T.V.Sundaram Iyengar & Sons Limited, Madurai V. DCIT, Madurai

ITA 2777/CHNY/2014

• Counselvise Citation: 277721714 RSA 2014
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: S A BALASUBRAMANYAN
• Keywords: Business expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2777/MDS/2014 ' (' / ASSESSMENT YEAR : 2010-11 M/S T.V. SUNDRAM IYENGAR & SONS LIMITED, 7-B, WEST VELI STREET, MADURAI 625 001. PAN : AABCT 0159 K V. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I(1), MADURAI. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH.S.A. BALASUBRAMANYAN, ADVOCATE ,-*+ . / / RESPONDENT BY : SH. P. RADHAKRISHNAN, JCIT 0 . 1$ / DATE OF HEARING : 11.06.2015 2!( . 1$ / DATE OF PRONOUNCEMENT : 03.07.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, MADURAI, DA TED 18.09.2014. 2 I.T.A. NO.2777/MDS/14 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO EXPENDITURE INCURRED BY THE ASSESSEE ON EDUCATION O F THE CHILDREN OF THE DIRECTORS. 3. SH.S.A. BALASUBRAMANYAN, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE INCURRED EXPENDITURE ON THE FOREIGN EDUCATION OF GRAND CHILDREN OF THE DIRECTORS. ACCO RDING TO THE LD. COUNSEL, THE ASSESSEE-COMPANY WAS IN EXISTENCE OVER SEVERAL DECADES. BUT BECAUSE OF THEIR EDUCATION, THE COMPA NY COULD NOT HAVE GROWN TO THIS LEVEL. THE LD.COUNSEL SUBMITTED THAT THE ENTIRE EXPENDITURE WAS ONLY FOR THE PURPOSE OF BUSINESS. THE LD.COUNSEL PLACED RELIANCE ON THE JUDGMENT OF THE DELHI HIGH C OURT IN KOSTUB INVESTMENT LTD. V. CIT (2014 365 ITR 436. ACCORDIN G TO THE LD. COUNSEL, THE JUDGMENTS OF MADRAS HIGH COURT IN CIT V. RKKR STEELS P. LTD. (2002) 258 ITR 306 AND IN K. SUBRAMANIAM BR OS V. CIT 250 ITR 769 ARE NOT APPLICABLE TO THE FACTS OF THE CASE . 4. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ADMITTEDLY THE CHILD REN OF THE DIRECTORS WERE SENT TO FOREIGN FOR EDUCATION AND TH E EXPENDITURES WERE INCURRED BY THE ASSESSEE-COMPANY. ACCORDING T O THE LD. D.R., IT IS LIABILITY OF THE PARENTS TO EDUCATE THE IR CHILDREN. IT IS NOT 3 I.T.A. NO.2777/MDS/14 THE BUSINESS EXPENDITURE OF THE COMPANY. WHETHER T HEIR GRANDCHILDREN OR CHILDREN, THE DIRECTORS HAVE TO ED UCATE THEM BY THEIR OWN INCOME. NO BUSINESS PURPOSE WOULD COME I NTO OPERATION WHEN THE EXPENDITURE ON FOREIGN EDUCATION OF GRANDC HILDREN AND CHILDREN OF THE DIRECTORS ARE INCURRED BY THE ASSES SEE-COMPANY. THE LD. D.R. SUBMITTED THAT THE MADRAS HIGH COURT I N RKKR STEELS P. LTD. (SUPRA) AND IN K. SUBRAMANIAM BROS (SUPRA) DECIDED THE ISSUE AGAINST ASSESSEE ON IDENTICAL CIRCUMSTANCES. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MAD E BY THE ASSESSING OFFICER BY FOLLOWING THE ABOVE JUDGMENTS OF THE MADRAS HIGH COURT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE INCURRED EXPENDITURE ON HIGHER EDUCATION A ND FOREIGN TOURS OF THE GRANDCHILDREN/CHILDREN OF THE DIRECTOR S. AS RIGHTLY SUBMITTED BY THE LD. D.R., IT IS THE RESPONSIBILITY OF THE PARENTS/ GRANDPARENTS TO GIVE EDUCATION TO THEIR CHILDREN/GR ANDCHILDREN. NO BUSINESS PURPOSE IS GOING TO BE SERVED TO THE ASSES SEE BY INCURRING EXPENDITURE ON THE FOREIGN EDUCATION OF THE CHILDRE N AND GRANDCHILDREN OF THE DIRECTORS. MERELY BECAUSE THE COMPANY WAS IN EXISTENCE FOR DECADES, THE LAW LAID DOWN BY THE JUR ISDICTIONAL HIGH 4 I.T.A. NO.2777/MDS/14 COURT IN RKKR STEELS P. LTD. (SUPRA) AND IN K. SUBR AMANIAM BROS (SUPRA) WOULD NOT CHANGE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LAW LAID DOWN BY MADRAS HIGH COURT IN RKKR STEELS P. LTD. (SUPRA) AND IN K. SUBRAMANIAM BROS ( SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THER EFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A PPEALS) AND ACCORDINGLY, THE SAME IS CONFIRMED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 7. SH.S.A. BALASUBRAMANYAN, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER CAN COMPUTE TH E DISALLOWANCE UNDER RULE 8D OF THE INCOME-TAX RULES, 1962 ONLY IN THE CASE WHERE HE WAS SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE WITH REGARD TO ACCOUNTS OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, IT IS THE STATUTORY OBLIGATION ON THE PART OF THE ASSESSING OFFICER TO RECORD HIS SATISFACTION WITH REGARD TO C ORRECTNESS OF THE CLAIM ON THE BASIS OF THE ACCOUNTS. SINCE THE SATI SFACTION WAS NOT RECORDED, ACCORDING TO THE LD. COUNSEL, THE DISALLO WANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 5 I.T.A. NO.2777/MDS/14 8. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R HAS CLEARLY STATED ON PERUSAL OF THE ACCOUNTS THAT THE ASSESSEE MADE INVESTMENT AND EARNED DIVIDEND INCOME WHICH WAS EXE MPTED UNDER SECTION 10(34) OF THE ACT. THIS WAS ALSO BROUGHT T O THE NOTICE OF THE ASSESSEE BY WAY OF SHOW CAUSE NOTICE. THEREFORE, I T IS NOT CORRECT TO SAY THAT THE ASSESSING OFFICER IS NOT SATISFIED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTL Y SUBMITTED BY THE LD. D.R., THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT OF ACCOUNT CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY THE EXPENDITURE RELATABLE TO EARNING OF DIVIDEND SHOULD NOT BE DISALLOWED. THIS CLEARLY SHOWS THAT THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE ON THE BAS IS OF THE BOOKS OF ACCOUNT. THEREFORE, IT WOULD NOT BE CORRECT TO SAY THAT THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE ACCOUNT. RULE 8D CAME INTO OPERATION BY FINANCE AC T, 2009, WHICH IS MANDATORY FOR COMPUTATION OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) AND ACCORDINGLY, THE SAME IS CONFIRMED. 6 I.T.A. NO.2777/MDS/14 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 3 RD JULY, 2015 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 3 RD JULY, 2015. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-I, MADURAI 4. 0 81 /CIT-I, MADURAI 5. 69 ,1 /DR 6. :' ; /GF.