SRM Civil Works Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 429/CHNY/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0342 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS R ANITA
• Assessee Lawyers: B PURUSHOTAMAN
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 429/CHNY/2017 / ASSESSMENT YEAR :2012-13 M/S. SRM CIVIL WORKS PVT. LTD., NO. 23, VENGADA MANGALAM, CHENGALPATTU TK., KANCHIPURAM DISTRICT [PAN:AAGCS1005G] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(3), CHENNAI 34. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI B. PURUSHOTAMAN, C.A. / RESPONDENT BY : MRS. R. ANITA, JCIT / DATE OF HEARING : 07.01.2021 /DATE OF PRONOUNCEMENT : 15.03.2021 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 18, CHENNAI, DATED 22.11.2016 RELEVANT TO THE ASSESSMENT YEAR 2012-13. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. 2. BRIEF FACTS RELATING TO THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT ARE THAT AGAINST THE INVESTMENT OF .2,34,29,175/- MADE IN THE FINANCIAL YEAR 2011-12 IN THE SHARES OF HEMADRI CEMENTS LTD., THE TOTAL INVESTMENTS I.T.A. NO. 429/CHNY/17 2 IN SHARES AS ON 31.03.2012 WAS .9,39,29,175/-. MOREOVER, THE ASSESSING OFFICER NOTED FROM THE BOOKS OF ACCOUNTS AND BANK STATEMENT THAT THE ASSESSEE HAS TAKEN TERM LOAN OF .2,50,00,000/- ON 31.01.2012, OUT OF WHICH .2,34,29,175/- WAS INVESTED IN THE ABOVE MENTIONED INVESTMENTS. ON THE SAID TERM LOAN, THE ASSESSEE HAS CLAIMED INTEREST EXPENSE OF .5,47,585/- DURING THE FINANCIAL YEAR 2011-12. IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF EARNING AN EXEMPT INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME, THE ASSESSING OFFICER ISSUED A SHOW CAUSE. IN REPLY TO THE SHOW CAUSE, THE ASSESSEE HAS ADMITTED THAT BY AVAILING TERM LOAN, THE ASSESSEE HAS MADE INVESTMENT IN THE SHARES OF HEMADRI CEMENTS LTD. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXEMPT INCOME DURING THE FINANCIAL YEAR 2011-12 AND THEREFORE, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT DOES NOT ARISE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D, THE ASSESSING OFFICER WORKED OUT THE EXPENDITURE TO BE DISALLOWED AT .37,07,196/- AND BROUGHT TO TAX. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D. 3. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS NOT I.T.A. NO. 429/CHNY/17 3 EARNED ANY EXEMPT INCOME IN THE RELEVANT ASSESSMENT YEAR AND THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D WAS COMPLETELY CONTRARY TO THE PROVISIONS OF THAT SECTION AS RULE 8D ONLY PROVIDES FOR A METHOD TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME OF THE ASSESSEE AND PRAYED FOR DELETING THE ADDITION. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN THE RELEVANT ASSESSMENT YEAR AGAINST THE INVESTMENTS. UNDER THESE CIRCUMSTANCES, IN THE CASE OF CIT V. CHETTINAD LOGISTICS (P) LTD. [2017] 248 TAXMAN 55 (MAD), THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED AND HELD THAT WHEN THERE WAS NO DIVIDEND INCOME EARNED IN THE RELEVANT ASSESSMENT YEAR, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D WAS COMPLETELY CONTRARY TO THE PROVISIONS OF THAT SECTION AS RULE 8D ONLY PROVIDES FOR A METHOD TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME, WHICH DOES NOT FORM PART OF TOTAL INCOME OF THE ASSESSEE. AGAINST THE DECISION OF THE HONBLE HIGH COURT, THE DEPARTMENT PREFERRED SPECIAL LEAVE PETITION, WHICH WAS DISMISSED BY THE I.T.A. NO. 429/CHNY/17 4 HONBLE SUPREME COURT [2018] 257 TAXMAN 02. IN VIEW OF THE ABOVE DECISION RENDERED IN THE CASE OF CIT V. CHETTINAD LOGISTICS (P) LTD. (SUPRA), THE DISALLOWANCE OF .37,07,196/- MADE BY THE ASSESSING OFFICER UNDER SECTION 14A R.W. RULE 8D STANDS DELETED. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 15 TH MARCH, 2021 IN CHENNAI. SD/ - SD/ - (S. JAYARAMAN) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 15.03.2021 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.