Sara Elgi Arteriors Ltd., Coimbatore V. DCIT, Coimbatore

ITA 521/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4543 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Court: TRIBUNAL
• Department Lawyers: MURUGABOOPATHY JCIT
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 521/MDS/2017 / ASSESSMENT YEAR : 2012-13 M/S. SARA ELGI ARTERIORS LTD., 737-D, GREEN FIELDS, PULIAKULAM ROAD, COIMBATORE 641 045. [PAN: AAHCS 7971E] VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -2, COIMBATORE. ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI M. KARUNAKARAN, ADVOCATE )*% & / RESPONDENT BY : SHRI MURUGABOOPATHY, JCIT & /DATE OF HEARING : 15.05.2017 & /DATE OF PRONOUNCEMENT : 26.05.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE DATED 25.01.2017. :-2-: I.T.A. N0. 521/MDS/2017 2. M/S. SARA ELGI ARTERIORS LTD., THE ASSESSEE, IS A MANUFACTURER OF ELECTRICAL AND GENERAL ENGINEERING PRODUCTS. IN TH E ASSESSMENT MADE U/S. 143(3) FOR ASSESSMENT YEAR 2012-13, THE ASSESSING O FFICER FOUND THAT THE ASSESSEE MADE AN INVESTMENT IN SHARES. INVOKING S ECTION 14A R.W.R. 8D AND THE CBDT CIRCULAR NO. 5 OF 2014 DATED 11.02.2014, T HE ASSESSING OFFICER DISALLOWED EXPENDITURE OF RS. 10,48,444/-, AGAINST WHICH THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS)- 1, COIMBATORE. THE ASSESSEE PLEADED BEFORE HIM THAT THE AO MADE SUCH D ISALLOWANCE IRRESPECTIVE OF THE FACT WHETHER IT EARNED ANY EXEMPT INCOME DUR ING THE FINANCIAL YEAR OR NOT. FURTHER, IT SUBMITTED THAT THE ENTIRE INVESTM ENT I.E., RS. 2,93,74,856/- MADE DURING THE YEAR WAS WITH ITS SUBSIDIARY COMPAN Y M/S. ELGI BUILDING PRODUCTS LTD., SUCH INVESTMENT WAS MADE NOT FOR THE PURPOSE OF EARNING DIVIDEND OR CAPITAL GAIN, BUT TO PROMOTE BUSINESS O F THE SUBSIDIARY COMPANY ON ACCOUNT OF BUSINESS EXIGENCY. THE CIT(A) FOLLOW ING THE RULING OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF UNITED BREWERIES LTD, REPORTED IN 72 TAXMANN.COM 102 (KARNATAKA) AND THE HONBLE ITAT , MUMBAI DECISION IN THE CASE OF SARASWAT CO-OPERATIVE BANK LIMITED IN I TA NO. 8622/MUM/2010 SUSTAINED THE DISALLOWANCES MADE U/S. 14A R.W.R. 8D (2)(II) TO THE EXTENT OF RS. 9,01,570/- AND 8D(2)(III) TO THE EXTENT OF RS. 1,46 ,874/- (TOTALLING RS. 10,84,444/-). :-3-: I.T.A. N0. 521/MDS/2017 3. AGGRIEVED AGAINST THE CIT(A) ORDER, THE ASSESSEE FILED THIS APPEAL. THE AR PLEADED THAT THE ASSESSEE HAS NOT EARNED ANY EXE MPTED INCOME AND RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. CHETTINAD LOGISTICS PVT. LTD ., IN TCA NO. 24 OF 2017 DATED 13.03.2017. 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE COPIES OF THE JUDGEMENTS RELIED ON BY THE AR. THE QUESTION AROSE IN THE ABOVE CASE IS EXTRACTED AS UNDER: THE ONLY ISSUE, WHICH AROSE FOR CONSIDERATION, BEF ORE THE TRIBUNAL, WAS, WHETHER AN ADDITION MADE IN THE SUM OF RS. 86,62,748/- QUA, THE ASSESSEE, BY INVOKING THE PROV ISIONS OF SECTION 14A OF THE ACT, READ WITH, RULE 8D OF THE I NCOME TAX RULES, 1962 (IN SHORT, THE RULES) WAS VALID. THE OPERATIVE PORTION OF THE JUDGMENT IS EXTRACTED AS UNDER: TO OUR MINDS, QUESTIONS OF LAW, WHICH COULD HAVE ARISEN ARE ALREADY COVERED BY THE JUDGEMENT OF A CO-ORDINA TE BENCH OF THIS COURT RENDERED IN M/S. REDINGTON (INDIA) LIMIT ED CASE. THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF RED INGTON (INDIA) LTD. VS. ACIT (TCA NO. 520 OF 2016 DATED 23.12.2016) HELD TH AT IN CONCLUSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 14A R.W.R. 8D OF THE RULES CANNOT BE MADE APPLICABLE IN A VACUUM I.E. IN THE A BSENCE OF EXEMPT :-4-: I.T.A. N0. 521/MDS/2017 INCOME. SINCE, IN THIS CASE, THERE IS NO EXEMPT I NCOME, APPLYING THE RATIOS IN THE ABOVE JUDGEMENTS, THE ADDITIONS ARE DELETED. 5. IN THE RESULT, THE APPEAL IS ALLOWED ORDER PRONOUNCED ON FRIDAY, THE 26 TH DAY OF MAY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 26 TH MAY, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF