Shriram Fortune Solutions Ltd., CHENNAI V. DCIT, CHENNAI

ITA 406/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8684 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 31-05-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: R SIVARAMAN
• Keywords: Depreciation; Revenue expenditure
• Section: 14A; 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO. 406/MDS/2016 / ASSESSMENT YEAR : 2012-13 M/S SHRIRAM FORTUNE SOLUTIONS LTD NO.66, II FLOOR, CITY CENTRE COMPLEX THIRUMALAI PILLAI ROAD T. NAGAR, CHENNAI 600 017 VS. THE DY. COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 6(1) CHENNAI [PAN AAACS 7708 N] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO. 731/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE DY. COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 6(1) CHENNAI VS. M/S SHRIRAM FORTUNE SOLUTIONS LTD NO.66 II FLOOR, CITY CENTRE COMPLEX THIRUMALAI PILLAI ROAD T. NAGAR, CHENNAI 600 017 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE DEPARTMENT BY : SHRI SHIVA SRINIVAS, JCIT / DATE OF HEARING : 31 - 05 - 2016 / DATE OF PRONOUNCEMENT : 29 - 0 7 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE APPEAL OF THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-15, CHENNAI, DATED 24.9.2015 FOR ASSESSME NT YEAR 2012-13. ITA NO.406 & 731/16 :- 2 -: 2. LET US FIRST TAKE UP THE ASSESSEES APPEAL I.T.A.NO . 406/MDS/2016. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF ` 2,51,498/-. 4. SHRI R. SIVARAMAN, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSES SEE HAS RECEIVED DIVIDEND OF ` 41,38,052/-. THE ASSESSEE HAS DISALLOWED EXPENS ES U/S 14A TO THE EXTENT OF ` 67,829/-. THE ASSESSING OFFICER HAS COMPUTED THE DISALLOWANCE U/S 14A R.W.R 8D TO THE EXTENT OF ` 2,51,498/-. ACCORDING TO THE LD. COUNSEL, THE ASSES SING OFFICER HAS NOT RECORDED THE SATISFACTION IN THE ASSESSMENT ORDER, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE. THE LD. COUNSEL SUBMIT TED THAT APPLICATION OF RULE 8D IS NOT AUTOMATIC. ACCORDING TO THE LD. COUNSEL, FOR THE PURPOSE OF APPLYING RULE 8D, THE ASSESSING OFFICER HAS TO RECORD HIS SATISFACTION ON THE BASIS OF HIS FINDING THAT THE CLAIM MADE BY THE ASSESSEE IS NOT CORRECT. IN THE CASE BEFO RE US, ACCORDING TO THE LD. COUNSEL, NO SUCH FINDING WAS RECORDED BY TH E ASSESSING OFFICER, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS NOT JUSTIFIED. 5. ON THE CONTRARY, SHRI SHIVA SRINIVAS, LD. DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT THE PROFIT & LOSS ACC OUNT SHOWS THE ITA NO.406 & 731/16 :- 3 -: RECEIPT OF DIVIDEND TO THE EXTENT OF ` 41,38,052/- AND THE ASSESSEE INCURRED DIRECT EXPENDITURE TO THE EXTENT OF ` 67,829/-. THIS CLAIM OF EXPENDITURE TO THE EXTENT OF ` 67,829/- WAS FOUND TO BE NOT CORRECT BY THE ASSESSING OFFICER. THEREFORE, BY APPLYING THE PROCEDURE PRESCRIBED UNDER RULE 8D, THE ASSESSING OFFICER COMPUTED THE D ISALLOWANCE AT ` 2,51,498/-. THE COMPUTATION MADE BY THE ASSESSING OFFICER IS NOT CHALLENGED BY THE ASSESSEE. THE TOTAL INVESTMENT MADE BY THE ASSESSEE AS ON 1.4.2010 AND AS ON 31.3.2011 IS NOT IN DISPUTE. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E FIRST OBJECTION OF THE ASSESSEE IS THAT NO SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER FOR THE PURPOSE OF MAKING DISALLOWANCE UND ER RULE 8D. EITHER SEC. 14A OR RULE 8D DOES NOT PRESCRIBE ANY FORM FOR THE PURPOSE OF RECORDING SATISFACTION. THE SATISFACTION HAS TO BE INFERRED FROM THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE CO MPUTATION MADE. WHEN THE ASSESSING OFFICER FOUND THERE WAS A DIRECT EXPENDITURE RELATING TO EARNING OF THE EXEMPTED INCOME AND THE ASSESSEE HAS NOT COMPUTED THE DISALLOWANCE UNDER RULE 8D, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER WAS N OT SATISFIED WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE. THEREFO RE, THE ASSESSING ITA NO.406 & 731/16 :- 4 -: OFFICER HAS TO RECOMPUTE THE DISALLOWANCE BY APPLY ING THE PROCEDURE PRESCRIBED UNDER RULE 8D. THE AVERAGE INVESTMENT M ADE DURING THE YEAR UNDER CONSIDERATION IS NOT IN DISPUTE. THE DI RECT EXPENDITURE INCURRED BY THE ASSESSEE TO THE EXTENT OF ` 67,829/- FOR EARNING THE INCOME WHICH DO NOT FORM PART F THE TOTAL INCOME IS ALSO NOT IN DISPUTE. IN THE ABSENCE OF ANY ALLEGATION WITH REGARD TO THE CORRECTNESS OF THE COMPUTATION MADE BY THE ASSESSING OFFICER FOR DISAL LOWING ` 2,51,498/- , THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THEREFORE, THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 7. NOW COMING TO REVENUES APPEAL I.T.A.NO.731/MDS/201 6, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF ROYALTY TO THE EXTENT OF ` 83,85,459/-. 8. SHRI SHIVA SRINIVAS, LD. DR SUBMITTED THAT THE ASS ESSEE HAS PAID ` 46,47,278/- TO SHRIRAM OWNERSHIP TRUST FOR USING T HEIR LOGO IN THE ASSESSEES BUSINESS. THE ASSESSING OFFICER TR EATED THE PAYMENT AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION @ 12. 5%. ACCORDING TO THE LD. DR, THE PAYMENT MADE BY THE ASSESSEE WAS I N THE NATURE OF CAPITAL, THEREFORE, THE CIT(A) OUGHT NOT TO HAVE AL LOWED THE EXPENDITURE AS REVENUE. ACCORDING TO THE LD. DR, T HERE CANNOT BE ANY ITA NO.406 & 731/16 :- 5 -: REASON TO ALLOW THE CLAIM OF THE ASSESSEE. SINCE THE PAYMENT WAS IN RESPECT OF INTANGIBLE RIGHT AND THE ASSESSING OFFIC ER HAS ALLOWED DEPRECIATION @ 12.5%, THE CIT(A) OUGHT NOT TO HAVE ALLOWED THE CLAIM OF THE ASSESSEE. 9. ON THE CONTRARY, SHRI R. SIVARAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SHRIRAM OWNERSHIP TRUST IS AN INDEPENDENT TRUST AND ITS LOGO WAS USED BY THE ASSESSEE IN ITS BUSINESS. THE PAYMENT WAS MADE FOR THE PURPOSE OF USING THE LOGO ON TURNOVER BASIS, THEREFORE, THE CIT(A) HAS RIGHTLY ALLOWED TH E CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SH RIRAM OWNERSHIP TRUST IS A TRUST BY ITSELF, THEREFORE, ITS LOGO CAN NOT BE USED BY ANY OTHER CONCERN. THE OBJECT OF THE TRUST IS NOT TO D O BUSINESS. THE ASSESSEE-COMPANY WAS ESTABLISHED FOR THE PURPOSE OF BUSINESS. WHEN THE ASSESSEE-COMPANY USED THE LOGO BELONGS TO SHRIR AM OWNERSHIP TRUST, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT FOR THE PURPOSE OF USING THE LOGO, THE ASSESSEE HAS TO NECESSARIL Y MAKE THE PAYMENT. IN THE CASE BEFORE US, THE PAYMENT WAS MADE ON TURN OVER BASIS, THEREFORE, THE SAME HAS TO BE ALLOWED AS REVENUE EX PENDITURE U/S ITA NO.406 & 731/16 :- 6 -: 37(1) OF THE ACT. THIS TRIBUNAL DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE SAME I S CONFIRMED. 11. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE AND THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 29 TH JULY, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF