ACIT CORPORATE CIRCLE 2, MADURAI V. SUNDARAM INDUSTRIES PRIVATE LIMITED, MADURAI

ITA 2996/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2548 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LAKSHMI
• Keywords: Wholly owned subsidiary
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI , . , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2996/CHNY/2018 /ASSESSMENT YEAR: 2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MADURAI. VS M/S. SUNDARAM INDUSTRIES PVT.LTD., POST BOX NO.123, 211,SOUTHVELI STREET, MADURAI-625 001. PAN:AABCS5320H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SRIDHAR DORA, JCIT /RESPONDENT BY : MS. LAKSHMI, CA /DATE OF HEARING : 07.03.2019 /DATE OF PRONOUNCEMENT : 07.03.2019 / O R D E R PER S.JAYARAMAN, AM: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IN ITA NO.0052/ 2016-17 DATED 02.08.2018 FOR THE ASSESSMENT YEAR 2013-14. 2. M/S. SUNDARAM INDUSTRIES PVT. LTD, THE ASS ESSEE, IS ENGAGED MANUFACTURE OF AUTOMOBILE RUBBER PRODUCTS AND RETR EADING AND DISTRIBUTION OF TYRES. WHILE MAKING THE ASSESSMEN T FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER, INTER-ALIA, MA DE DISALLOWANCE U/S.14A READ WITH RULE 8D. AGGRIEVED, THE ASSESSEE FILED AN APPEAL 2 ITANO.2996/CHNY/2018 BEFORE THE CIT(A) AND THE LD CIT(A) ALLOWED THE AP PEAL. AGAINST THE ORDER OF THE CIT(A), THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2.1 THE COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING THE DISALLOWANCE MADE U/S.14A OF RS. 1,54,93,280/- ON T HE GROUND THAT THE ASSESSEE HAD OWN SUFFICIENT FUND AND HENCE NO B ORROWED FUNDS WERE USED FOR INVESTMENT. 2.2 THE COMMISSIONER OF INCOME TAX (A) OUGHT TO HAV E SEEN THAT IN THE ASSESSMENT ORDER THE AO HAS ELABORATELY EXPLAIN ED THE REASONS FOR DISALLOWANCE U/S. 14A AND WORKED OUT TH E SAME AS PER THE RULE 8 D OF THE IT RULES AND HENCE OUGHT TO HAV E SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE VIEW OF THE DECISION OF SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD VS CIT, NEW DELHI (402 ITR 640(SC)). 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADD UCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED . 3. THE LD. DR PRESENTED THE CASE ON THE LINES IN WHICH THE ASSESSMENT WAS MADE AND ON THE LINES OF GROUNDS O F APPEAL, SUPRA. PER CONTRA, THE LD. AR SUBMITTED THAT THE LD CIT(A) FOR THE ELABORATE REASONS GIVEN HIS ORDER HAS ALLOWED THE APPEAL. TH E REVENUE HAS NOT CONTESTED THE FINDINGS RECORDED BY THE LD CIT(A) W ITH ANY RELEVANT MATERIAL AND HENCE THE ORDER OF THE LD CIT(A) B E UPHELD. 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE RELEVANT PORTION OF FINDINGS OF THE L D. CIT(A) IS EXTRACTED AS UNDER:- 3 ITANO.2996/CHNY/2018 6. THE ASSESSING OFFICER HAS MADE THE ADDITION ON T HE GROUND THAT THE APPELLANT HAD NOT CLARIFIED THROUGH WHICH BANK ACCO UNT THE INVESTMENT WAS ROUTED. IN THE ABSENCE OF THE DETAILS WITH RESP ECT TO THE BANK ACCOUNT HE HAS INFERRED THAT SOME INTEREST EXPENSES WOULD HAVE BEEN INCURRED TO MAKE THE SAID INVESTMENT AND HAS THEREB Y MADE THE ADDITION AFTER DISALLOWING THE SAME U/S 14A. 7. IT IS CLEARLY SEEN THAT DURING THE YEAR UNDER RE VIEW, THE APPELLANT RECEIVED A SUM OF RS.34.24 CRORES ON 26.06.2012 BEI NG PROCEEDS FROM SALE OF SHARES OF BRIDGESTONE TVS INDIA PRIVATE LIM ITED. THIS WAS INVESTED IN UN-FIXED DEPOSIT ON THE SAME DATE WITH STATE BANK OF INDIA. A SUM OF RS.32.30 CRORES WAS WITHDRAWN ON 18.07.2012 AND A SUM OF RS.32.60 CRORES WAS INVESTED IN MONEY FUND ON THE S AME DAY. BESIDES, THE COMPANY HAS INVESTED DURING THE YEAR A SUM OF R S.17.94 LAKHS ON 11.03.2013 IN PUSAM RUBBER COMPANY PRODUCTS LIMITED (A WHOLLY OWNED SUBSIDIARY COMPANY) WHICH IS ALSO OUT OF SALE PROCEEDS OF THESE SHARES, FOR WHICH INVESTMENT NO INTEREST SHOULD BE ATTRIBUTED HOLDING THE INVESTMENTS TO BE FROM OUT OF BORROWED FUNDS. 7.1. A SUM OF RS.50.69 LAKHS HAS BEEN INVESTED DURI NG THE YEAR IN TVS NOVOTEMA ELASTOMERIC ENGINEERED PRODUCTS PVT. LTD. THESE SHARES WERE ALLOTTED AGAINST THE AMOUNT OF RS.88.79 IAKHS DUE B Y THEM TO THE COMPANY AS ON 31.03.2012. NO CASH OUTGO WAS INVOLVE D IN THIS INVESTMENT. THE APPELLANT HAS PRODUCED THE COPIES O F LEDGER ACCOUNTS FOR INVESTMENT IN SHARES, SUNDARAM MONEY FUND AND F OR THE UNFIXED DEPOSIT IN STATE BANK OF INDIA. ALL THESE DOCUMENTS HAVE BEEN PLACED ON RECORD. 8. IN LIGHT OF THE ABOVE, IT IS SEEN THAT THE APPEL LANT HAD SUFFICIENT FUNDS THE SOURCE OF WHICH HAS BEEN CLEARLY EXPLAINED BY T HEM AND THAT NO BORROWED FUNDS WERE USED FOR INVESTMENT IN MONEY FU ND AND IN SHARES. THEREFORE, THE ASSESSING OFFICER HAS ERRED IN LEVYI NG INTEREST U/S 14A AND THE SAME IS DELETED. HENCE, ALL THE GROUNDS OF THE APPELLANT ARE ALLOWED 5. FROM THE ABOVE, IT IS CLEAR THAT THE LD. CIT(A) HAS ON DETAILED EXAMINATION OF THE ACCOUNTS FOUND THAT THE ASSESSE E HAD SUFFICIENT FUNDS, SOURCE OF WHICH HAS BEEN CLEARLY EXPLAINED B Y THEM AND THAT NO BORROWED FUNDS WERE USED FOR INVESTMENT IN MONEY FUND AND IN SHARES. THEREFORE, THE ASSESSING OFFICER HAS ERRED IN LEVYI NG INTEREST U/S.14A. THOUGH THE REVENUE FILED THIS APPEAL, IT HAS NOT PL ACED ANY MATERIAL TO 4 ITANO.2996/CHNY/2018 DISPEL THE FINDINGS RECORDED BY THE LD. CIT(A). IN VIEW OF THAT WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. C IT(A) AND HENCE UPHOLD THE SAME. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2019 AT CHENNAI SD/- SD/- ( ) ( . ) (GEORGE MATHAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, # /DATED 07 TH MARCH, 2019 SOMU '( )( /COPY TO: 1. APPELLANT 2. RESPONDENT 3. * () /CIT(A) 4. * /CIT 5. ( . /DR 6. 1 /GF