DCIT, CHENNAI V. Goldquest International P Ltd, CHENNAI

ITA 3125/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7902 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 25-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-12-2014
• Court: TRIBUNAL
• Department Lawyers: R DURAI
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2852/MDS./2014 / ASSESSMENT YEAR : 2008-09 M/S.GOLDQUEST INTERNATIONAL PVT. LTD. RAIN TREE PLACE, 9 TH FLOOR, MC.NICHOLS ROAD, CHETPUT, CHENNAI VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), CHENNAI 600 034. PAN : AABCG 3717 C ( $% / APPELLANT) ( &'$% /RESPONDENT) ./ I.T.A.NO.3125/MDS./2011 / ASSESSMENT YEAR : 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), CHENNAI 600 034. VS. M/S.GOLDQUEST INTERNATIONAL PVT. LTD. RAIN TREE PLACE, 9 TH FLOOR, MC.NICHOLS ROAD, CHETPUT, CHENNAI PAN : AABCG 3717 C ( $% / APPELLANT) ( &'$% /RESPONDENT) ASSESSEE BY : SHRI G.SEETHARAMAN, C.A. REVENUE BY : SHRI R.DURAI PANDIAN,JCIT,D.R / DATE OF HEARING : 25 - 10 - 201 6 / DATE OF PRONOUNCEMENT : 16 - 12 - 2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS ARE AGAINST THE ORDER OF THE LD . CIT(A)-II, CHENNAI DATED 27.08.2014 PASSED U/S.143(3) R.W.S147 OF THE ACT FOR ASSESSMENT YEAR 2008-09. ITA NO. 2852 & 3125/MDS./2014 M/S.GOLDQUEST INTERNATIONAL P LTD. :- 2 -: FIRST, LET US TAKE UP REVENUE S APPEAL IN ITA NO .3125/MDS./2014 AS UNDER : 2. THE ONLY GROUND IN ITS APPEAL IS WITH REGARD TO DELETION OF DISALLOWANCE OF TRAVELLING CONVEYANCE, SALES PROMOT ION, BANK CHARGES AND PROFESSIONAL CHARGES AND THE LD.CIT(A) FAILED T O APPRECIATE THAT THE ASSESSEE HAD SOLD THE GOLD COINS ONLY TO ONE CL IENT WHICH IS ITS OWN SISTER CONCERN AND THAT TOO SITUATED ON THE ADJACEN T FLOOR OF THE ASSESSEE COMPANY. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE COM PANY IS BUYING GOLD COINS FROM ICICI BANKLTD.,CHENNAI AND A LSO IMPORTING FROM BH MAYER, HONGKONG. AFTER BUYING GOLD COINS, T HEY ARE PACKED IN PACING MATERIALS BOUGHT FROM M/S.QUESTNET INTERNATI ONAL LTD AND SOLD ONLY TO M/S.QUESTNET INDIA ENTERPRISES PVT LTD WHIC H IS A GROUP COMPANY OF THE ASSESSEE AND IS ALSO SITUATED IN THE SAME PREMISES OF THE ASSESSEE COMPANY. THE AO FOUND THAT THE ASSESS EE DEBITED VARIOUS EXPENSES AMOUNTING TO ` 72,62,999/- IN P & L A/C RELATING TO TRAVELLING AND CONVEYANCE( ` 6,53,577), SALES PROMOTION EXPENSES( ` 14,35,315), CLEARING AND HANDLING CHARGES ( ` 23,40,622), BANK CHARGES( ` 1,01,083) AND PROFESSIONAL CHARGES( ` 27,32,402). THE AO OBSERVED THAT SINCE ALL THE SALES ARE MADE TO IT S GROUP CONCERN M/S.QUESTNET INDIA ENTERPRISES PVT LTD., WHICH IS A LSO LOCATED IN THE SAME BUILDING, THERE WAS NO NEED FOR THE ASSESSEE T O INCUR THESE ITA NO. 2852 & 3125/MDS./2014 M/S.GOLDQUEST INTERNATIONAL P LTD. :- 3 -: EXPENSES. HENCE, THE AO DISALLOWED THE EXPENSES AN D ADDED TO THE TOTAL INCOME OF ASSESSEE AMOUNTING TO ` 72,62,999/-. THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) CONSIDERED THE ISSUE IN THE LIGHT OF THE EARLIER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.1445/MDS./2013 VIDE ORDER DATED 18.12.2013 AND D ELETED THE ADDITION. AGAINST THIS, THE REVENUE IS IN APPEAL B EFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. ADMITTEDLY, SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE DATED 18.12.2013 CITED SUPRA WH EREIN THE TRIBUNAL DELETED THE SIMILAR ADDITIONS. BEING SO, THE EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE REVENUE CANNOT SIT AND JUDGE OVER THE SAME. AS SUCH THE DELETION OF ADDITIONS MADE BY THE LD.CIT(A) IS JUSTIFIED AND TH E ORDER OF LD.CIT(A) IS CONFIRMED. HENCE, THE APPEAL OF REVENUE IS DISM ISSED. ASSESSEES APPEAL IN ITA NO.2852/MDS./2014 5. AT THE OUTSET, LD.A.R DID NOT PRESS THE ISSUE R ELATING TO THE ADDITION TOWARDS VALUATION OF CLOSING STOCK. ACCORD INGLY, THIS ISSUE IS DISMISSED AS NOT PRESSED. 5.1 REGARDING CLEARING AND HANDLING CHARGES, THE A SSESSEE HAS NOT PRODUCED THE PAYMENT DETAILS; AS SUCH THE SAME WAS DISALLOWED BY THE LOWER AUTHORITIES. BEFORE US, LD.A.R PLEADED THAT ONE MORE ITA NO. 2852 & 3125/MDS./2014 M/S.GOLDQUEST INTERNATIONAL P LTD. :- 4 -: OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO PLACE N ECESSARY EVIDENCE BEFORE THE AO. ACCORDINGLY, THIS ISSUE RELATING TO CLEARING AND HANDLING CHARGES IS REMITTED TO THE FILE OF AO WITH A DIRECT ION TO THE ASSESSEE TO PRESENT NECESSARY DOCUMENTS REGARDING PAYMENT OF EX PENDITURE. THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. THE NEXT ISSUE IS REGARDING DISALLOWANCE U/S.14 A OF THE ACT. 6.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE COMPANY IS FOUND TO HAVE INVESTED AN AMOUNT OF ` 8,99,32,877/- IN SHARES/FUNDS AS ON 31.03.2008 ( ` 7,26,93,434/- AS ON 31.03.2007), AS COULD BE SEEN FROM THE INVESTMENTS SCHEDULE OF THE BALANCE S HEET AND EARNED A DIVIDEND INCOME OF ` 77,85,479/- DURING THE FINANCIAL YEAR 2007-08. ACCORDING TO THE AO, THE ASSESSEE HAS NOT SEGREGATE D ANY EXPENDITURE ATTRIBUTABLE TO SUCH INVESTMENTS AND EARNING OF DIV IDENDS INCOME WHICH IS EXEMPT FROM TAX. HAVING NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE, THE AO INVOKED THE PROVISIONS OF THE SECT ION 14A R.W.RULE 8D AND DETERMINED THE EXPENDITURE ATTRIBUTABLE FOR EARNING SUCH EXEMPT INCOME AT ` 4,06,566/-. THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) FOLL OWING THE VARIOUS JUDGEMENTS OF HIGH COURTS AND ORDERS OF TRIBUNAL UP HELD THE ACTION OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE IS RELATING TO THE ASSESSMENT YE AR 2008-09. THERE ITA NO. 2852 & 3125/MDS./2014 M/S.GOLDQUEST INTERNATIONAL P LTD. :- 5 -: WAS AN AMENDMENT OF RULE-8D WITH EFFECT FROM 24.03. 2008. BEING SO, IN OUR OPINION, IT IS NOT APPROPRIATE TO APPLY RULE -8D FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, BY PLACING RELIANCE ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF SIMPSON & CO. LTD. V. DCIT IN TAX CASE NO.2621 OF 2006 DATED 15.10.2002, WE DIRECT THE AO TO DISALLOW 2% OF EXEMPTED INCOME TOW ARDS NOTIONAL EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING THI S INCOME. THIS GROUND IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 16 TH DECEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER / CHENNAI ! / DATED: 16 TH DECEMBER , 2016. K S SUNDARAM !' $%& '& / COPY TO: 1 . () / APPELLANT 3. * ( ) / CIT(A) 5. &-. $/ / DR 2. $0 () / RESPONDENT 4. * / CIT 6. .1 2 / GF