2 -: NO.375/3-14, IN PROCEEDINGS UNDER SECTION143(3)OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. IT IS TO BE SEEN FROM THE GROUNDS RAISED THAT THE ASSESSEES GRIEVANCE IN THE INSTANT APPEAL IS TWO FOLDED I.E H E IS AGGRIEVED BY ACTION OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE OF ` 9,01,561/- CLAIMED AS INCIDENTAL EXPENSES AND ALSO THE DISALLO WANCE U/S 14A R.W.R 8D OF THE INCOME-TAX RULES WHICH WAS MADE BY THE ASSESSING OFFICER TO THE TUNE OF ` 12,34,799/- BUT MODIFIED BY THE CIT(A) @ 5% OF THE DIVIDEND RECEIVED. 3. IN THE COURSE OF HEARING, THE ASSESSEE REITERATES THE PLEADINGS AND ARGUES THAT THE CIT(A) OUGHT TO HAVE DELETED BOTH IMPUGNED DISALLOWANCES/ADDITIONS INSTEAD OF PARTLY DELETING THE LATTER ONE. IN VIEW OF THE AFORESAID PLEADINGS, THE ASSE SSEE PRAYS FOR ACCEPTANCE OF ITS APPEAL. 4. THE REVENUE DRAWS STRONG SUPPORT FROM THE ORDER OF THE CIT(A) ON BOTH THE DISALLOWANCES/ADDITIONS IN QUEST ION. 5. THE ASSESSEE, A COMPANY, IS ENGAGED IN THE BUSIN ESS OF CLEARING AND FORWARDING, MANUFACTURING, TRADING AND SHIP MANAGEMENT I.T.A.NO.2165/13 :- 3 -: SERVICES. ON 30.12.2006, IT HAD FILED ITS RETURN D ISCLOSING TOTAL INCOME OF ` 7,06,89,035/-. 6. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER CAME ACROSS ASSESSEES CLAIM IN THE NATURE OF INCIDENTAL EXPE NDITURE OF ` 9,01,561/-. THE ASSESSEE HAD NOT SUPPORTED THE SA ME BY WAY OF FILING ANY DETAILS. ON BEING PUT UP TO NOTICE, ITS ONLY EXPLANATION WAS THAT THE EXPENDITURE REPRESENTED PAYMENTS MADE AT P ORT AND OTHER AUTHORITIES IN CONNECTION WITH THE PORT AND OTHER L OGISTIC OPERATIONS OF THE COMPANY ALLOWABLE U/S 37 OF THE ACT. THE ASSE SSING OFFICER, IN THE ASSESSMENT ORDER DATED 11.12.208 DECLINED TO AC CEPT THE AFORESAID EXPLANATION FOR WANT OF EVIDENCE IN ORDER TO PROVE THE GENUINENESS OF THE EXPENDITURE. 7. IN ASSESSEES APPEAL, THE CIT(A) HAS ALSO CONFIRME D THE FINDINGS OF THE ASSESSING OFFICER QUA IMPUGNED DISA LLOWANCE. THEREFORE, THE INSTANT GROUND HAS BEEN RAISED BEFO RE US. 8. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE REL EVANT FINDINGS. UNDISPUTEDLY, FACTUAL POSITION IS THAT T HOUGH THE ASSESSEE HAD CLAIMED TO HAVE INCURRED THE AFORESAID EXPENDIT URE AT PORT AND OTHER AUTHORITIES IN THE NATURE OF PORT AND OTHER L OGISTIC OPERATIONS, NO I.T.A.NO.2165/13 :- 4 -: DETAILS, WHATSOEVER, ARE FORTHCOMING IN THE CASE FI LE. WE MAKE IT CLEAR THAT ALLOWABILITY OF EXPENDITURE TO HAVE BEEN INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS U/S 37 IS S UBJECT TO THE DISCHARGE OF ONUS BY THE CONCERNED ASSESSEE IN PRO VING THE SAME. IN OUR VIEW, THE PRESENT CLAIM DOES NOT SATISFY THIS C ONDITION I.E SUPPORTED BY COGENT MATERIAL PLACED ON RECORD. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE ASSESSE ES CLAIM OF THE SO CALLED INCIDENTAL EXPENDITURE INCURRED. ACCORDI NGLY, WE UPHOLD THE FINDINGS OF THE LOWER AUTHORITIES IN THIS REGARD. 9. NOW, WE COME TO THE NEXT DISALLOWANCE U/S 14A(SUP RA). IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOT ICED THE ASSESSEE TO HAVE EARNED EXEMPT INCOME OF ` 1,21,22,449/-. IT HAD NOT ALLOCATED ANY EXPENDITURE TOWARDS EARNING THE SAME. THE ASSESSING OFFICER INVOKED RULE 8D(2)(III) OF THE INCOME TAX R ULES; COMPUTED THE DISALLOWANCE AT ` 12,34,799/- AND MADE NECESSARY ADDITION IN THE ASSESSEES INCOME. 10. IN THE LOWER APPELLATE PROCEEDINGS, FIRST OF ALL TH E CIT(A) OBSERVES THAT IN VIEW OF THE DECISION OF SPECIAL B ENCH OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF CHEMINVEST L TD VS ITO [121 ITD 318], DISALLOWANCE U/S 14A R.W.R 8D COULD BE MADE EVEN IN A YEAR IN I.T.A.NO.2165/13 :- 5 -: WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIVED BY THE ASSESSEE. THEREAFTER, QUA THE APPLICABILITY OF RUL E 8D, HE OBSERVES THAT IT SHOULD BE INVOKED ONLY FROM ASSESSMENT YEAR 2008-09 AND NOT IN THE IMPUGNED ASSESSMENT YEAR 2006-07. AT THE SA ME TIME, THE CIT(A) HOLDS THAT STILL, A REASONABLE COMPUTATION COULD BE ADOPTED FOR MAKING NECESSARY DISALLOWANCE U/S 14A. THEREAFTER , HE HAS DEEMED APPROPRIATE TO SUSTAIN DISALLOWANCE @ 5% OF THE DIV IDENDS INCOME. IN THIS MANNER, THE IMPUGNED DISALLOWANCE STANDS PARTL Y DELETED. THIS LEAVES THE ASSESSEE AGGRIEVED. 11. BEFORE US, THE ASSESSEE HAS CITED THE CASE LAW OF THE TRIBUNAL IN THE CASE OF TVS INVESTMENTS LTD VS AC IT, I.T.A.NO. 1609/MDS/2012, DATED 29.1.2013 WHEREIN EVEN FOR ASS ESSMENT YEAR 2008-09, THE DISALLOWANCE @ 2% OF THE EXEMPT INCOME HAS BEEN DEEMED APPROPRIATE BY OBSERVING THAT RULE 8D IS NOT APPLICABLE FOR THE ACCOUNTING PERIOD FROM 1.4.2007 TO 23.3.2008. IN VIEW THEREOF, WE ALSO FOLLOW SUIT AND DIRECT THE ASSESSING OFFICER T O COMPUTE IMPUGNED DISALLOWANCE @ 2% OF THE EXEMPT INCOME. RELEVANT G ROUNDS RAISED BY THE ASSESSEE IN THE APPEAL ARE, THEREFORE, PART LY ACCEPTED. I.T.A.NO.2165/13 :- 6 -: 12. THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 13 TH OF FEBRUARY, 2014, AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (S. S. GODARA) JUDICIAL MEMBER DATED: 13 TH FEBRUARY, 2014 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR