DCIT, CHENNAI V. Sundaram Clayton Ltd., CHENNAI

ITA 2611/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86247 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 16-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R VIJAYARAGHAVAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI .. , ! , ' #$ BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NO. 2611/MDS/2014 & C.O. NO. 136/MDS/2014 ' % &% / ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI - 600 034. V. M/S SUNDARAM CLAYTON LTD., JAYALAKSHMI ESTATES, NO.29, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI - 600 006. PAN : AAACS 4920 J (!(/ APPELLANT) (*+!(/ RESPONDENT & CROSS OBJECTOR) !( , - / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT *+!( , - / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCA TE . , / / DATE OF HEARING : 22.01.2015 01& , / / DATE OF PRONOUNCEMENT : 22.01.2015 / O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS-OB JECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDE R DATED 30.07.2014, PASSED BY LD. COMMISSIONER OF INCOME TA X (APPEALS)- VI, CHENNAI AND RELATE TO ASSESSMENT YEAR 2007-08. BOTH THE 2 I.T.A. NO. 2611/MDS/2014 C.O. NO. 136/MDS/2014 PARTIES ARE AGGRIEVED BY THE DECISION RENDERED BY T HE LD. CIT(APPEALS) IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE LD.COUNSEL APPEARING FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAD EARNED A DIVIDEND INCOME OF ` 15.72 CRORES. THE ASSESSING OFFICER ORIGINALLY COMPUTED DISALLOWANCE AS PER RULE 8D OF INCOME-TAX RULES, 1962. HOWEVER, THE TRIBUNAL S ET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER SINCE I T HELD THAT THE PROVISIONS OF RULE 8D SHALL BE APPLICABLE FROM ASSE SSMENT YEAR 2008-09 ONWARDS ONLY. IN THE SET ASIDE PROCEEDINGS , THE ASSESSING OFFICER COMPUTED THE DISALLOWANCE AT ` 3.96 CRORES. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(APPEALS) RESTRICTED THE DI SALLOWANCE TO ` 40,53,203/-. 3. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD ITSELF DISALLOWED A SUM OF ` 33,56,354/-. THE REVENUE HAS FILED THE APPEAL CHALLENGING THE ORDER OF THE LD. CIT(APPEALS ) AND ASSESSEE HAS FILED THE CROSS-OBJECTION WITH A PRAYER THAT AD DITION SHOULD BE SUSTAINED TO THE EXTENT OF DISALLOWANCE MADE BY THE ASSESSEE. 4. THE LD. COUNSEL SUBMITTED THAT UPTO ASSESSMENT Y EAR 2007- 08, RULE 8A WAS NOT APPLICABLE AND HENCE DISALLOWAN CE IS REQUIRED TO BE MADE IN A REASONABLE MANNER. THE LD. COUNSEL FURTHER 3 I.T.A. NO. 2611/MDS/2014 C.O. NO. 136/MDS/2014 SUBMITTED THAT HON'BLE JURISDICTIONAL HIGH COURT CO NSIDERED AN IDENTICAL ISSUE IN THE CASE OF M/S SIMPSON & CO. LT D. V. DCIT IN TAX CASE (APPEAL) NO.2621 OF 2006 DATED 15.10.2012 WHER EIN THE HON'BLE HIGH COURT UPHELD THE VIEW OF THE ITAT THAT THE DISALLOWANCE SHOULD BE MADE AT 2% OF THE DIVIDEND I NCOME EARNED BY THE ASSESSEE. THE LD. COUNSEL SUBMITTED THAT TH E 2% OF DIVIDEND INCOME EARNED BY THE ASSESSEE WORKS OUT TO LESS THAN THE AMOUNT OF ` 33,56,354/- DISALLOWED BY THE ASSESSEE. ACCORDING LY, HE PRAYED THAT THE ADDITION UNDER SECTION 14A SHOUL D BE SUSTAINED TO THE EXTENT OF DISALLOWANCE MADE BY THE ASSESSEE. 5. THE LD. D.R. DID NOT DISPUTE THE FACTUAL ASPECTS SUBMITTED BY THE LD. COUNSEL. 6. SINCE HON'BLE MADRAS HIGH COURT HAS HELD IN THE CASE OF M/S SIMPSON & CO. LTD. (SUPRA) THAT THE DISALLOWANCE BE MADE AT 2% OF DIVIDEND INCOME UNDER SECTION 14A IS JUSTIFIED AND SINCE THE DISALLOWANCE MADE BY THE ASSESSEE WORKS OUT TO MORE THAN 2% OF THE DIVIDEND INCOME, WE ARE OF THE VIEW THAT THE DI SALLOWANCE UNDER SECTION 14A SHOULD BE RESTRICTED TO THE AMOUNT DISA LLOWED BY THE ASSESSEE ON ITS OWN. ACCORDINGLY, WE MODIFY THE OR DER OF THE LD. CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO RE STRICT THE DISALLOWANCE TO ` 33,56,354/- AS DISALLOWED BY THE ASSESSEE. 4 I.T.A. NO. 2611/MDS/2014 C.O. NO. 136/MDS/2014 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSI ON OF HEARING ON THE 22 ND DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( ! ) ( .. ) (VIKAS AWASTHY) (B.R. BASKARAN) ' /JUDICIAL MEMBER /ACCOUNTANT MEMBER /CHENNAI, A /DATED, THE 22 ND JANUARY, 2015. KRI. B , *'/C D &/ /COPY TO: 1. !( /APPELLANT 2. *+!( /RESPONDENT 3. . E/ () /CIT(A)-VI, CHENNAI-34 4. . E/ /CIT-VI 5. FG *'/' /DR 6. GH% I /GF.