DCIT Corporate Circle 5(1), CHENNAI V. Rane Holdings Ltd., CHENNAI

ITA 2888/CHNY/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9437 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Rule 8D; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2888/CHNY/2017 & C.O. NO.27/CHNY/2018 (IN I.T.A. NO.2888/CHNY/2017) & '& / ASSESSMENT YEAR : 2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1), CHENNAI - 600 034. V. M/S RANE HOLDINGS LTD., NO.132, MAITHRI, CATHEDRAL ROAD, CHENNAI - 600 086. PAN : AABCR 5136 J ()*/ APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) )* + , / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT -.)* + , / RESPONDENT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE / + 0# / DATE OF HEARING : 15.10.2019 12' + 0# / DATE OF PRONOUNCEMENT : 02.01.2020 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNAI, D ATED 30.08.2017 AND PERTAINS TO ASSESSMENT YEAR 2013-14. THE ASSES SEE FILED THE CROSS- OBJECTION AGAINST THE VERY SAME ORDER OF THE CIT(AP PEALS). THEREFORE, 2 I.T.A. NO.2888/CHNY/17 C.O. NO.27/CHNY/18 WE HEARD BOTH THE APPEAL AND THE CROSS-OBJECTION TO GETHER AND DISPOSING THE SAME BY THIS COMMON ORDER. 2. SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE CIT(APPEALS) DIRECTED THE ASSESS ING OFFICER TO EXCLUDE THE INVESTMENT MADE IN THE SUBSIDIARY COMPANIES BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN EIH ASSOCIATED HOTELS LTD. V. DCIT 2013 (9) TMI 604. REFERRING TO THE JUDGMENT OF APEX COURT I N MAXOPP INVESTMENT LTD. V. CIT (2018) 402 ITR 640, THE LD. D.R. SUBMIT TED THAT EVEN IF THE INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANIES OR IN STRATEGIC INVESTMENTS, THE PROVISIONS OF SECTION 14A OF THE I NCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IS APPLICABLE. THEREFORE, ACC ORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT CORRECT IN DIRECTING THE ASSESS ING OFFICER TO EXCLUDE THE INVESTMENTS MADE IN SUBSIDIARY COMPANIES. 3. ON THE CONTRARY, SH. R. VIJAYARAGHAVAN, THE LD.C OUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAD SUFFICIEN T FUNDS FOR MAKING INVESTMENTS. WHEN THE ASSESSEE HAS INVESTED ITS OW N FUNDS, ACCORDING TO THE LD. COUNSEL, THERE CANNOT BE ANY DISALLOWANC E. ON A QUERY FROM THE BENCH WHEN THE INVESTMENTS WERE MADE? WHETHER THE ASSESSEE HAD SUFFICIENT SURPLUS FUNDS ON THE DATE OF INVESTM ENTS? THE LD.COUNSEL SUBMITTED THAT THE DETAILS ARE NOT AVAILABLE AND TH E MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 3 I.T.A. NO.2888/CHNY/17 C.O. NO.27/CHNY/18 REFERRING TO RULE 8D(2)(II) AND (III) OF THE INCOME -TAX RULES, 1962, THE LD.COUNSEL SUBMITTED THAT THE INVESTMENT, WHICH DOE S NOT RESULT IN EXEMPTED INCOME, HAS TO BE EXCLUDED FOR COMPUTATION . ACCORDING TO THE LD. COUNSEL, ONLY THOSE INVESTMENTS WHICH EARNED EX EMPTED INCOME DURING THE YEAR UNDER CONSIDERATION, HAS TO BE CONS IDERED FOR DISALLOWANCE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE MAIN CLAIM OF THE ASSESSEE IS THAT WHEN SUFFICIENT OWN FUNDS WERE AVA ILABLE FOR MAKING INVESTMENT IN THE SHARES, THEN THERE CANNOT BE ANY DISALLOWANCE TOWARDS EXPENDITURE. HOWEVER, THE DETAILS OF THE DATE OF I NVESTMENTS IN THE SHARES AND AVAILABILITY OF FUNDS ON THE DATE OF INV ESTMENTS ARE NOT AVAILABLE ON RECORD. THEREFORE, AS SUBMITTED BY TH E LD.COUNSEL FOR THE ASSESSEE, THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE ENTIRE ISSUE OF DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFIC ER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND BRING ON RE CORD THE ACTUAL DATES OF INVESTMENTS MADE IN THE SHARES, AVAILABILITY OF THE ASSESSEES OWN FUNDS ON THE DATE OF INVESTMENTS AND THE INVESTMENT WHICH EARNED THE EXEMPTED INCOME AND THEREAFTER DECIDE THE ISSUE AFR ESH IN ACCORDANCE 4 I.T.A. NO.2888/CHNY/17 C.O. NO.27/CHNY/18 WITH LAW, IN THE LIGHT OF THE JUDGMENT OF APEX COUR T IN MAXOPP INVESTMENT LTD. (SUPRA) AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. THE CROSS-OBJECTION IS FOR APPLICABILITY OF SECT ION 14A OF THE ACT AND THE EXPENDITURE FOR EARNING EXEMPTED INCOME. T HE ISSUE RAISED IN THE CROSS-OBJECTION IS ALSO REMANDED BACK TO THE AS SESSING OFFICER FOR RECONSIDERATION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS-OBJECTION OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED IN THE COURT ON 2 ND JANUARY, 2020 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 2 ND JANUARY, 2020. KRI. + -056 76'0 /COPY TO: 1. )*/ APPELLANT 2. -.)*/ RESPONDENT 3. / 80 () /CIT(A)-3, CHENNAI-34 4. PRINCIPAL CIT- 5, CHENNAI 5. 69 -0 /DR 6. :& ; /GF.