DCIT, Trichy V. The Lakshmi Vilas Bank Ltd., Karur

ITA 567/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4064 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 1995-1996
• Appeal Filed On: 06-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SURESH KUMAR
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.567/MDS/2017 ( / ASSESSMENT YEAR: 1995-1996) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1), TRICHY 620 001. VS M/S. THE LAKSHMI VILAS BANK LTD., REGD. OFFICE, KATHAPARAI, KARUR. PAN: AAACT4291P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S. SURESH KUMAR, ADDL. CIT /RESPONDENT BY : SHRI G. SEETHARAMAN, CA /DATE OF HEARING : 02.05.2017 !' /DATE OF PRONOUNCEMENT : 10.07.2017 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-1, TIRUCHIRAPALLI DATED 30.12.2016 IN ITA NO.687/2006- 07/CIT(A)- 1/TRY FOR THE ASSESSMENT YEAR 1995-96 PASSED U/S.25 0(6) R.W.S.143(3) & 254 OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL; HOWEVER THE CRUX OF THE ISSUE IS THAT:- 2 ITA NO.567/MDS/2017 (I) THE LD.CIT(A) HAS ERRED IN ESTIMATING THE DISAL LOWANCE U/S.14A OF THE ACT @2% OF EXEMPT INCOME. (II) THE LD.CIT(A) HAS ERRED IN QUANTIFYING THE EXE MPT INCOME AT RS.3,47,74,365/- AS AGAINST THE ACTUAL EXEMPT INCOM E OF RS.7,62,16,179/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A LIMITED COMPANY ENGAGED IN BANKING BUSINESS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1995-96 ON 29.11.199 5 ADMITTING TOTAL INCOME OF RS.19,71,81,300/-. THE CASE WAS TA KEN UP FOR SCRUTINY AND THE RETURN WAS PROCESSED U/S.143(3) OF THE ACT. SUBSEQUENTLY THE MATTER WAS TAKEN UP BEFORE THE FIR ST AND SECOND APPELLATE AUTHORITY. THEREAFTER THE TRIBUNAL REMITT ED THE MATTER BACK TO THE FILE OF THE LD.AO. THE LD.AO IN HIS ORD ER DATED 29.12.2006 RECONFIRMED THE ADDITION MADE WITH RESPE CT TO SECTION 14A OF THE ACT. SUBSEQUENTLY THE LD.CIT(A) PARTIALL Y ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE M/S. SIMPSON & CO. LTD VS. DCIT, WHEREIN IT WAS HELD THAT ADDITION AT THE RATE OF 2% OF EXEMPT INCOME WOULD SUFFICE WHILE DEALING WITH SECTION 14A OF THE ACT. THE REVENUE AGGRIEVED BY THE ORDER OF THE LD.CIT(A) IS IN APPEAL 3 ITA NO.567/MDS/2017 BEFORE US ON TWO COUNTS AS ENUMERATED IN THE GROUND S OF APPEAL HEREIN ABOVE. 4. AFTER PERUSING THE MATERIALS ON RECORD AND HEAR ING BOTH THE PARTIES, WE ARE IN AGREEMENT WITH THE ORDER OF THE LD.CIT(A) WHO HAS ONLY FOLLOWED THE ORDER OF THE JURISDICTION HIG H COURT ( SUPRA) WHEREIN IT WAS HELD THAT 2% OF THE EXEMPT INCOME MA Y BE DISALLOWED BY VIRTUE OF SECTION 14A OF THE ACT. IT IS PERTINENT TO MENTION THAT RULE 8D WAS BROUGHT IN BY THE 5 TH AMENDMENT RULES 2008 W.E.F. 24.03.2008 I.E., FROM THE ASSESSMENT YE AR 2008-09 ONWARDS. IN THE CASE OF THE ASSESSEE, THE ASSESSME NT YEAR IS 1995-96, HENCE THE RULE 8D WILL NOT BE APPLICABLE. THEREFORE THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) WILL PREVAIL. FURTHER, WITH RESPECT TO THE QUANTUM OF EXEMPT INCO ME FOR COMPUTING 2% OF DISALLOWANCE U/S.14A OF THE ACT, WE FIND SOME MERIT IN THE SUBMISSION OF THE LD.DR. FROM THE ASS ESSMENT ORDER, IT APPEARS THAT THE INCOME FROM TAX FREE BONDS IS R S.6,92,18,929/-, FROM THE GROUNDS OF APPEAL IT APPEARS THAT THE TAX FREE INCOME IS RS.7,62,16,179/-, WHILE AS THE LD.CIT(A) HAS HELD T HE EXEMPT INCOME OF THE ASSESSEE AT RS.3,47,74,365/-. THEREF ORE, THE ACTUAL TAX FREE INCOME IS NOT CLEAR FROM THE ORDERS OF THE REVENUE AUTHORITIES OR FROM THE MATERIALS PRODUCED BEFORE U S. HENCE IN THE 4 ITA NO.567/MDS/2017 INTEREST OF JUSTICE, WE REMIT THIS MATTER BACK TO T HE FILE OF LD.AO FOR FRESH CONSIDERATION. ACCORDINGLY THE FIRST GROUND R AISED BY THE REVENUE IS DEVOID OF MERIT WHILE AS THE SECOND GROU ND RAISED BY THE REVENUE WITH RESPECT TO EXEMPT INCOME EARNED BY THE ASSESSEE IS REMITTED BACK FOR FRESH CONSIDERATION. 5. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 10 TH JULY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 10 TH JULY, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF