DCIT, CHENNAI V. M/s. Shriram SEPL Composites Pvt.Ltd., Sriperambudur

ITA 2741/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4968 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R SIVARAMAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !.. # $%, ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2741/MDS/2016 + ,+ / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), CHENNAI - 600 034. V. M/S SHRIRAM SEPL COMPOSITES PVT. LTD., PLOT NO.74, PERIYAR NAGAR, THIRUKATCHOOR VILLAGE, SRIPERUMBUDUR ROAD, SINGAPERUMAL KOIL 603 204. PAN : AALCS 8044 E (.// APPELLANT) (01.// RESPONDENT) ./ 2 3 / APPELLANT BY : SHRI SUPRIYO PAL, JCIT 01./ 2 3 / RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE # 2 4' / DATE OF HEARING : 13.03.2017 56, 2 4' / DATE OF PRONOUNCEMENT : 13.04.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 15, CHEN NAI, DATED 27.06.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.2741/MDS/16 2. SHRI SUPRIYO PAL, THE LD. DEPARTMENTAL REPRESENT ATIVE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. D.R., THE A SSESSEE PAID INTEREST TO THE EXTENT OF ` 2.58 CRORES TO ITS RELATED COMPANY, NAMELY, M/S SHRIRAM EPC LIMITED. THE ASSESSEE ALSO ADVANCED LOAN TO M/S SHRIRAM COMPOSITES LIMITED AND M/S STRA TEGIC ENGINEERING PVT. LTD. FOR THE ASSESSMENT YEAR 2011 -12, THE ASSESSEE RECEIVED AN INTEREST OF ` 1,95,00,529/- WHICH WAS OFFERED FOR TAXATION. DURING THE CURRENT ASSESSMENT YEAR, THE ASSESSEE HAS RECEIVED INTEREST OF ` 33,56,649/- FROM M/S STRATEGIC ENGINEERING PVT. LTD. AND NO INTEREST WAS CHARGED FROM M/S SHRI RAM COMPOSITES LTD. ACCORDING TO THE LD. D.R., THE ASSESSEE-COMPA NY IS ENGAGED IN MANUFACTURING GPR PIPES. THE ASSESSEE CLAIMED T HAT M/S SHRIRAM COMPOSITES LTD. IS A WHOLLY OWNED SUBSIDIAR Y COMPANY OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE INVESTMENT WAS NOT MADE WHOLLY AND EXCLUSIVELY FOR THE ASSESSEES BUSINESS. THE ASSESSEE HAS NOT RECEIVED ANY ADVANT AGE FROM THE INVESTMENT MADE. THEREFORE, THE INTEREST COMPONENT CORRESPONDING TO THE INVESTMENT WAS DISALLOWED BY THE ASSESSING O FFICER. 3 I.T.A. NO.2741/MDS/16 3. ON THE CONTRARY, SHRI R. SIVARAMAN, THE LD.COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE, IN FACT, PAI D ` 2.58 CRORES TO M/S SHRIRAM EPC LIMITED. THE ASSESSEE HAS ADVANCED MONEY IN ITS SUBSIDIARY COMPANY, NAMELY, M/S SHRIRAM COMPOSI TES LIMITED AND M/S STRATEGIC ENGINEERING PVT. LTD. IN RESPECT OF INVESTMENT MADE IN M/S SHRIRAM COMPOSITES LIMITED, INTEREST WA S NOT CHARGED. ACCORDING TO THE LD. COUNSEL, THE ADVANCE WAS MADE FOR MEETING THE RAW MATERIAL REQUIREMENT OF SUBSIDIARY COMPANY AND ITS OVERHEAD COST. ACCORDING TO THE LD. COUNSEL, THERE FORE, THE ADVANCE MADE BY THE ASSESSEE IS FOR COMMERCIAL EXPE DIENCY. THE LD.COUNSEL SUBMITTED THAT IN VIEW OF JUDGMENT OF AP EX COURT IN S.A. BUILDERS LIMITED V. CIT (288 ITR 1), THE CIT(APPEAL S) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 4. ON A QUERY FROM THE BENCH HOW M/S SHRIRAM COMPOS ITES LTD. IS A SISTER COMPANY OF THE ASSESSEE? WHAT IS THE SHAREHOLDING PATTERN? WHETHER THE ASSESSEE-COMPANY IS HOLDING M AJOR SHARES IN M/S SHRIRAM COMPOSITES LTD.? THE LD.COUNSEL COULD NOT FURNISH ANY OF THE DETAILS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CLAIM OF THE 4 I.T.A. NO.2741/MDS/16 ASSESSEE IS THAT THE INVESTMENT WAS MADE IN THE SUB SIDIARY COMPANY, NAMELY, M/S SHRIRAM COMPOSITES LTD. FOR THE PURPOSE OF EXAMINING THE CLAIM, WE HAVE TO FIRST FIND OUT H OW M/S SHRIRAM COMPOSITES LTD. IS THE SUBSIDIARY COMPANY OF THE AS SESSEE- COMPANY. FOR THAT PURPOSE, WE HAVE TO EXAMINE THE SHAREHOLDING PATTERN AND HOW MANY SHARES WERE HELD BY THE ASSESS EE IN M/S SHRIRAM COMPOSITES LTD. SINCE THESE DETAILS WERE NOT AVAILABLE ON RECORD, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED. ACCORDINGLY, THE ORDERS O F THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE OF DISALLOWANCE O F INTEREST IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRESH AFTER BR INGING ON RECORD THE SHAREHOLDING PATTERN OF M/S SHRIRAM COMPOSITES LTD. AND SHARES HELD BY THE ASSESSEE-COMPANY IN M/S SHRIRAM COMPOSITES LTD. AND THEREAFTER DECIDE THE ISSUE AFRESH, IN ACC ORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESS EE. 6. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE UNDER SECTION 14A OF THE ACT. 7. SHRI SUPRIYO PAL, THE LD. DEPARTMENTAL REPRESENT ATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED BEFORE THE ASSE SSING OFFICER 5 I.T.A. NO.2741/MDS/16 THAT INVESTMENT WAS MADE IN THE WHOLLY OWNED SUBSID IARY COMPANY, NAMELY, M/S SHRIRAM COMPOSITES LTD. WHILE DISCUSSI NG THE ISSUE IN RESPECT OF DISALLOWANCE MADE BY THE ASSESSING OFFIC ER TOWARDS INTEREST IN PARA 5 OF THIS ORDER, THE MATTER WAS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO BRING ON RECORD TH E SHAREHOLDING PATTERN OF M/S SHRIRAM COMPOSITE LTD. AND THE SHARE S HELD BY THE ASSESSEE-COMPANY IN M/S SHRIRAM COMPOSITES LTD. IN VIEW OF THIS DECISION, THE ISSUE OF DISALLOWANCE UNDER SECTION 1 4A OF THE ACT ALSO NEEDS TO BE RE-EXAMINED. ACCORDINGLY, THE ORD ERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE IS RE MITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL RE- EXAMINE THE MATTER AFRESH IN ACCORDANCE WITH LAW, A FTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 13 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( ! . . # $% ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 13 TH APRIL, 2017. 6 I.T.A. NO.2741/MDS/16 KRI. 2 04$9 :9,4 /COPY TO: 1. ./ /APPELLANT 2. 01./ /RESPONDENT 3. # ;4 () /CIT(A)-15, CHENNAI-34 4. # ;4 /CIT-6, CHENNAI-34 5. 9< 04 /DR 6. !+ = /GF.