DCIT, CHENNAI V. M/s. ABI Showatech [India] Ltd., CHENNAI

ITA 249/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52073 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: K SRINIVASAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 249/MDS/2011 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(1), CHENNAI. V. M/S. ABI SHOWATECH (INDIA) LTD., NO, 67, CHAMIERS ROAD, CHENNAI-600028. [PAN : AABCA8160B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY : SHRI K. SRINIVASAN, CA DATE OF HEARING : 14-11-2011 DATE OF PRONOUNCEMENT : 18-11-2011 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-III, CHENNAI IN ITA NO. 192/09-10/A.II I DATED 12-11-2010 FOR THE ASSESSMENT YEAR 2007-08. 2. SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL REPR ESENTED ON BEHALF OF THE REVENUE AND SHRI K. SRINIVASAN, CA REPRESENTED ON B EHALF OF THE ASSESSEE. I.T.A. NO.249/MDS/2011 2 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1) THE ORDER OF THE LEARNED CIT(A) IS CONTRARY T O THE LAW AND FACTS OF THE CASE. 2) THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S 14A TO 2% OF THE EXEMPT INCOME AS AGAINST THE DISALLOWANCE MADE OF ` 9,07,048/-. 2.1) IT IS SUBMITTED THAT DISALLOWANCE U/S 14A IS ON THE EXPENSES CLAIMED IN RELATION TO EARNING OF THE INCO ME AND NOT ON THE INCOME EARNED. IT MAY ALSO BE NOTED THAT IT HA S BEEN HELD IN THE CASE OF M/S. CHEMINVEST THAT DISALLOWANCE U/S 1 4A IS TO BE MADE EVEN IF THE DIVIDEND INCOME IS NOT RECEIVED FR OM THE INVESTMENTS MADE. AS THERE WOULD NOT BE ANY DISALL OWANCE U/S 14A IF THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND I NCOME THE CBDT HAS INTRODUCED THE CALCULATION FORMULA UNDER R ULE 8D. 2.2 IT IS FURTHER SUBMITTED THAT IN THE INSTANT CA SE, THE ASSESSING OFFICER HAS APPLIED THE THIRD LIMB OF RULE 8D FORMU LATED BY THE CBDT WHICH STATES THAT % OF THE TOTAL INVESTMENTS BE TREATED AS EXPENSES ALLOCATED TO EARNING OF EXEMPTED INCOME , FOR DISALLOWANCE U/S 14A. 2.3) NOT WITHSTANDING TO THE SUBMISSIONS ABOVE IT IS SUBMITTED THAT THE LEARNED CIT(A) HAS NOT CONSIDERE D THE FACT I.T.A. NO.249/MDS/2011 3 THAT NO DIVIDEND WAS RECEIVED DURING THE PY ON ACCO UNT OF INVESTMENTS MADE IN SUBSIDIARY M/S LIGHT ALLOY PROD UCTS LTD. VIZ 2,49,99,250 AND HENCE THE ESTIMATION BY THE CIT(A) IN THE PRESENT CASE IS NOT ACCEPTABLE. 3) THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 1,19,195/- MADE U/S 41(1) OUT OF THE SUNDRY CREDITORS OUTSTANDING FOR MORE THAN 3 YEARS. 3.1) IT IS SUBMITTED THAT THE LEARNED CIT(A) HAS R ELIED ON THE DECISIONS IN THE CASES OF CIT VS SOUTHERN ROADWAYS LTD. 282 ITR 379 (MAD) AND CIT VS TAMILNADU WAREHOUSING CORPORAT ION (2006-TIOL-321- HC-MAD-IT). THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF M/S. TV SUNDARAM IYENG AR & SONS LTD. (22 ITR 344 (SC SHOULD HAVE BEEN CONSIDERED BY THE LD. CIT WHEREIN THE HON'BLE COURT HAS STATED THAT THE AMOUNT RECEIVED IN THE COURSE OF TRADING TRANSACTION SHALL BE TREAT ED AS THE INCOME OF THE PREVIOUS YEAR IN WHICH IT CEASES TO B E REPAYABLE TO THE PERSONS FROM WHOM IT WAS COLLECTED. 3.2) THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT TH E DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF M/S. BATLIBOI & CO. PVT. LTD., (149 ITR 604 (BOM) REQUIR ES TO BE CONSIDERED IN WHICH THE HON'BLE COURT HAS STATED TH AT THE I.T.A. NO.249/MDS/2011 4 UNCLAIMED BALANCES IN THE NAMES OF CUSTOMERS, WHICH HAS BEEN RECEIVED AS ADVANCES AGAINST SUPPLIES TO BE MADE SU CH UNCLAIMED ACCOUNTS CONSTITUTE TRADING RECEIPTS. 4) FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 5. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE GROUNDS RAISED, VIZ. GROUNDS NO. 2 TO 2.3 OF THE REVENUES APPEAL, WHICH WERE AG AINST THE ACTION OF THE LEARNED CIT(A) IN DIRECTING THE ASSESSING OFFICER TO RESTRI CT THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 TO 2% OF THE EXEMPTED INCOME, WERE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX VS. M/S. TURBO ENERGY LTD . IN ITA NO. 907/MDS/2011 DATED 12-08-2011, WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LEARNED CIT(A) SHOWS THAT THE LEAR NED CIT(A) HAS CONSIDERED THE DECISION OF THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., REFERR ED TO SUPRA, WHEREIN IT HAS BEEN CLEARLY HELD THAT RULE 8D CAN B E APPLIED ONLY FROM THE ASSESSMENT YEAR 2008-09. IT IS FURTH ER NOTICED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION O F THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TVS MOTOR I.T.A. NO.249/MDS/2011 5 COMPANY LTD., REFERRED TO SUPRA TO RESTRICT THE DIS ALLOWANCE UNDER SECTION 14A TO 2%. THESE DECISIONS STILL HOL D THE FIELD. IN THE CIRCUMSTANCES, AS IT IS NOTICED THAT THE LEA RNED CIT(A) HAS ONLY FOLLOWED THE DECISION OF THE HIGHER JUDICI AL FORUMS, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT (A) IS ON THE RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENC E. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE STANDS DISM ISSED. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DE CISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. TURBO ENERGY LTD., THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE STANDS CONFIRMED. 6. IN REGARD TO GROUNDS 3 TO 3.2 IT WAS SUBMITTED B Y THE LEARNED DR THAT THE ISSUE WAS AGAINST THE DIRECTION GIVEN BY THE LEARNE D CIT(A) TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS OF SEC. 41(1) OF THE INCOME TAX ACT, 1961 IN REGARD TO THE SUNDRY CREDIT ORS OUTSTANDING FOR MORE THAN 3 YEARS. IT WAS THE SUBMISSION THAT AS THE AMOUNTS H AD BEEN OUTSTANDING FOR MORE THAN 3 YEARS, THE DEBT HAD BECOME TIME BARRED AND C ONSEQUENTLY THE AMOUNT WAS LIABLE TO BE ADDED BACK BY INVOKING THE PROVISIONS OF SECTION 41(1). IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 7. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TAMILNADU WAREHOUSING CORPORATION, REPORT ED IN 2006-TIOL-321-HC-MAD- IT DATED 10-10-2006 WHEREIN IT HAS BEEN HELD THAT A S LONG AS A SUM IS SHOWN AS I.T.A. NO.249/MDS/2011 6 LIABILITY IN THE BALANCE-SHEET, THE SAME CANNOT BE TREATED AS ASSESSABLE UNDER SECTION 41(1) OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IN THE GROUNDS ARE SQUARELY COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TAMILNADU WAREHOUSING CORPORAT ION, REFERRED TO SUPRA, THE FINDING OF THE LEARNED CIT(A) STANDS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 18/11/ 2011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 18 TH NOVEMBER, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE