DCIT, CHENNAI V. M/s. Equitas Holding Pvt. Ltd., CHENNAI

ITA 2853/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3969 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATI
• Assessee Lawyers: JAISHEILA CA
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 2853/MDS/2016 & C.O. NO. 9/MDS/2017 / ASSESSMENT YEAR : 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI 600 034. VS. M/S. EQUITAS HOLDING PVT. LTD., NO. 672, 4 TH FLOOR, TEMPLE TOWERS, ANNA SALAI, NANDANAM, CHENNAI 600 035. [PAN: AAACU 9126C] ( / APPELLANT) ( RESPONDENT & CROSS OBJECTOR) % & / APPELLANT BY : SHRI ASHISH TRIPATI, JCIT )*% & / RESPONDENT BY : MS. JAISHEILA, CA & /DATE OF HEARING : 30.05.2017 & /DATE OF PRONOUNCEMENT : 27.07.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED AN APPEAL AND THE ASSESSEE FILED THE CO AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6 , CHENNAI IN ITA NO. 305/CIT(A)-6/2015-16 DATED 21.07.2016. :-2-: ITA NO. 2853/MDS/2016 CO NO. 9/MDS/2017 2. M/S. EQUITAS HOLDING PVT, LTD., THE ASSESSEE, I S AN INVESTMENT AND HOLDING COMPANY WITH SUBSTANTIAL INVESTMENTS IN SUB SIDIARY COMPANIES. IN THE ASSESSMENT MADE FOR ASSESSMENT YEAR 2013-14, ON PERUSAL OF THE BALANCE SHEET, THE AO FOUND THAT THE ASSESSEE HAD AN INVEST MENT OF RS. 406.36 CRORES WHICH COMPRISED TO RS. 144.96 CRORES, FRESH INVESTM ENT DURING THE ASSESSMENT YEAR. WHEN HE PROPOSED TO APPLY SECTION 14A R.W.R. 8D, THE ASSESSEE OBJECTED PRIMARILY ON THE GROUND THAT IT D ID NOT EARN ANY EXEMPTED INCOME AND IT DID NOT INCUR ANY DIRECT/INDIRECT/COM MON EXPENSES. IT ALSO RELIED ON VARIOUS DECISIONS INCLUDING THE CHENNAI, ITAT DECISION IN THE CASE OF M. BASKARAN DECIDED ON 31.07.2014 AND CLAIMED THAT THE EXPENDITURE ON THE INVESTMENTS IN SUBSIDIARY COMPANIES WAS OUT OF COMM ERCIAL EXPEDIENCY. THE AO DID NOT AGREE THAT THE ASSESSEES VIEW. RELYING ON THE BOARD CIRCULAR NO. 5/2014 DATED 11.02.2014, HE APPLIED THE PROVISIONS OF SECTION 14A R.W.R. 8D AND DISALLOWED RS. 60,07,048/-. AGGRIEVED, THE ASS ESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) RELYING ON THE DECIS IONS OF THIS TRIBUNAL IN THE CASES OF M. BASKARAN, ITA NO. 1717/MDS/2013 DATED 3 1.07.2014 AND OF EIH ASSOCIATED HOTELS LTD. VS DCIT IN ITA NOS. 1503, 16 24/MDS/2012 DATED 17.07.2013, HELD THAT IT IS AN UNDISPUTED THAT THE APPELLANT COMPANY HAS NOT EARNED ANY DIVIDEND INCOME DURING THE YEAR. IT IS ALSO A MATTER OF RECORD THAT THE ENTIRE INVESTMENT OF RS. 406.36 CRORES ARE STRA TEGIC INVESTMENTS IN SUBSIDIARY COMPANIES. KEEPING THIS ASPECTS INTO CO NSIDERATION AND RESPECTIVELY FOLLOWING THE BINDING JUDICIAL PRECEDE NCE OF LD. CHENNAI TRIBUNAL :-3-: ITA NO. 2853/MDS/2016 CO NO. 9/MDS/2017 (SUPRA), THE CIT(A) DELETED THE DISALLOWANCE. AGGR IEVED, THE REVENUE FILED THIS APPEAL PLEADING THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INVESTMENT MADE BY THE ASSESSEE COMPANY IN ITS SUBS IDIARY COMPANIES IS ALSO ENTITLED FOR DIVIDEND AND HENCE, THE SAME SHOULD BE TREATED PAR WITH OTHER INVESTMENTS, THERE IS NO EXCEPTION PROVIDED IN RULE 8D(II) IN RESPECT OF THE INVESTMENT MADE IN THE SUBSIDIARY COMPANIES, THE DE CISIONS RELIED ON BY THE CIT(A) ARE PENDING BEFORE THE HONBLE HIGH COURT AN D AS PER THE BOARD CIRCULAR NO. 5/2014 DATED 11.02.2014 AND AS PER BOA RD CIRCULAR, THE DISALLOWANCE U/S. 14A IS EXIGIBLE EVEN IF THERE IS NO EXEMPT INCOME EARNED DURING THE RELEVANT PREVIOUS YEAR. 3. THE ASSESSEE IN ITS CO PLEADED THAT THE CIT(A) FAILED TO APPRECIATE THAT THE AO HAS NOT RECORDED SATISFACTION FOR INVOKING R ULE 8D OF THE INCOME TAX RULES, THE DISALLOWANCE MADE U/S. 14A R.W.R. 8D WAS NOT WARRANTED AS NO EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR EARNIN G EXEMPT INCOME AND THE AO ERRED IN APPLYING RULE 8D ON THE INVESTMENT WITH OUT CONSIDERING THE FACT THAT THE INVESTMENTS DID NOT YIELD ANY RETURN IN TH E FORM OF DIVIDEND DURING THE IMPUGNED ASSESSMENT YEAR. 4. WE HEARD THE RIVAL CONTENTIONS. IT WAS BROUGHT TO OUR NOTICE THAT THIS TRIBUNAL IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 2012-13 IN ITA NO. 1424/MDS/2016 DATED 13.02.2017, ON SIMILAR FACTS, D ISMISSED THE REVENUES :-4-: ITA NO. 2853/MDS/2016 CO NO. 9/MDS/2017 APPEAL, RELYING ON THE DECISIONS OF THIS TRIBUNAL I N THE CASE OF EIH ASSOCIATES HOTEL PVT. LTD., VS DCIT AND THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD., VS ADDL. CIT IN TCA NO. 520 OF 2016 DATED 23.12.2016. SINCE, THERE IS NO CHANGE IN THE LAW A ND THE FACTS, FOLLOWING THIS TRIBUNAL DECISION IN THE ASSESSEES CASE, SUPRA, TH E REVENUES APPEAL IS DISMISSED. 5. ON THE UNDISPUTED FACTS, THE CIT(A) HAS CORRECTL Y APPLIED THE RATIOS OF THIS TRIBUNAL AND HENCE, HIS ORDER DOES NOT REQUIRE ANY INTERFERENCE. HENCE, THE ASSESSEES CO IS ALSO DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 27 TH DAY OF JULY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 27 TH JULY, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF