DCIT Non Corporate Circle 2, CHENNAI V. Shriram Investments, CHENNAI

ITA 3259/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7416 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 29-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR ADD L
• Keywords: Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.3259/CHNY/2018 /ASSESSMENT YEAR: 2014-15 DY. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, CHENNAI. VS. M/S.SHRIRAM INVESTMENTS, MOOKAMBIKA COMPLEX, NO.4,LADY DESIKA ROAD, MYLAPORE,CHENNAI 600 004. [ PAN: AAAFS 2590 M ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : SHRI R.CLEMENT RAMESH KUMAR,ADDL. C.I.T. D.R *+) , /RESPONDENT BY : SHRI RAGHAV RAJEEV MENON, ADVOCATE , /DATE OF HEARING : 22.07.2019 , /DATE OF PRONOUNCEMENT : 22.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI, IN ITA NO.219/2016- 17/A.Y.2014-15/C.I.T(A)-2, DATED 27.08.2018 FOR THE AY 2014-15. ITA NO.3259/CHNY/2018 :- 2 -: 2. SHRI R.CLEMENT RAMESH KUMAR REPRESENTED ON BEHAL F OF THE REVENUE AND SHRI RAGHAV RAJEEV MENON REPRESENTED ON BEHALF OF THE ASSESSEE. 3. AT THE OUTSET, IT WAS FAIRLY AGREED THAT BY BOT H SIDES THAT THE ONLY ISSUE IN THE REVENUES APPEAL WAS AGAINST THE ACTIO N OF LD.CIT(A) IN ALLOWING THE EXPENDITURE CLAIMED U/S.36(1)(III) OF THE ACT. IT WAS FAIRLY AGREED BY BOTH THE PARTIES THAT THE ISSUED RAISED I N THE REVENUES APPEAL IS SQUARELY COVERED BY THE DECISIONS OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YE ARS BEING 2012-13 & 2013-14 IN ITA NO.2895/CHNY/2018 DATED 20.06.2019 A ND ITA NO.995/CHNY/2017 DATED 19.07.2018 WHEREIN THE CO-OR DINATE BENCH OF THIS TRIBUNAL HAD FOLLOWED THE DECISION OF THE JURI SDICTIONAL HIGH COURT IN THE CASE OF C.I.T VS. SHRIRAM INVESTMENTS (FIRM), R EPORTED IN [2015] 54 TAXMANN.COM 15, HAD HELD THE ISSUE IN FAVOUR OF ASS ESSEE BY HOLDING THAT:- 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD DEBITED IN IT S PROFIT AND LOSS ACCOUNT, ONLY THE ACTUAL INTEREST PAID AND CREDITE D ONLY THE ACTUAL INTEREST RECEIVED, SINCE IT WAS FOLLOWING THE CASH SYSTEM OF ACCOUNTING. IN OUR OPINION IN A CASH BASIS OF ACCO UNTING SYSTEM, THERE IS NO QUESTION OF APPLYING ANY MATCHING PRINCIPLE. INTEREST IS CREDITED AS INCOME AT POINT OF RECEIPT AND DEBITED AS EXPEN SES AT THE POINT OF PAYMENT. ACCORDING TO THE DISPARITY IN THE PERIO D FOR WHICH INTEREST IS RECEIVED AND PAID, THERE COULD BE DIFFERENCE. TH AT APART, COPY OF THE PARTNERS CURRENT ACCOUNT PLACED AT PAPER BOOK P AGE 10, SHOWS THAT DEBIT BALANCES IN PARTNERS CURRENT ACCOUNT ARO SE MORE ON ACCOUNT ITA NO.3259/CHNY/2018 :- 3 -: OF LOSSES SUFFERED IN THE EARLIER YEARS, THAN DUE T O ANY DRAWINGS BY THE PARTNERS. IT MIGHT BE TRUE THAT IT HAD RECEIVE D INTEREST ONLY FROM FOUR INDIVIDUALS TO WHICH IT HAD ADVANCED AMOUNTS D URING THE RELEVANT PREVIOUS YEAR. THIS DOES NOT MEAN THAT ASSESSEE HA D NOT RECEIVED INTEREST FROM OTHER PARTIES IN OTHER YEARS. DURING THE PREVIOUS ASSESSMENT YEAR 2009-2010, IT HAD RECEIVED INTEREST OF 13,34,06,510/ - FROM PERSONS TO WHOM IT HAD ADVANCED LOANS. HENCE IN OUR OPINION, IT IS OBVIOUS THAT DISPARITY BETWEEN INTEREST RECEIVED AND INTEREST PAYMENT AROSE NOT ON ACCOUNT OF ANY SELECTIVE CHARGING OF INTEREST, BUT ON ACCOUNT OF CASH BASIS SYSTEM FOLLOWED BY THE ASSESSEE. THERE IS NOTHING IN THE STATUTE WHIC H STOPPED THE ASSESSEE FROM FOLLOWING THE CASH SYSTEM OF ACCOUNTI NG. IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-2010 ON REVENUE A PPEAL (ITA NO.1690/MDS/2013, DATED 27.11.2013), THIS TRIBUNAL HAD HELD AS UNDER:- 6. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ASSESSEE IS AN INVESTMENT COMPANY MADE INVESTMENTS IN GROUP CONCERNS AS PART OF ITS BUSINESS OF THE ASSESSEE I. E. ADVANCING LOANS TO GROUP CONCERNS. THE COMMISSIONER OF INCOM E TAX (APPEALS) ALSO GAVE A FINDING THAT MONIES ARE BORRO WED FROM GROUP CONCERNS ONLY AND THESE MONIES ARE UTILIZED B Y THE INVESTEE CONCERNS FOR THEIR TRADE PURPOSES. SINCE THE INVESTMENTS IN SHARES OF GROUP CONCERNS AMOUNTING T O 4,38,00.000/ - ARE WITHIN THE COURSE OF TRADING ACTIVITIES AND OUT OF COMMERCIAL EXPEDIENCY AND THE DECISION OF TH E HONBLE HON'BLE SUPREME COURT IN THE CASE OF S.A.BUILDERS ( 288 ITR 1) IS APPLICABLE TO THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO HELD THAT 76,58,00,000/ - INVESTED IN SISTER CONCERNS AS SHARE APPLICATION MONEY IS NOT CAPABLE OF YIELDING ANY INCOME NOR ANY RIGHT TO A BENEFIT IS VESTED IN, THEREFORE PROVISIONS OF SECTION 14A ARE NOT ATTRACTED IN VIEW OF THE ITA NO.3259/CHNY/2018 :- 4 -: DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASES OF MSA SECURITY SERVICES AND NMS CONSULTANCY P. LT D (SUPRA). THE DEPARTMENT COULD NOT REBUT ANY OF THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. THUS ASSESSEE HAS BEEN CONSIDERED AS AN INVESTMENT COMPANY AND MAKING INVESTMENTS WAS PART OF ITS BUSINESS. HONB LE JURISDICTIONAL HIGH COURT ALSO IN THE CASE OF CIT VS. SHRIRAM INVE STMENTS (FIRM), (2015) 54 TAXMANN.COM 15 ALSO HELD THAT DEDUCTION U/S.36(1) (III) OF THE ACT HAD TO BE ALLOWED IN RESPECT OF INTEREST PA ID, IF CAPITAL WAS BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION . AS ALREADY MENTIONED BY US, THERE IS NO FINDING BY ANY OF TH E LOWER AUTHORITIES THAT DISPARITY BETWEEN INTEREST RECEIPTS AND PAYM ENTS AROSE ON ACCOUNT OF CHARGING OF LOWER RATE OF INTEREST ON L OANS ADVANCED WHEN COMPARED TO INTEREST PAID ON LOANS RECEIVED. IN TH E CIRCUMSTANCES, WE ARE OF THE OPINION THAT LD. ASSESSING OFFICER WA S NOT JUSTIFIED IN MAKING A DISALLOWANCE FOR THE DIFFERENCE BETWEEN I NTEREST RECEIVED AND INTEREST PAID BY THE ASSESSEE. DISALLOWANCE OF 1,65,81,384/ - STANDS DELETED. IT WAS THE SUBMISSION THAT THE REVENUE HAD NOT ACCE PTED THE SAID DECISIONS AND APPEALS ARE PENDING. 4. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS IT IS NOTICED THAT THE ISSUE RAISED IN THE REVENUES APPEAL IS SQUARELY COVERED BY THE DECISIO NS OF THIS TRIBUNAL IN ITA NO.3259/CHNY/2018 :- 5 -: ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YE ARS, AND AS IT IS NOTICED THAT LD.CIT(A) HAS FOLLOWED THE JUDICIAL DI SCIPLINE BY DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER BY FOLLOWING THE DECISIONS OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE FOR THE PRECEDING ASSESSMENT YEARS, WE FIND NO REASON TO IN TERFERE IN THE ORDER OF THE LD. CIT(A). CONSEQUENTLY, THE GROUNDS RAISED IN THE REVENUES APPEAL STAND DISMISSED. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 22 ND DAY OF JULY, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 22 ND JULY, 2019. K S SUNDARAM , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF