Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 4335 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-06-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
13-04-2017
Assessment Year
2013-2014
Appeal Filed On
23-09-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2747/MDS/2016 ( / ASSESSMENT YEAR: 2013-14) M/S. SHRIRAM INSIGHT SHARE BROKERS LTD, MOOKAMBIKA COMPLEX, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), CHENNAI. PAN: AAACI2727H ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.3080/MDS/2016 ( / ASSESSMENT YEAR: 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), CHENNAI. VS M/S. SHRIRAM INSIGHT SHARE BROKERS LTD, MOOKAMBIKA COMPLEX, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 004. PAN: AAACI2727H ( /APPELLANT) ( /RESPONDENT) / ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE / REVENUE BY : SHRI A.V. SREEKANTH, JCIT /DATE OF HEARING : 13.04.2017 /DATE OF PRONOUNCEMENT : 08.06.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE AND THE REVENUE ARE DIR ECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS)-15, CHENNAI DATED 11.08.2016 I N ITA 2 ITA NO.2747 & 30 80/MDS/2016 NO.339/CIT(A)-15/2015-16 FOR THE ASSESSMENT YEAR 20 13-14 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL; HOWEVER THE CRUXES OF THE ISSUES ARE AS FOLLOWS: I. THE LD.CIT(A) HAS ERRED IN CONFIRMING PARTLY THE ORDER OF LD.A.O TOWARDS DISALLOWANCE U/S.14A OF THE ACT READ WITH 8D OF THE RULES. II. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD DISALLOWED THE CLAIM OF BAD DEBTS AMOUNTING TO RS.1,78,57,131/-. III. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAS LEVIED INTEREST U/S.234D OF THE ACT, FOR RS.2,97,711/-. :- SINCE LEVY OF INTEREST U/S.234D OF THE ACT, IS CONSEQUENTIAL IN NATURE AS RIGHTLY HELD BY THE LD.CIT(A), WE HEREBY CONFIRM THE ORDER OF THE REVEN UE AUTHORITIES ON THIS ISSUE. IV. GROUND WITH RESPECT TO COMPUTATION OF INCOME U/S.11 5JB OF THE ACT:- AT THE TIME OF ARGUMENT, THE LD.AR SUBMITTED THAT THE ASSESSEE HAS WRONGLY RAISED THIS GROUND AND THEREFORE SOUGHT TO WITHDRAWAL THE SAME. 3 ITA NO.2747 & 30 80/MDS/2016 THE LD.DR DID NOT EXPRESS ANY OBJECTION. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IS TREATED AS WITHDRAWN. 3. THE REVENUE HAS ALSO RAISED SEVERAL ELABORATE GR OUNDS, AND THEY ARE BRIEFLY STATED HEREIN BELOW FOR ADJUDI CATION:- I. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE TOWARDS ROYALTY THOUGH IT IS CAPITAL EXPENDITURE. II. THE LD.CIT(A) HAS ERRED IN DIRECTING THE LD.AO TO EXCLUDE THE INVESTMENT MADE BY THE ASSESSEE IN SUBSIDIARY COMPANIES WHICH DID NOT YIELD TAXABLE INCOME WHILE COMPUTING THE DISALLOWANCE U/S.14A R.W.R. 8D OF THE RULES. III. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE U/S.14A R.W..R. 8D WHILE CALCULATING BOOK PROFIT U/ S.115JB OF THE ACT BEING EXPENDITURE INCURRED FOR EARNING E XEMPT INCOME. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF STOCK BR OKING, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-1 4 ON 25.09.2013. THE CASE WAS SELECTED UP FOR SCRUTINY UNDER CASS 4 ITA NO.2747 & 30 80/MDS/2016 AND FINALLY ORDERS U/S. 143(3) WAS PASSED ON 24.03. 2016 WHEREIN THE LD.AO MADE SEVERAL ADDITIONS AND DISALLOWANCE. 5. ASSESSEES APPEAL IN ITA NO.2747/MDS/2016 5.1 GROUND NO.I : PARTLY CONFIRMING THE DISALLOWANC E U/S.14A OF THE ACT:- IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAS MADE INVESTMENTS IN SHARES OF ASSOCIATE COMPANIES, OTHER COMPANIES, GOVERNMENT SECURITIES AND MUTUAL FUNDS. FURTHER, THE ASSESSEE HAD RECEIVED DIVIDEND AGGREGATING TO RS.1,01,71,198/- FROM SUCH INVESTMENTS. THE ASSESSE E BY VIRTUE OF SECTION 14A OF THE ACT, SUO-MOTO DISALLOWED RS.7,200/- AS EXPENSES PERTAINING TO EXEMPT INCOME. HOWEVER, THE LD.AO INVOKED RULE 8D(2)(III) OF THE RULES AND COMPUTED T HE DISALLOWANCE AT RS.7,13,309/-. SINCE THE ASSESSEE H AD ALREADY DISALLOWED RS.7,200/- EXCLUDING THE SAME FROM RS.7, 13,309/-, THE LD.AO FURTHER DISALLOWED RS.7,06,109/- AND ADDE D TO THE INCOME OF THE ASSESSEE. BEFORE THE LD.CIT(A), IT W AS SUBMITTED THAT THE INVESTMENT OF RS.87,21,000/- WAS MADE IN W HOLLY OWNED SUBSIDIARY COMPANIES VIZ, INSIGHT COMMODITIES & FUT URE PVT. LTD. THE LD.CIT(A) RELYING ON THE DECISION OF THE CHENNA I BENCH OF THE TRIBUNAL IN THE CASE OF EIH ASSOCIATED HOTELS L TD. VS. DCIT 5 ITA NO.2747 & 30 80/MDS/2016 IN ITA NO.1503/MDS/2012, ORDER DATED 17.07.2013 HEL D THAT THE INVESTMENT MADE IN SUBSIDIARY COMPANIES HAS TO BE E XCLUDED WHILE COMPUTING DISALLOWANCE U/S.14A R.W.R. 8D OF T HE ACT. THESE ABOVE STATED FACTS IN THE PRESENT CASE BEFORE US ARE NOT DISPUTED BY BOTH THE PARTIES. NOW THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS CONFIRMED THE DISALLOWANC E U/S.14A OF THE ACT WITH RESPECT TO INVESTMENT MADE IN OTHER CO MPANIES AND MUTUAL FUNDS. WE FIND ON THIS IDENTICAL ISSUE IT H AS BEEN CATEGORICALLY HELD BY THE CHENNAI BENCH OF THE TRIB UNAL THAT WITH RESPECT TO INVESTMENT IN MUTUAL FUND AND OTHER COMP ANIES WHEREIN THE INCOME DERIVED IS EXEMPT FROM TAX PROVI SIONS OF SECTION 14A OF THE ACT WOULD BE APPLICABLE. THE GI ST OF THE RELEVANT DECISION IS REPRODUCED HEREIN BELOW FOR RE FERENCE: M/S. SIDD LIFE SCIENCES IN ITA NO.3004/MDS/2016, OR DER DATED 10.04.2017:- 8. THEREFORE, FOLLOWING THE AFORESAID DECISION OF T HE TRIBUNAL, WE HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF SECTION 14A WHERE INVESTMENTS ARE MADE IN SISTER CONCERNS SUCH AS EQUITY SHARES AND SHARE APPLICATIO N MONEY. HOWEVER, IF THE INVESTMENTS ARE MADE FROM BORROWED FUNDS, SECTION 14A OF THE ACT WOULD BE APPLICABLE AND LEARNED ASSESSING OFFICER SHALL COMP UTE THE DISALLOWANCE UNDER SECTION 14A READ WITH RULES 8D IN ACCORDANCE WITH LAW. 6 ITA NO.2747 & 30 80/MDS/2016 6.1 ACCORDINGLY WE HEREBY REMIT BACK THE MATTER TO THE FILE OF THE LD. AO TO CONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE ORDER OF THE TRIBUNAL AND PASS APPROPRIATE ORDER IN ACCOR DANCE WITH MERITS AND LAW. WE ALSO MAKE IT CLEAR THAT FOR THE INVESTMENTS MADE IN MUTUAL FUNDS, PROVISIONS OF SECTION 14A REA D WITH RULE 8D WILL BE APPLICABLE SINCE THE ASSESSEE WOULD INCU R SOME EXPENDITURE AT LEAST FOR THE DECISION MAKING PROCES S AS TO IN WHICH MUTUAL FUND THE INVESTMENT HAS TO BE MADE AND AT WHAT POINT OF TIME EXIT FROM SUCH FUNDS . IT IS ORDERED ACCORDINGLY. FOLLOWING THE RATIO HELD IN THE DECISION C ITED SUPRA, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE ASSE SSEE BEFORE US. ACCORDINGLY THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 5.2 GROUND NO.2: BAD DEBTS :- IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HA D CLAIMED BAD DEBTS OF RS.1,94,30,233/- IN ITS PROFIT & LOSS ACCOUNT. IT WAS EXPLAINED BY THE ASSESSEE THAT ON THE DIRECTION OF ITS CLIENTS THE ASSESSEE HAD PURCHASED SHARES ON BEHALF OF ITS CLIENTS BUT THE CLIENTS M/S. NIRMALA BEHEN SHAH AND M/S. GAN NAYAK TRADERS PVT. LTD., FAILED TO MAKE PAYMENT. M EANWHILE THE VALUE OF THE SHARES HAD FALLEN AND THE CLIENTS REFU SED TO HONOR THEIR COMMITMENT. THEREFORE, THE ASSESSEE TREATED THE FALL IN VALUE OF SHARES AS BAD DEBTS. HOWEVER, THE LD.AO R EJECTED THE 7 ITA NO.2747 & 30 80/MDS/2016 SUBMISSION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF BAD DEBTS DUE TO THE FOLLOWING REASONS: 1) THE ASSESSEE HAD NOT WRITTEN OFF THE BAD DEBTS I N THE BOOKS OF ACCOUNT. 2) THE PROVISIONS OF SECTION 36(1)(VII) IS NOT COMP LIED WITH, I.E., THE TRADE RECEIVABLE WAS NOT OFFERED TO TAX DURING EARLIER YEARS. 3) THE DECISION OF THE HONBLE APEX COURT IN THE CA SE TRF LTD. VS. CIT REPORTED IN 190 TAXMAN 391 WAS AGAINST THE CASE OF THE ASSESSEE. 4) THE DECISION OF THE HONBLE APEX COURT IN THE CA SE OF VIJAYA BANK VS. CIT REPORTED IN 190 TAXMAN 257 WAS NOT APP LICABLE IN THE CASE OF THE ASSESSEE BECAUSE IT IS NOT A BANKIN G COMPANY BUT ONLY SHARE BROKING COMPANY. 5) THE STOCK WHICH WAS PURCHASED BY THE ASSESSEE ON BEHALF OF ITS CLIENTS WAS STILL IN POSSESSION OF THE ASSESSEE AND THE ASSESSEE OWNS IT. 6) THE DECISION OF THE CASE CIT V. SHREYAS S. MORAK HIA REPORTED IN 206 TAXMAN 32 WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. FURTHER, BY RELYING ON THE VARIOUS OTHER DE CISIONS, THE LD.AO DISALLOWED THE CLAIM OF BAD DEBTS AND THEREBY ADDED RS.1,78,57,131/- TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) FOLLOWING THE DECISION OF THE CHENNAI BEN CH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 733,734&735/MDS/2015 DATED 05.05.2016 CONFIRMED THE ORDER OF 8 ITA NO.2747 & 30 80/MDS/2016 THE LD.AO. THE GIST OF THE ORDER OF THE LD.CIT(A) IS REPRODUCED HEREIN BELOW FOR REFERENCE: 6.3 THE MATTER IS CONSIDERED. THE ID. CHENNAI TRIBU NAL, IN APPELLANT'S OWN CASE IN ITA NO.733,734 &735/MDS/201 5 DATED 05.05.2016 HAS HELD AS UNDER ON THE ISSUE: 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 36(2)(I) OF THE ACT READS AS FOLLOWS: '36(2) IN MAKING ANY DEDUCTION FOR A BAD DEBT OR PA RT THEREOF, THE FOLLOWING PROVISIONS SHALL APPLY- (I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING TH E INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOU NT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIE R PREVIOUS YEAR, OR REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY-LENDING WHICH IS CARRIED ON BY THE ASSESSEE. IN VIEW OF THE ABOVE, IT IS FOR THE ASSESSE TO ESTA BLISH THAT THE BAD DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING T HE INCOME OF THE ASSESSEE OF ANY OF THE PREVIOUS YEAR OR THE MONEY WAS LENT IN THE COURSE OF ORDINARY BUSINESS OF THE ASSE SSEE. IN CASE THE MONEY LENDING IS NOT THE BUSINESS OF THE ASSESS EE, THEN THE ASSESSEE HAS TO NECESSARILY ESTABLISH THAT THE SO-C ALLED DEBT WAS TAKEN AS INCOME OF THE ASSESSEE FOR THE PREVIOUS YE AR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. THERE IS NO MATERIAL ON RECO RD TO SUGGEST THAT THE AMOUNT INVESTED IN SHARES WAS TAKEN AS INC OME OF THE ASSESSEE IN ANY OF THE PREVIOUS YEAR. MOREOVER, AS RIGHTLY SUBMITTED BY THE LD.D.R., THE SHARES PURCHASED BY T HE ASSESSEE REMAINED WITH ASSESSEE. THE PRICE OF THE SHARE MIGH T HAVE GONE DOWN CONSIDERABLY, HOWEVER, THE FACT REMAINS THAT T HE SHARE REMAINED WITH THE ASSESSEE AND THE ASSESSEE HAS A R IGHT TO HOLD 9 ITA NO.2747 & 30 80/MDS/2016 THE SAME TILL THE PAYMENT WAS MADE BY THE RESPECTIV E CLIENTS. THEREFORE, MERELY BECAUSE THE CLIENTS COULD NOT HON OUR THEIR RESPECTIVE COMMITMENT OF PAYING THE PURCHASE PRICE, IT DOES NOT MEAN THAT THE ASSESSEE SUFFERS LOSS AT THIS STAGE. THE ASSESSEE HAS TO FIRST SELL THE SHARES AND THE ASSESSEE COULD NOT REALISE THE ENTIRE AMOUNT INVESTED, THEN THE AMOUNT WHICH COULD NOT BE REALIZED MAY BE CLAIMED AS BUSINESS LOSS. AT NO STR ETCH OF IMAGINATION, IT CAN BE SAID THAT THE AMOUNT DUE FRO M THE CLIENTS IS BAD DEBT. SINCE THE PROVISIONS OF SECTION 36(2)( I) WAS NOT COMPLIED WITH, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE OUTSTANDING AMOUNT CANNOT BE CONSTRUED AS BAD D EBT. THEREFORE, THERE IS NO QUESTION OF ALLOWING THE SAM E AS BAD DEBT. SINCE THE SHARES REMAINED WITH THE ASSESSEE A ND IT CAN BE SOLD AT ANY TIME, AT THE BEST, IT CAN BE CLAIMED AS BUSINESS LOSS IN THE YEAR IN WHICH THOSE SHARES ARE SOLD PROVIDED THERE IS ANY ACTUAL LOSS. ACCORDINGLY, THE ASSESSING OFFICER SHA LL VERIFY WHETHER THE ASSESSEE SOLD THE SHARES DURING THE YEA R UNDER CONSIDERATION AND SUFFERED ANY LOSS. IF THE ASSESSE E SUFFERED LOSS ON SALE OF SUCH SHARES, THE SAME SHALL BE ALLOWED A S BUSINESS LOSS (EMPHASIS SUPPLIED).' RESPECTFULLY FOLLOWING THE DECISION OF ID. CHENNAI TRIBUNAL ON THE ISSUE, THE DISALLOWANCE OF BAD DEBTS MADE BY AO STANDS CONFIRMED. THE GROUNDS OF APPEAL IN THIS REGARD ARE DISMISSED. AFTER HEARING BOTH SIDES, WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL CITED BY THE LD.CIT(A) IN HIS ORDER SUPRA . FURTHER THE LD.AO HAS ALSO CONSIDERED THE ISSUE IN DETAIL AND RELYING ON THE VARIOUS DECISION OF THE HIGHER JUDICIARY AND THE HONBLE AP EX COURT SUPRA, RIGHTLY DISALLOWED THE CLAIM OF BAD DEBTS MADE BY T HE ASSESSEE. IN THIS SITUATION, WE DO NOT FIND IT NECESSARY TO I NTERFERE WITH THE 10 ITA NO.2747 & 3 080/MDS/2016 ORDER OF THE REVENUE AUTHORITIES ON THIS ISSUE. AC CORDINGLY WE HEREBY CONFIRM THE ORDER OF THE REVENUE AUTHORITIES ON THIS ISSUE. 6. THE ASSESSEE HAS SUBMITTED AN ADDITIONAL GROUND FOR THE RELEVANT ASSESSMENT YEAR VIDE LETTER DATED 11.05.20 17 AFTER THE DATE OF HEARING WHICH STATES AS FOLLOWS:- THE HONBLE ITAT MAY BE PLEASED TO DIRECT THE ASSE SSING OFFICER TO DEDUCT THE CLAIMS PAYABLE AMOUNT OF RS.5 0,23,360/- INCLUDED BY THE ASSESSEE AS INCOME IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 THOUGH THE SAME AMOUNT HAD BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2010-2011 AND CONFIRMED IN APPEAL HOWEVER, RULE 11 OF THE INCOME TAX APPELLA TE TRIBUNAL MANDATES THAT THE TRIBUNAL SHALL NOT DECIDE ANY GRO UND WITHOUT PROVIDING OPPORTUNITY TO THE OTHER SIDE OF BEING HE ARD. THEREFORE IT IS CLEAR THAT AN ADDITIONAL GROUND FILED BY EITH ER PARTY AFTER THE DATE OF HEARING CANNOT BE ENTERTAINED. ACCORDINGLY , THIS ADDITIONAL GROUND RAISED BY THE ASSESSEE AFTER THE DATE OF HEARING DOES NOT SURVIVE. 7 REVENUE APPEAL IN ITA NO.3080/MDS/2016 11 ITA NO.2747 & 3 080/MDS/2016 7.1 DELETING THE ADDITION MADE BY DISALLOWING THE R OYALTY EXPENDITURE OF RS.43,36,271/- BY TREATING IT AS REV ENUE EXPENDITURE: THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.43,36,27 1/- AS ROYALTY EXPENSES. ON QUERY IT WAS EXPLAINED THAT T HE AFORESAID AMOUNT WAS PAID TO M/S. SHRIRAM OWNERSHIP TRUST FOR USING THE COPYRIGHT LOGO AS PER THE AGREEMENT DATED 22.07.201 1. THE ASSESSEE FURTHER POINTED OUT THAT ON THE IDENTICAL ISSUE IN THE CASE OF GROUP COMPANY VIZ., SHRIRAM CITY UNION FINA NCE LTD IN ITA NO.1899/MDS/2015 VIDE ORDER DATED 11.04.2013, T HE CHENNAI BENCH OF THE TRIBUNAL ALLOWED THE CLAIM OF ROYALTY EXPENSES AS REVENUE EXPENDITURE. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CIT V S. WAVIN (INDIA) LTD REPORTED IN 236 ITR 314, WHEREIN THE ID ENTICAL ISSUE WAS HELD IN FAVOUR OF THE ASSESSEE. HOWEVER, THE L D.AO REJECTED THE CLAIM OF THE ASSESSEE AND DISALLOWED T HE ROYALTY EXPENSES BY TREATING IT AS CAPITAL EXPENDITURE BUT ALLOWED DEPRECIATION @ 25% BY OBSERVING AS UNDER: FURTHER, THOUGH THE ISSUE OF ROYALTY PAYMENTS HAS BEEN HELD IN FAVOUR OF THE ASSESSEES GROUP COMPANY BY THE ITAT, CHENNAI, WITH DUE RESPECT TO THE APPELLATE AUTHORITIES, THE SAME HAS NOT BEEN ACCEPTED AND THE DEPARTMENT HAS FILED FURTHER APPEAL TO HONOURABLE MADRAS HIGH COURT. HOWEVER, THE MATTER HAS NOT REACHED ITS FINALITY AS ON DATE. THEREFORE, THE CL AIM OF THE ASSESSEE IS NOT ENTERTAINED AND ROYALTY PAYMENT OF 12 ITA NO.2747 & 3 080/MDS/2016 RS.32,52,204/- IS DISALLOWED AFTER ALLOWING THE ELI GIBLE DEPRECIATION @25% ON RS.43,36,271/-. ACCORDINGLY DEPRECIATION OF RS.10,84,067/- IS ALLOWED. ON APPEAL, THE LD.CIT(A) FOLLOWING THE DECIS ION OF THE CHENNAI BENCH OF THE TRIBUNAL DELETED THE ADDITION MADE BY THE LD.AO AND ALLOWED THE CLAIM OF ROYALTY EXPENDITURE AS REVENUE EXPENDITURE BY OBSERVING AS UNDER: THE MATTER IS CONSIDERED. THE LD. CHENNAI TRIBUNA L IN ITS DECISION IN THE CASE OF SHRIRAM CITY UNION FINANCE LTD IN IUTA NO.868 & 869/MDS/2015 DATED 29.01.2016 HAS CATEGORI CALLY HELD THAT DISALLOWANCE OF ROYALTY IS NOT WARRANTED. RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDE NCE OF LD. CHENNAI TRIBUNAL ON THE ISSUE, THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF ROYALTY PAYMENTS ST AND DELETED. THIS GROUND IS ALLOWED. AFTER HEARING BOTH PARTIES AND PERUSING TH E ISSUE IN DETAIL, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE O RDER OF THE LD.CIT(A), BECAUSE ON THE IDENTICAL ISSUE, THE MATT ER HAS BEEN ALREADY DECIDED IN FAVOUR OF THE ASSESSEE BY THE CH ENNAI BENCH OF THE TRIBUNAL WHICH THE LD.CIT(A) HAS ONLY JUDICI OUSLY FOLLOWED. THEREFORE WE HEREBY CONFIRM THE ORDER OF THE LD.CIT (A) ON THIS ISSUE. 13 ITA NO.2747 & 3 080/MDS/2016 7.2 DIRECTION OF THE LD.CIT(A) TO EXCLUDE THE INVES TMENT MADE IN SISTER COMPANIES EARNING EXEMPT INCOME WHIL E COMPUTING DISALLOWANCE U/S.14A R.W.R. 8D OF THE RUL ES:- SINCE THE LD.CIT(A) HAS FOLLOWED THE RATIO LAID D OWN IN THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE OF M/S. SIDD LIFE SCIENCES CITED SUPRA IN THE ASSESSEES APPEAL PARA 5.1 , WE DO NOT FIND IT NECESSARY TO INTERFERE WIT H THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THEREFORE THIS GROUND RAI SED BY THE REVENUE DOES NOT HAVE MERIT AND WILL NOT SURVIVE. 7.3 DELETION OF THE ADDITION MADE TO BOOK PROFITS U/S.115JB OF THE ACT:- THE LD.AO WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSEE U/S.115JB OF THE ACT MADE ADDITION BY DISALLOWING T HE EXPENSE U/S.14A OF THE ACT OF RS.7,06,109/-. ON APPEAL THE LD.CIT(A) DELETED THE ADDITION FOLLOWING THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL ON THE IDENTICAL ISSUE IN THE CASE OF ASSOCIATED COMPANY M/S. SHRIRAM CAPITAL LIMITED IN ITA NO.512&513/MDS/2015 DATED 26.06.2015, WHEREIN IT WA S HELD THAT DISALLOWANCE MADE U/S.14A OF THE ACT, READ WIT H RULE 8D CANNOT BE ADDED TO THE BOOK PROFIT U/S.115JB OF THE ACT. SINCE 14 ITA NO.2747 & 3 080/MDS/2016 THE LD.CIT(A) HAS ONLY FOLLOWED THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL ON THE IDENTICAL ISSUE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT (A) ON THIS ISSUE. IT IS ALSO WORTHWHILE TO MENTION AT THIS JU NCTURE THAT WHILE INTERPRETING FISCAL STATUTES, ON A PROVISION OF THE ACT WITH FRICTION, ANOTHER PROVISION OF THE ACT WITH FRICTION CANNOT B E SUPERIMPOSED. THEREFORE THIS GROUND RAISED BY THE REVENUE ALSO DOES NOT HAVE MERIT AND WILL NOT SURVIVE. 8. IN THE RESULT APPEAL OF THE ASSESSEE AS WELL AS THAT OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON THE 08 TH JUNE, 2017. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) !' /JUDICIAL MEMBER !' / ACCOUNTANT MEMBER $ /CHENNAI, %! /DATED 08 TH JUNE, 2017 JR ! '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF
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