Pandian Chemicals Limited, Madurai V. DCIT Corporate Circle 2, Madurai

ITA 2826/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0170 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C YAMUNA
• Assessee Lawyers: C CHIRANJEEVI RAJ
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.2826/CHNY/2018 / ASSESSMENT YEAR :2013-14 M/S. PANDIAN CHEMICALS LIMITED, 17A, VALLABHAI ROAD, CHOKKIKULAM, MADURAI 625 002. [PAN:AABCP6618D] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI C. CHIRANJEEVI RAJ, C.A. / RESPONDENT BY : SMT. C. YAMUNA, JCIT / DATE OF HEARING : 25.06.2019 /DATE OF PRONOUNCEMENT : 27.06.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1, MADURAI DATED 02.08.2018 RELEVANT TO THE ASSESSMENT YEAR 2013-14. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ACT IN SHORT] R.W. RULE 8D. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 29.09.2013 ADMITTING AN INCOME OF I.T.A. NO.2826/CHNY/18 2 .4,41,98,290/-. THE CASE WAS SELECTED FOR SCRUTINY AND AGAINST THE NOTICE UNDER SECTION 143(2) OF THE ACT, THE ASSESSEE FURNISHED THE PARTICULARS AS CALLED FOR. ON PERUSAL OF THE ACCOUNTS OF THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED A DIVIDEND INCOME OF .1,07,99,487/- DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2013-14. ACCORDINGLY, THE ASSESSEE WAS SHOW CAUSED AS TO WHY DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D SHOULD NOT BE MADE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER DETERMINED THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D AND BROUGHT TO TAX. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION. 3. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW INCLUDING PAPER BOOK FILED BY THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS EARNED DIVIDEND EXEMPT INCOME AT .1,07,99,487/- OUT OF WHICH MORE THAN 99% OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE WAS FROM SUBSIDIARY COMPANY. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT THE INVESTMENT IN SUBSIDIARY COMPANY, BEING STRATEGIC INVESTMENTS IS TO BE EXCLUDED WHILE CALCULATING THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD. V. ADDL. CIT IN TCA NO. 520 OF 2016 DATED 23.12.2016, THE LD. I.T.A. NO.2826/CHNY/18 3 CIT(A) CONFIRMED THE DISALLOWANCE. DURING THE COURSE OF HEARING, THE LD. DR STRONGLY RELIED ON THE LATEST JUDGEMENT IN THE CASE OF MAXOPP INVESTMENT LTD. V. CIT 402 ITR 640 (SC), WHEREIN, THE HONBLE SUPREME COURT HAS HELD AS LONG AS AN EXEMPT INCOME WAS EARNED, THE EXPENDITURE INCURRED AS ATTRIBUTABLE TO EARNING SUCH EXEMPT INCOME, HAD TO BE DISALLOWED UNDER SECTION 14A OF THE ACT. MOREOVER, IT WAS ALSO CATEGORICALLY HELD THAT ANY INVESTMENT MADE WITH A VIEW TO EARN TRADING PROFITS OR AS INVESTMENT REPRESENTING CONTROLLING INTEREST AND THE ASSESSEE EARN AN INCIDENTAL EXEMPT INCOME, SECTION 14A OF THE ACT APPLIES. IN VIEW OF THE ABOVE JUDGEMENT OF THE HONBLE SUPREME COURT, THE CONTENTION OF THE LD. COUNSEL THAT THE INVESTMENT IN SUBSIDIARY COMPANY, BEING STRATEGIC INVESTMENTS IS TO BE EXCLUDED WHILE CALCULATING THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D STANDS REJECTED AND THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 27 TH JUNE, 2019 AT CHENNAI. SD/ - SD/ - (S. JAYARAMAN) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 27.06.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.