DCIT Corporate Circle 1(2), CHENNAI V. Bharath Wind Farm Ltd., CHENNAI

ITA 3026/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5120 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N GOPI KRISHNA
• Assessee Lawyers: R SIVARAMAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !' .$%$&, ( ') BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.3155/CHNY/2016 & +& / ASSESSMENT YEAR : 2011-12 & ./ ITA NO.3026/CHNY/2017 & +& / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX / THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI - 600 034. V. M/S BHARATH WIND FARM LTD., 4 TH FLOOR, SIGAPI ACHI BUILDING, 18/3, RUKMANI LAKSHMIPATHY ROAD, EGMORE, CHENNAI - 600 008. PAN : AADCB 1556 E (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI N. GOPIKRISHNA, JCIT /0-. 1 2 / RESPONDENT BY : SHRI R. SIVARAMAN, ADVOCATE 3 1 4( / DATE OF HEARING : 21.06.2018 56+ 1 4( / DATE OF PRONOUNCEMENT : 26.06.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNAI, FOR THE ASSESSMENT YEARS 2011-12 AND 2012- 13. SINCE 2 I.T.A. NO.3155/CHNY/16 I.T.A. NO.3026/CHNY/17 COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF TH E SAME BY THIS COMMON ORDER. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE I NCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') READ WITH RULE 8D OF INCO ME-TAX RULES, 1962. 3. SHRI N. GOPIKRISHNA, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE CIT(APPEALS) DELETED THE DISALLO WANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NO EXEMPTED INCOME EARNED BY THE ASSESSEE. ACCORDING TO THE LD . D.R., THE ASSESSEE ADMITTEDLY INVESTED HEAVY AMOUNT IN EARNIN G THE EXEMPTED INCOME. FOR MANAGING INVESTMENTS, THE ASS ESSEE HAS TO NECESSARILY INCUR EXPENDITURE. WITHOUT INCURRING E XPENDITURE, ACCORDING TO THE LD. D.R., THE ASSESSEE CANNOT MANA GE THE INVESTMENTS. THEREFORE, MERELY BECAUSE THERE WAS N O DIVIDEND INCOME, THE CIT(APPEALS) CANNOT DELETE THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER TOWARDS EXPENDITURE. ACCORDI NG TO THE LD. D.R., SECTION 14A OF THE ACT OR RULE 8D DOES NOT SA Y THAT THERE 3 I.T.A. NO.3155/CHNY/16 I.T.A. NO.3026/CHNY/17 CANNOT BE ANY EXPENDITURE WHEN THERE WAS NO EXEMPTE D INCOME EARNED BY THE ASSESSEE. 4. WE HEARD SHRI R. SIVARAMAN, THE LD.COUNSEL FOR T HE ASSESSEE ALSO. THE MADRAS HIGH COURT IN THE CASE O F REDINGTON (INDIA) LTD. V. ADDL. CIT (2017) 77 TAXMANN.COM 257 FOUND THAT THERE CANNOT BE ANY ADDITION TOWARDS EXPENDITURE UN LESS THERE WAS EXEMPTED INCOME EARNED BY THE ASSESSEE. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH COURT, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 36(1)(III) O F THE ACT. 6. SHRI N. GOPIKRISHNA, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSEE HAS DEBITED 9,16,50,523/- FOR THE ASSESSMENT YEAR 2011-12 TOWARDS INTEREST PAYMENT. SIMILARLY, A DEBIT WAS ALSO FOUND FOR THE ASSESSMENT YEAR 2012-1 3. ACCORDING TO THE LD. D.R., THE ASSESSEE DIVERTED THE BORROWED FUNDS TO SISTER CONCERNS AND TO VARIOUS PARTIES WITHOUT INTEREST OR FOR A NOMINAL INTEREST. THEREFORE, ACCORDING TO THE LD. D.R., TH E ASSESSING OFFICER 4 I.T.A. NO.3155/CHNY/16 I.T.A. NO.3026/CHNY/17 HAS DISALLOWED THE CLAIM OF THE ASSESSEE. THE CIT( APPEALS) FOUND THAT CERTAIN PAYMENTS WERE TRADE ADVANCES, THEREFOR E, IT CANNOT BE CONSTRUED AS LOAN. REFERRING TO THE ASSESSMENT ORD ER, THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS NOT PRODUCED ANY EV IDENCE BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE THE CLAIM OF TRADE ADVANCES. THEREFORE, ACCORDING TO THE LD. D.R., WHAT WAS SAID TO BE FILED BEFORE THE CIT(APPEALS) WAS NOT AVAILABLE BEFORE TH E ASSESSING OFFICER FOR CONSIDERATION. HENCE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 7. ON THE CONTRARY, SHRI R. SIVARAMAN, THE LD.COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE MADE A SPECIF IC CLAIM BEFORE THE ASSESSING OFFICER THAT THE INTEREST PAYMENTS WE RE MADE TO BANKS ON TERM LOANS. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE- COMPANY HAS NOT AVAILED ANY FRESH LOAN DURING THE F INANCIAL YEAR UNDER CONSIDERATION. THE INTEREST WAS PAID ONLY IN RESPECT OF EXISTING LOAN. THEREFORE, ACCORDING TO THE LD. COU NSEL, THERE CANNOT BE ANY DISALLOWANCE DURING THE YEARS UNDER CONSIDER ATION. MOREOVER, THE ADVANCES WERE GIVEN IN THE COURSE OF TRADE AND IT IS NOT A LOAN AT ALL. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 5 I.T.A. NO.3155/CHNY/16 I.T.A. NO.3026/CHNY/17 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THERE WAS ANY D IVERSION OF BORROWED FUNDS. THE ASSESSEE CLAIMS THAT THERE WAS NO FRESH BORROWAL DURING THE YEAR UNDER CONSIDERATION AND TH E MONEY BORROWED DURING THE EARLIER YEAR CONTINUED TO EXIST DURING THE YEARS UNDER CONSIDERATION ALSO. MOREOVER, THE ADVANCES W ERE GIVEN FOR BUSINESS PURPOSE. THEREFORE, THESE ARE ALL TRADE A DVANCES. THE FACT REMAINS THAT THE ASSESSEE HAS NOT FILED ANY MA TERIAL EVIDENCE BEFORE THE ASSESSING OFFICER TO DEMONSTRATE THAT WH AT WERE GIVEN ARE TRADE ADVANCES. IN THOSE CIRCUMSTANCES, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-E XAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER ON THE BASIS OF THE MATERIAL THAT MAY BE FIL ED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6 I.T.A. NO.3155/CHNY/16 I.T.A. NO.3026/CHNY/17 ORDER PRONOUNCED ON 26 TH JUNE, 2018 AT CHENNAI. SD/- SD/- ( !' .$%$& ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ( / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 26 TH JUNE, 2018. KRI. 1 /49: ;:+4 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. 3 <4 () /CIT(A)-1, CHENNAI 4. PRINCIPAL CIT, CHENNAI-1, CHENNAI 5. := /4 /DR 6. >& ? /GF.