DCIT, CHENNAI V. M/s. Indus Teqsite Pvt. Ltd., CHENNAI

ITA 2585/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4513 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: R VENKATESH
• Keywords: Earning of tax free income; Wholly owned subsidiary
• Section: 43B; 143(3); 14A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 2 58 5 /MDS/201 6 / ASSESSMENT YEAR :20 1 2 - 1 3 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2 ( 2 ) , ROOM NO. 512, 5 TH FLOOR, WANAPARTHY BLOCK, 121 M.G. ROAD, CHENNAI 600 034. VS. M/S. INDUS TE QSITE PVT. LTD., PLOT NO. H - 9, 4 TH MAIN ROAD, SIPCOT, IT PARK, SIRUSERI CHENNAI 600 1 03 . [PAN: AA A C I 6684D ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT / RESPOND ENT BY : SHRI R. VENKATESH, C.A. / DATE OF HEARING : 01 . 0 3 .201 7 / DATE OF P RONOUNCEMENT : 30 . 0 5 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 6 , C HENNAI DATED 1 3 . 0 7 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 2 - 1 3 . THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS VIZ., (I) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BE LATED REMITTANCE OF EMPLOYEE S CONTRIBUTION TO PF & ESI AND (II) THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D. I.T.A. NO . 2 58 5 /M/ 16 2 2. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE DEVELOPMENT OF TECHNOLOGY AND IN THE MANUFACTURE AND SALE OF ELECTRONIC AUTOMATED ON BOARD TEST EQUIPMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 . 0 9 .201 2 ADMITTING ITS INCOME OF . 17,05,96,44 0 / - . THE ASSESSMENT U NDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] ACT WAS COMPLETED ON 0 2 . 0 3 .201 5 , BY ASSESSING TOTAL I N COME OF THE ASSES SEE AT .17,54,08,113 / - BY MAKING VARIOUS ADDITIONS. 3. IN THIS CASE, BY OVERSIGHT, THE DEPARTMENT HAS FILED THE ASSESSMENT ORDER PERTAINING TO M/S. HERMES I TICKETS PRIVATE LIMITED HAVING PAN AABCH7295J. HENCE, WE PROCEEDED TO DECIDE THE APPEAL BASED ON THE FACTS AND FINDINGS GIVEN IN THE APPELLATE ORDER. 4 . THE ASSESSEE WAS IN DEFAULT IN REMITTING EMPLOYEE S CONTRIBUTION TOWARDS PF AND ESI TO THE EXTENT OF .30,70,193/ - AND .6,22 ,629/ - RESPECTIVELY BELATEDLY AND THUS, NOT QUALIFIED FOR CLAIMING DEDUCTION UNDER SECTION 36(1)(VA) OF THE ACT TO AVAIL THE BENEFIT UNDER SECTION 43B OF THE ACT AND THUS, THE ASSESSING OFFICER HAS DEEMED THE IMPUGNED AMOUNT AS THE INCOME OF THE ASSESSEE. 5 . ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION IN THE CASE OF CIT V. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA PVT. LTD. IN TCA NOS. 585 & 586 OF 2015 & M.P. NO. 1 OF I.T.A. NO . 2 58 5 /M/ 16 3 2015 DATED 24.07.2015, THE LD. CIT(A) DELETED THE ADDITION MADE ON THIS ACCOUNT. 6 . ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE MAIN CONTENTION OF THE LD. DR IS THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION IN THE CASE OF CIT V. INDUSTRIAL SECURITY AND INTELLIGE NCE INDIA PVT. LTD. (SUPRA) AND A REVIEW PETITION HAS BEEN FILED BEFORE THE HON BLE HIGH COURT AND THEREFORE, PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERTED AND RESTORED THAT OF THE ASSESSING OFFICER. ON THE OTHER HAND, BY FILING COPY OF THE J UDGEMENT IN THE CASE OF CIT V. INDUSTRIAL SECURITY AND INTEL LIGENCE INDIA PVT. LTD. (SUPRA), THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE TH ROUGH THE ORDERS OF AUTHORITIES BELOW. SINCE THE ASSESSEE HAS NOT REMITTED THE CONTRIBUTION OF EMPLOYEES TOWARDS PF AND ESI BEFORE DUE DATE, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE DOES NOT QUALIFY FOR CLAIMING DEDUCTION UNDER SECTION 36(1)(VA) O F THE ACT TO AVAIL THE BENEFIT UNDER SECTION 43B OF THE ACT. BY FOLLOWING THE DECISION IN THE CASE OF CIT V. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA PVT. LTD. IN TCA NOS. 585 & 586 OF 2015 & M.P. NO. 1 OF 2015, THE LD. CIT(A) DELETED THE ADDITION MADE O N THIS ACCOUNT. IN THIS CASE, I T IS NOT DISPUTED BY THE REVENUE THAT THE ASSESSEE HAS NOT PAID THE EMPLOYEES CONTRIBUTION RECEIVED BY IT BEFORE THE DUE DATE OF I.T.A. NO . 2 58 5 /M/ 16 4 FILING OF THE RETURN. VARIOUS COURTS INCLUDING THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. INDUSTRIAL SECURITY AND INTELLIGENCE INDIA PVT. LTD. (SUPRA) HAS HELD THAT THERE CAN BE NO DEEMED ADDITION UNDER SECTION 36(12)(VA) R.W.S. 2(24)(X) OF THE ACT, IF THE IMPUGNED AMOUNT HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. THU S, RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE TRIBUNAL HAS ALSO FOLLOWED THE ABOVE DECISION OF THE HON BLE MADRAS HIGH COURT IN DECIDING SIMILAR ISSUE. IN VIEW OF THE ABOVE, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8 . WITH REGARD TO THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE ASSESSEE HA S INVESTMENTS OF . 1,5 0 , 58 , 780 / - CAPABL E OF YIELDING EXEMPT INCOME . B Y APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE TOWARDS MAINTAINING THESE INVESTMENTS AT . 11,18,750 / - AND DISALLOWED THE SAME . 9 . THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE LD. CIT(A). BY REITERATING THE SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER , THE ASSESSEE HAS SUBMITTED THAT IT HAS NOT EARNED ANY EXEMPT INCOME AND MOREOVER THE INVESTMENTS WERE MADE IN ITS SUBSIDIARY M/S. DPIPL, WHICH IS ENGAGED IN S IMILAR LINE OF BUSINESS AND SYNERGICALLY ASSOCIATED WITH THE TECHNOLOGY RELATED BUSINESS OF THE ASSESSEE, THE ASSESSEE HAS STRONGLY I.T.A. NO . 2 58 5 /M/ 16 5 ARGUED THAT THESE ARE STRATEGIC INVESTMENTS AND NOT MADE FOR THE INTENTION OF EARNING EXEMPT INCOME . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS V. DCIT IN I.T.A. NO.1503/MDS/2012 DATED 17.07.2015, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE AC T. 10 . ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THAT THE ABOVE DECISION OF THE TRIBUNAL HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IN TCA NO. 227 OF 2014 IS PENDING BEFORE THE HON BLE HIGH COURT. 11 . WE HAVE HEARD BOTH SIDES , PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME OUT OF INVESTMENTS. MOREOV ER, THE ABOVE INVESTMENTS MADE IN A SSESSEE S WHOLLY OWNED SUBSIDIARY CO MPANY ARE STRATEGIC INVESTMENTS AND NOT WITH THE INTENTION TO EARN EXEMPT INCOME. IN THE CASE OF EIH ASSOCIATED HOTELS V. DCIT (SUPRA), THE COORDINATE BENCHES OF THE TRIBUNAL HAS DECIDED THAT THESE STRATEGIC INVESTMENTS MADE IN WHOLLY OWNED SUBSIDIARY DO NOT WARRANT DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE MAIN CONTENTION OF THE LD. DR THAT THE ABOVE DECISION OF THE TRIBUNAL HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER APPEAL IN TCA NO. 227 OF 2014 IS PENDING BEFORE THE HON BLE HIGH COURT CANNOT BE A GROUND TO TAKE A DIFFERENT VIEW UNLESS THE DECISION OF THE TRIBUNAL IS MODIFIED OR I.T.A. NO . 2 58 5 /M/ 16 6 REVERSED BY THE HIGH COURT. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE DIS ALLOWANCE MADE UNDER SECTION 14A OF THE ACT AND W E FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 12 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. OR DER PRONOUNCED ON THE 30 TH MAY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 30 . 0 5 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.