DCIT, CHENNAI V. M/s. Empee Holdings Ltd., CHENNAI

ITA 3123/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5651 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: S NATARAJA IRS
• Keywords: Business income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NO. 3123/MDS/2016 ! ' / ASSESSMENT YEAR : 2012-2013. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1) CHENNAI 600 034. VS. M/S. EMPEE HOLDINGS LTD, NO.59, EMPEE TOWERS, HAMS ROAD, PUDUPET, CHENNAI 600 002. [PAN AABCE 5490N] ( / APPELLANT) ( /RESPONDENT) # $ % / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE &'# $ % /RESPONDENT BY : SHRI. S. NATARAJA, IRS, JCIT. ( ) $ *+ /DATE OF HEARING : 21.12.2017 ,-'! $ *+ /DATE OF PRONOUNCEMENT : 21.12.2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE REVENUE, IT IS AGGRI EVED ON THE DIRECTIONS GIVEN BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, ITA NO. 3123/MDS/2016. :- 2 -: CHENNAI TO THE ASSESSING OFFICER FOR EXCLUDING IN VESTMENTS MADE BY THE ASSESSEE IN ITS SUBSIDIARY COMPANIES WHILE CALC ULATING DISALLOWANCE U/S.14A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSI NESS OF PROVIDING MANAGEMENT AND TECHNICAL CONSULTATIONS HA D FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSI NG INCOME OF RS.85,52,410/-. LD. ASSESSING OFFICER NOTED THAT A SSESSEE WAS HAVING INVESTMENTS OF RS.24,30,00,000/- IN ITS GROUP COMPA NIES. AS PER THE LD. ASSESSING OFFICER, ASSESSEE HAVING RECEIVED DIV IDEND OF RS.3,15,00,000/-, SECTION 14A OF THE ACT HAD TO BE APPLIED. THOUGH THE ASSESSEE STATED THAT NONE OF ITS INTEREST PAYIN G LOANS WERE USED FOR MAKING INVESTMENTS, THIS WAS NOT ACCEPTED BY TH E LD. ASSESSING OFFICER. ACCORDING TO HIM, THERE WAS INCREASE IN UNSECURED LOANS BY A SUM OF RS.1,32,00,000/-, CLEARLY INDICATING THAT IN TEREST PAYING FUNDS WERE USED FOR MAKING INVESTMENTS. AN ADDITION OF RS .32,63,884/- WAS MADE APPLYING RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). SUCH ADDITION COMPRISED OF RS.21,20,959/- UNDER RULE 8D(2)(I) AND RS.11,42,925/- UNDER RULE 8D(2)(III). THERE WAS NO ADDITION UNDER RULE 8D(2) (II). ITA NO. 3123/MDS/2016. :- 3 -: 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT RS.21,20,959/-, OUT OF THE TOTAL ADDITION OF RS.32,63,884/- WAS INTEREST EXPENDITURE ON LOANS DIRECTLY USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. CONTENTION OF THE ASSESS EE WAS THAT INVESTMENTS MADE BY THE ASSESSEE IN ITS SUBSIDIARY AND GROUP COMPANIES WERE STRATEGIC IN NATURE AND HENCE SUCH I NVESTMENTS FELL OUTSIDE THE SCOPE OF SEC. 14A OF THE ACT. RELIANC E WAS PLACED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF EIH ASSOCIATED HOTELS VS. DCIT (ITA NO.1505/MDS/2012, DATED 17.07.2013) . 4. LD. CIT(A) AFTER HEARING THE SUBMISSIONS OF THE AS SESSEE WAS OF THE OPINION THAT INTEREST EXPENDITURE DIRECT LY RELATABLE TO THE TAXABLE BUSINESS INCOME OF THE ASSESSEE HAD TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE UNDER RULE 8D. FURTHER, ACCO RDING TO HIM, INVESTMENTS MADE BY THE ASSESSEE IN ITS GROUP/SUBSI DIARY COMPANIES ALSO NEEDED TO BE EXCLUDED SINCE SUCH INVESTMENTS W ERE FOR STRATEGIC PURPOSES. 5. NOW BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT ASSESSEE COULD NOT BRING IN ANY EVID ENCE TO SHOW THAT ITA NO. 3123/MDS/2016. :- 4 -: INTEREST PAYMENTS MADE WERE ON LOANS, USED FOR THE BUSINESS OF THE ASSESSEE. FURTHER, ACCORDING TO HIM, THERE WAS NOT HING ON RECORD TO SHOW THAT INVESTMENTS MADE BY THE ASSESSEE IN ITS G ROUP/ SUBSIDIARY COMPANIES WERE FOR ANY STRATEGIC PURPOSE. THUS, AC CORDING TO HIM, LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RELYI NG ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE EIH ASSOCIATED HOTELS (SUPRA). 6. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED BY THE REVENUE THAT INVESTMENTS MADE BY THE ASSESSEE WHICH GAVE RISE TO TAX FREE DIVIDEND WERE IN ITS GROUP COMPANIES. ASSESSEES ARGUMENT T HAT SUCH INVESTMENTS WERE FOR STRATEGIC PURPOSE FOUND ACCEPT ANCE FROM THE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. DEPARTME NTAL REPRESENTATIVE WAS UNABLE TO SHOW WHY SUCH FINDIN G OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS INCORRECT. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD ALSO ACC EPTED THE CLAIM OF THE ASSESSEE THAT INTEREST BEARING BORROWINGS WERE USED FOR THE PURPOSE OF ITS BUSINESS AND NOT USED FOR MAKING INVESTMENTS IN THE SUBSIDIARIES. HERE ALSO REVENUE HAS BEEN UNABLE TO PLACE ON RECORD ANYTHING TO CONTRADICT THIS FACTUAL FINDING OF THE LD.CIT(A). WE ALSO ITA NO. 3123/MDS/2016. :- 5 -: FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD RELIED ON A DECISION OF CO-ORDINATE BENCH IN THE CASE OF EIH ASSOCIATED HOTELS (SUPRA ), THAT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF J.M. FINANCIAL LIMITED VS. ADD. CIT (ITA NO.4521/MUM/201 2, DATED 26.03.2014 ) AND ON A JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD (ITA 605/2012, DATED 15.01.2013 ). IN THE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISS ED. ORDER PRONOUNCED AT THE TIME OF HEARING ON 21 ST DECEMBER, 2017 AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ! ' ) (ABRAHAM P. GEORGE) $ %& / ACCOUNTANT MEMBER .) / CHENNAI / / DATED: 21 ST DECEMBER, 2017. KV 0 $ &*12 32'* / COPY TO: 1 . # / APPELLANT 3. ( 4* () / CIT(A) 5. 278 &*9 / DR 2. &'# / RESPONDENT 4. ( 4* / CIT 6. 8: ;) / GF