Toshnitek International, CHENNAI V. DCIT, CHENNAI

ITA 302/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6865 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J PRABHAKAR
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.302/CHNY/2017 ' (' / ASSESSMENT YEAR : 2012-13 ./ ITA NO.1173/CHNY/2018 ' (' / ASSESSMENT YEAR : 2013-14 M/S TOSHNI TEK INTERNATIONAL, 267, KILPAUK GARDEN ROAD, KILPAUK, CHENNAI - 600 010. PAN : AAAFT 2541 D V. THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 10(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI J. PRABHAKAR, FCA ,-*+ . / / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 0 . 1$ / DATE OF HEARING : 26.12.2018 2!( . 1$ / DATE OF PRONOUNCEMENT : 02.01.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-12, CHENNAI, FOR THE ASSESSMENT YEARS 2012-13 AND 2013- 14. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, WE HEARD 2 I.T.A. NO.302/CHNY/17 I.T.A. N O. 1173/CHNY/18 BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI J. PRABHAKAR, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDING TO THE LD. RE PRESENTATIVE, THE ASSESSEE-PARTNERSHIP FIRM INVESTED IN THE MUTUAL FU NDS AND EARNED EXEMPTED INCOME. ACCORDING TO THE LD. REPRESENTATI VE, THE ASSESSEE INVESTED ITS OWN FUNDS IN THE MUTUAL FUNDS AND NO B ORROWED FUNDS WERE USED FOR INVESTMENT IN THE MUTUAL FUNDS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HAS FOUND THA T THE ASSESSEE HAS PAID INTEREST ON THE CAPITAL ACCOUNT OF THE PARTNER S. IF THESE FUNDS WERE UTILISED FOR THE PURPOSE OF BUSINESS, THE INTEREST PAID TO THE PARTNERS COULD HAVE BEEN AVOIDED. ACCORDING TO THE LD. REPRESENTA TIVE, INTEREST PAID TO THE PARTNERS IS NOT AN EXPENDITURE. ACCORDING TO T HE LD. REPRESENTATIVE, NO MONEY WAS BORROWED FOR MAKING ANY INVESTMENT. P LACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN DCIT V. RAJAPALAYAM M ILLS LTD. IN I.T.A. NO.3165/MDS/2016 DATED 25.01.2018, THE LD. REPRESEN TATIVE SUBMITTED THAT WHEN THE ASSESSEE INVESTED ITS OWN FUNDS, THIS TRIBUNAL FOUND THAT THERE CANNOT BE ANY DISALLOWANCE EVEN THOUGH THE IN VESTMENT RESULTED IN EARNING OF EXEMPTED INCOME. TO ESTABLISH THE AVAIL ABILITY OF FUNDS, 3 I.T.A. NO.302/CHNY/17 I.T.A. N O. 1173/CHNY/18 ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE H AS ALSO FILED COPIES OF BALANCE SHEET AND OTHER MATERIALS. 3. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS INV ESTED IN MUTUAL FUNDS APART FROM DEBT FUND AND EQUITY FUND. ACCORD ING TO THE LD. D.R., THE ASSESSEE HAS RECEIVED DIVIDEND BOTH FROM DEBT F UND AND EQUITY FUND AND ALSO EARNED EXEMPTED INCOME FROM MUTUAL FUNDS. FOR THE ASSESSMENT YEAR 2012-13, ACCORDING TO THE LD. D.R., THE ASSESSEE INVESTED TO THE EXTENT OF 1,90,92,755/- AS ON 31.03.2012. THE ASSESSEE RECEIVED DIVIDEND INCOME OF 12,94,654/-. TILL 31.03.2011, THE INVESTMENT WAS 1,79,64,789/-. AS ON 31.03.2012, THE INVESTMENT WA S 1,90,92,755/-. THE ASSESSEE HAS ALSO PAID INTEREST TO THE EXTENT OF 27,22,308/- TO THE PARTNERS BASED ON THE BALANCES A VAILABLE IN THE CURRENT ACCOUNT OF THE PARTNERS. ACCORDING TO THE LD. D.R., IF THE AVAILABLE FUNDS WERE UTILISED FOR MAKING INVESTMENT FOR EARNING DIVIDEND INCOME FOR THE PURPOSE OF BUSINESS, THEN THE INTERE ST PAID TO THE PARTNERS COULD HAVE BEEN AVOIDED. THEREFORE, ACCORDING TO T HE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE 4 I.T.A. NO.302/CHNY/17 I.T.A. N O. 1173/CHNY/18 ADMITTEDLY IS A PARTNERSHIP FIRM. THE ASSESSEE NOW CLAIMS BEFORE THIS TRIBUNAL THAT THE INVESTMENT IN THE MUTUAL FUNDS AN D OTHER INVESTMENTS, WHICH YIELDED EXEMPTED INCOME, WERE MADE FROM THEIR OWN FUNDS. DISALLOWANCE UNDER SECTION 14A OF THE ACT NEEDS TO BE MADE PROVIDED THE ASSESSEE INCURRED EXPENDITURE. IN THIS CASE, T HE ASSESSEE CLAIMS THAT THERE WAS NO SUCH EXPENDITURE INCURRED. THE A SSESSEE ALSO PAID INTEREST TO THE PARTNERS ON THE OUTSTANDING BALANCE IN THE CURRENT ACCOUNT. SINCE THE ASSESSEE CLAIMS THAT THE INVESTMENTS WERE MADE FROM THEIR OWN FUNDS, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER AN D FIND OUT WHETHER THE ASSESSEE HAS INVESTED FROM ITS OWN FUNDS OR THE BORROWED FUNDS. 5. IT ALSO NEEDS TO BE EXAMINED WHETHER THE ASSESSE E HAS INCURRED ANY INDIRECT EXPENDITURE OF PAYMENT OF INTEREST BY BORROWING FUNDS FOR THE PURPOSE OF BUSINESS. IN THOSE FACTUAL CIRCUMSTANCE S, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER IN TH E LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND BRING ON RECO RD WHETHER THE ASSESSEE BORROWED ANY FUNDS FOR THE PURPOSE OF BUSI NESS DURING THE YEARS AND CONSIDERATION AND WHETHER THE ASSESSEE HA D SUFFICIENT FUNDS 5 I.T.A. NO.302/CHNY/17 I.T.A. N O. 1173/CHNY/18 FOR MAKING INVESTMENT IN THE MUTUAL FUNDS AND OTHER INVESTMENTS FOR EARNING EXEMPTED INCOME DURING THE YEARS UNDER CONS IDERATION AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WI TH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 2 ND JANUARY, 2019 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R .S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 2 ND JANUARY, 2019. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-12, CHENNAI 4. PRINCIPAL CIT-3, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.