Subramanian Engineering Ltd., CHENNAI V. DCIT Corporate Circle 6(2), CHENNAI

ITA 2723/CHNY/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1211 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S HARISH KUMAR
• Keywords: Business income; Business expenditure; Earning of tax free income; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! ' # , % #& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2723/CHNY/2017 ) *) / ASSESSMENT YEAR : 2013-14 M/S SUBRAMANIAN ENGINEERING LTD., 11, COLLEGE LANE, LINDEN TOWERS, CHENNAI - 600 006. PAN : AAICS 9342 L V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI - 600 034. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI S. HARISH KUMAR, ADVOCATE ./,- 0 1 / RESPONDENT BY : SHRI V.M. MAHIDAR, JCIT 2 0 3% / DATE OF HEARING : 07.08.2019 45* 0 3% / DATE OF PRONOUNCEMENT : 03.09.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -15, CHENN AI, DATED 29.08.2017 AND PERTAINS TO ASSESSMENT YEAR 2013-14. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF 12,38,893/- UNDER SECTION 14A OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT'). 2 I.T.A. NO.2723/CHNY/17 3. WE HEARD SHRI S. HARISH KUMAR, THE LD.COUNSEL FO R THE ASSESSEE AND SHRI V.M. MAHIDAR, THE LD. DEPARTMENTA L REPRESENTATIVE. THE ASSESSING OFFICER FOUND THAT T HERE WAS A HUGE INVESTMENT TO THE EXTENT OF 44,80,05,388/- IN THE MUTUAL FUNDS. THE ASSESSING OFFICER HAS ALSO FOUND THAT THE ASSES SEE HAS EARNED DIVIDEND INCOME TO THE EXTENT OF 63,07,489/- AND CLAIMED EXEMPTION. THE ASSESSING OFFICER BY APPLYING RULE 8(2) OF THE INCOME-TAX RULES, 1962, MORE PARTICULARLY LIMB (III ), FOUND THAT 0.5% OF THE AVERAGE TOTAL INVESTMENT WAS 12,38,893/-. ACCORDINGLY, HE DISALLOWED THE SAME. IN ADDITION TO THIS, THE ASSE SSING OFFICER HAS ALSO DISALLOWED THE ENTIRE EXPENDITURE CLAIMED BY T HE ASSESSEE TO THE EXTENT OF 1,57,48,031/-. THE LD.COUNSEL FOR THE ASSESSEE BY PRODUCING A COPY OF THE ORDER OF THE ASSESSING OFFI CER FOR THE ASSESSMENT YEAR 2012-13, POINTED OUT THAT A SIMILAR EXPENDITURE CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE ASSES SING OFFICER ON THE GROUND THERE WAS NO BUSINESS ACTIVITY. THE CIT(APPEALS) FOUND THAT MERELY BECAUSE NO BUSINESS INCOME WAS RE PORTED THAT DOES NOT MEAN THAT THERE WAS NO BUSINESS ACTIVITY. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE DISALLOWANCE OF 1,57,48,031/- IS NO JUSTIFIED. REFERRING TO THE ORDER OF THE ASSESS ING OFFICER, THE 3 I.T.A. NO.2723/CHNY/17 LD.COUNSEL POINTED OUT THAT THE ASSESSING OFFICER D ISALLOWED THE CLAIM OF 1,57,48,031/- ON THE GROUND THAT A SIMILAR EXPENDIT URE WAS DISALLOWED FOR THE ASSESSMENT YEAR 2012-13. THE FA CT THAT THE CIT(APPEALS) ALLOWED SIMILAR CLAIM FOR THE ASSESSME NT YEAR 2012- 13 IS NOT CONSIDERED BY THE ASSESSING OFFICER AT AL L. THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINST THE ORD ER OF THE CIT(APPEALS) FOR THE ASSESSMENT YEAR 2012-13 AND IT ATTAINED FINALITY. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER CANNOT PLACE RELIANCE ON HIS OWN ORDER FOR THE ASSESSMENT YEAR 2012-13. 4. THE ISSUE ARISES FOR CONSIDERATION IS DISALLOWAN CE OF 12,38,893/- UNDER SECTION 14A OF THE ACT AND DISALL OWANCE OF 1,57,48,031/- TOWARDS BUSINESS EXPENDITURE. AS RIG HTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE ASSESSING O FFICER BY PLACING RELIANCE ON HIS OWN ORDER FOR THE ASSESSMEN T YEAR 2012-13, FOUND THAT THERE WAS NO BUSINESS INCOME ADMITTED BY THE ASSESSEE. THEREFORE, HE DISALLOWED THE EXPENDITURE. THE FACT REMAINS THAT THE CIT(APPEALS), ON APPEAL BY THE ASSESSEE, ALLOWED TH E CLAIM OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN 4 I.T.A. NO.2723/CHNY/17 PLACING HIS RELIANCE ON HIS OWN ORDER FOR THE ASSES SMENT YEAR 2012- 13. 5. MOREOVER, IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, THE ASSESSEE CLAIMED THE INVESTMENT MADE IN MUTUAL FUNDS. THE ASSESSING OFFICER HAS TO BRING O N RECORD HOW THE DIVIDEND INCOME EARNED BY THE ASSESSEE IS EXEMPTED FROM TAXATION. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER IN THE LIGHT OF THE ORDER OF THE CIT(APPEALS ) FOR THE ASSESSMENT YEAR 2012-13 AND ALSO BRING ON RECORD TH E EXEMPT INCOME EARNED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5 I.T.A. NO.2723/CHNY/17 ORDER PRONOUNCED IN THE COURT ON 3 RD SEPTEMBER, 2019 AT CHENNAI. SD/- SD/- ( ! ' # ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 3 RD SEPTEMBER, 2019. KRI. 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-15, CHENNAI-34 4. PRINCIPAL CIT- 6, CHENNAI 5. 9< .3 /DR 6. =) > /GF.