Global Calcium Private Limited, Hosur V. DCIT, CHENNAI

ITA 28/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8748 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: M VISWANATHAN
• Keywords: Earning of tax free income; Revised return
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NOS.28 & 29/MDS/2016 ' $ %$ / ASSESSMENT YEAR : 2011-12 & 2012-2013 M/S. GLOBAL CALCIUM PRIVATE LIMITED, 125 & 126, SIPCOT INDUSTRIAL COMPLEX, HOSUR 635 1260 VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2) CHENNAI 600 034. [PAN AAACG 2998N] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. M. VISWANATHAN, C.A. *+&' ( ) /RESPONDENT BY : SHRI. A.V.SREEKANTH, IRS, JCIT. ( , / DATE OF HEARING : 11-07-2016 -.% ( , / DATE OF PRONOUNCEMENT : 20-07-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THESE TWO APPEALS ARE FILED BY THE ASSESSEE A RE DIRECTED AGAINST DIFFERENT ORDERS OF COMMISSIONER OF INCOME -TAX (APPEALS)-6, CHENNAI DATED 30.11.2015 FOR THE ASSESSMENT YEARS 2 011-12 AND 2012-13 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961. ITA NOS.28 & 29/MDS/2016 :- 2 -: SINCE THE ISSUE IN THESE APPEALS ARE COMMON IN NATURE, THESE APPEAL S ARE CLUBBED, HEARD TOGETHER, AND DISPOSED OF BY THI S COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE TAKE UP ITA NO.28/MDS/2 016 OF ASSESSMENT YEAR 2011-12 FOR ADJUDICATION. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APP EAL:- THE APPELLANT SUBMITS THAT THE DISALLOWANCE U/SEC. 14A CANNOT EXCEED THE DIVIDEND INCOME EARNED. FURTHER, THE APPELLANT RELIES UPON THE DECISION OF DAGA GLOBAL CHEMICALS PVT. LTD VS. ACIT, MUMBAI IN ITA NO.592/MUM/2012 OF INCOME TAX APPELLATE TRIBUNAL, D BENCH WHEREIN IT IS HELD THAT THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING OF BULK DRUG AND FILED E-RETURN ON 30.09.2011 DECLARING TOTAL INCOME OF B2,28,06,150/- AN CLAIMED DEDUCTION UNDER U/S.80IA OF THE ACT AND RETURN OF I NCOME WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 13.07.2012 DECLARING NI L INCOME. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S .143(2) OF THE ACT WAS ISSUED. IN COMPLIANCE TO NOTICES, THE LD. AUTHO RISED REPRESENTATIVE OF ASSESSEE APPEARED FROM TIME TO TIME AND PRODUCED PARTICULARS CALLED FOR BY REVENUE. THE LD. ASSESSING OFFICER ON PERUSAL OF THE INFORMATION FOUND THAT THE ASSESSEE COMPANY HAS RE CEIVED DIVIDEND ITA NOS.28 & 29/MDS/2016 :- 3 -: INCOME OF B57,703/-AND CLAIMED AS EXEMPTED U/S.10(3 3) OF THE ACT AND NO EXPENDITURE WAS DISALLOWED IN RESPECT OF EA RNING EXEMPTED DIVIDEND INCOME AND NO APPORTIONMENT OF EXPENDITURE AND RELIED ON THE DECISION OF THE SPECIAL BENCH OF DELHI TRIBUNA L IN THE CASE OF CHEMINVEST LTD. ITO IN ITA NO.87/DEL/2008, DATED 05 .08.2009 AND KOLKATA HIGH COURT DECISION IN THE CASE OF DHANUKA AND SONS (201 TAXMANN 105). FURTHER, ON VERIFICATION OF THE TRANSACTION OF LO ANS AND ADVANCES, THE ASSESSEE COMPANY COULD NOT EXPLAIN WH ETHER INTEREST FREE FUNDS WERE UTILIZED FOR MAKING INVESTMENTS AND BIFURCATION OF SECURED AND UNSECURED LOANS. THE LD. ASSESSING O FFICER DETERMINED THE DISALLOWANCE UNDER PROVISIONS OF U/S.14A R.W.S RULE 8D(2)(I)(II) (III) B6,24,054/- AND MADE ADDITION TO RETUNED INCOME AL ONGWITH OTHER ADDITIONS AND PASSED ASSESSMENT ORDER U/S.143(3) OF THE ACT DATED 27.03.2014. AGGRIEVED BY THE ORDER, THE ASSESSEE F ILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS ON CONSTITUTIONAL VALIDITY AND APPLICABILITY OF PROVISIONS OF SEC. 14A OF THE ACT AND RULE 8D AND EXPLAINED THE ANALOGY THAT ASSESSEE HAS EARNED DI VIDEND INCOME B57,703/- WEREAS DISALLOWANCE U/S.14A R.W.R. 8D IS B6,24,054/- AND FURTHER EXPLAINED THAT THE ASSESSEE HAS NOT INCURRE D ANY EXPENDITURE ITA NOS.28 & 29/MDS/2016 :- 4 -: ON EARNING EXEMPTED INCOME AND SUBMITTED ELABORATE LY ON PROVISIONS AND RELIED ON HIGH COURT AND TRIBUNAL DECISIONS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BASED ON THE F INDINGS OF THE ASSESSING OFFICER AND THE ARGUMENTS ENVISAGED BY THE LD. AUTHORISED REPRESENTATIVE AND PERUSED THE DECISIONS RELIED BY THE ASSESSEE INCLUDING CO-ORDINATE BENCH DECISIONS AND DISTINGUI SHED THE JUDICIAL DECISIONS AND FORMED AN UNILATERAL OPINION AS THER E IS NO BREAKUP OF NON INTEREST BEARING FUNDS WERE PROVIDED BY THE ASS ESSEE IN THE ASSESSMENT PROCEEDINGS AND RELIED ON THE DELHI HIGH COURT DECISION OF MAXOPP INVESTMENT LTD & ORS. VS. CIT 347 ITR 272 AND OBSERVED THAT THE LD. ASSESSING OFFICER HAS RECORDED SATISFACTION ON INVOKING APPLICABILITY OF PROVISIONS OF RULE 8D AND CALCULAT ED DISALLOWANCE U/S. RULE 8D(2) AND SUSTAINED ADDITION U/SEC. 14A RULE 8 D B6,24,054/-. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TA X (APPEALS), THE ASSESSEE ASSAILED AN APPEAL BEFORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE LD. ASSESSING OFFICER AND LD. COMMISSIONER OF INCOME TAX (APPEAL S) WITH JUDICIAL DECISIONS RELIED BEFORE LOWER AUTHORITIES AND EMPHA SIZED THAT THERE IS NO RATIONALITY IN DISALLOWANCE U/S.14A R.W.R. 8D BE ING B6,24,054/- AS ITA NOS.28 & 29/MDS/2016 :- 5 -: AGAINST THE DIVIDEND INCOME RECEIVED B57,703/- AND RELIED ON THE MUMBAI ITAT DECISION OF DAGA GLOBAL CHEMICALS PVT. LTD VS. ACIT IN ITA NO.592/MUM/201 2 AND PRAYED FOR RESTRICTION OF DISALLOWANCE UNDER SECTION 14A R.W.R 8D TO THE EXTENT OF EXEMPTE D DIVIDEND INCOME AND ALSO SUPPORTED WITH DECISION IN ASSESSEE S OWN CASE ITA NO.81/MDS/2015, ASSESSMENT YEAR 2010-2011, DATED 29 .05.2015, WERE THE TRIBUNAL HAS CONSIDERED RESTRICTION DISALL OWANCE U/SEC. 14A RULE 8D TO THE EXTENT OF EXEMPTED INCOME AND PRAYED FOR ALLOWING THE APPEAL. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE RELIED ON THE ORDERS OF LOWER AUTHORITIES AND VEHEM ENTLY OPPOSED TO THE GROUNDS. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AUTHO RISED REPRESENTATIVE CONTENTION THAT THE ASSESSEE COMPANY MADE INVESTMEN TS OUT OF FUNDS GENERATED IN THE BUSINESS AND THE LOANS OBTAINED WERE NOT UTILIZED FOR THE PURPOSE OF INVESTMENTS AND THE ASSESSEE CO MPANY HAS CLAIMED INTEREST CHARGES IN PROFIT AND LOSS ACCOUNT ON SECURED LOANS. FURTHER, THE LD. AUTHORISED REPRESENTATIVE DEMONSTR ATED ADEQUATE RESERVE & SURPLUS OF EARLIER YEARS. SIMILARLY, THE INVESTMENTS OF THE ASSESSEE COMPANY AS ON 31.03.2011 ARE B2.93 CRORES AND ON ITA NOS.28 & 29/MDS/2016 :- 6 -: COMPARING THE INVESTMENTS AS ON 31.03.2010 B2.59 CRORES, THE INCREMENTAL INCREASE IS ONLY B34.02 LACS. THE LD. AUTHORISED REPRESENTATIVE DEMONSTRATED THAT THE ASSESSEE HAS M ADE INVESTMENTS OUT OF INTERNAL ACCRUALS OF BUSINESS OPERATIONS. W E FOUND THE ANALOGY ADOPTED BY THE ASSESSEE COMPANY RELYING ON THE RESERVE AND SURPLUS IS NOT ACCEPTED AND FURTHER THE ASSESSEE COMPANY COULD NOT SUBSTANTIATE THE INVESTMENTS WITH CASH FLOW STATE MENT AND BANK ACCOUNT WITH DIRECT NEXUS AND THE LD. ASSESSING OFF ICER HAS RELIED ON PROVISIONS OF SEC.14A R.W.S. 8D(2) AND CALCULATED D ISALLOWANCE. CONSIDERING THE APPARENT FACTS, FINANCIAL STATEMENT S AND INCREMENTAL VALUES, THE DISPUTED ISSUE HAS TO BE RE-EXAMINED BY THE LD. ASSESSING OFFICER AS THERE IS NO PROPER CLEAR FINDINGS BY THE LD. ASSESSING OFFICER IN THE ASSESSMENT ORDER. WE RESPECT THE CO-ORDINA TE BENCH DECISION OF EARLIER YEAR AND MUMBAI ITAT DECISION RELIED BY THE LD. AUTHORISED REPRESENTATIVE. BUT PRIME FACIE THE ASSESSEE COMP ANY SHALL PROVIDE INFORMATION ON TAX FREE FUNDS UTILIZED FOR INVESTME NTS WITH CREDITABLE EVIDENCE AND STRATEGIC MANAGEMENT DETAILS OF USAGE OF OFFICE ESTABLISHMENT AND RELATED COST. HENCE, WE REMIT TH E ENTIRE DISPUTED ISSUE TO THE FILE OF ASSESSING OFFICER TO CONSIDER AFRESH AND THE ASSESSEE SHALL BE PROVIDED WITH ADEQUATE OPPORTUNIT Y OF HEARING BEFORE PASSING THE ORDER. THE GROUND APPEAL OF THE ASSESSEE IS ITA NOS.28 & 29/MDS/2016 :- 7 -: ALLOWED FOR STATISTICAL PURPOSE. 8. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IN ITA NO.29/MDS/2016 FOR ASSESSMENT YEAR 2012-2013 IS AL SO ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS. 28 & 29/MDS/2016 ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 20TH DAY OF JUL Y, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) / JUDICIAL MEMBER / CHENNAI 0 / DATED:20.07.2016 KV 1 ( *',23 43%, / COPY TO: 1 . &' / APPELLANT 3. 5, () / CIT(A) 5. 389 *',' / DR 2. *+&' / RESPONDENT 4. 5, / CIT 6. 9:$ ; / GF