JCIT, Corp Cir -2(1), Chennai V. Envestor Ventures Ltd, Chennai

ITA 568/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5684 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 05-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . , . , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.568/CHNY/2019 /ASSESSMENT YEAR: 2015-16 THE DY. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-2(1), ROOM NO.511, 5 TH FLOOR, WANAPARTHY BLOCK, NO.121, M.G.ROAD, CHENNAI-600 034. VS. M/S.ENVESTOR VENTURES LTD., SHRIRAM HOUSE, FIRST FLOOR, NO.4, BURKIT ROAD, T.NAGAR, CHENNAI-600 017. [PAN: AARCS 0789 A] ( # /APPELLANT) ( $%# /RESPONDENT) DEPARTMENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT ASSESSEE BY : MR. R.SIVARAMAN, ADV. ' /DATE OF HEARING : 08.07.2019 ' /DT. OF PRONOUNCEMENT : 27.09.2019 / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, IN ITA NO.102/C IT(A)-6/2017-18 DATED 26.11.2018 FOR THE AY 2015-16. ITA NO.568/CHNY/2019 :- 2 -: 2. M/S. ENVESTOR VENTURES LTD., THE ASSESSEE, IS IN THE BUSINESS OF INVESTMENT PROMOTION INCLUDING FACILITATING PRIVATE EQUITY. WHILE MAKING THE ASSESSMENT FOR THE AY 2015-16, THE AO FOUND THA T THE ASSESSEE HAD INVESTED IN EQUITY SHARES AT RS.120,36,22,878/- AS ON 31.03.2015. SINCE THE INVESTMENT IS CAPABLE OF EARNING DIVIDEND, THE AO REQUIRED TO SHOW CAUSE WHY THE DISALLOWANCE CANNOT BE MADE U/S.14A. AFTER CONSIDERING THE ASSESSEES REPLY ETC, THE AO HELD THAT THE ASSE SSEE MADE INVESTMENT OF RS.134,05,71,759/- DURING THIS ASSESSMENT YEAR. THOUGH, THE ASSESSEE CLAIMED THE SOURCES FOR THE INVESTMENT WAS OUT OF I NTEREST FREE LOAN TAKEN FROM ITS GROUP CONCERNS M/S.SHAMANI MANAGEMENT SERV ICES PVT. LTD, THE AO FOUND THAT THE ASSESSEE TOOK A LOAN OF RS.75 CRS . FROM M/S.SHRIRAM CITY UNION FINANCE LTD., AT THE INTEREST COST OF RS .7,24,71,575/- AND RE- PAID THE LOAN TAKEN FROM M/S.SHAMANI MANAGEMENT SER VICES PVT. LTD. THEREFORE, THE AO HELD THAT SINCE THE INTEREST BE ARING LOAN WAS UTILIZED TO REPAY THE EXISTING NON-INTEREST BEARING LOAN, W HICH WAS THE SOURCE FOR THE INVESTMENT WHICH YIELDED DIVIDEND INCOME, THE F INANCE COST INCURRED BY THE ASSESSEE AT RS.7,24,71,575/- WAS DIRECTLY RE LATED TO EXEMPT INCOME AND HENCE HE DISALLOWED IT U/R.8D(I). HE F URTHER DISALLOWED RS.8,71,557/- U/R.8D(III) AND COMPLETED THE ASSESSM ENT. 3. AGGRIEVED AGAINST THAT ORDER THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD.CIT(A) RELIED ON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF PCIT V. STATE BANK OF PATIALA REPORTED IN [2018] 99 ITA NO.568/CHNY/2019 :- 3 -: TAXMANN.COM 286 (SC) AND HELD THAT THE AMOUNT OF D ISALLOWANCE U/S.14A COULD BE RESTRICTED TO THE AMOUNT OF EXEMPT INCOME ONLY. SINCE THE ASSESSEE EARNED DIVIDEND INCOME OF RS.2,58,225/- O NLY DURING THE ASSESSMENT YEAR FROM M/S.TECH SOLUTIONS LTD., HE RE STRICTED THE DISALLOWANCE U/S.14A TO RS.2,58,225/- AND THUS, PAR TLY ALLOWED THE APPEAL. 4. AGGRIEVED AGAINST THAT ORDER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS: 1 THE CIT(A) ERRED IN DIRECTING THE AO TO RESTRIC T THE DISALLOWANCE TO THE EARNING OF EXEMPTED INCOME. 2 THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT A PROPOSAL IN THE CASE OF M/S. CHETTINADU LOGISTICS PVT LTD HAS BEEN SENT T O THE PR.DGIT, (L&R), NEW DELHI FOR FILING OF REVIEW PETITION BEFORE THE HON'BLE SUPREME COURT VIDE C.NO.450/1/PCLT(C)-1/2017-18 DATED 20.12.2018 BY TH E DGIT (INV) CHENNAI. 3 THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE CBDT CIRCULAR NO.5/201 WHEREIN IT IS CLARIFIED THAT, DISALLOWANCE U/S.14A R.W.R, 8D HAS TO BE MADE EVEN THE TAXPAYER IN A PARTICULAR YEAR NOT EARNED ANY EX EMPT INCOME. 4 FOR THESE AND OTHER GROUNDS THAT MAY BE A DDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 5. THE LD.DR ARGUED ON THE LINES OF GROUNDS OF APPE AL. PER CONTRA, THE LD.AR SUPPORTED THE ORDER OF THE LD.CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIALS. SINCE THE LD. CIT(A) FOLLOWED THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT V. STATE BANK OF PATIALA, SUPRA, WE DO ITA NO.568/CHNY/2019 :- 4 -: NOT FIND ANY REASON TO INTERFERE WITH THE ORDER O F THE LD.CIT(A) AND HENCE DISMISS THE REVENUES APPEAL. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 27 TH DAY OF SEPTEMBER, 2019, IN CHENNAI. SD/- SD/- ( , - . . . ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 27 TH SEPTEMBER, 2019. TLN ' $12 32 /COPY TO: 1. # /APPELLANT 4. 4 /CIT 2. $%# /RESPONDENT 5. 2 $ /DR 3. 4 ( ) /CIT(A) 6. /GF