M/s. Shripathee Investments Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2897/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8095 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS JT
• Assessee Lawyers: Y SRID HAR
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 115JB

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI , ! ' # $' # % . &' , ( ! )* BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 2897/MDS/2016 / ASSESSMENT YEAR :2010-11 SHRIPATHEE INVESTMENTS PVT. LTD. C/O RAMESH AND RAMACHANDRAN, CHARTED ACCOUNTANTS NEW NO.39, OLD NO.29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN: AAGCS 0993M] VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-VI(2), CHENNAI. ( +, /APPELLANT ) ( -.+, / RESPONDENT ) / APPELLANT BY : SHRI Y.SRIDHAR, CA / RESPONDENT BY : SHRI SHIVA SRINIVAS, JT. CIT / DATE OF HEARING : 03.01.2017 /DATE OF PRONOUNCEMENT : 25.01.2017 / / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-15 DATED 06.07 .2016 (CIT(A) FOR SHORT) PASSED UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 [ACT IN SHORT], FOR THE ASSESSMENT YEAR (AY) 2010-11 VIDE O RDER DATED 01.02.2013. 2. THE ASSESSEE RAISED THE GROUND THAT CIT ERRED IN CONFIRMING THE DISALLOWANCE U/S. 14A R/W. S. RULE 8D WHILE COMPUTI NG THE INCOME OF THE ASSESSEE BOOK PROFITS CALCULATED U/S. 115JB OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .2897 2897 2897 2897/M /M/M /MDS DSDS DS/ // /201 201201 2016 66 6 2 3. THE FACTS OF THE ISSUE, THE A ASSESSEE RECEIVED DIVIDEND OF RS.69,60,487/-. THE AO DISALLOWED RS.4,39,233/- U/S 14A R.W .RULE 8D AND ADDED IT TO BOOK PROFIT FOR COMPUTING TAXABLE B OOK PROFIT AS PER THE PROVISION OF SEC.115JB. THE ASSESSEE HAS SUBMITTED THAT SECTION 115JB IS A NON-OBSTANTE CLAUSE AND HAS OVERRIDING E FFECT OVER CONTRARY PROVISIONS EITHER IN THE SAME ENACTMENT OR SOME OTH ER ENACTMENT. THE ONLY ADJUSTMENTS THAT ARE PERMITTED ARE THOSE PRESC RIBED IN THE PROVISIONS OF SECTION 115JB. HOWEVER, THE LD. ASSE SSING OFFICER IN THE PRESENT CASE HAS TRAVERSED BEYOND HER POWERS BY INV OKING DISALLOWANCE U/S. 14A. IN THIS REGARD, THE ASSESSE E WISHES TO RELY ON THE DECISION OF THE APEX COURT IN THE CASE OF APOLL O TYRES LTD VS CIT 1 20021 255 ITR 273 IT WAS HELD THAT THE FINAL, ACCO UNTS CERTIFIED BY THE STATUTORY AUDITOR, AND THE DIRECTORS OF THE COMPANY WAS ADOPTED BY THE SHAREHOLDERS IN GENERAL BODY MEETING AND THE APPELL ANT SUBMITTED THESE AUDITED ACCOUNT TO THE REGISTRAR OF COMPANIES'. HEN CE, BY THE DECISION OF THE SUPREME COURT IN THIS CASE, THE LD. ASSESSIN G OFFICER COULD MAKE ADJUSTMENTS TO THE BOOK PROFIT SHOWN IN THE AUDITED ACCOUNTS, AS PROVIDED IN EXPLANATION TO SECTION II5JB(2). TO FUR THER SUBSTANTIATE THE SAME, THE LD AR RELIED ON THE FOLLOWING CASE LAWS: CIT VS ADBHUT TRADING CO PRIVATE LIMITED [2011] 33 8 ITR 94 (BOMBAY) CIT VS VIJAYASHREE FINANCE AND INVESTMENTS CO PRIV ATE LIMITED [2008] 2 DTR 038 (MADRAS) FOREVER DIAMONDS (P) LTD VS DCIT [2013] 252 DJ 62 (MUMBAI) I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .2897 2897 2897 2897/M /M/M /MDS DSDS DS/ // /201 201201 2016 66 6 3 DCIT VS INDIAN SYNTANS INVESTMENT (P) LTD [2007] 1 07 ITD 457 (ITAT CHENNAI) WITHOUT PREJUDICE TO THE ABOVE, HE SUBMITTED THAT T HE LD. ASSESSING OFFICER ERRED IN DISALLOWING THE TOTAL EXPENDITURE DEBITED IN PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.4,39,233/- INSTEAD OF CONSIDERING ONLY EXPENDITURE DIRECTLY RELATED TO EARNING EXEMPT INCO ME, I.E., STT AND DEMAT CHARGES AMOUNTING TO RS.60,038/- AND RS. 7 ,2 90/- RESPECTIVELY. THE LD. AO FAILED TO NOTE THAT AUDIT FEES ARE STATU TORY EXPENSES WHICH THE APPELLANT WOULD HAVE INCURRED WHETHER OR NOT HE HAS EXEMPT INCOME. THEREFORE, IF DISALLOWANCE IS TO BE MADE TH EN THE SAME MAY BE RESTRICTED TO RS.67,328/-. 4. THE LD. CIT(A) NOT AGREEING WITH THE CONTENTION OF THE ASSESSEE OBSERVED THAT THE PROVISION OF S. 14A R/W RULE 8D A PPLICABLE WITH RESPECT OF DIVIDEND INCOME BY THE ASSESSEE AND THAT THE INCOM E OF THE ASSESSEE COMPUTED U/S. 115JB OF THE ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATER IAL ON RECORD. THE IDENTICAL ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ITA NO.512 & 513/MAD/2015 FOR THE AY 2010-11 AND 2011-12 IN THE CASE OF SHRIRAM CAPITAL LIMITED V. DCIT VIDE ORDER DATED 26.06.2015, THE TRIBUNAL OBSERVED HEREIN OF THIS ISSUE: WE HAVE HEARD BOTH THE PARTIES. THIS ISSUE OF DISA LLOWANCE MADE BY THE ASSESSING OFFICER FOR THESE TWO ASSESSMENT YEARS BY INVOKING PROVISION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .2897 2897 2897 2897/M /M/M /MDS DSDS DS/ // /201 201201 2016 66 6 4 U/S.L4A R.W. RULE 8D, WAS ALREADY ADJUDICATED BY US IN OUR EARLIER PARA OF THIS ORDER. IN OUR OPINION, DISALLOWANCE MADE U/S.14A R. W. RULE 8D CANNOT BE ADDED WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT THAT THE DISALLOWANCE IS ONLY DISALLOWANCE FOR THE PURPOSE OF COMPUTING T AXABLE INCOME OF THE ASSESSEE IN THE NORMAL COURSE. THERE IS NO PROVISIO N IN THE AC TO ADD THESE KIND OF DISALLOWANCE WHILE COMPUTING BOOK PROFIT U/ S.115JB AND IT CANNOT CHANGE THE BOOK PROFIT ON THIS COUNT. THEREFORE EVE N IF THERE IS AN ADDITION IN VIEW OF PROVISION U/S.14A R.W.RULE 8D, THAT CANNOT BE ADDED BACK TO COMPUTE THE BOOK PROFIT U/S.115JB. THIS GROUND IS ALLOWED. 6. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE A RE INCLINED TO HOLD THAT THERE CANNOT BE APPLICATION OF PROVISION OF S. 14A R/W RULE 8D WHILE COMPUTING THE TAX OF THE ASSESSEE ON THE BASIS OF B OOK PROFIT IN TERMS OF S. 115JB OF THE ACT. 7. ACCORDINGLY WE INCLINED TO ALLOW THE GROUND TAKE N BY THE ASSESSEE ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 25 TH JANUARY, 2017 AT CHENNAI. SD/ - SD/ - (DUVVURU RL REDDY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 25.01.2017 EDN. !' #$ %$ /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. & ( ) /CIT(A), 4. & /CIT, 5. $'( ) /DR & 6. (* + /GF.