ACIT Corporate Circle 2, Madurai V. Rajapalayam Mills Private Limited, Rajapalayam

ITA 2848/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7774 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBASHRI
• Assessee Lawyers: J PRABHAKAR
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI , . , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.2439 & 2848/CHNY/2018 ( / ASSESSMENT YEARS: 2013-14 & 2009-10) THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. VS M/S. RAJAPALAYAM MILLS PVT. LTD., POST BOX NO.1, RAJAPALAYAM MILLS PREMISES, PAC RAMASAMY RAJA SALAI, RAJAPALAYAM 626 117. PAN: AAACR8897F ( /APPELLANT) ( /RESPONDENT) / APPELLANTS BY : MS. SUBASHRI, JCIT / RESPONDENT BY : SHRI J. PRABHAKAR, FCA /DATE OF HEARING : 31.01.2019 /DATE OF PRONOUNCEMENT : 11.04.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1, CHENNAI, DATED 27.06.2018 IN ITA NO.0064/2016-17 AND 19.07.2018 IN ITA NO.240/2016-17 PASSED U/S. 250(6) R.W.S. 143(3) AND 250(6) R.W.S. 143(3) & 148 OF THE ACT, FOR THE ASSESSMENT YEARS 2013-14 & 2009-10 RESPECTIVELY. 2 ITA NOS.2439 & 2848/CHNY /2018 2. THE REVENUE HAS RAISED THREE IDENTICAL GROUNDS IN ITS APPEALS HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.2,44,14,420/- AND RS.1,13,39,777/- FOR THE ASSESSMENT YEARS 2013-14 & 2009-10 RESPECTIVELY TOWARDS DISALLOWANCE U/S.14A R.W.R. 8D OF THE RULES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF COTTON YARN, DEVELOPMENT AND SALE OF TISSUE CULTURE PLANTS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2013-14 & 2009-10 ON 31.03.2014 & 28.09.2009 ADMITTING NIL INCOME & LOSS OF RS.7,20,58,206/- RESPECTIVELY. THEREAFTER ASSESSMENTS WERE COMPLETED U/S.143(3) OF THE ACT AND 143(3) R.W.S. 148 OF THE ACT ON 24.03.2016 & 23.12.2016 FOR THE ASSESSMENT YEARS 2013-14 & 2009-10 RESPECTIVELY, WHEREIN THE LD.AO COMPUTED DISALLOWANCE U/S.14A OF THE ACT FOR RS.2,44,14,420/- FOR THE ASSESSMENT YEAR 2013-14 AND RS.1,13,39,777/- FOR THE ASSESSMENT YEAR 2009-10. 4. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION MADE BY THE LD.AO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT FOR BOTH THE 3 ITA NOS.2439 & 2848/CHNY /2018 ASSESSMENT YEARS BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ITA NO.3615/MDS/2016 DATED 25.01.2018. THE LD.CIT(A) ALSO EXTRACTED THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN HIS ORDER. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAD SURPLUS FUNDS OF ITS OWN. IT IS NOT DISPUTED THAT THE ASSESSEE WAS HAVING RS.43,451.32 LAKHS. THE INVESTMENT IS ONLY RS.441.20 LAKHS. IT IS ALSO NOT IN DISPUTE THAT THE INVESTMENT WAS MADE ONLY IN THE SUBSIDIARY COMPANY, NAMELY, M/S. RAJAPALAYAM SPINNING MILLS LIMITED. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE INVESTMENT MADE IN THE SISTER CONCERN/SUBSIDIARY COMPANY IS AN INVESTMENT FOR BUSINESS EVEN THOUGH EARNING OF DIVIDEND INCOME IS INCIDENTAL TO INVESTMENT. MOREOVER, THE ASSESSEE HAS INVESTED ITS OWN PROFIT IN THE SUBSIDIARY COMPANY, THEREFORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, THIS TRIBUNAL DO NOT HAVE ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 5. AT THE OUTSET, WE FIND THAT IN THE CASE OF THE ASSESSEE THE LD.CIT(A) HAS FOLLOWED THE ORDER OF THE TRIBUNAL WHEREIN IT WAS HELD THAT NO COST WOULD BE INCURRED BY THE ASSESSEE FOR EARNING DIVIDEND INCOME WHICH IS EXEMPT FROM TAX WHEN THE ASSESSEE HAS MADE INVESTMENT IN EQUITY SHARES OF ITS OWN SUBSIDIARY CONCERNS OUT OF ITS OWN NON-INTEREST BEARING FUNDS. NOTHING IS BROUGHT BEFORE US BY THE LD.REVENUE AUTHORITIES TO ESTABLISH THE FACTS OTHERWISE FOR BOTH THE ASSESSMENT YEARS IN THE RELEVANT CASES OF THE ASSESSEE. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH 4 ITA NOS.2439 & 2848/CHNY /2018 THE ORDERS OF THE LD.CIT(A) ON THIS ISSUE FOR BOTH THE ASSESSMENT YEARS. 6. IN THE RESULT THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 11 TH APRIL, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 11 TH APRIL, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) /ACCOUNTANT MEMBER