TTK Healthcare Limited, CHENNAI V. ACIT, CHENNAI

ITA 3271/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1030 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 30-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R ANITHA IRS
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NOS.3270 & 3271/CHNY/2018 ! / ASSESSMENT YEAR : 2013-2014 & 2014-15. M/S. TTK HEALTHCARE LIMITED, NO.6, CATHEDRAL ROAD, GOPALAPURAM, CHENNAI 600 086. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1) CHENNAI. [PAN AABCT 3312J] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADV &' '# $ % /RESPONDENT BY : MS. R. ANITHA, IRS, JCIT. ( ) $ * /DATE OF HEARING : 27-08-2019 +,! $ * /DATE OF PRONOUNCEMENT : 12-09-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED A GAINST COMMON ORDERS OF THE COMMISSIONER OF INCOME TAX (AP PEALS)-11, CHENNAI (CIT(A) FOR SHORT) DATED 25.09.2018 FOR THE ASSESSMENT YEARS 2013-14 & 2014-2015. ITA NOS.3270 &3271/2018 :- 2 -: 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE APPEAL IN ITA NO.3270/CHNY/2018 FOR ASSESSMENT YEAR 2013-14 ARE STATED HEREIN. 4. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CAS E. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF RS.6,58,9261- U/S 14 A BY APPLYING RULE 8D. 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD APPORTIONED EXPE NDITURE IN RESPECT OF DIVIDEND INCOME AND THE APPELLANT AND OF FERED A SUM OF RS.6685/- AS EXPENDITURE IN ITS RETURN OF INCOME AND HENCE NO FURTHER NOTIONAL EXPENDITURE COULD BE DEDUCTED F ROM THE SAID INCOME. 2.2 THE APPELLANT SUBMITS THAT IT HAS NOT UTILIZED BORROWED FUNDS FOR MAKING THE INVESTMENTS AND HENCE NO PORTI ON OF THE INTEREST EXPENDITURE IS DISALLOWABLE UNDER RULE 8D. 2.3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT SECTION. 14A R.W. RULE 8D CAN BE I NVOKED ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF SUCH EXPEN DITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. 2.4 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT AS PER SECTION 14A(2) THE ASSESSIN G OFFICER HAS NOT GIVEN COGENT REASONS OR DETAILED REASONING WHIL E RECORDING ITA NOS.3270 &3271/2018 :- 3 -: HIS DIS-SATISFACTION WITH THE CORRECTNESS OF THE CL AIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. 2.4 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF PROPORTIONATE INTERE ST EXPENDITURE OF RS 477206 UNDER RULE 8D(2)(II), ON T HE PRESUMPTION THAT THE ASSESSEE HAS UTILIZED BORROWIN GS FOR MAKING THE INVESTMENTS. 2.5 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT ONLY INTEREST FREE SURPLUS FUNDS W ITH THE ASSESSEE IS UTILIZED FOR MAKING INVESTMENTS IN MUTU AL FUNDS. 2.6 THE APPELLANT RELIES ON THE DECISIONS OF THE HO NBLE MADRAS HIGH COURT IN CT VS. HOTEL SAVERA 239 ITR 795 AND G UJARAT HIGH COURT IN CT VS GUJARAT STATE FERTILIZERS & CHE MICALS LTD 85 CCH 273 GUJ HC WHERE IT WAS HELD THAT NO AD-HOC DIS ALLOWANCE OF EXPENDITURE U/S 14A WAS WARRANTED WHERE THE ASSE SSEE HAD SUFFICIENT FUNDS AVAILABLE WITH IT, WHICH WAS MORE THAN THE AMOUNT IT INVESTED FOR EARNING DIVIDEND INCOME. 2.7 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS M/S. HERO CYCLES LIMITED - REPOR TED IN 323 ITR 518 HAS HELD THAT DISALLOWANCE U/S.14A REQUIRE S FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE ULS.14A CANNOT STAND. 3. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS OF APPEAL AT THE TIME OF HEARING. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. TTK HEALTHCARE LIMITED IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING PHARMACEUT ICALS FORMULATIONS, BULK DRUGS, READY TO EAT PRODUCTS ETC . THE RETURN OF ITA NOS.3270 &3271/2018 :- 4 -: INCOME FOR THE AY 2013-14 WAS FILED ON 30.11.2013 D ISCLOSING TOTAL INCOME OF RS. 21,99,32,100/-. AGAINST THE SAID RETU RN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIO NER OF INCOME TAX, CORPORATE CIRCLE 3(1), CHENNAI (HEREINAFTER CA LLED AO) VIDE ORDER DATED 23.03.2016 PASSED U/S. 143(3) OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT) AFTER MAKING SEVERAL DI SALLOWANCES AT J24,71,44,050/-. THE DISALLOWANCES INTER ALIA INCLU DES ADDITION U/S.14A R.W.RULE 8D OF J6,58,926/- WITH WHICH WE ARE CONCE RNED. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAVING NOTICED THAT ASSESSEE MADE INVESTMENT OF J76,81,000 /-, INVOKED THE PROVISIONS OF SECTION 14A R.W.R8D AND COMPUTED TH E AMOUNT OF DISALLOWANCE UNDER RULE 8D AT J6,58,926/-. 6. BEING AGGRIEVED BY THE ABOVE ADDITION, AN APPEAL WA S PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDE R CONFIRMED THE ADDITION . 7. BEING AGGRIEVED BY THE ABOVE DECISION OF THE CIT( A), THE APPELLANT IS IN APPEAL BEFORE US CHALLENGING THE CORRECTNESS OF THE ORDER OF THE CIT(A). THE LD. AUTHORISED REPRESENTA TIVE CONTENDED THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT IN COME. HE FURTHER SUBMITTED THAT ONLY INVESTMENTS WHICH YIELDED EXEMP T INCOME ALONE TO BE CONSIDERED AND PLACED RELIANCE ON THE ORDER OF T HE HONBLE DELHI ITA NOS.3270 &3271/2018 :- 5 -: HIGH COURT IN THE CASE OF ACB INDIA LIMITED VS. ACIT, (2015) 374 ITR 108 . 8. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE EARN ED EXEMPT INCOME AND THEREFORE THE PROVISIONS OF SECTION 14A OF THE ACT SHOULD BE APPLIED. HOWEVER FOR THE PURPOSE OF CALCULATING AVE RAGE VALUE OF INVESTMENT, THE INVESTMENT WHICH YIELDED EXEMPT IN COME SHOULD ALONE BE CONSIDERED IN THE LIGHT OF THE JUDGMENT O F HONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA LIMITED (SUPRA) AND DECISION OF THE DELHI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT PVT. LTD, 2017-TIOL-923-ITAT-DEL-SB. THEREFORE WE REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO COMPUTE THE AMOUNT OF DISALLOWANCE IN ACCORDANCE WITH LAW L AID DOWN BY HONBLE DELHI HIGH COURT IN THE CASE OF ACB INDIA L IMITED (SUPRA). ITA NO.3271/CHNY/ 2018 FOR ASSESSMENT YEAR 2014-1 5 IN RESPECT OF M/S. TTK HEALTHCARE LIMITED. 10. SINCE, THE FACTS IN THE PRESENT APPEAL ARE IDENTIC AL TO THE FACTS IN ITA NO.3270/CHNY/2018, FOR THE REASONS MENTIONED THEREIN, WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER AS IN THE SAME LINES INDICATED IN APPEAL ITA NO.3270/CHNY/2018 SUP RA. HENCE, THE ITA NOS.3270 &3271/2018 :- 6 -: ABOVE CAPTIONED APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE I N ITA NOS. 3270 & 3271/CHNY/2018 FOR ASSESSMENT YEARS 2013-14 AND 2 014-15 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 12TH DAY OF SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED:12TH SEPTEMBER, 2019. KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF