M/s. Computer Age Management Services Pvt.. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2250/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3930 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , .. ' #$, & '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2250/MDS/2016 * +* / ASSESSMENT YEAR : 2011-12 M/S COMPUTER AGE MANAGEMENT SERVICES PVT. LTD., C/O M/S SUBBARAYA AIYAR PADMANABHAN & RAMAMANI ADVOCATES, NEW NO.75 (OLD NO.105), DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI - 600 004. PAN : AAACC 3035 G V. THE ASSISTANT COMMISSIONER OF INCOME TAX, LTU (APPEALS) 1, CHENNAI - 600 101. (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE /0-. 1 2 / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT ' 1 3& / DATE OF HEARING : 02.11.2016 45+ 1 3& / DATE OF PRONOUNCEMENT : 27.12.2016 2 I.T.A. NO.2250/MDS/16 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 17, CHEN NAI, DATED 30.03.2016 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF 59,25,357/- UNDER SECTION 14A OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT') READ WITH RULE 8D OF THE INCOME-TA X RULES, 1962. 3. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE ASSESSEE-COMPANY RECEIVED DIVIDE ND INCOME OF 3,72,79,429/-. HOWEVER, NO EXPENDITURE WAS INCURRE D FOR EARNING THE INCOME. REFERRING TO SECTION 14A AND RULE 8D, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENDITURE INC URRED FOR EARNING THE EXEMPT INCOME ALONE NEEDS TO BE DISALLOWED. AC CORDING TO THE LD. COUNSEL, THE ENTIRE INVESTMENT WAS MADE FROM TH E ASSESSEES OWN FUND AND NO EXPENDITURE WAS INCURRED FOR EARNIN G THE DIVIDEND INCOME. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE ITSELF WORKED OUT THE EXPENDITURE AT 10,04,673/-. REFERRING TO THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR 200 6-07 IN I.T.A. NO. 3 I.T.A. NO.2250/MDS/16 1236/MDS/2014, THE LD.COUNSEL SUBMITTED THAT ON IDE NTICAL SET OF FACTS, THIS TRIBUNAL DIRECTED THE ASSESSING OFFICER TO DISALLOW ONLY 0.5% OF AVERAGE VALUE OF INVESTMENT WHICH HAS GIVEN RISE TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. T HEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) IS N OT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI A.V. SREEKANTH, THE LD. DE PARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R COMPUTED THE DISALLOWANCE UNDER RULE 8D OF INCOME-TAX RULES, 196 2. REFERRING TO THE ASSESSMENT ORDER, THE LD. D.R. SUBMITTED THA T THE DIRECT EXPENDITURE WAS TAKEN AS NIL BY THE ASSESSING OFFIC ER. SINCE THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT ITS OWN FUND WAS USED FOR INVESTMENT, THE DISALLOWANCE UNDER DIR ECT EXPENDITURE WAS ALSO TAKEN AS NIL. HOWEVER, ACCORDING TO THE L D. D.R., UNDER CLAUSE (III) OF RULE 8D(2) OF THE INCOME-TAX RULES, 1962, 0.5% OF THE AVERAGE VALUE OF INVESTMENT, INCOME OF WHICH DOES N OT FORM PART OF TOTAL INCOME, WAS COMPUTED AT 69,30,037/- AND AFTER REDUCING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TO THE E XTENT OF 10,04,673/-, THE ASSESSING OFFICER COMPUTED THE DIS ALLOWANCE AT 59,25,357/-. 4 I.T.A. NO.2250/MDS/16 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE APPEARS TO HAVE NOT INCURRED ANY DIRECT EXPENDITURE FOR EARNING EXEMPT INCOME. IT IS ALSO NOT THE CASE OF THE ASSE SSEE THAT ANY FUNDS WERE BORROWED FOR BUSINESS. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT CLAUSE (I) AND (II) OF RULE 8D(2) MAY NOT BE APPLICABLE. HOWEVER, IN VIEW OF CLAUSE (III) OF RU LE 8D(2), 0.5% OF AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME, HAS TO BE DISALLOWED. THE INCOME EARNED BY THE ASSESSEE WAS 3,72,79,429/-. THE AVERAGE VALUE OF INVESTMENT WHICH RESULTED IN INCOME DOES NOT FORM PART OF TOTA L INCOME IS 1,38,60,07,410/-. THEREFORE, THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE AT 69,30,037/-. AFTER DEDUCTING THE DISALLOWANCE MADE BY THE ASSESSEE TO THE EXTENT OF 10,04,680/-, THE ASSESSING OFFICER SUSTAINED THE DISALLOWANCE AT 59,25,357/-. SINCE THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE UNDER R ULE 8D(2) OF THE INCOME-TAX RULES, 1962, THIS TRIBUNAL DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 5 I.T.A. NO.2250/MDS/16 ORDER PRONOUNCED ON 27 TH DECEMBER, 2016 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 27 TH DECEMBER, 2016. KRI. 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. ' :3 () /CIT(A)-17, CHENNAI-34 4. ' :3 /CIT-LTU, CHENNAI 5. 8; /3 /DR 6. * < /GF.