Natesan Synchrocones Pvt Ltd., CHENNAI V. ACIT Corporate Circle 4(2), CHENNAI

ITA 2359/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5051 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-01-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 26-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SURESH KUMAR
• Assessee Lawyers: S SRIDHAR
• Section: 142(1); 14A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2359/MDS/2017 / ASSESSMENT YEAR :2014 - 15 M/S. NATESAN SYNCHROCONES P. LTD., 54/4, PAULWELLS ROAD, SRIPURAM, ST. THOMAS MOUNT, CHENNAI 600 0 16 . [PAN: A A A C N2399A ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CO RPORATE CIRCLE 4(2), CHENNAI. ( APPELLANT ) ( R ESPONDENT ) / APPELLANT BY : SHRI S. S RIDHAR, ADVOCATE / RESPONDENT BY : S HRI S. SURESH KUMAR , ADDL. CIT / DATE OF HEARING : 0 2 . 0 1 .201 8 / DATE OF P RONOUNCEMENT : 04 . 0 1 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 8 , C HENNA I DATED 2 6 .0 7 .201 7 RELEVANT TO THE ASSESSMENT YEAR 201 4 - 1 5 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] R.W. RULE 8D OF IT RULES. I.T.A. NO. 2359 /M /17 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS MANUFACTURERS OF SYNCHROCONES AND SYNCHRONIZERS RI N GS AND GENERATES ELECTRICITY THROUGH WIND MILLS. THE ASSESSEE FILED ITS RETURN OF INCOME ADMITTING AN INCOME OF . 1 0 , 60 ,7 9 , 080 / - ON 30.09.2014 FOR THE ASSESSMENT YEAR 201 4 - 1 5 . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 3 1 .08.201 5 AND SERVED ON THE ASSESSEE ON 12.09.2015 . NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED ON 1 0 .0 5.2016 AND THE ASSESSEE HAS FILED ALL THE DETAILS AS CALLED FOR. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING O FFICER HAS NOTICED THAT THE ASSESSEE HAS MADE HUGE INVESTMENTS IN VARIOUS MUTUAL FUNDS, ETC. , WHICH IS EXEMPTED FROM TOTAL INCOME CHARGEABLE TO TAX. SINCE , THE ASSESSEE HAS NOT ADMITTED ANY EXPENSES FOR MAKING AND MAINTAINING INVESTMENTS IN MUTUAL FUNDS, E TC. , BY INVOKING THE PROVISIONS OF SECTION 14A R.W. RULE 8D, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE COMPONENT AT . 1 0, 03 , 54 3/ - AND B ROUGHT TO TAX. 3 . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING VARIOUS SU BMISSIONS OF THE ASSESSEE , THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE . I.T.A. NO. 2359 /M /17 3 4 . ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MORE THAN SUFFICIENT FUNDS UNDER RESERVE & SURPLUS FOR MAKING INVESTMENTS AND W HEN THE ASSESSEE GOT ITS OWN SUFFICIENT FUNDS FOR MAKING INVESTMENTS, THE ASSESSING OFFICER CANNOT APPLY RULE 8D AND MAKE THE DISALLOWANCE . IT WAS ALSO SUBMITTED THAT THE STRATEGIC INVESTMENT OF THE ASS ESSEE SHOULD BE KEPT OUTSIDE THE SCOPE OF DETERMINING NOTIONAL DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. B Y RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT SIMILAR DECISION MAY BE GIVEN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE OR DERS OF AUTHORITIES BELOW. SINCE THE ASSESSEE HAS NOT ADMITTED ANY EXPENDITURE FOR MAKING HUGE INVESTMENTS AND MAINTAINING THE SAME, THE ASSESSING OFFICER WORKED OUT THE EXPENDITURE COMPONENT AND DISALLOWED .10,03,543/ - . BUT, THE ASSESSMENT ORDER DID NOT SPEAK AS TO WHETHER THE ASSESSEE HAD ANY RESERVES AND SURPLUS FOR MAKING INVESTMENTS AND UTILIZED BORROWED FUNDS FOR MAKING INVESTMENTS. IN THE APPELLATE ORDER ALSO NO COMPLETE FACTS ARE EMANATING. I.T.A. NO. 2359 /M /17 4 6. ON AN IDENTICAL ISSUE IN SIMILAR FACTS AND CIRCUMSTA NCES, FOR THE ASSESSMENT YEARS 2011 - 12, 2013 - 14 & 2012 - 13 IN I.T.A. NOS. 2162/MDS/2015, 1006 & 1007/MDS/2017 VIDE ORDER DATED 08.11.2017, THE TRIBUNAL HAS HELD AS UNDER: 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW INCLUDING PAPER BOOK FILED BY THE ASSESSEE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRED TO THE BALANCE SHEET WITH REGARD TO THE OUTSTANDING IN SECURED AND UNSECURED LOAN ACCOUNT AMOUNTING TO .13,50,2 3,594/ - AND .7,50,000/ - RESPECTIVELY AND BY INVOKING THE PROVISIONS OF SECTION 14A R.W. RULE 8D, THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE. BUT, THE ASSESSMENT ORDER DID NOT SPEAK AS TO WHETHER THE ASSESSEE HAD ANY RESERVES AND SURPLUS FOR MAKING INVESTMENTS AND UTILIZED BORROWED FUNDS FOR MAKING INVESTMENTS. IN THE APPELLATE ORDER ALSO NO COMPLETE FACTS ARE EMANATING AND SIMPLY DISTINGUISHED THE CASE LAW. 6 . BEFORE US, BY RELYING ON THE BALANCE SHEET OF THE ASSESSEE, THE LD. COUNSEL HAS ARGUED T HAT THE ASSESSEE HAS MORE THAN SUFFICIENT FUNDS UNDER RESERVE & SURPLUS FOR MAKING INVESTMENTS AND W HEN THE ASSESSEE GOT ITS OWN SUFFICIENT FUNDS FOR MAKING INVESTMENTS, THE ASSESSING OFFICER CANNOT APPLY RULE 8D(2)(II) AND MAKE THE DISALLOWANCE. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING WITH REGARD TO THE QUANTUM OF INTEREST FREE FUNDS AT ASSESSEE S DISPOSAL FOR INVESTMENTS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ACCOUNTS OF T HE ASSESSEE AND DECIDE THE ISSUE AFRESH WITH REGARD TO THE DISALLOWANCE MADE UNDER RULE 8D(2)(II) IN ACCORDANCE WITH AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE BY KEEPING IN VIEW OF THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF C IT V. HDFC BANK LTD. (SUPRA), WHEREIN, ITS OWN DECISION IN THE CASE OF CIT V. RELIANCE UTILITIES AND POWER LTD. (SUPRA) HAS BEEN APPLIED. 7. AFTER VERIFICATION OF THE ACCOUNTS, IF THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT MADE ANY STRATEGIC INVESTMENTS, THEN THE DISALLOWANCE MADE UNDER RULE 8D(2)(III) CAN BE SUSTAINED. I.T.A. NO. 2359 /M /17 5 8. WITH REGARD TO THE ASSESSMENT YEARS 2013 - 14 AND 2012 - 13, SINCE FACTS ARE SIMILAR AS THAT OF ASSESSMENT YEAR 2011 - 12, WE REMIT THE MATTER FOR ALL THE ASSESSMENT YEARS TO T HE FILE OF THE ASSESSING OFFICER FOR PASS SPEAKING ORDER AS OBSERVED HEREINABOVE AT PARA 6. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL IN EARLIER ASSESSMENT YEARS, FOR THE AS SESSMENT YEAR UNDER CONSIDERATION ALSO, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO COMPLY WITH THE DIRECTIONS GIVEN IN EARLIER ASSESSMENT YEARS AS REFERRED HEREINABOVE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 04 TH JANUARY , 201 8 AT CHENNAI. SD/ - SD/ - (A.MOHAN ALANKA MONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, 04 . 0 1 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.