TVS Interconnect Systems Private Limited, Madurai V. DCIT, Madurai

ITA 553/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8767 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVASRINIVAS IRS
• Assessee Lawyers: S A BALASUBRAMANYAN
• Keywords: Opportunity of being heard; Wholly owned subsidiary; Notional interest
• Section: 143(3); 14A; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , ! . ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.552 & 553/MDS/2016 # % &% / ASSESSMENT YEAR : 2010-2011 & 2011-2012. TVS INTERCONNECT SYSTEMS PRIVATE LIMITED, (FORMERLY KNOWN AS TVS INTERCONNECT SYSTEMS LTD) 7-B, WEST VELI STREET, MADUARAI 625 001. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I(1) MADURAI. [PAN AADCS 3666G] ( / APPELLANT) ( /RESPONDENT) APPELLANT BY : SHRI. S.A. BALASUBRAMANYAN, ADV RESPONDENT BY : SHRI. SHIVA SRINIVAS, IRS, JCIT. ' ' ( /DATE OF HEARING : 06-07-2016 )& ' ( /DATE OF PRONOUNCEMENT : 27-07-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST DIFFERENT ORDERS OF COMMISSIONER OF INCOM E-TAX (APPEALS)-1, MADURAI DATED 02.12.2015 FOR THE ASSESSMENT YEARS 2010-2011 AND 2011-2012 PASSED U/S.143(3) AND 250 OF THE INCOME T AX ACT, 1961. ITA NO.552 &553/MDS/2016 :- 2 -: SINCE THE ISSUE IN THESE APPEALS ARE COMMON IN NATURE, THESE APPEAL S ARE CLUBBED, HEARD TOGETHER, AND DISPOSED OF BY THI S COMMON ORDER FOR THE SAKE OF CONVENIENCE, WE TAKE UP ITA NO.552/MDS/ 2016 OF ASSESSMENT YEAR 2010-2011 FOR ADJUDICATION:- 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1.1 THE LEARNED CIT (APPEALS) ERRED IN AFFIRMING THE DISALLOWANCE OF RS.44,18,136 /- UNDER SECTION 14A O F THE ACT. HE FAILED TO NOTE THAT WHEN THE ASSESSEE H AS NOT RECEIVED ANY EXEMPTED INCOME THIS YEAR THERE WAS NO SCOPE OF APPLYING SEC. 14A OF THE ACT WHICH ENABLED THE AO TO DISALLOW THE EXPENDITURE INCURRED IN RELATION TO EXEMPTED INCOME. 1.2 THE LEARNED CIT ( APPEALS ) FAILED TO APPRECIA TE THAT WHILE THE INVESTMENT IN SHARES WERE ONLY RS. 15,00,000/-, AS STATED BY HIM IN HIS ORDER, THE ASSUMED EXPENDITURE IN RELATION TO THE INVESTMENT HAS BEEN AT RS.44,18,138/- FOR DISALLOWANCE U/S 14A WHICH COULD NEVER HAVE BEEN THE CASE. 1.3 THE LEARNED CIT ( APPEALS) OUGHT TO HAVE HELD THAT EVEN IF A DISALLOWANCE U/S 14A IS POSSIBLE IN THIS CASE, SUCH A DISALLOWANCE CANNOT EXCEED THE EXEMPTED INCOME. AS IN THIS CASE, ADMITTEDLY, NO DIVIDEND INCOME WAS RECEIVED THIS YEAR THE EXPENDITURE FOR DISALLOWANCE COULD NOT EXCEED THIS AMOUNT WHICH IS ZERO. 1.4 THE LEARNED CIT ( APPEALS ) IS NOT JUSTIFIED I N HOLDING THAT EVEN IF NO DISALLOWANCE COULD BE MADE U/S 14A THERE COULD BE A DISALLOWANCE UNDER SEC. 36(1 )(III) OF THE ACT. HE FAILED TO APPRECIATE THA T THE ASSESSEE DOES NOT MAKE ANY STOCK MARKET INVESTMENTS BUT ALL ITS INVESTMENTS WERE MADE ONLY IN RELATION TO ITS BUSINESS. AS THESE WERE BUSINESS RE LATED INVESTMENTS IT COULD NOT BE SAID THAT THE BORROWING S WERE DIVERTED FOR NON BUSINESS PURPOSES AND INTERES T COULD NOT BE DISALLOWED EVEN UNDER SECTION 36(1 )(I II) OF THE ACT. ITA NO.552 &553/MDS/2016 :- 3 -: 2.1 THE LEARNED CIT (APPEALS) IS NOT CORRECT IN AFFIRMING INTEREST AT 11.75 % ON THE TWO LOANS ADVA NCED BY THE ASSESSEE TO M/S NSM HOLDINGS LTD AND M/S NK TELE SYSTEMS LTD. BY APPLYING SEC. 36(1)(III) OF TH E ACT. HE FAILED TO APPRECIATE THAT THESE WERE ADVANCED ON LY FOR BUSINESS PURPOSES AND NO PORTION OF THE INTERES T PAID BY THE ASSESSEE COULD BE DISALLOWED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS IN THE BUSINESS OF MANUFACTURE, SALE AND TRADING IN CABLE ASSEMBILIES, ELECTRONIC CONNECTORS, RF COOKS, FIBRE OPTIC, NETWO RKING PRODUCTS ETC., AND FILED E-RETURN OF INCOME ON 28.09.2010 ADMITTIN G A LOSS OF =24,26,91,184/- UNDER NORMAL PROVISIONS OF INCOME TAX AND =28,50,94,678/- UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE AC T ON 06.03.2012 AND THE ASSESSEE COMPANY FILED RECTIFICATION PETITI ONS U/S.154 OF THE ACT AND WAS RECTIFIED. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) OF THE ACT WAS IS SUED. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND PRODUCED BOOKS OF ACCOUNT FOR VERIFICATION AND THE CASE WAS DISMISSED. THE LD. ASSESSING OFFICER IN THE SCRUT INY PROCEEDINGS OBSERVED THAT THE ASSESSEE COMPANY HAS MADE INVESTM ENT OF =15,00,000/- IN THE FINANCIAL YEAR AND CLAIMED EXEM PTION OF DIVIDEND INCOME U/S.10(34) OF THE ACT. THE LD. ASSESSING OFF ICER FOUND THAT THE ASSESSEE COMPANY IS NOT ELIGIBLE TO CLAIM EXPENDITU RE ON SUCH EXEMPTED INCOME AND THE PROVISIONS OF SEC. 14A OF T HE ACT SHALL APPLY ITA NO.552 &553/MDS/2016 :- 4 -: AND RELIED ON THE BOMBAY HIGH COURT DECISION OF GODREJ & BOYCE MFG. CO. LTD VS. DCIT 328 ITR 81 AND OTHER DECISIONS AND CALCULATED DISALLOWANCE U/S.14A R.W.R.8D. FURTHER, THE LD. ASS ESSING OFFICER ALSO FOUND THAT THE ASSESSEE HAS TRANSACTIONS WITH ASSO CIATE CONCERNS WERE THE ASSESSEE PROVIDED LOAN OF =26,00,000/- TO M/ S. NSM HOLDINGS LTD DURING THE PREVIOUS YEAR AND CHARGED INTEREST ONLY FOR SIX MONTHS. SIMILARLY, LOAN WAS ALSO GIVEN TO M/S. NK TELESYST EMS LTD =19,00,000/- AND THE ASSESSEE COMPANY HAS NOT CHARG ED ANY INTEREST. THE LD. AUTHORISED REPRESENTATIVE EXPLAINED THAT TH E AMOUNTS WERE LENT DUE TO BUSINESS EXPEDIENCY IN THE ORDINARY CO URSE OF BUSINESS. THE LD. AUTHORISED REPRESENTATIVE SUBMISSIONS ARE NOT CLEAR, AND THE LD. ASSESSING OFFICER ASSUMED THAT THE LOANS AND A DVANCES ARE ONLY FOR PARTICULAR BENEFIT, AS THE ASSESSEE IS AVAILING LOA NS FOR CARRYING ON DAY TO DAY AFFAIRS BY PLEADING THE STOCK AND SECURITIES AND PAYING INTEREST AND BUT HAS NOT CHARGING INTEREST ON LOANS TO SIST ER/ASSOCIATE CONCERNS. THE LD. ASSESSING OFFICER ESTIMATED INTE REST @ 17% PER ANNUM ON ADVANCES TO M/S. NSM HOLDINGS LTD FOR 6 MONTHS PERIOD AND AT THE RATE OF @ 11.75% BEING BANK CREDIT RATE ON ADVANCE OF RS.19,00,000/- TO M/S. NK TELESYSTEMS LTD AND THE A GGREGATE INTEREST AMOUNT WAS ADDED TO THE RETURNED INCOME AND ORDER P ASSED U/SEC. 143(3) OF THE ACT. AGGRIEVED BY THE ORDER OF LD. CO MMISSIONER OF ITA NO.552 &553/MDS/2016 :- 5 -: INCOME TAX (APPEALS) THE ASSESSEE FILED AN APPEAL B EFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE APPEARED AND ARGUED THE GROUNDS AND EXPLAINED THE FACTS THAT THE LD. ASSESSING OFFICER ERRED IN APPLYING THE PROVISIONS OF SEC. 14A R.W.R. 8D WERE ASSESSEE COMP ANY HAS NOT RECEIVED ANY EXEMPTED INCOME. THE ASSESSEE COMPANY HAS MADE INVESTMENTS IN SUBSIDIARIES/SISTER CONCERNS WITH B USINESS MOTIVE OVER A PERIOD. THE LD. ASSESSING OFFICER ERRED IN CHARG ING INTEREST ON ADVANCES TO SISTER COMPANIES WERE THE ADVANCES ARE PROVIDED ON VARIOUS BUSINESS CONSIDERATION. FURTHER, THE LD. AS SESSING OFFICER HAS QUANTIFIED INTEREST RATE DIFFERENTLY FOR CALCULATIO N OF NOTIONAL INTEREST. THE INVESTMENT IN SISTER CONCERN ARE BASED ON THE BUSINESS MOTIVE AND DIVIDEND INCOME IS INCIDENTAL. THE INVESTEE COM PANIES ARE LOSS MAKING COMPANIES AND SUCH INVESTMENTS ARE FOR STRAT EGIC STABILITY OF BUSINESS. THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) CONSIDERED THE FINDINGS AND GROUNDS OF THE ASSESSEE AND CBDT CIRCULAR NO.5/2014, DATED 11.02.2014. FURTHER, THE ASSESSEE HAS MADE INVESTMENTS IN FOUR GROUP COMPANIES DURING THE YEA R AND THREE COMPANIES IN THE YEAR 2007 AND THE ASSESSEE COMPAN Y COULD NOT PROVIDE BONAFIDE EVIDENCE THAT THE OWN FUNDS WERE UTILIZED FOR ITA NO.552 &553/MDS/2016 :- 6 -: INVESTMENTS IN SHARES AND ON PERUSAL OF BALANCE SH EET, THE OUTSTANDING LOAN FUNDS ARE =122.48 CRORES. THEREFO RE, THERE COULD NOT BE ANY REASON FOR ASSESSEE COMPANY TO INVEST OUT OF ITS OWN FUND AND COULD NOT SUBSTANTIATE THAT THE INVESTMENTS WERE MA DE FOR BUSINESS EXPEDIENCY. WITH THESE FINDINGS, THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION U/S.14A OF THE ACT . 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED THAT THE ASSESSEE HAS BORROWED FUNDS AND IN THE OPINION OF THE LD. ASSESSING OFFICER THE FUNDS WERE DIVERTED TO NON B USINESS PURPOSE AND UNDER THE PROVISIONS OF SEC. 36(1)(III) OF THE ACT, INTEREST ON CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS CAN O NLY BE ALLOWED. BUT THE ASSESSEE HAS DIVERTED THE BORROWED FUNDS TO SIS TER CONCERN AND THE LD. ASSESSING OFFICER WAS RIGHT IN CALCULATI NG NOTIONAL INTEREST BUT RATE OF INTEREST VARIED DIFFERENTLY AT 11.75% & 1 7% AND DIRECTED THE LD. ASSESSING OFFICER TO RECALCULATE INTEREST AT 11 .75% INSTEAD OF 17% AND PARTLY ALLOWED THE GROUND. AGGRIEVED BY THE COM MISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASSESSEE ASSAILED A N APPEAL BEFORE TRIBUNAL. 6. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE REITER ATED THE SUBMISSIONS MADE BEFORE ASSESSMENT AND APPELLATE P ROCEEDINGS AND ITA NO.552 &553/MDS/2016 :- 7 -: EXPLAINED THAT THE ASSESSEE HAS NOT RECEIVED ANY EX EMPTED INCOME AND THEREFORE PROVISIONS OF SEC. 14A ARE NOT APPLI CABLE. FURTHER, THE ASSESSEE HAS INVESTED =15,00,000/- DURING THE YEAR AND THE DISALLOWANCE OF SEC.14A IF APPLICABLE CANNOT EXCEED THE EXEMPTED INCOME AS THERE IS NO DIVIDEND INCOME RECEIVED BY T HE ASSESSEE. THERE COULD NOT BE ANY DISALLOWANCE. THE ASSESSEE HAS MADE INVESTMENTS IN SUBSIDIARY/SISTER COMPANIES FOR BUSI NESS PURPOSE, THEREFORE PROVISIONS OF SEC.14A DOES NOT APPLY AND ALSO BORROWED FUNDS WERE NOT DIVERTED FOR NON BUSINESS PURPOSES A ND PRAYED FOR ALLOWING THE APPEAL. 7. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND OPPOSED TO THE GROUNDS. 8. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE CRUX OF T HE ISSUE BEING THE ASSESSEE HAS MADE INVESTMENTS IN SUBSIDIARY/SISTER COMPANIES AND THE CONTENTION THAT OWN FUNDS GENERATED OUT OF BUSINES S WERE INVESTED AND NO BORROWED FUNDS WERE UTILIZED FOR THE PURPOS E OF INVESTMENTS. FURTHER, INVESTMENTS IN SUBSIDIARY/SISTER COMPANY S HALL NOT BE CONSIDERED FOR THE PURPOSE OF CALCULATION OF DISALL OWANCE UNDER RULE 8(2). THE LD. AUTHORISED REPRESENTATIVE DREW OUR A TTENTION TO THE ITA NO.552 &553/MDS/2016 :- 8 -: STATEMENT OF DETAILS OF SUBSIDIARY GROUP COMPANIES AND ALSO THE INVESTMENTS ARE REFLECTED IN FINANCIAL STATEMENTS A ND RELIED ON JUDICIAL DECISIONS. THE ASSESSEE MADE INVESTMENTS IN THESE COMPANIES ON BUSINESS EXPEDIENCY AND NO INCOME HAS BEEN GENERA TED BY SISTER/GROUP COMPANIES AND SHAREHOLDING PATTERN AL SO VARIED FROM COMPANY TO COMPANY. THE PROVISIONS OF SEC. 14A R.W. R. 8D ARE MANDATORILY APPLICABLE FROM ASSESSMENT YEAR 2008-09 BUT WHILE CALCULATING THE DISALLOWANCE U/SEC. RULE 8D(2), THE LD. ASSESSING OFFICER SHALL CONSIDER THAT THE INVESTMENTS IN SUBSIDIARIE S ARE IN ORDINARY COURSE OF BUSINESS. WE FOUND THAT THERE ARE NO FI NDINGS IN THE ASSESSMENT ORDER ON THIS SUBSIDIARY/GROUP COMPANIES CONSIDERED AS INVESTMENTS FOR CALCULATING DISALLOWANCE U/SEC. 14A R.WR.8D(2) AND WE RESPECTFULLY, FOLLOW THE CO-ORDINATE BENCH DECISION OF M/S. RANE HOLDINGS VS. ACIT, CHENNAI IN ITA NO.115/MDS/2015 , DATED 06.01.2016 WERE SIMILAR ISSUE WAS HELD AS UNDER:- TAKING NOTE OF THE ABOVE DECISIONS AND THE DECISI ON OF THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.156/MDS/13 CITED SUPRA, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF LD. ASSESSING OFFICER TO EXAMINE THE ISSUE INVOLVED IN THIS CASE AFRESH AND PASS APPROPRIATE ORDER AS PER LAW AND ME RITS AND IN THE LIGHT OF THE DECISIONS CITED HEREIN ABOVE. WHIL E DOING SO, WE ALSO DIRECT THE LD. ASSESSING OFFICER TO CONSIDER T HE DECISION OF THE TRIBUNAL IN THE CASE M/S AGILE ELECTRIC SUB ASS EMBLY PVT. LTD. CITED SUPRA WHEREIN IT WAS HELD AS FOLLOWS:- 7.2 IN REGARD TO APPLICABILITY OF SECTION 14A OF TH E ACT READ WITH RULE 8D ALSO; THE ABOVE VIEW WILL BE APPLICABLE. MO REOVER IN THE CASE EIH ASSOCIATED HOTELS LTD V. DCIT REPORTED IN 2013 (9) ITA NO.552 &553/MDS/2016 :- 9 -: TMI 604 IN ITA NO.1503, 1624/MDS/2012 DATED 17TH JULY, 2013, IT HAS BEEN HELD BY THE CHENNAI BENCH OF THE TRIBUN AL AS FOLLOWS :- DISALLOWANCE U/S. 14A RW RULE 8D CIT UPHELD DISALLOWANCE HELD THAT INVESTMENTS MADE BY THE ASSESSEE IN THE SUBSIDIARY COMPANY ARE NOT ON ACCOU NT OF INVESTMENT FOR EARNING CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOT EL INDUSTRY. A PERUSAL OF THE ORDER OF THE CIT(APPEALS ) SHOWS THAT OUT OF TOTAL INVESTMENT OF RS.64,18,19,7 75/-, RS.63,31,25,715/- IS INVESTED IN WHOLLY OWNED SUBSIDIARY. THIS FACT SUPPORTS THE CASE OF THE ASSE SSEE THAT THE ASSESSEE IS NOT INTO THE BUSINESS OF INVES TMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXPEDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIARY COMPA NY IS PURELY INCIDENTAL. THEREFORE, THE INVESTMENTS MA DE BY THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKON ED FOR DISALLOWANCE U/S. 14A R.W.R. 8D. THE ASSESSING OFFI CER IS DIRECTED TO RE-COMPUTE THE AVERAGE VALUE OF INVESTMENT UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVESTMENTS MADE BY THE ASSESSEE IN SUBSID IARY COMPANY DECIDED IN FAVOUR OF ASSESSEE. FOR THE ABOVE SAID REASONS, WE HEREBY HOLD THAT IN THE CASE OF THE ASSESSEE THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WILL NOT BE APPLICABLE IN REGARD TO INVESTMENTS MADE FOR ACQUIRING THE SHARES OF THE ASSESSEES SISTER CONCERNS. ACCORDINGLY WE RESTRAIN OURSELVES FROM INTERFERING WITH THE ORDER OF THE LD.CIT(A) ON THIS REGARD. IT IS ORDERED ACCORDINGLY. WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER TO VERIFY AND EXCLUDE THE INVESTMENT IN SUBSIDIARY COM PANIES FOR THE PURPOSES OF CALCULATION OF DISALLOWANCE UNDER RULE 8D AND THE ASSESSEE SHOULD BE PROVIDED ADEQUATE OPPORTUNITY OF BEING HEARD. THE GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSE. ITA NO.552 &553/MDS/2016 :- 10 -: 9. IN RESPECT OF DISALLOWANCES OF INTEREST ON LOANS AN D ADVANCES BY THE M/S. NK TELE SYSTEMS LTD. THE CONTENTION OF TH E LD. AUTHORISED REPRESENTATIVE THAT THESE LOANS WERE PROVIDED FOR THE BUSINESS PURPOSE AND INTEREST CALCULATED BY THE LD. ASSESSING OFFIC ER AS NOTIONAL INCOME IS BAD IN LAW. THE ASSESSEE COMPANY PROVIDED ADVANCE S ON THE PRINCIPLE OF BUSINESS EXPEDIENCY AND COMMERCIAL TRANSACTIONS. TH E ASSESSEE COMPANY ALSO HAVE BORROWED FUNDS IN ITS FINANCIAL STATEMENT S WHEREAS SISTER COMPANY M/S. NSM HOLDINGS COMPANY IS A INVESTMENT COMPANY AND M/S. NK TELE SYSTEMS LTD IS A MANUFACTURER AND ENGAGED I N TELECOM EQUIPMENTS. THE FINANCIAL STATEMENTS OF M/S. NK TE LE SYSTEMS LTD DOES NOT PROVIDED INFORMATION OF INCOME OR EXPENDITURE. WE ARE OF THE OPINION THAT THE ADVANCE/LOAN BY THE ASSESSEE COMP ANY ARE FOR THE BENEFIT OF THE COMPANY BUT LACKS COMMERCIAL ASPECTS . THEREFORE, THE LD. ASSESSING OFFICER IS DIRECTED TO VERIFY THE LOANS PROVIDED TO THE SUBSIDIARY COMPANYS HAVING COMMERCIAL MOTIVE AND DECIDE ON C HARGING OF INTEREST ON MERITS AND THIS GROUND OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. 10. NOW, WE TAKE UP ITA NO.553/MDS/2016 OF ASSESSMENT Y EAR 2011-2012:- THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF =54,75,162/- IN RESPECT OF SEC. 14 A OF THE ACT. ITA NO.552 &553/MDS/2016 :- 11 -: 11. WE HAVE CONSIDERED THE FACTS AND SUBMISSIONS MADE B Y THE LD. AUTHORISED REPRESENTATIVE AND LD. DEPARTMENTAL REPR ESENTATIVE, SIMILAR ISSUE WAS ADJUDICATED BY US FOR THE ASSESSMENT YEAR 2010-2011 IN ITA NO.552/MDS/2016 AT PARA 08 AND WE ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSE. 12. THE SECOND GROUND RAISED BY THE ASSESSEE IS THAT TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF INTEREST OF =15,00,000/- ON THE IN TEREST FREE LOAN. 13. WE HAVE CONSIDERED THE FACTS AND SUBMISSIONS MADE B Y THE LD. AUTHORISED REPRESENTATIVE AND LD. DEPARTMENTAL REPR ESENTATIVE, SIMILAR ISSUE WAS ADJUDICATED BY US FOR THE ASSESSMENT YEAR 2010-2011 IN ITA NO.552/MDS/2016 AT PARA 09 AND WE ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSE. 14. IN THE LAST GROUND WERE THE LD. ASSESSING OFFICER H AS DISALLOWED AN AMOUNT OF =53,193/- PAID AS CONSULTANCY CHARGES TO M/S. INDIA TELECOM INFRA LTD BY APPLYING THE PROVISIONS OF SEC . 40(A)(IA) OF THE ACT AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S CONFIRMED THE ADDITION. AGGRIEVED BY THE COMMISSIONER OF INCOME T AX (APPEALS) ORDER, THE ASSESSEE ASSAILED AN APPEAL BEFORE TRIBUNAL. ITA NO.552 &553/MDS/2016 :- 12 -: 15. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE EXPLAI NED THAT THE AMOUNT REPRESENTS REIMBURSEMENT OF EXPENSES TO THE COMPANY AND NOT CONSULTANCY FEES AS VIEWED BY THE LD. ASSESSING OF FICER AND PRAYED FOR ALLOWING THE APPEAL. 16. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND OPPOSED TO THE GROUNDS. 17. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORDS. THE CRUX OF THE ISSUE BEING THAT THE ASSES SEE HAS CLAIMED EXPENDITURE OF =53,193/- TOWARDS CONSULTANCY CHARGE S AND WAS DISALLOWED BY APPLYING PROVISIONS OF SEC.40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS. THE LD. AUTHORISED REPRESENTATI VE EXPLAINED THAT THE AMOUNT IS REIMBURSEMENT OF EXPENSES WERE DEBIT NO TE WAS RAISED AND WAS TRANSFERRED TO THE CONSULTANCY CHARGES ACCOUNT. THE ASSESSEE COMPANY COULD NOT SUBSTANTIATE WITH ANY EVIDENCE BE FORE LOWER AUTHORITIES. THEREFORE, WE INCLINED TO PROVIDE ONE MORE OPPORTUNITY TO ASSESSEE TO SUBMIT COMPLETE DETAILS BEFORE THE LD. ASSESSING OFFICER AND WE REMIT DISPUTED ISSUE TO THE FILE OF THE LD. ASSE SSING OFFICER TO VERIFY THE CONTENTIONS OF THE ASSESSEE COMPANY AS REIMBURSEMEN T OF EXPENSES ITA NO.552 &553/MDS/2016 :- 13 -: ALONGWITH EVIDENCE AND PASS THE ORDER ON MERITS. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 18. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA N OS.552 & 553/MDS/2016 ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH DAY OF JULY, 2016 AT CHENNAI. SD/- SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . ) (G. PAVAN KUMAR) ! ' / JUDICIAL MEMBER / CHENNAI * / DATED: 27TH JULY, 2016. KV + ' ,#(-. /.&( / COPY TO: 1 . 01 / APPELLANT 2. ,201 / RESPONDENT 3. ' 3( () / CIT(A) 4. ' 3( / CIT 5. . 67 ,#(# / DR 6. 78% 9 / GF