DCIT, CORP CIR 3(1), CHENNAI V. TAMIL NADU SUGAR CORPORATION LTD, CHENNAI

ITA 3469/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8767 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 21-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N V LAKSHMI
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! , ' # BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBE R ! ./ ITA NO.3469/CHNY/2018 $ /ASSESSMENT YEAR: 2014-15 DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(1), CHENNAI. VS. M/S. TAMIL NADU SUGAR CORPORATION LTD., NO.690, E.V.R PERIAR BUILDING, ANNA SALAI, NANDANAM, CHENNAI 600 035. [PAN: AAACT 1308B] ( % /APPELLANT) ( &'% /RESPONDENT) % ( ) / APPELLANT BY : SHRI A.R.V. SREENIVASAN, JCIT &'% ( ) /RESPONDENT BY : MS. N.V.LAKSHMI, C.A * ( +' /DATE OF HEARING : 12.06.2019 ,-$ ( +' / DATE OF PRONOUNCEMENT : 12.06.2019 . / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI, IN ITA NO.22(T)/CIT(A)-7/2017-18 DATED 28.09.2018 FOR THE ASSESSMENT YEAR (AY) 2014-15. 2. M/S. TAMIL NADU SUGAR CORPORATION LTD., THE ASSE SSEE, IS ENGAGED IN MANUFACTURE OF WHITE CRYSTAL SUGAR. WHILE MAKIN G THE ASSESSMENT FOR ITA NO.3469/CHNY/2018 :- 2 -: AY 2014-15, THE ASSESSING OFFICER (A O) FOUND THAT THE ASSESSEE EARNED DIVIDEND INCOME OF RS. 28,01,000/- AND CLAIMED IT AS AN EXEMPT INCOME U/S. 10(34). ITS INVESTMENT PORTFOLIO AS ON 31.03.2 014 STOOD AT AN AGGREGATE VALUE OF RS. 36.26 CR. SINCE, THE ASSESS EE HAS NOT QUANTIFIED THE DISALLOWANCE U/S. 14A R/W RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES), THE A O AFTER RECORDING DUE SAT ISFACTION COMPUTED THE DISALLOWANCE OF RS.1,21,06,941/-. FURTHER, HE FOUND THAT THE ASSESSEE HAS REMITTED EPS/PF/ESI CONTRIBUTIONS OF THE EMPLOY EES BEYOND THE DUE DATE UNDER THE RESPECTIVE ACTS. THEREFORE, HE DISAL LOWED THE SAME U/S. 36(1)(VA) OF THE ACT. AGGRIEVED AGAINST THAT ORDER , THE ASSESSEE FILED AN APPEAL BEFORE CIT(A), WHO FOLLOWING THE ITAT DECI SION HELD THAT THE INVESTMENT MADE IN THE SUBSIDIARY COMPANY M/S. PERA MBALUR SUGAR MILLS LTD SHOULD NOT BE TAKEN INTO FOR MAKING THE DISALL OWANCE U/S. 14A R/W RULE 8D AND ALLOWED THE ASSESSEES CLAIM. ON THE I SSUE OF DISALLOWANCE OF EPF/ESI, THE LD. CIT(A) EXAMINED THIS ISSUE AND FOUND THAT THE REMITTANCE OF EMPLOYEES CONTRIBUTION THOUGH MADE B ELATEDLY UNDER THE RESPECTIVE ACTS, HOWEVER, THEY WERE REMITTED WELL B EFORE THE LAST DATE OF FILING THE INCOME TAX RETURN U/S. 139(1) OF THE INC OME TAX ACT, 1961. THEREFORE, APPLYING THE HONBLE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD. (TCA NO.585/2015) ALLOWED THE ASSESSEES CLAIM. AGGRIEVE D AGAINST THAT ORDER OF THE LD.CIT(A), THE REVENUE FILED THIS APPEAL WIT H THE FOLLOWING GROUNDS: ITA NO.3469/CHNY/2018 :- 3 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ID. CIT(A) ERRED IN DELETING THE ADDITION BE ING THE BELATED REMITTANCE OF EMPLOYEES PF/ESI CONTRIBUTIONS WHICH WERE LAWFULLY TREATED AS INCOME U/S. 36(1)(VA). 2.1 THE ID. CIT(A) ERRED IN DELETING THE ASSESSING OFFICERS ADDITION BEING THE BELATED REMITTANCE OF EMPLOYEES PF/ESI C ONTRIBUTIONS WHICH WERE LAWFULLY TREATED AS INCOME U/S. 36(1)(VA ) WHEREAS THE CIT(A) OUGHT TO HAVE ACTUALLY UPHELD THE ASSESSING OFFICERS ADDITION AS RENDERED BY THE RECENT JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF M/S. UNIFAC MANAGEMENT SERVICES (INDIA) PRI VATE LTD., VS DCIT- 3(2), CHENNAI IN WP NO5264 OF 2018 AND WMP NO .6461 OF 2018. 2.2 THE ID. CIT(A) ERRED IN DELETING THE DISALLOWAN CE MADE U/S 14A R.W.R.8D. 2.3 THE ID. CIT(A) ERRED IN NOT CONSIDERING THE DEC ISION OF THE HONBLE APEX COURT IN THE CASE OF M/S. MAXOPP INVES TMENTS LIMITED VS CIT, NEW DELHI (91 TAXMANN.COM 154) WHEREIN THE HONBLE COURT HAD HELD THAT THE DOMINANT PURPOSE FOR WHICH INVEST MENT IS MADE BY THE ASSESSEE MAY NOT BE RELEVANT AS SECTION 14A APP LIES IRRESPECTIVE O THE PURPOSE FOR WHICH INVESTMENT IS MADE AND EXPENDITURE ATTRIBUTABLE TO EXEMPT INCOME HAS TO BE DISALLOWED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADD UCQD AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEA RNE CI CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 4. THE LD. DEPARTMENTAL REPRESENTATIVE ARGUED ON TH E LINES OF GROUNDS OF APPEAL, SUPRA. PER CONTRA, THE LD. AUTH ORIZED REPRESENTATIVE OF ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL ON RECORD. SINCE, THE HON'BLE APEX COURT IN THE CASE OF M/S. MAXOPP INVESTMENTS LIMITED VS. CIT, NEW DELHI (91 TAXMANN. COM 154) HAD HELD THAT THE DOMINANT PURPOSE FOR WHICH INVESTMENT IS M ADE BY THE ASSESSEE MAY NOT BE RELEVANT AS SECTION 14A OF THE ACT APPL IES IRRESPECTIVE OF THE ITA NO.3469/CHNY/2018 :- 4 -: PURPOSE FOR WHICH INVESTMENT IS MADE AND EXPENDITUR E ATTRIBUTABLE TO EXEMPT INCOME HAS TO BE DISALLOWED, WE HOLD THAT TH E DISALLOWANCE MADE BY THE AO U/S 14A R/W R. 8D IS IN ORDER. HOW EVER, FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF JOINT INVESTMENTS PVT. LTD. (372 ITR 694), WE DIRECT THE ASSESSING OF FICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A R/W R. 8D TO THE EXT ENT OF DIVIDEND INCOME EARNED, AND ACCORDINGLY TO RECOMPUTE THE DIS ALLOWANCE. IN RESPECT OF THE DISALLOWANCE ON THE EMPLOYEES CONTR IBUTION TO PF & ESI, SINCE THE LD. CIT (A) FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD., SUPRA, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER AND HENCE, THE CORRESPONDING GROUNDS OF THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE , 2019 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, /! /DATED: 12 TH JUNE, 2019 . EDN, SR. P.S . ( &+01 21$+ /COPY TO: 1. % /APPELLANT 2. &'% /RESPONDENT 3. * 3+ ( )/CIT(A) 4. * 3+ /CIT 5. 1 45 &+ /DR 6. 56 7 /GF