MTAR Technologies Private Limited, Hyderabad V. Asst. Commissioner of Income Tax, Circle-16(2), Hyderabad

ITA 489/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6471 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G KALYAN DAS
• Section: 143(3); 14A; 115JB; 143(1); 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.489/HYD/2018 ASSESSMENT YEAR:2013 - 14 MTA R TECHNOLOGIES PRIVATE LIMITED, HYDERABAD. PAN: AACCM 2021 N VS. ACIT, CIRCLE - 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G. KALYAN DAS & A. HARISH REVENUE BY: SHRI ROHIT MUJUMDAR, DR DATE OF HEARING: 09/02/2021 DATE OF PRONOUNCEMENT: 09 /0 4 /2021 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A) - 4, HYDERABAD IN APPEAL NO. 0020/16 - 17/DCIT, CIR.16(2)/CIT(A) - 4/HYD/17 - 18, DATED 17/01/2018 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE AY: 2013 - 14. 2. THE ASSESSEE HAS RAISED FIVE GROUNDS IN ITS APPEAL HOWEVER, THE CRUX ES OF THE ISSUE ARE THAT: - 2 1. THE LD. AO HAS ERRED BY DISALLOW ING THE NOTIONAL EXPENDITURE OF RS. 57,26,865/ - INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT . 2. THE LD. CIT (A) HAS ERRED BY TREATING THE APPEAL OF THE ASSESSEE TO BE INFRUCTUOUS AS THE ASSESSEE HAS FILED APPEAL AGAINST THE ASSESSMENT ORDER U/S. 154 OF THE ACT DATED 6/3/2017 IN RESPECT OF ADDITION MADE TO WARDS THE BO OK PROFIT U/S. 115JB OF THE ACT INVOKING SECTION 14A OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING ENGINEERING GOODS FILED ITS RETURN OF INCOME ON 1/10/2013 DECLARING NIL INCOME AS PER NORMAL PROVISIONS OF THE ACT AND RS. 2,20,93,000/ - U/S. 115JB OF THE ACT. INITIALLY, THE CASE WAS PROCESSED U/S. 143(1) OF THE ACT AND THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AS PER THE NORMS OF CASS. FINALLY, THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 29/2/2016 WHEREIN TH E LD. AO MADE ADDITION OF RS. 57,26,865/ - INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT AND ALSO DISALLOWED AMOUNT OF RS. 14,000/ - TOWARDS PRIOR PERIOD EXPENDITURE. ON APPEAL, WITH RESPECT TO ADDITION MADE BY INVOKING SECTION 14A OF THE ACT, THE LD. C IT (A) DISMISSED THE APPEAL TREATING IT TO BE INFRUCTUOUS BECAUSE THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ASSESSMENT ORDER U/S. 154 OF THE ACT DATED 6/3/2017 WHICH WAS SUSTAINED. 3 4. AT THE OUTSET, THE LD. AR SUBMITTED BEFORE U S THAT THE LD. CIT (A) HA S NOT DECIDED THE ISSUE WITH RESPECT TO ADDITION MADE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT WHILE COMPUTING TAXABLE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT . THE LD. AR FURTHER SUBMITTED THAT THE ISSUE IN THE ASSESSMENT ORDER U/S. 154 OF THE ACT WAS WITH RESPECT TO THE ADDITION MADE INVOKING THE PROVISION OF SECTION 14A OF THE ACT WHILE COMPUTING THE TAXABLE INCOME U/S. 115JB OF THE ACT AND HENCE, NOT RELATED TO THE ISSUE WHICH WAS BEFORE THE LD. CIT (A). THE LD. AR FURTHER ARGUED STATING THAT THE ENTIRE INVESTMENT MADE BY THE ASSESSEE COMPANY WAS IN ITS SISTER COMPANY OUT OF ITS NON - INTEREST - BEARING FUNDS AND THEREFORE , THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED BECAUSE THERE WAS NO EXPENSE S INVOLVED FOR MAKING SUCH INVESTMENT. IT WAS THEREFORE PLEADED THAT THE ADDITION MADE FOR RS. 57,26,865/ - MAY BE DELETED. THE LD. DR ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDER OF THE LD. AO HOWEVER, ADMITTED THAT THE LD. CIT (A) HAD ABSTAINED FROM ADDRESSING THE ISSUE RAISED IN THE APPEAL ERRONEOUSLY BY TREATING THE APPEAL TO BE INFRUCTUOUS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. WITH RESPECT TO THE ARGUMENTS ADVANCED BY THE LD. AR DISMISSING THE APPEAL OF THE ASSESSEE BY THE LD. CIT (A) BY TREATING THE APPEAL TO BE INFRUCTUOUS, WE FIND MERIT IN THE SAME. THE ISSUE IN THE APPEAL AGAINST THE ORDER U/S. 154 OF THE ACT WAS WITH RESPECT TO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT BY COMPUTING 4 THE TAXABLE INCOME OF THE ASSESSEE U/S. 115JB OF THE ACT. THEREFORE, WE DO NOT FIND IT TO BE OF ANY RELEVANCE WITH RESPECT TO THE ISSUE RAISED IN TH E APPEAL BEFORE THE LD. CIT (A) WHICH IS ON INVOKING THE PROVISIONS OF SECTION 14A OF THE A CT WHILE COMPUTING THE TAXABLE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. HENCE, IT IS EVIDENT THAT THE LD. CIT (A) HAS NOT ADDRESSED THE GROUND RAISED IN THE APPEAL . 6. HOWEVER O N AN EARLIER OCCASION ON THE IDENTICAL ISSUE OF INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT WHILE COMPUTING THE TAXABLE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT , THIS BENCH OF THE TRIBUNAL HAD HELD IN ITA NO. 1990/HYD/2018 (AY 2013 - 14), VIDE ORDER DATED 15/02/2021 IN THE CASE OF M/S. SHALIVAHANA GREEN ENERGY LIMITED AS FOLLOWS : - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FACTUALLY FOR MAKING ANY INVESTMENT IN EQUITY SHARES BY ANY ENTITY ONLY THE FOLLOWING CATEG ORIES OF EXPENDITURE WILL BE ATTRIBUTABLE: - (I) INTEREST ON INTEREST BEARING FUNDS THAT IS UTILISED FOR THE PURPOSE OF MAKING SUCH INVESTMENT. (II) DIRECT AND INDIRECT EXPENSES ATTRIBUTABLE TO THE PROCESS OF MAKING SUCH INVESTMENT SUCH AS EXPENDITURE INCURRED FOR DUE DILIGENCE, MANAGERIAL EXPENDITURE, CLERICAL EXPENSE, STATIONARY EXPENDITURE AND PORTFOLIO MANAGEMENT EXPENDITURE. 7. THERE CANNOT BE ANY OTHER EXPENDITURE OTHER THAN THE EXPENDITURE MENTIONED HEREIN ABOVE THAT CAN BE INCURRED BY AN ENTITY WHICH WILL BE ATTRIBUTABLE TOWARDS INVESTMENTS MADE IN EQUITY SHARES OF OTHER COMPANIES. IN THE CASE OF THE ASSESSEE, THE ASSESSEE HAS INVESTED IN ITS OWN SUBSIDIARY COMPANIES OUT OF ITS NON - INTEREST - BEARING FUNDS SUCH AS OWN SHARE CAPITAL AND RESERVES AND THIS IS NOT IN DISPUTE. SINCE IN THE CASE OF THE ASSESSEE THE ASSESSEE COMPANY HAS UTILISED ONLY ITS NON - INTEREST - BEARING FUNDS FOR MAKING INVESTMENT IN ITS OWN SUBSIDIARY COMPANY, NO INTEREST COST CAN BE ATTRIBUTABLE TO THE SAME BECAUSE, THERE IS NO INTEREST COST T O THE ASSESSEE, AS IT CAN BE TREATED THAT THE ASSESSEE HAS WITHDRAWN FROM ITS CAPITAL AND RESERVES WHICH ARE ASSESSEES INTEREST FREE FUNDS FOR MAKING SUCH INVESTMENT. FURTHER, FOR MAKING INVESTMENT IN ITS OWN COMPANY THERE CANNOT BE ANY COST ATTRIBUTABLE WITH RESPECT TO DIRECT AND INDIRECT EXPENSES TOWARDS THE PROCESS OF DECISION MAKING, DUE DILIGENCE, 5 MANAGERIAL EXPENDITURE AND PORTFOLIO MANAGEMENT EXPENDITURE BECAUSE NO SUCH COST CAN ARISE FOR MAKING INVESTMENT IN ONES OWN ENTITY. FURTHER, ONLY MEAGRE EXPENSES CAN BE ATTRIBUTABLE WITH RESPECT TO CLERICAL AND STATIONARY EXPENSES WHICH IS NEGLIGIBLE AND THAT IS DESERVED TO BE IGNORED. THEREFORE, FACTUALLY THERE CANNOT BE ANY EXPENDITURE ATTRIBUTABLE TO THE INVESTMENT MADE IN SISTER COMPANY WHEN THE INVEST MENT IS OUT OF ITS OWN INTEREST FREE FUND.. 7 . FOLLOWING THE RATIO LAID DOWN BY US IN THE ABOVE - MENTIONED DECISION, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. AO TO VERIFY WHETHER THE ASSESSEE HAD MADE THE ENTIRE INVESTMENT IN ITS SISTER - CONCERNS OUT OF ITS NON - INTEREST - BEARING FUNDS AND IF FOUND SO, DELETE THE ADDITION MADE FOR RS. 57,26,865/ - INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT AND IF FOUND OTHERWISE, PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW AND MERIT. ACCORDING LY, BOTH THE RELEVANT GROUNDS RAISED IN THE APPEAL ARE DISPOSED OFF. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREIN ABOVE. PRONOUNCED IN THE OPEN COURT ON THE 09 TH APRIL , 2021. SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 09 TH APRIL , 2021. OKK 6 COPY TO: - 1. M/S. MTAR TECHNOLOGIES PRIVATE LIMITED C/O. M/S. KALYANDAS & CO., CHARTERED ACCOUNTANTS, 15, VENKATESWARA COLONY, NARAYANGUDA, HYDERABAD 500 029. 2. ASST. COMMISSIONER OF INCOME TAX , CIRCLE - 16(2), HYDERABAD. 3. THE CIT (A) - 4, HYDERABAD. 4. PR. COMMISSIONER OF INCOME TAX - 4, HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. 6. G UARD FILE.