C & K Management Limited , Secunderabad V. Income Tax Officer, Ward-1(4), Hyderabad

ITA 457/Hyd/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9564 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 30-12-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 29-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: J MARUTI RAGHURAM
• Keywords: Depreciation; Earning of tax free income; Reasonable cause; Condonation of delay; Rule 8D
• Section: 43B; 14A; 250; 201; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD SMC - B BENCH : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 4 5 7 /HYD./201 9 ASSESSMENT YEAR: 20 1 2 - 13 M/S C&K MANAGEMENT LTD. VS. ITO, WARD 1( 4 ) HYDERABAD. HYDERABAD. PAN: A ABCC4481D (APPELLANT) (RESPONDENT) FOR ASSESSE E : S H. J. MARUTI RAGHURAM , A.R. FOR REVENUE : S H. NILANJAN DEY, D.R. DATE OF HEARING : 30 / 1 2 /19 DATE OF PRONOUNCEMENT : 08 / 01 / 20 O R D E R THIS IS ASSESSEES APPEAL FOR A.Y. 201 2 - 13 AGAINST THE ORDER OF THE LD.CIT(A) - 1 , HYDERABAD DATED 19.09. 2017. 2. AT THE OUTSET , IT IS SEEN THAT THERE IS A DELAY OF 43 7 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT STATING THE REASONS FOR CONDONATION OF DELAY. ON PERUSAL OF THE SAME, IT IS NOTICED THAT THE C.A. OF THE ASSESSEE FIRM HAS SUFFERED A PARALYSIS ATTACK AND SINCE MOST OF THE RECORDS, FILES, INFORMATION AND CORRESPONDENCE WITH THE INCOME TAX DEPARTMENT REMAINED WITH THE C.A. , THEY COULD NOT BE RECOVERED WITHIN TIME AND HENCE THE APPEAL WAS FILED WITH A DELAY. IT WAS FURTHER SUBMITTED THAT SRI T.SRIDHAR ONE OF THE DIRECTORS OF THE FIRM WAS ALSO SUFFERING FROM CANCER DURING THE RELEVANT PERIOD AND HAS PASSED AWA Y ON 05.08.2018. 2.1. TAKING ALL THESE REASONS INTO CONSIDERATION, I AM SATISFIED THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE IN FILING THE APPEAL WITHIN TIME BEFORE THE TRIBUNAL. THEREFORE, THE DELAY IS CONDONED. ITA NO. 457 /HYD./201 9 AY 201 2 - 13 C & K MANAGEMENT LTD., SEC.BAD 2 2.2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSMENT ORDER AND CIT(A) ORDER IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. BECAUSE LD. AO ERRED IN DISALLOWING EMPLOYEE CONTRIBUTION OF ESI U/S.36(1)(VA) OF THE IT ACT, AS IT IS NOT PAID WITHIN THE DUE DATE OF ESI ACT, 1948 EVEN THOUGH THE SAME IS PAID ON OR BEFORE THE DUE DATE OF FILING INCOME TAX RETURN AND ALLOWABLE U/S. 43B OF IT ACT, A NON - OBSTANTE CLAUSE. LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANC E MADE. 3. BECAUSE THE LD. AO ERRED IN DISALLOWING EXPENDITURE NOT INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME U/S.14A READ WITH RULE 8D(II) AND RULE 8D(III) AS INVESTMENT IN SUBSIDIARY COMPANY IS MADE IN AY 2012 - 13 (A) FROM FREE CASH F LOWS GENERATED FROM BUSINESS OPERATIONS OF THE COMPANY (B) AS A PART OF STRATEGIC INVESTMENT TO ACQUIRE CONTROLLING STAKE AND NOT FOR INCIDENTAL OR EXEMPT INCOME. LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE. 4. BECAUSE THE LD. AO ERRED IN ADDING BACK THE EXPENDITURE DISALLOWED U/S.14A UNDER THE MAT PROVISIONS U/S.115JB OF IT ACT, 1961. LD. CIT(A) ERRED IN UPHOLDING THE ADDITIONS MADE. 5. BECAUSE THE LD. AO ERRED IN DISALLOWING THE DEPRECIATION ON INTERNALLY GENERATED INTANGIBLE FIXED ASSETS (A) CONTENT (B) MARKET DEVELOPMENT EXPENDITURE WHICH ARE CAPITALISED IN ACCORDANCE WITH THE MANDATORY AS 10 (ACCOUNTING STANDARD ON FIXED ASSETS), MATCHING PRINCIPLE (MATCHING OF REVENUE VS. EXPENSE FOR THE YEAR), FINANCIAL STATEMENTS (INCLUDING SCHEDULES, N OTES TO FINANCIAL STATEMENTS) AUDITED AND CERTIFIED AS 'TRUE AND FAIR' BY PRACTISING CHARTERED ACCOUNTANT AS PER COMPANIES ACT 1956. LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE MADE. 6. BECAUSE THE LD.AO ERRED IN NOT QUANTIFYING AND NOTIFYING THE AMOU NT OF LOSS TO BE CARRIED FORWARD IN THE ASSESSMENT ORDER AS PER SEC.157 OF THE IT ACT. THE LD. CIT(A) ERRED BY NOT GIVING ANY DECISION ON THIS GROUND OF APPEAL. 2.3 . AS REGARDS GROUND NO.2, THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ALL THE PAYMENTS OF ESI WERE MADE WITHIN THE DUE DATES EXCEPT FOR THE PAYMENT WERE IN JANUARY, 2012 WITH A DELAY OF 3 DAYS. HE SUBMITTED THAT ALL THE PAYMENTS HAVE BEEN MADE INTO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. 2.4. THE LD.DR WAS ALSO HEARD. 3. I FIND THAT THE ASSESSEE HAS FILED THE FOLLOWING CHART GIVING THE DETAILS OF PAYMENT S OF ESIC: ITA NO. 457 /HYD./201 9 AY 201 2 - 13 C & K MANAGEMENT LTD., SEC.BAD 3 SL. NO. MONTH AMOUNT DEDUCTED DUE DATE AMT. PAID ON EMPLOYEE (1.75) EMPLOYER (4.75) TOTAL DELAY 43 B DIS - ALLOWANCE 1. MAR.2011 18334 21 APR.11 15 APR.11 4936 13398 18334 - 6 2. MAR.2011 7224 21 APR.11 15 APR.11 1945 5279 7224 - 6 3. APR.11 19063 21 MAY .11 1 1 MAY .11 5132 13931 19063 - 10 4. APR.11 7406 21 MAY .11 1 1 MAY .11 1994 5412 7406 - 10 5. MAY.11 22016 21 JUNE.11 20 JUNE.11 5927 16089 22016 - 1 6. MAY.11 6719 21 JUNE.11 20 JUNE.11 1809 4910 6719 - 1 7. JUNE.11 21575 21 JULY.11 21 JULY.11 5809 15766 21575 0 8. JUNE.11 6746 21 JULY.11 21 JULY.11 1816 4930 6746 0 9. JULY.11 20030 21 AUG.11 24 AUG.11 5383 14637 20030 3 10. JULY.11 6273 21 AUG.11 24 AUG.11 1689 4584 6273 3 11. AUGUST.11 22285 21 SEPT.11 15 SEPT.11 6000 16285 22285 - 6 ON TIME 12. AUGUST.11 7802 21 SEPT.11 15 SEPT.11 2101 5701 7802 - 6 ON TIME 13. SEPT.11 21693 21 OCT.11 12 OCT.11 5840 15853 21693 - 9 14. SEPT.11 7515 21 OCT.11 12 OCT.11 2023 5492 7515 - 9 15. OCT.11 20249 21 NOV.11 11 NOV.11 5452 14797 20249 - 10 16. OCT.11 5183 21 NOV.11 11 NOV.11 1395 3788 5183 - 10 17. NOV.11 19399 21 DEC.11 12 DEC.11 5223 14176 19399 - 9 18. NOV.11 5321 21 DEC.11 11 DEC.11 1433 3888 5321 - 10 19. DEC.11 19559 21 JAN.12 23 JAN.12 5266 14293 19559 2 20. DEC.11 5330 21 JAN.12 23 JAN.12 1435 3895 5330 2 21. JAN.12 18889 21 FEB.12 24 FEB.12 5085 13804 18889 3 DELAY 22. JAN.12 5060 21 FEB.12 24 FEB.12 1362 3698 5060 3 DELAY 23. FEB.12 17559 21 MAR.12 16 MAR.12 4747 12832 17559 - 5 ON TIME 24. FEB.12 5338 21 MAR.12 16 MAR.12 1437 3901 5338 - 5 ON TIME 25. MARCH.12 17005 21 APR.12 19 APR.12 4578 12427 17005 - 2 26. MARCH.12 4886 21 APR.12 19 APR.12 1315 3571 4886 TOTAL 338459 91122 247337 338459 ITA NO. 457 /HYD./201 9 AY 201 2 - 13 C & K MANAGEMENT LTD., SEC.BAD 4 TAKING NOTE OF THE FACT THAT ASSESSEE HAS MADE THE PAYMENTS WITHIN THE DUE DATES PRESCRIBED BY THE RELEVANT ACT AND THE DELAYED PAYMENTS ARE ALSO BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME, THE DISALLOWANCE U/S 36 (1)(VA) OF THE INCOME TAX ACT, 196 1 (THE ACT) R.W.S. 2 ( 24 ) OF THE ACT IS DELETED. 4. AS REGARDS GROUND NOS. 3 AND 4 AGAINST THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE ITAT RULES, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE RELE VANT AY, AND, THEREFORE, NO DISALLOWANCE U/S 14A WAS REQUIRED TO BE MADE. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, I FIND THAT THE AO HAS MADE DISALLOWANCE U/S 14A OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS UTILISED BORROWE D FUNDS TO MAKE INVESTMENT OF RS.2.71 CRORES IN M/S TMI EZE ACADEMY PVT. LTD. HOWEVER, IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME DURING THE YEAR AND THAT ALL OF ITS INCOME HA S BEEN OFFERED TO TAX. I FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. CHETTINAD LOGISTICS (P) LTD. REPORTED IN (2018) 95 TAXMANN.COM 250 (SC) HAS UPHELD THE FINDINGS OF THE HONBLE MADRAS HIGH COURT IN CIT VS. CHETTINAD LOGISTS P LTD. REPOR TED IN (2017) 80 TAXMANN.COM 221 (MAD.), WHERE IN IT WAS HELD THAT WHERE THERE IS NO EXEMPT INCOME EARNED, NO DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE. RESPECTFULLY FOLLOWING THE SAME, THE DISALLOWANCE MADE U/S 14A IS DELETED. 6. AS REGARDS GROUND NO .5, I FIND THAT THE ASSESSEE HAS NOT FILED ANY DETAILS OF THE FIXED ASSETS (A) CONTENT; (B) MARKET DEVELOPMENT EXPENDITURE EITHER BEFORE THE AO OR CIT(A) FOR DEPRECIATION CLAIMED THEREON , DUE TO WHICH B OTH THE AO AND CIT(A) DISALLOWED THE CLAIM OF DEPRECI ATION. THE LD.COUNSEL FOR THE ASSESSEE SOUGHT TO FILE SOME DETAILS BEFORE THE TRIBUNAL. HOWEVER, SINCE NO MATERIAL WAS FILED BEFORE THE AUTHORITIES BELOW, I DEEM IT FIT AND PROPER TO REMAND THE ISSUE BACK TO THE FILE OF AO WITH A DIRECTION TO THE ASSESS EE TO FILE ALL THE NECESSARY DETAILS BEFORE THE AO AND ON SUCH FILING, THE AO SHALL CONSIDER AND DECIDE THE ISSUE AFRESH . NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. THIS GROUND IS ACCORDINGLY TREATED AS ALLOWED F OR STATISTICAL PURPOSES. ITA NO. 457 /HYD./201 9 AY 201 2 - 13 C & K MANAGEMENT LTD., SEC.BAD 5 7. GROUND NO.6 IS ALSO REMITTED TO THE FILE OF AO TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESSEE. 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 08 TH JANUARY, 2020 . SD/ - (P MAD HAVI DEVI) JUDICIAL MEMBER DATED: THE 08 TH JANUARY, 2020 . *GMV COPY FORWARDED TO: 1. C&K MANAGEMENT LTD., 1 - 8 - 303/48/12, CAREER CENTER, PRENDERGHAST ROAD, SECUNDERABAD 500 003, TELANGANA . 2. ITO, WARD 1( 4 ), HYDERABAD 3. CIT (A) - 1 , HYDERABAD 4. THE PR.CIT - 1 , HYDERABAD 5 . D.R. ITAT HYDERABAD 6 . GUARD FILE // C O P Y // ITA NO. 457 /HYD./201 9 AY 201 2 - 13 C & K MANAGEMENT LTD., SEC.BAD 6 1. DRAFT DICTATED ON 3 0/12/19 2. DRAFT PLACED BEFORE THE AUTHOR 0 1 / 01 / 20 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO SRPS 6. KEPT FOR PRONOUNCEMENT 08/01/20 7. FILE SENT TO BENCH CLERK