BBR Projects Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(2), Hyderabad

ITA 2173/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7059 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY GARLA DINNE
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: TDS; Rule 8D
• Section: 14A; 40(a)(ia); 201(1); 143(1); 11

Judgement Text

ITA 2173 OF 2018 BBR PROJECTS P LTD HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.2173/HYD/2018 ASSESSMENT YEAR: 2014-15 BBR PROJECTS (P) LTD HYDERABAD PAN:AACCB7153J VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI P. MURALI MOHANA RAO REVENUE BY : SRI VIJAY GARLADINNE, DR DATE OF HEARING: 27/07/2021 DATE OF PRONOUNCEMENT: 30/08/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-1, HYDERABAD, DATED 28.09. 2018. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF CONSTRUCTION, E-FILED IT S RETURN OF INCOME FOR THE A.Y 2014-15 ON 30.09.2014, ADMITTING A LOSS OF RS.1,23,24,356/- UNDER THE NORMAL PROVISIONS AND BO OK LOSS OF RS.1,05,87,705/- UNDER THE PROVISIONS OF SECTION 11 5JB OF THE ACT. THE RETURN WAS INITIALLY PROCESSED U/S 143(1) AND THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. DURI NG THE ASSESSMENT PROCEEDINGS U/S 143(3), THE ASSESSING OF FICER NOTICED THAT THE ASSESSEE HAS MADE AN INVESTMENT OF RS.21,3 5,42,678/- IN THE EQUITIES OF VARIOUS ENTITIES, FROM WHICH IT HAS EARNED ITA 2173 OF 2018 BBR PROJECTS P LTD HYDERABAD PAGE 2 OF 5 DIVIDEND INCOME OF RS.59,87,703/- DURING THE YEAR. HE OBSERVED THAT AS PER THE PROVISIONS OF SECTION 10(34) OF THE ACT, DIVIDEND INCOME, IS EXEMPT FROM TAX, AND THEREFORE, THE PROV ISIONS OF SECTION 14A ARE CLEARLY ATTRACTED AND ACCORDINGLY T HE DISALLOWANCE IS TO BE MADE UNDER RULE 8D OF I.T. RULES. HE ACCOR DINGLY ASKED THE ASSESSEE TO SHOW-CAUSE, AS TO THE WHY DISALLOWA NCE SHOULD NOT BE MADE U/S 14A OF THE ACT R.W. RULES 8D OF I.T . RULES. IN RESPONSE, THE ASSESSEE, VIDE ITS REPLY DATED 22.12. 2016, STATED THAT ALL BORROWED FUNDS WERE UTILIZED FOR SPECIFIC PURPOSES AND THE INVESTMENTS WERE DONE IN THE INTEREST OF THE BUSINE SS AND NO DIRECT EXPENDITURE HAS BEEN INCURRED ON SUCH INVEST MENTS. HOWEVER, OBSERVING THAT THE PROVISIONS OF SECTION 1 4A ARE ATTRACTED, THE ASSESSING OFFICER HAS COMPUTED THE D ISALLOWANCE UNDER RULE 8D(2)(III) I.E. HALF PER CENT OF THE AVE RAGE OF THE VALUE OF INVESTMENT AT RS.10,67,713,39/- AND BROUGHT IT TO T AX. 3. THE ASSESSING OFFICER FURTHER NOTICED THAT THE A SSESSEE HAS PAID AN INTEREST OF RS.1,60,59,588/- ON LOANS F ROM FINANCIAL INSTITUTIONS BUT THE ASSESSEE HAS NOT DEDUCTED THE TDS FROM SUCH PAYMENTS. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN, T HE ASSESSEE MERELY FURNISHED FORM 26A. OBSERVING THAT THE ASSES SEE HAS FAILED TO PROVIDE ANY CONFIRMATION/CERTIFICATE FROM THE FINANCIAL INSTITUTIONS TO THE EFFECT THAT THEY HAVE OFFERED T HE INTEREST INCOME TO TAX IN THEIR RETURNS OF INCOME FOR THE RELEVANT A.Y, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND BROUGHT THE SUM OF RS.1,60,59,588/- TO TAX. A 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) WHO CONFIRMED THE ORDER OF THE ASSESSING OF FICER. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: ITA 2173 OF 2018 BBR PROJECTS P LTD HYDERABAD PAGE 3 OF 5 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED BOTH ON FACTS AND LAW BY DISMISSING THE APPEAL. 2. THE APPELLATE ORDER OF LD. CIT (A)-I, HYDERABAD IN APPEAL NO.0206/CIT (A)-I, HYDERABAD /2016-17/2018-1 9 DATED 28.09.2018 FOR THE ASSESSMENT YEAR 2014-15 IS ERRONEOUS IN LAW. 3. THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THAT TH ERE IS NO NEXUS BETWEEN INTEREST EXPENDITURE ON THE TERM LOAN S AND THE DIVIDEND RECEIVED ON THE EQUITY SHARES AND ACCORDINGLY INVOKING PROVISIONS OF SECTION 14A OF T HE INCOME TAX ACT,1961 BY THE AA IS BAD-IN-LAW. 4. THE LD CIT(A) OUGHT TO HAVE APPRECIATED THAT WHE N PROVISIONS U/ S 14A ARE NOT APPLICABLE, THE APPLICA BILITY OF RULE 8D DOES NOT ARISE IN THE APPELLANT'S CASE AND AS THE APPELLANT HAS NOT EARNED ANY DIVIDEND INCOME FROM T HE SAID INVESTMENTS 5. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF SECTION U/ S 40(A)(IA) ARE NOT APPLIC ABLE IN THE APPELLANT'S CASE SINCE THE RECEIVER OF THE INTEREST I.E., PAYEE, AS IT HAS OFFERED THE SAID INTEREST OF RS.1,60,59,888/IN IT'S RETURN OF INCOME FOR THE RES PECTIVE FINANCIAL YEAR. 6. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT WHE N THE INTEREST AMOUNT OF RS 1,60,59,888/- WAS ASSESSED IN THE HANDS OF THE RECIPIENT AND IT CANNOT BE ARRESTED IN THE HANDS OF THE APPELLANT, WHICH AMOUNT TO DOUBLE TAXA TION WHICH IS AGAINST TO THE PRINCIPLE OF NATURAL JUSTIC E AND MOREOVER, THE APPELLANT WAS NOT TREATED AS 'ASSESSE E-IN DEFAULT U/S 201(1) OF THE ACT ,INVOKING OF PROVISIO NS U/S 40(A)(IA)OF THE ACT IS BAD- IN-LAW. 7. THE APPELLANT MAY ADD OR ALTER OR AMEND OR MODIF Y OR SUBSTITUTE OR DELETE AND/OR RESCIND ALL OR ANY OF T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI P. MU RALI MOHAN RAO, SUBMITTED THAT THE ASSESSEE HAS NOT CLAI MED ANY DIVIDEND INCOME AS EXEMPT FROM TAX DURING THE RELEV ANT A.Y AND THAT THE ASSESSEE HAS OFFERED THE SAID INCOME TO TA X. THEREFORE, ACCORDING TO HIM, NO DISALLOWANCE U/S 14A IS CALLED FOR. IN EVIDENCE THEREOF, HE HAS DRAWN OUR ATTENTION TO PAG E 45 OF THE PAPER BOOK FILED BY THE ASSESSEE WHICH IS THE STATE MENT OF P&L ITA 2173 OF 2018 BBR PROJECTS P LTD HYDERABAD PAGE 4 OF 5 A/C FOR THE YEAR ENDED ON 31.03.2014, WHEREIN INCOM E OFFERED TO TAX UNDER THE HEAD OTHER INCOME WAS RS.86,87,073 /- AND NOTE NO.15 WHICH IS PLACED AT PAGE 53 SHOWS THE OTHER IN COME AS CONSISTING OF: A) DIVIDEND INCOME RS.59,87,073 B) RENT RECEIVED - RS.27,00,000 TOTAL = RS. 86,87,750 THUS, IT IS CLEAR THAT THE ASSESSEE HAS OFFERED THE DIVIDEND INCOME ALSO TO TAX AND THEREFORE, THERE IS NO CASE FOR ANY DISALLOWANCE U/S 14A R.W.RULE 8D. HOWEVER, FOR THE LIMITED PURPO SE OF VERIFICATION OF THIS FACT, WE REMAND THE ISSUE TO T HE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY, THE GROUNDS OF A PPEAL NOS. 2 TO 4 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. AS REGARDS GROUNDS 5 & 6, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE RECIPIENTS OF THE INTER EST HAVE OFFERED THE SAID INCOME TO TAX. HOWEVER, THE ASSESSEE HAS N OT FILED COPIES OF THE CERTIFICATES ISSUED BY THE CHARTERED ACCOUNT ANT OF THE RECIPIENTS TO THIS EFFECT AND AS PER THE SECOND PRO VISO TO SECTION 40(A)(IA), SINCE THE ASSESSEE HAS NOT BEEN TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT, NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. THE LEARNED COUNSEL FOR THE ASSESSEE THERE FORE, PRAYED FOR AN OPPORTUNITY TO SUBMIT SUCH DETAILS BEFORE TH E ASSESSING OFFICER. IN VIEW OF THE SAME, WE DEEM IT FIT AND PR OPER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICE R WITH A DIRECTION TO THE ASSESSEE TO FILE ALL THE RELEVANT DETAILS BE FORE THE ASSESSING OFFICER AND IF THE ASSESSEE FURNISHES SUCH DETAILS TO THE EFFECT THAT THE RECIPIENTS HAVE OFFERED THE INCOME TO TAX, THEN NO DISALLOWANCE U/S 40(A)(IA) SHALL BE MADE. THEREFORE , THESE GROUNDS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA 2173 OF 2018 BBR PROJECTS P LTD HYDERABAD PAGE 5 OF 5 7 IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 30 TH AUGUST, 2021. VINODAN/SPS COPY TO: S.NO ADDRESSES 1 BBR PROJECTS (P) LTD C/O P. MURALI & CO. C.A, 6-3 - 655/2/3, SOMAJIGUDA, HYDERABAD 500082 2 DY.CIT , CIRCLE 1(2) HYDERABAD 500004 3 CIT (A) - 1, HYDERABAD 4 PR. CIT -1, HYDERABAD 5 DR, ITAT HYDERABAD BENCHES 6 GUARD FILE BY ORDER