DCIT, CHENNAI V. M/s. Halidon Marketing Ltd., CHENNAI

ITA 2636/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4474 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 12-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRINIRANJANI
• Keywords: Earning of tax free income
• 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. 2636 /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. HALIDON MARKETING LTD., NO. 35, 5 TH AVENUE, ORUR OLCOTT ROAD, BESANT NAGAR, CHENNAI 600 0 90 . [PAN: AA A C H2381P ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT / RESPONDENT BY : MS. S. SRINIRANJANI, ADVOCATE / DATE OF HEARING : 02 . 0 3 .201 7 / DATE OF P RONOUNCEMENT : 24 . 0 5 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C HENNAI DATED 2 0 . 0 9 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 3 - 1 4 . THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS VIZ., (I) THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE UNDER S ECTION 14A R.W. RULE 8D TO THE EXTENT OF EXEMPT INCOME RECEIVED AND (II) THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION I.T.A. NO . 2636 /M/ 16 2 MADE ON ACCOUNT OF BELATED REMITTANCE OF EMPLOYEE S CONTRIBUTION TO PF & ESI. 2. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENTS, TRADING, ADVERTISING, ETC. AND FILED ITS RETURN OF INCOME ON 29 . 0 9 .201 2 ADMITTING ITS INCOME OF . 67,25,840 / - . THE CASE WAS TAKEN FOR SCRUTINY THROUGH CASS AND ASSESSMENT U NDER SECTION 143(3) OF T HE ACT WAS COMPLETED ON 28 . 0 3 .201 5 , BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .1,23,25,187/ - BY MAKING VARIOUS ADDITIONS. 4 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HA S NON - CURRENT INV ESTMENTS OF .4,30,32,792/ - AS ON 31.03.2012 IN THE FORM OF INVESTMENT IN EQUITY SHARES. FURTHER, THE ASSESSEE HAS EARNED DIVIDEND OF .2,92,500/ - DURING THE YEAR AND CLAIMED THE SAME AS EXEMPT. HOWEVER, SINCE THE ASSESSEE HAS NOT SHOWN TO HAVE INCURRED AN Y EXPENDITURE DIRECTLY RELATING TO THE ABOVE INCOME IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER BELIEVED THAT THE ASSESSEE HAS TO INCUR MINOR EXPENDITURE EMBEDDED IN THE INDIRECT EXPENDITURE TOWARDS MAINTAINING THESE INVESTMENTS, THE ASSESSING OF FICER DETERMINE D THE EXPENDITURE RELATABLE TO THE INCOME EARNED BY THE ASSESSEE UNDER SECTION 14A OF THE INCOME TAX ACT , 1961 [ ACT IN SHORT] R.W. RULE 8D OF THE IT RULES AT .32,53,935/ - AND DISALLOWED THE SAME . I.T.A. NO . 2636 /M/ 16 3 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BY REITERATING THE SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER AND BY FILING COPY OF THE FINANCIAL STATEMENTS AND STATEMENT OF TAX COMPUTATIO N, THE ASSESSEE HAS SUBMITTED THAT THE INVESTMENTS TOWARDS ACQUIRING SHARES WAS MADE DURING THE FINANCIAL YEAR 2005 - 06 AND HAD APPLIED SECTION 14A R.W.R. 8D AND DISALLOWED THE EXPENDITURE OF .41,16,687/ - DURING THE ASSESSMENT YEAR 2006 - 07 . IT WAS ALSO SUB MITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENTS FROM THE FINANCIAL YEAR 2006 - 07 TO 2011 - 12. THE FINANCE COST OF .30,98,959/ - WHICH WAS ACTUALLY THE INTEREST PAID ON THE WORKING CAPITAL FACILITY (CASH CREDIT/OVERDRAFT AND PACKIN G CREDIT) AVAILED FROM BANKS AND THE SAME CANNOT BE HELD TO BE ATTRIBUTED TO THE ABOVE INVESTMENTS ON SHARES AND PLEADED TO DELETE THE DISALLOWANCE MADE ON THIS ACCOUNT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ON VERIFICATION OF THE FINANCE S TATEMENTS FILED AS WAS FILED BEFORE THE ASSESSING OFFICER AND BY FOLLOWING THE DECISION IN THE CASE OF PR. CIT V. BHARAT OVERSEAS PVT. LTD. IN ITA NO. 802/2015 DATED 17.12.2015 OF HON BLE DELHI HIGH COURT , WHEREIN, IT WAS HELD THAT WHILE APPORTIONING INTER EST EXPENDITURE UNDER CLAUSE (II) OF RULE 8D(2), INTEREST EXPENDITURE INCURRED FOR EARNING TAXABLE INCOME SHOULD BE EXCLUDED FROM CONSIDERATION, THE LD. CIT(A) DELETED THE DISALLOWANCE OF .30,38,959/ - MADE UNDER RULE 8D(2)(II). SIMILARLY, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS RESTRICTED TO AO S COMPUTATION UNDER RULE 8D(2)(III) BEING .2,14,976/ - , AGAINST WHICH, THE I.T.A. NO . 2636 /M/ 16 4 REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. HOWEVER, THE ASSESSEE HAS NOT FILED ANY APPEAL OR CO AGAINST THE ORDER OF THE LD. CIT(A) . 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BEFORE THE ASSESSING OFFICER, IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE SHARES ACQUIRED WERE OLD AND NOT ACQUIRED RECENTLY. BE FORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT THE SHARES ACQUIRED FROM M/S. KARPAGAMBAL MILLS LTD. WERE PERTAINING TO THE FINANCIAL YEAR 2005 - 06 AND FROM THE FINANCIAL YEAR 2005 - 06 TO 2011 - 12, THE ASSESSEE HAS NOT ACQUIRED ANY NEW SHARES. IT WAS AL SO THE SUBMISSIONS OF THE ASSESSEE THAT FOR THE RELEVANT ASSESSMENT YEAR 2006 - 07, THE ASSESSEE HAS ALREADY DISALLOWED THE EXPENDITURE UNDER SECTION 14A OF THE ACT AMOUNTING TO .41,16,687/ - AND FILED COPY OF THE FINANCIAL STATEMENTS AND STATEMENT OF TAX CO MPUTATION FOR VERIFICATION BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS OBSERVED THAT NO PORTION OF INTEREST/FINANCE CHARGES DURING THE YEAR CAN BE ATTRIBUTED TO THE INVESTMENTS ON THE LOANS/ADVANCES FOR WHICH THE ASSESSEE HAVE BEEN REPAID IN THE FINANCIAL YE AR 2006 - 07. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS RIGHTLHY DELETED THE INTEREST EXPENDITURE OF .30,98,959/ - WORKED OUT BY THE ASSESSING OFFICER UNDER RULE 8D(2)(II) BY FOLLOWING THE DECISION IN THE CASE PR. CIT V. BHARAT OVERSEAS PVT. LTD. (SUPRA), WHEREIN, IT WAS HELD THAT WHILE APPORTIONING INTEREST EXPENDITURE UNDER CLAUSE (II) OF RULE 8D(2), IN TEREST I.T.A. NO . 2636 /M/ 16 5 EXPENDITURE INCURRED FOR EARNING TAXABLE INCOME SHOULD BE EXCLUDED FROM CONSIDERATION. WE 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. 7. THE NEXT GROUND RAIS ED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF . 23,45,412/ - , WHICH WAS MADE IN VIEW OF THE PROVISIONS OF SECTION 36(1)(VA) OF THE ACT. 8. ON PERUSAL OF THE SCHEDULES TO FORM 3CD, THE ASSESSING OFFICER HAS O BSERVED THAT THE ASSESSEE WAS IN DEFAULT IN REMITTING THE CONTRIBUTION OF EMPLOYEES TOWARDS PF AND ESI TO THE EXTENT OF .16,84,174/ - AND .6,61,238/ - 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. 9. 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 2015, THE LD. CIT(A) DELETED THE ADDITION MADE ON THIS ACCOUNT. 10 . 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 INTELLIGENCE INDIA PVT. LTD. (SUPRA) AND A REVIEW PETITION HAS BEEN FILED BEFORE THE HON BLE I.T.A. NO . 2636 /M/ 16 6 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, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 11 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SINCE THE ASSESSEE HAS NOT REMITTED EMPLO YEE S CONTRIBUTION 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) OF 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) DELETE D THE ADDITION MADE ON 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 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. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE LD. CIT(A) HAS DELETED THE ADDITION. IN VIEW OF THE ABOVE, I.T.A. NO . 2636 /M/ 16 7 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. 1 2 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON TH E 24 TH MAY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24. 0 5 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.