Dewa Properties Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2234/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73791 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 19-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2013
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: NANDITHA
• Keywords: Deemed to accrue or arise in india
• Section: 143(3); 14A; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNALC BENCH, CHEN NAI . , , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 2234/MDS/2013 / ASSESSMENT YEAR : 2006-07 DEWA PROPERTIES LTD., NO.770A, II FLOOR, DEWA TOWER I, ANNA SALAI, CHENNAI-600 002 [PAN: AAACS 5085 Q] ( # /APPELLANT) VS ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(4), CHENNAI ( $% # /RESPONDENT) / APPELLANT BY : MS. NANDITHA, C.A., / RESPONDENT BY : SHRI T.N.BETGERI, JCIT / DATE OF HEARING : 19-03-2014 ! / DATE OF PRONOUNCEMENT : 21-03-2014 & / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)(C)-II, C HENNAI DATED 31-10-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. I.T.A. NO. 2234/MDS/2013 2 2. THE ONLY ISSUE IN APPEAL IS ADDITION MADE U/S.14 A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) ON ACCOUNT OF INVESTMENTS MADE IN SHARES YIELDING TAX FREE INCOME. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND RETAILING OF AUDIO AND VIDEO CASSETTES E TC. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY.2006 -07 ON 30-11- 2006 ADMITTING LOSS OF ` 6,17,15,633/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED ON 29-12-2008 ASSESSING THE INCOME A T ` 25,06,596/- AND LONG TERM CAPITAL LOSS OF ` 3,71,95,211/-. THEREAFTER, THE CIT INVOKED THE PROVISIONS OF SECTI ON 263 AND DIRECTED THE ASSESSING OFFICER TO LOOK INTO THE ISS UES OF DIS-ALLOWANCE U/S.14A AND DEEMED INCOME ARISING OUT OF SHARES ACQUIRED BY THE ASSESSEE AT CONCESSIONAL RATE. IN ASSESSMENT PROCEEDINGS ARISING OUT OF THE DIRECTIONS OF CIT, T HE ASSESSING OFFICER VIDE ORDER DATED 07-12-2011 MADE DIS-ALLOWA NCE OF ` 1,38,32,711/- U/S.14A R.W.R.8D. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE IMPUGNED ORDER HELD THAT THE PROVISIONS OF RUL E 8D ARE NOT APPLICABLE IN THE AY.2006-07. HOWEVER, THE CIT(APP EALS) HELD I.T.A. NO. 2234/MDS/2013 3 THAT THE PROVISIONS OF SECTION 14A WOULD BE APPLICA BLE AND FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SOUTHERN PETRO CHEMICAL INDUSTRIES VS. DCIT REPORTED AS 93 TTJ 161 RESTRICTED THE ADDITION TO ` 10.00 LAKHS. AGGRIEVED AGAINST THE ORDER THE CIT(APPEALS), THE A SSESSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 4. MS.NANDITHA, C.A., APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT INVESTMENTS WERE MADE OUT OF OWN FUN DS AND NO PART OF BORROWED FUNDS WERE UTILIZED FOR MAKING INV ESTMENTS. OUT OF TOTAL INVESTMENT OF ` 50.00 CRORES, INVESTMENTS TO THE TUNE OF ` 2.36 CRORES WERE MADE DURING THE FINANCIAL YEAR 200 5-06. IN THE RELEVANT AY, INVESTMENT WAS MADE IN A PRIVATE LIMIT ED COMPANY IN RIGHTS ISSUE. ONE OF THE COMPANIES IN WHICH THE IN VESTMENTS ARE MADE IS THE GROUP COMPANY OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THERE IS NO NEXUS BETWEEN THE BORROW INGS AND THE INVESTMENTS MADE. THE FUNDS WERE BORROWED FOR THE SPECIFIC PURPOSES AND THE SAME WERE UTILIZED FOR THAT VERY P URPOSE. THE CIT(APPEALS) HAS MADE ADDITION OF ` 10.00 LAKHS MERELY ON ESTIMATION BASIS. THE ASSESSEE HAD NOT EARNED ANY DIVIDEND DURING THE RELEVANT AY. I.T.A. NO. 2234/MDS/2013 4 5. ON THE OTHER HAND, SHRI T.N.BETGERI, APPEARING O N BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF THE C IT(APPEALS) AND SUBMITTED THAT REASONABLE ADDITION HAS BEEN MAD E KEEPING IN VIEW THE HUGE INVESTMENTS MADE BY THE ASSESSEE. TH E LD.DR PRAYED FOR CONFIRMING THE ADDITION AND DISMISSAL OF APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE ALSO PER USED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED THAT THE ASSESSEE HAS MADE INVESTMENT TO THE TUNE OF ` 50.00 CRORES IN THE SHARES OF A PRIVATE LIMITED, UN-LISTED COMPANIES FROM ITS OWN S OURCES. IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE HAS MADE INVE STMENTS FROM INTEREST BEARING FUNDS. DURING THE AY UNDER C ONSIDERATION, THE ASSESSEE HAS MADE INVESTMENT OF ` 2.36 CRORES IN THE RIGHTS ISSUE OF M/S.SAREGAMA INDIA P. LTD. THE ASSESSEE I S HAVING INVESTMENT PORTFOLIO OF ` 50.86 CRORES AND THESE INVESTMENTS HAVE BEEN MADE OVER A PERIOD OF TIME. THE ASSESSEE MUST HAVE BEEN SPENDING SOME AMOUNT IN MANAGING THE PORTFOLIO. THE CIT(APPEALS) HAS MADE AN ESTIMATION OF ` 10.00 LAKHS. SINCE THE ASSESSEE HAS ONLY INVESTED IN PRIVATE LIMITED, UN-L ISTED COMPANIES AND ONE OF THE COMPANIES IN WHICH THE ASSESSEE HAS MADE I.T.A. NO. 2234/MDS/2013 5 INVESTMENT IS ITS OWN GROUP CONCERN, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE CIT(APPEALS) IS ON THE HIGHER SIDE. IN THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT ` TWO LAKHS IS JUST AND REASONABLE AMOUNT TOWARDS DIS-ALL OWANCE U/S.14A OF THE ACT. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TH E AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 21 ST MARCH, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (VIKAS AWASTHY) JUDICIAL MEMBER DATED: 21 ST MARCH, 2014 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR