Madras Engineering Industries (P) Ltd., Chennai V. Income Tax Officer, Corporate Ward 4(2), C hennai

ITA 2320/CHNY/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0869 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR ADD L
• Assessee Lawyers: N ARJUN RAJ

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' ,$ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2320/CHNY/2017 ' (' / ASSESSMENT YEAR :2014-15 M/S MADRAS ENGINEERING INDUSTRIES (P) LTD., 14, SATHYA NARAYANA AVENUE, RAJA ANNAMALAIPURAM, CHENNAI - 600 028. PAN : AAACM 4509 P V. THE INCOME TAX OFFICER, CORPORATE WARD 4(2), CHENNAI. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI N. ARJUN RAJ, CA ,-*+ . / / RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADD L.CIT 0 . 1$ / DATE OF HEARING : 14.11.2018 2!( . 1$ / DATE OF PRONOUNCEMENT : 16.11.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -8, CHENNA I, DATED 18.08.2017 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2 I.T.A. NO.2320/CHNY/17 2. SHRI N. ARJUN RAJ, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS DISALLOWANCE OF RENT PAID BY THE ASSESSEE UNDER SEC TION 40A(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). REF ERRING TO THE ORDER OF THIS TRIBUNAL IN I.T.A. NOS.2259, 2260 & 2261/MD S/2015 DATED 21.09.2016, THE LD. REPRESENTATIVE SUBMITTED THAT I N THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2010-11, 2011-12 & 20 12-13, THIS TRIBUNAL FOUND THAT THE ENTIRE TRANSACTION IN PAYME NT OF RENT IS NOTHING BUT AN ARRANGEMENT WHEREIN BENEFIT IS BESTO WED UPON THE INDIVIDUAL OF THE FAMILY RATHER THAN THE COMPANY DE RIVING ANY BENEFIT. ACCORDING TO THE LD. REPRESENTATIVE, THIS TRIBUNAL UPHELD THE SIMILAR DISALLOWANCE. IN FACT, THIS TRIBUNAL OBSERVED AS F OLLOWS AT PARA 19 OF ITS ORDER:- 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THOUGH THE ASSESSEE HAS ARGUED THAT THE RENT PAID IS REASONABLE COMPARING THE OTHER RES IDENTIAL PREMISES THE ASSESSEE HAS NOT MADE OUT A CASE FOR T AKING THE ACCOMMODATION ON LEASE FROM THE DIRECTOR AND LE ASING OUT TO HIM. THERE IS NO OTHER PERSON, WHO HAS BEEN PAID THE RENT IN THE SIMILAR MANNER IN THE COMPANY. MR. SRIRAMSIVARAM IS A WHOLE TIME DIRECTOR AND THERE AR E OTHER DIRECTORS BUT NO SUCH FACILITY WAS EXTENDED TO ANY O F THE OTHER DIRECTORS. THE LEASED ACCOMMODATION IS A TAXA BLE PERQUISITE IN THE HANDS OF MR. SRIRAMSIVARAM, WHICH IS MUCH LOWER IN RATE. MR. SRIRAMSIVARAM IS A DIRECTOR OF THE COMPANY AND DRAWING SALARY. SECTION 40A(2) WAS BROU GHT 3 I.T.A. NO.2320/CHNY/17 INTO ACT TO CURB THE INCIDENCE OF TAX EVASION, CURBI NG SUCH PRACTICE OF DISTRIBUTING PROFITS WITHOUT MAKING THE PAYMENT OF LEGITIMATE TAX. THEREFORE, WE AGREE WITH THE CIT (A)S ORDER AND THE ENTIRE TRANSACTION IS NOTHING BUT AN ARRANGEMENT WHEREIN BENEFIT IS BESTOWED UPON INDIVI DUAL OF THE FAMILY RATHER THAN THE COMPANY DERIVING ANY BEN EFIT. THEREFORE, A.O. HAS RIGHTLY DISALLOWED THE EXPENDITU RE AS UNREASONABLE AND WE UPHELD THE ORDER OF LD.CIT(A) A ND DISMISS THE ASSESSEES GROUND ON THIS ISSUE FOR ALL THE ASSESSMENT YEARS. 3. WE HEARD SHRI R. CLEMENT RAMESH KUMAR, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO. THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE IN I.T.A. NOS.2 259, 2260 & 2261/MDS/2015 DATED 21.09.2016 IN RESPECT OF VERY S AME PROPERTY, CONFIRMED SIMILAR DISALLOWANCE. FOR THE SAME REASO NING, THE ORDER OF THE CIT(APPEALS) IS CONFIRMED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 16 TH NOVEMBER, 2018 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 16 TH NOVEMBER, 2018. KRI. 4 I.T.A. NO.2320/CHNY/17 . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT, CHENNAI-4, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.