TVS Logistics Services Ltd., Madurai V. DCIT, Madurai

ITA 609/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8211 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: M VISWANATHAN
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . !' , # $% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.609/MDS/2016 & '& /ASSESSMENT YEAR : 2010-11 M/S.TVS LOGISTICS SERVICES LTD., 7-B, TVS BUILDING, WEST VELI STREET, MADURAI 625 001. PAN : AACCT 1412 E V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. ( () /APPELLANT) ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI. M.VISWANATHAN, C.A. *+(),- /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT ,.# /DATE OF HEARING : 29.09.2016 /0' ,.# /DATE OF PRONOUNCEMENT : 28.10.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF CIT(A) -1, MADURAI DATED 20.01.2016 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2 I.T.A. NO.609/MDS/2016 2. SHRI M.VISWANATHAN, THE LEARNED REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESSEE HAS NOT IN CURRED ANY EXPENDITURE TO EARN DIVIDEND FROM FOREIGN COMPANIES . ACCORDING TO THE LEARNED REPRESENTATIVE, THE DIVIDEND INCOME EARNED BY THE ASSESSEE FROM FOREIGN COMPANIES ARE TAXABLE IN INDIA. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT. 3. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LEARNE D DEPARTMENT REPRESENTATIVE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INVESTED A SUM OF RS.21.50 CRORES AND RECEIVED DIVIDEND INCOME OF RS.40.50 LAKHS. THE ASSESSEE HAS CLAIMED THE ABOVE DIVIDEND INCOME OF RS.40.50 LAKHS AS EXEMPTED UNDER SECTION 10(34) OF THE ACT. THEREFORE, IT IS NOT CORRECT TO SAY THAT THE ASSESS EE HAS INVESTED ONLY IN FOREIGN COMPANIES AND THE DIVIDEND RECEIVED FROM TH E FOREIGN COMPANY IS TAXABLE IN INDIA. SINCE ADMITTEDLY, THE ASSESSEE HAS EARNED DIVIDEND INCOME AND ALSO CLAIMED THE SAME EXEMPTED UNDER SEC TION 10(34) OF THE ACT, THE ASSESSING OFFICER HAS TO NECESSARILY COMPU TE THE DISALLOWANCE BY APPLYING THE PROVISIONS OF RULE 8D OF THE INCOME TA X RULES. IN FACT, THE DISALLOWANCE WAS COMPUTED STRICTLY BY APPLYING THE PROVISIONS OF RULE 8D. 3 I.T.A. NO.609/MDS/2016 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY OBJECTION OF THE LEARNED REPRESENTATIVE OF THE ASSESSEE IS THAT THE INVESTME NT MADE IN FOREIGN COMPANIES TO EARN DIVIDEND INCOME WAS NOT FOR EARNI NG INCOME EXEMPTED FROM TAXATION. THEREFORE, THERE CANNOT BE ANY DISALLOWAN CE OF EXPENDITURE IN RELATION TO THAT INVESTMENT. HOWEVER, THE DETAILS OF THE INV ESTMENT MADE IN FOREIGN COMPANIES ARE NOT MADE AVAILABLE ON RECORD. AS RIGH TLY SUBMITTED BY THE DEPARTMENT REPRESENTATIVE, THE ASSESSEE HAS INVESTE D RS.21.50 CRORES DURING THE YEAR UNDER CONSIDERATION AND ALSO EARNED RS.40. 50 LAKHS AS INCOME EXEMPTED FROM TAXATION. THEREFORE, THE DISALLOWANCE HAS TO BE COMPUTED BY APPLYING THE PROVISIONS OF RULE 8D(2) OF INCOME TAX RULES. EVEN THOUGH THE ASSESSEE CLAIMS THAT THERE WAS NO EXPENDITURE FOR E ARNING DIVIDEND INCOME, SECTION 14A READ WITH RULE 8D MANDATES THE ASSESSIN G OFFICER TO COMPUTE THE DISALLOWANCE. HOWEVER, IF ANY INVESTMENT IS MADE WH ICH RESULTED TAXABLE INCOME SUCH INVESTMENT CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING DISALLOWANCE. SINCE THE DETAILS OF INVESTMENT MADE IN FOREIGN COMPANIES WHICH RESULTED IN TAXABLE INCOME IS NOT AVAILABLE ON RECO RD, THIS TRIBUNAL IS UNABLE TO UPHOLD THE CONTENTIONS OF THE LEARNED REPRESENTATIV E OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED. 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I)(A) OF THE ACT. SHRI M.VISWANATHAN, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID COMMISSION FOR THE SERVICES RENDERED 4 I.T.A. NO.609/MDS/2016 OUTSIDE INDIA. ACCORDING TO THE LEARNED REPRESENTAT IVE, THE PAYMENTS WERE IN FACT MADE TO UK COMPANY FOR THE SERVICES RENDERED I N UK. THE RECIPIENT OF THE FOREIGN COMPANY DO NOT HAVE ANY PERMANENT ESTABLISH MENT IN INDIA. THE ASSESSEE ALSO DO NOT HAVE ANY BRANCH IN UK TO RECEI VE THE GOODS DISPATCHED FROM INDIA. THEREFORE, THE PAYMENT MADE TO UK COMPA NY IS NOT SUBJECTED TO TAXATION IN INDIA. HENCE, THE QUESTION OF DISALLOWA NCE UNDER SECTION 40(A)(I)(A) OF THE ACT DOES NOT ARISE FOR CONSIDERATION. 6. ON THE CONTRARY, SHRI SHIVA SRINIVAS, THE LEARNE D DEPARTMENT REPRESENTATIVE SUBMITTED THAT THE ASSESSEE DISPATCH ED THE GOODS TO UK AND OTHER EUROPEAN COUNTRIES. THE ASSESSEE CLAIMED BEFO RE THE ASSESSING OFFICER THAT THE FOREIGN COMPANY RENDERED THEIR SERVICES OU TSIDE INDIA. THEREFORE, THE COMMISSION RECEIVED BY THEM IS NOT TAXABLE IN INDIA . REFERRING TO THE ORDER OF THE CIT(A), THE LEARNED DEPARTMENT REPRESENTATIVE S UBMITTED THAT THE RECIPIENT IS NONE OTHER THAN THE APPELLANTS OWN SUBSIDIARY CO MPANY WHICH WAS ADMITTEDLY CONTROLLED AND MANAGED BY THE DIRECTORS IN INDIA. MOREOVER, THE ASSESSEE ADMITTED BEFORE THE CIT(A) THE RECIPIENT C OMPANY HAD TRANSPORTED GOODS FROM INDIA. THEREFORE, THE SERVICES WERE VERY MUCH RENDERED IN INDIA. HENCE, THE ASSESSEE IS LIABLE TO DEDUCT THE TAX IN RESPECT OF THE PAYMENT MADE TO SUBSIDIARY COMPANIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH TH E ASSESSEE CLAIMS THAT THE PAYMENT WAS MADE TO UK COMPANY FOR THE SERVICES REN DERED OUTSIDE INDIA, IN FACT THE UK COMPANY IS A SUBSIDIARY COMPANY OF THE ASSESSEE AND TRANSPORTED 5 I.T.A. NO.609/MDS/2016 THE GOODS FROM INDIA. THIS FACT WAS ADMITTED BY THE ASSESSEE BEFORE THE CIT(A). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE SERVICES ARE IN FACT RENDERED IN INDIA. HENCE, THE PAYMENT M ADE TO UK COMPANY IS TAXABLE IN INDIA. THEREFORE, THE ASSESSEE IS LIABLE TO DEDUCT TAX ON THE PAYMENT MADE TO UK COMPANY. 8. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDING LY, THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON 28 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( . . !' ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) # /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 1 /DATED, THE 28 TH OCTOBER, 2016. SP. , *.!2 32'. /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. 4. ( )/CIT(A) 4. 4. /CIT, 5. 25 *. /DR 6. & 6 /GF.