ACIT, CHENNAI V. Chettinad Logistics Pvt Ltd., CHENNAI

ITA 429/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77241 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: S SRIDHAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ I.T.A. NO.429/MDS/2014 ( / ASSESSMENT YEAR : 2006-2007) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3) CHENNAI 600 034 . ( # /APPELLANT) VS M/S. CHETTINAD LOGISTICS PVT. LTD, RANI SEETHAI HALL, V FLOOR, NO.603, ANNA SALAI, CHENNAI 600 006 [PAN :AABCC4551C] ( $% # /RESPONDENT) / APPELLANT BY : SHRI. SHAJI P. JACOB, IRS, ADDL CIT. / RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE /DATE OF HEARING : 16.04.2014 ! /DATE OF PRONOUNCEMENT : 09.05.2014 & / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNAI, D ATED 25.10.2013 RELEVANT TO THE ASSESSMENT YEAR 2006-2007. I.T.A.NO.429/MDS/2014 . :- 2 -: 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE BUSINESS OF CLEARING & FORWARDING, MANUFACTURING, T RADING AND SHIP MANAGEMENT SERVICES. THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT YEAR 2006-07 ON 30.12.2006 DECLARING ITS INCOME AS B7,06,89,035/-. DURING THE COURSE OF SCRUTINY ASSE SSMENT, THE ASSESSING OFFICER MADE CERTAIN ADDITION/DISALLOWANC E IN THE INCOME RETURNED BY THE ASSESSEE. IN RETURN OF INCOME THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B. THE ASSESSING OFFICER O BSERVED THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF B79,15,484/- ON FREIGHT FOR DELIVERY OF GOODS OUTSIDE INDIA AND EXCLUDED THE SA ME FROM EXPORT TURNOVER WITHOUT REDUCING THE SAME FROM TOTAL TURNO VER. THE ASSESSING OFFICER FURTHER MADE DISALLOWANCE U/S.14A R.W. RULE 8D TO THE TUNE OF B12,34,799/-. AGGRIEVED AGAINST THE AS SESSMENT ORDER DATED 11.12.2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO EXCLUDE FREIGHT EXPENSES FROM EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER IN ACCORDANCE WITH THE DECISION OF THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ITO VS M/S. SAK SOFT LTD, I.T.A.NO.429/MDS/2014 . :- 3 -: REPORTED AS 313 ITR(AT) 353 . AS REGARDS DISALLOWANCE U/S.14A, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE PROVISIONS OF RULE 8D ARE NOT APPLICABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND THUS MADE DISALLOWANCE OF 5% OF DIVIDEND INCOME. NOW THE REVENUE HAS COME IN APPEAL ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 3. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH SIDES AND HAVE ALSO PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE HAS ASSAILED THE FI NDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) DIRECTING THE ASSESSING OFFICER TO EXCLUDE FREIGHT ON EXPORT AND INSURANCE FROM TH E EXPORT TURNOVER AS WELL AS TOTAL TURNOVER TO COMPUTE DEDUCTION U/ S.10B AND RESTRICTING DISALLOWANCE U/S.14A TO 0.5% OF THE DIV IDEND INCOME. 4. AS FAR AS THE FIRST ISSUE U/S10B IS CONCERNED, IT IS A WELL SETTLED LAW THAT WHATEVER IS TO BE REDUCED FROM EXP ORT TURNOVER HAS TO BE REDUCED FROM TOTAL TURNOVER AS WELL. THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SAK SOFT LTD (SUPRA) HAS LAID DOWN THIS I.T.A.NO.429/MDS/2014 . :- 4 -: PRINCIPLE WHICH HAS BEEN CONSISTENTLY FOLLOWED. KE EPING IN VIEW THE DECISION OF SPECIAL BENCH, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE. 5. IN THE SECOND GROUND OF APPEAL, THE REVENUE IS AGGRIEVED AGAINST RESTRICTING OF DISALLOWANCE U/S14A TO 0.5% OF DIVIDEND INCOME. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSE SSEE HAS MADE INVESTMENTS OF OVER B24 CRORE YIELDING TAX FREE INC OME OF B1,21,22,449/- FOR THE ASSESSMENT YEAR UNDER CONSID ERATION. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MANUFACTURING CO. LTD VS. DCIT (328 ITR 81) HAS HELD THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM ASSESSMEN T YEAR 2008-09 ONWARDS. THUS, THE PROVISION OF RULE 8D CANNOT BE APPLIED IN THE PRESENT ASSESSMENT YEAR I.E. 2006-07. HOWEVER, DIS ALLOWANCE U/S.14A HAS TO BE MADE KEEPING IN VIEW HUGE INVESTMENTS MAD E BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS MADE DISALLOWANCE AT THE RATE OF 5% OF DIVIDEND RECEIVED BY THE ASSESSEE FOR ASSESSMENT YEAR UNDER CONSIDERATION. THE CONT ENTION OF THE REVENUE THAT COMMISSIONER OF INCOME TAX (APPEALS) H AS MADE DISALLOWANCE OF 0.5% IS WRONG. THE COMMISSIONER OF INCOME TAX I.T.A.NO.429/MDS/2014 . :- 5 -: (APPEALS) HAS TAKEN A FAIR AND REASONABLE VIEW. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. 6. IN RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON FRIDAY, THE 09 TH OF MAY, 2014, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( ) (VIKAS AWASTHY) ! / JUDICIAL MEMBER '# /DATED:09.05.2014. K.V #$ %& '& /COPY TO: 1. ( APPELLANT 2. / RESPONDENT 3. ) ( )/CIT(A) 4. ) /CIT 5. &*+ , /DR 6. +- . /GF. I.T.A.NO.429/MDS/2014 . :- 6 -: