Travancore Textiles P Ltd., CHENNAI V. ITO, CHENNAI

ITA 483/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6428 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-07-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Earning of tax free income

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC D BENCH, CHENNAI , ! ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER . / ITA NO. 483/MDS/2017 / ASSESSMENT YEAR : 2013-14 M/S. TRAVANCORE TEXTILES P. LTD ., THE INCOME-TAX OFFICER, NO.12, OLD NO.22, V. CORPORATE WARD 3(2), HADDOWS ROAD, CHENNAI. CHENNAI 600 006. PAN AAACT 2492 E ( /APPELLANT) RESPONDENT) / APPELLANT BY : SHRI A.S.SRIRAMAN, ADVOCATE / RESPONDENT BY : SHRI B. SAGADEVAN, JCIT ! / DATE OF HEARING : 12.07.2017 '# ! / DATE OF PRONOUNCEMENT : 21.08.2017 # / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-11, CHEN NAI DATED 29.12.2016 FOR ASSESSMENT YEAR 2013-14. - - ITA 483/MDS/17 2 2. THE ONLY GRIEVANCE IN THIS APPEAL IS WITH REGARD TO SUSTAINING THE DISALLOWANCE OF EXPENSES AMOUNTING T O 7,37,749/- AS AGAINST THE TOTAL CLAIM OF 11,81,998/- IN PROPORTION TO THE AGRICULTURAL INCOME REPORTED AND THE INTEREST INCOME CLAIMED IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFF ICER FOUND THAT THE ASSESSEES INCOME MAINLY CONSISTS OF AGRIC ULTURAL INCOME, INTEREST INCOME AND PROFIT ON SALE OF INVES TMENT. NO TEXTILE BUSINESS HAS BEEN CARRIED OUT DURING THE YE AR. THE AO OBSERVED THAT THE ASSESSEE DEDUCTED ALL THE EXPENSE S DIRECTLY ATTRIBUTABLE TO AGRICULTURAL ACTIVITIES FROM GROSS AGRICULTURAL RECEIPTS WHEREAS ALL OTHER REMAINING EXPENSES HAVE BEEN DEDUCTED FROM THE INTEREST INCOME, WHICH IN TURN, R EDUCED THE TAXABLE INCOME. ACCORDING TO THE AO, IN THE ABSENC E OF ANY OTHER BUSINESS OTHER THAN INTEREST INCOME AND AGRIC ULTURAL ACTIVITY, ALL OTHER COMMON EXPENSES HAVE TO BE DEDU CTED PROPORTIONATELY FROM AGRICULTURAL INCOME AND OTHER TAXABLE INCOME AND SHOW CAUSE NOTICE WAS ISSUED TO THE ASSE SSEE, AS TO WHY 5/8 TH OF THE EXPENSES SHOULD NOT BE DISALLOWED. THE - - ITA 483/MDS/17 3 ASSESSEES CONTENTION THAT ALL THE EXPENSES INCURRE D IN CONNECTION WITH THE INVESTMENT ACTIVITY CARRIED OUT FROM THE REGISTERED OFFICE, WAS NOT ACCEPTED BY THE AO. T HEREFORE, THE AO DISALLOWED PROPORTIONATELY, I.E. 5/8 TH OF THE COMMON EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT AGAINST INTE REST INCOME OF 11,81,998/- AMOUNTING TO 7,38,749/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE A SSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. BEFORE THE CIT(APPEALS), THE LD. AR, FILED THE A SSESSEES FINANCIAL DETAILS BUT NO WRITTEN SUBMISSION WAS SUB MITTED IN SUPPORT OF THE ASSESSEES CLAIM. WHILE, THE ASSESS EE HAS CLAIMED EXEMPTION U/S.10 OF THE ACT TOWARDS AGRICUL TURAL INCOME AND U/S.10(38) OF THE ACT TOWARDS PROFIT ON SALE OF INVESTMENT AND THE ASSESSEE HAS CLAIMED THE ENTIRE EXPENDITURE AGAINST THE INTEREST INCOME, AS POINTED OUT BY THE AO. AS PER SEC.14A OF THE ACT, EXPENDITURE RELATABLE TO THE INCOME EXEMPT FRO M TAXATION SHOULD BE DISALLOWED WHICH THE ASSESSEE HAS FAILED TO DO SO. - - ITA 483/MDS/17 4 4.1 THE CIT(APPEALS) RELIED ON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF RHYTHM EXPORTS (P) LTD. V. ITO REPORTED IN 2 SOT 429, WHEREIN IT WAS HELD THAT THE EXPENDITURE RELATABLE TO AN EXEMPT INCOME SHOULD BE DISALLOWED ON PROPORTIONATE BASIS. THEREFORE, FOLLOWING THE AFOR ESAID DECISION OF THE TRIBUNAL, THE CIT(APPEALS) CONFIRMED THE DIS ALLOWANCE MADE BY THE AO. AGAINST THIS, THE ASSESSEE IS IN A PPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING, LD.A. R MADE A PLEA THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR AGRICULTURAL INCOME AND FOR INTEREST INCOME AND THE ASSESSEE HAS RIGHT TO DEMONSTRATE ACTUAL EXPENDITURE INCURRED TO WARDS AGRICULTURAL INCOME AND THE LD.A.R PLEADED FOR ONE MORE OPPORTUNITY TO PRESENT THE BOOKS OF ACCOUNTS BEFORE THE LD. ASSESSING OFFICER. CONSIDERING THE REQUEST OF THE L D.A.R, I AM INCLINED TO REMIT THE ISSUE TO THE FILE OF LD. ASSE SSING OFFICER TO ESTABLISH THE CLAIM OF EXPENDITURE FOR AGRICULTURAL . ACCORDINGLY, THE ISSUE IN DISPUTE IS REMITTED BACK TO THE FILE O F LD. ASSESSING - - ITA 483/MDS/17 5 OFFICER FOR FRESH CONSIDERATION FOR GIVING PROPER O PPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21 ST AUGUST, 2017 AT CHENNAI. SD/- ( $ % & ' ) ()*+,-*.//0*-12 ! 34566/7+8*+89:;<:- $= /CHENNAI, >3 /DATED, 21 ST AUGUST, 2017. K S SUNDARAM 3? @ABA / COPY TO: 1 . / APPELLANT 3. C2 / CIT(A) 5. ADE F / DR 2. / RESPONDENT 4. C / CIT 6. EGH / GF