Trimex Sands Private Ltd., CHENNAI V. ACIT Corporate Circle 3(1), CHENNAI

ITA 2529/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5934 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 30-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B S PURSHOTHAMC A
• Keywords: Earning of tax free income; Question of law
• Section: 14A; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI INTURI RAMA RAO , ACCOUNTANT MEMBER ./ I.T.A.NO.2529/CHNY/2018 / ASSESSMENT YEAR : 2014-15 M/S. TRIMEX SANDS PVT. LTD., NO.1, SUBBARAYA AVENUE, CP RAMASWAMY ROAD, ALWARPET, CHENNAI 600 018. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-3(1), CHENNAI. [ PAN AABCE3846Q ] ( / APPELLANT) ( /RESPONDENT) !' # $ / APPELLANT BY : MR.B.S.PURSHOTHAM,C.A %& !' # $ /RESPONDENT BY : MR.B.SAGADEVAN, JCIT,D.R ' ( # ) / DATE OF HEARING : 22 - 01 - 201 9 *+ # ) / DATE OF PRONOUNCEMENT : 22 - 01 - 201 9 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-11, CHENN AI IN APPEAL NO.266/16-17 DATED 28.06.2018 FOR THE ASSESSMENT YEAR 2014-15. 2. MR.B.S.PURSHOTHAM REPRESENTED ON BEHALF OF THE ASSESSEE AND MR.B.SAGADEVAN REPRESENTED ON BEHALF THE OF THE REVENUE. 3. IT WAS SUBMITTED BY LD.A.R THAT ONLY ISSUE IN T HIS APPEAL WAS AGAINST THE ACTION OF LD.CIT(A) IN CONFIRMING THE D ISALLOWANCE MADE BY ITA NO.2529/CHNY/2018 :- 2 -: THE AO U/S.14A R.W. RULE 8D OF THE INCOME TAX RULES ,1962. IT WAS A SUBMISSION THAT THE ASSESSEE HAS NOT RECEIVED ANY E XEMPT INCOME. IT WAS A FURTHER SUBMISSION THAT THE ISSUE WAS NOW SQU ARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2011-12 & 2012-13 VID E ORDER DATED 26.07.2017 IN ITA NOS.383 & 384/MDS/2017 WHEREIN TR IBUNAL HAS HELD AS FOLLOWS:- 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. SIMILAR ISSUE CAME FOR CONSIDERATION BE FORE THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD., IN T.C NO.520/16 DATED 23.12.2016 WHE REIN HELD THAT:- 13. RELIANCE IS ALSO PLACED ON A DECISION OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF BEACH MINERALS COMPANY PVT. LT D. VS. ASSISTANT COMMISSIONER OF INCOME TAX IN TCA NO.681 OF 2013, D ATED 2.12.2013. IN THAT CASE, PAYMENTS OF INTEREST BY THE ASSESSEE WERE SOUGHT TO BE DISALLOWED INVOKING THE PROVISIONS OF S.14A ON THE PREMISE THAT THE SAME RELATED TO BORROWINGS THAT HAD BEEN INVESTED A ND WOULD YIELD EXEMPT RETURNS. THE ASSESSEE CONTESTED THE DISALLOW ANCE U/S 14A ON MULTIPLE GROUNDS. IT WAS CONTENDED THAT THERE WERE SUFFICIENT RESERVES AND SURPLUSES AVAILABLE FOR THE PURPOSE OF INVESTME NTS, AND BORROWED FUNDS, FOR WHICH THE PAYMENT OF INTEREST HAD BEEN I NCURRED, HAD NOT BEEN INVESTED. THE ASSESSEE SOUGHT TO DRAW A NEXUS BETWEEN THE BORROWED FUNDS AND THE INTEREST PAYMENTS, HIGHLIGHT ING THE POSITION THAT THE QUANTUM OF AVAILABLE FREE FUNDS WAS FAR IN EXCESS OF THE INVESTMENTS MADE. THE BENCH, IN THE LIGHT OF THE AB OVE SUBMISSIONS, REMANDED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER TO BE CONSIDERED DE NOVO AND AFTER CONDUCTING A PROPER ENQUIRY. INTE R ALIA A DIRECTION WAS ISSUED TO THE ASSESSEE TO TENDER A PROPER EXPLA NATION FOR THE INTEREST PAYMENTS. THE OPEN REMAND WAS MADE IN THE FACTS AND ITA NO.2529/CHNY/2018 :- 3 -: CIRCUMSTANCES OF THAT CASE AND NO CONCLUSION WAS DR AWN BY THE BENCH ON THE POSITION OF LAW INVOLVED. IN FACT, THE SUBST ANTIAL QUESTION OF LAW RAISED IN THAT CASE FOR THE CONSIDERATION OF THE CO URT WAS COUCHED IN GENERAL TERMS AS FOLLOWS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE. THE INCOME TAR APPELLATE TRIBUNAL IS RIGHT IN LAW IN CONFIRMIN G THE DISALLOWANCE UNDER SECTION 11.1 OF THE INCOME TAX ACT, OF AN AMO UNT OF RS.55,00.000/- IN RELATION TO ASSESSMENT YEAR 2007- 2008? 14. NOTHING MUCH TURNS ON THE USE OF THE WORD INCL UDABLE AND THE PHRASE UNDER THE ACT IN S. 14A AND WE ARE NOT PER SUADED TO ACCEPT THE EMPHASIS LAID OR THE INTERPRETATION OF THE SAME BY THE REVENUE. AN ASSESSMENT IN TERMS OF THE INCOME TAX ACT IS SPECIF IC TO AN ASSESSMENT YEAR AND THE RELATED PREVIOUS YEAR. S.4 OF THE ACT, WHICH IMPOSES THE CHARGE TO TAX READS THUS : CHARGE OF INCOME-TAX 4. (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME TA X SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOM E-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCOR DANCE WITH AND SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS FOR THE LEVY OF ADDITIONAL INCOME-TAX) OF, THIS ACT IN RESPECT OF THE TOTAL IN COME OF THE PREVIOUS YEAR OF EVERY PERSON: PROVIDED THAT WHERE BY VIRTUE OF ANY PROVISION OF T HIS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THAN THE PREVIOUS YEAR, INCOME TAX SHALL BE CHARGED ACCORDIN GLY. THUS, WHERE THE STATUTE INDENTED THAT INCOME SHALL BE RECOGNIZED FOR TAXATION IN RESPECT OF ANY PREVIOUS OTHER THAN THAT IMMEDIATELY PRECEDING THE RELEVANT ASSESSMENT YEAR, THE PROVISI ON SHALL EXPRESSLY STATE SO. THE PROVISIONS OF S.1O IN CHAPTER III OF THE ACT DEALING WITH INCOMES NOT INCLUDED IN TOTAL INCOME COMMENCES WI TH THE PHRASE IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED. ITA NO.2529/CHNY/2018 :- 4 -: 15. THE EXEMPTION EXTENDED TO DIVIDEND INCOME WOULD RELATE ONLY TO THE PREVIOUS YEAR WHEN THE INCOME WAS EARNED AND NO NE OTHER AND CONSEQUENTLY THE EXPENDITURE INCURRED IN CONNECTION THEREWITH SHOULD ALSO BE DEALT WITH IN THE SAME PREVIOUS YEAR. THUS, BY APPLICATION OF THE MATCHING CONCEPT, IN A YEAR WHERE THERE IS NO EXEMP T INCOME, THERE CANNOT BE A DISALLOWANCE OF EXPENDITURE IN RELATION TO SUCH ASSUMED INCOME. (MADRAS INDUSTRIAL INVESTMENT CORPORATION L TD. VS. CIT (225 ITR 802). HE LANGUAE OF S.14A(1) SHOULD BE READ I N THE CONTEXT AND SUCH THAT IT ADVANCES THE SCHEME OF THE ACT RATHER THAN DISTORT IT. 4.1 THE SAME VIEW WAS TAKEN BY JURISDICTIONAL HIGH C OURT IN THE CASE OF CHETTINADU LOGISTICS IN TAX CASE NO.24 OF 2017 VIDE ORDER DATED 13.03.2017. ACCORDINGLY, SINCE THE IN VESTMENT DOES NOT EARN ANY EXEMPTED INCOME, THERE CANNOT BE ANY A PPLICABILITY OF SEC.14A R.W. RULE 8D OF THE INCOME TAX RULES,196 2. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IN BOTH TH ESE APPEALS IS ALLOWED. IT WAS PLEADED BY LD.A.R THAT THE TRIBUNAL MAY BE PLEASED TO ALLOW THE CLAIM OF THE ASSESSEE. 4. IN REPLY, LD.D.R VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER AND THE ORDER OF THE LD.CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOM E/EXEMPT INCOME, IN VIEW OF THE PRINCIPLE LAID DOWN BY THE JURISDICT IONAL HIGH COURT IN THE ITA NO.2529/CHNY/2018 :- 5 -: CASE OF CHETTINADU LOGISTICS IN TAX CASE NO.24 OF 2017 VIDE ORDER DATED 13.03.2017, AS ALSO THE DECISION OF THE CO-ORDINATE BENCH OF TH IS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR S 2011-12 & 2012- 13 REFERRED TO SUPRA, THE ADDITION MADE BY THE LD. ASSESSING OFFICER AND CONFIRMED BY THE LD.CIT(A) BY INVOKING THE PROV ISIONS OF THE SECTION 14A READ WITH RULE-8D STANDS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 22 ND JANUARY, 2019, AT CHENNAI. SD/ - SD/ - ( , ) (INTURI RAMA RAO) ! '# /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ '# / JUDICIAL MEMBER , ( / CHENNAI - / DATED: 22 ND JANUARY, 2019. K S SUNDARAM . # %)/0 1 0 ) / COPY TO: 1 . !' / APPELLANT 4. ' 2) / CIT 2. %&!' / RESPONDENT 5. 034 %)5 / DR 3. ' 2) () / CIT(A) 6. 48 9( / GF