ACIT Corporate Circle 6(2), CHENNAI V. Southern Petrochemical Industries Corporation Limited, CHENNAI

ITA 303/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1571 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ./ I.T.A.NO.303/CHNY/2019 ( [ [ / ASSESSMENT YEAR: 2013-14) THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI 34. VS M/S. SOUTHERN PETROCHEMICAL INDUSTRIES, CORPORATION LIMITED, SPIC HOUSE, 88, MOUNT ROAD, GUINDY, CHENNAI 600 032. PAN: AAACS4668K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI CLEMENT RAMESH KUMAR, ADDL. CIT / RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE /DATE OF HEARING : 06.06.2019 /DATE OF PRONOUNCEMENT : 07.06.2019 / O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE ARISE OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-16, CHENNAI VIDE PROCEEDINGS IN ITA NO.120/CIT(A)-16/2016-17 DATED 02.11.2018 FOR THE ASSESSMENT YEAR 2013-14 AGAINST THE ORDER OF ASSESSMENT PASSED BY THE LD.DCIT, CORPORATE CIRCLE 6(2), CHENNAI (HEREIN AFTER REFERRED TO AS LD. AO) U/S. 143(3) OF THE INCOME TAX ACT,1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2 ITA NO.303/CHNY/2019 2. THE ONLY GROUND RAISED BY THE REVENUE IS WITH REGARD TO CHALLENGING THE ACTION OF THE LD.CIT(A) IN RESTRICTING THE DISALLOWANCE MADE U/S.14A OF THE ACT, TO THE EXTENT OF EXEMPT INCOME. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.82,57,000/- AND CLAIMED THE SAME AS EXEMPT. THE ASSESSEE DISALLOWED VOLUNTARILY A SUM OF RS.12,89,650/- AS EXPENDITURE TO EARN EXEMPT INCOME. THE LD.AO HOWEVER PROCEEDED TO MAKE DISALLOWANCE UNDER RULE 8D OF THE RULES TO THE TUNE OF RS.6,16,09,793/- AFTER REDUCING THE AMOUNT ALREADY DISALLOWED BY THE ASSESSEE IN THE RETURN. THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME OF THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT REPORTED IN (2015) 372 ITR 0694 (DEL). AGGRIEVED, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE REFERRED TO SUPRA HAS HELD AS UNDER:- 9. IN THE PRESENT CASE, THE AO HAS NOT FIRSTLY DISCLOSED WHY THE APPELLANT/ASSESSEE'S CLAIM FOR ATTRIBUTING RS.2,97,440/- AS A DISALLOWANCE UNDER SECTION 14A HAD TO BE REJECTED. TAIKISHA SAYS THAT THE JURISDICTION TO PROCEED FURTHER AND DETERMINE AMOUNTS IS DERIVED AFTER EXAMINATION OF THE ACCOUNTS AND REJECTION IF ANY OF THE ASSESSEE'S CLAIM OR EXPLANATION. THE SECOND ASPECT IS THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOUNTS BY 3 ITA NO.303/CHNY/2019 THE AO - AN ASPECT WHICH IS COMPLETELY UNNOTICED BY THE CIT (A) AND THE ITAT. THE THIRD, AND IN THE OPINION OF THIS COURT, IMPORTANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREAS THE ENTIRE TAX EXEMPT INCOME IS RS.48,90,000/-, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110% OF THAT SUM, I.E., RS.52,56,197/-. BY NO STRETCH OF IMAGINATION CAN SECTION 14A OR RULE 80 BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE 'INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE. WE ALSO FIND THAT THIS PRINCIPLE HAS ALSO BEEN UPHOLD BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENTS LTD. VS. CIT REPORTED IN 402 ITR 640. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) RESTRICTING THE DISALLOWANCE U/S.14A OF THE ACT TO THE EXTENT OF EXEMPT INCOME. ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 7 TH JUNE, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 7 TH JUNE, 2019 ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (M. BALAGANESH) / ACCOUNTANT MEMBER 4 ITA NO.303/CHNY/2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. [ /GF