ACIT, CHENNAI V. M/s. Sterling Holiday Resorts (India) Ltd., CHENNAI

ITA 673/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64598 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 30-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: M VISWANATHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 673/MDS/2012 ASST. YEAR : 2002-03 THE ASST . COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI. (APPELLANT) V. M/S . STERLING HOLIDAY RESORTS (P) LTD., CITY TOWER NO.7, 3 RD CROSS STREET, KASTHURI BAI NAGAR, ADYAR, CHENNAI 600 020. PAN : AADCS4841D. (RESPONDENT) APPELLANT BY : MR. TN BETGERI, JCIT RESPONDENT BY : MR. M. VISWANATHAN, C.A DATE OF HEARING : 26 NOV 2012 DATE OF PRONOUNCEMENT : 26 NOV 2012 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI DATED 13.12.2011 IN ITA NO.301/10-11 FOR THE ASST. YEAR 2 002-03. THE ONLY GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THA T THE ITA 673/MDS/12 2 COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RESTR ICTING THE DISALLOWANCE UNDER SEC.14A OF THE I.T. ACT TO 2% OF DIVIDEND INCOME. 2. THE FACTS OF THE CASE THAT THE ASSESSING OFFICE R, WHILE COMPLETING THE ASSESSMENT, FOLLOWING THE MUMBAI SPE CIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF CIT V. DAG A CAPITAL MANAGEMENT PVT. LTD., VIDE ORDER DATED 20.10.2008 IN ITA NO.1375/DEL/2005 INVOKED THE PROVISIONS OF SEC.14A READ WITH RULE 8D OF I.T. RULES AND DISALLOWED THE EXPENDITURE ATT RIBUTABLE FOR EARNING DIVIDEND INCOME AT D11,00,577/-. ON APPEAL , THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF MADRAS BENCH OF THIS TRIBUNAL IN THE CASE OF SPIC V. DCIT, RESTRICTED THE EXPENDITURE TO 2% OF DIVIDEND INCOME. 3. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDER OF THE ASSESSING OFFICER AND THE COUNSEL FOR THE ASSE SSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). ITA 673/MDS/12 3 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. I N VIEW OF THE DECISION OF THE HON'BLE MUMBAI HIGH COURT IN THE CA SE OF GODREJ & BOYCE MANUFACTURING CO. LTD. V. DCIT (320 ITR 81), THE PROVISIONS OF SEC.14A READ WITH RULE 8D OF I.T. RULES ARE APPLICA BLE PROSPECTIVELY FROM THE ASST. YEAR 2008-09 ONWARDS. THE PROVISI ON OF RULE 8D OF I.T. RULES HAVE NO APPLICATION FOR THE ASST. YEAR U NDER CONSIDERATION. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE REST RICTING THE EXPENDITURE AT 2% OF DIVIDEND INCOME HELD AS UNDER :- 7. GROUND NO.3 DEALS WITH DISALLOWANCE OF DEDUCTION U/S.14AOF RS . L1 , 00,S77/-. HOWEVER, THE POINT MADE BY THE AO THAT THE APPELLANT INCURS ROUTINE EXPENDITUR E TO ' , MAINTAIN ITS ESTABLISHMENT AND TOWARDS ADMINISTRATI ON HAS NOT BEEN REBUTTED. FURTHER INVESTMENT TO THE TU NE OF RS.3 . 18 CRORE IS A SIZEABLE PORTFOLIO AND SUBSTANTIAL MANAGERIAL TIME IS DEVOTED FOR INVESTMENT FUNCTION. MATERIAL INVESTMENT DECISIONS ARE IN THE DOMAIN OF TOP MANAGEMENT AND THE DECISION DOES NOT STOP MERELY WI TH INVESTMENT BUT ALSO CONTINUOUS MONITORING AND COURS E CORRECTION IF ANY REQUIRED IS ALSO THE FUNCTION OF THE MANAGEMENT . THEREFORE I RELY ON THE JURISDICTIONAL TRIBUNAL JUDGEMENT IN THE CASE OF SPIC VS. DCIT, ITA 673/MDS/12 4 WHEREIN IT IS HELD THAT 'WHETHER TO INVEST OR NOT TO INVEST AND WHETHER TO RETAIN THE INVESTMENTS OR TO LIQUIDA TE THE SAME ARE VERY STRATEGIC DECISIONS WHICH THE MANAGEMENT IS CALLED UPON TO TAKE . THESE ARE MIND- BOGGLING DECISIONS AND TOP MANAGEMENT IS INVOLVED I N TAKING THESE DECISIONS. THE DECISION MAKING PROCESS IS VERY COMPLICATED AND REQUIRES VERY CAREFUL ANALYSIS . MOREOVER, THE ASSES SE E HAS TO KEEP TRACK OF VARIOUS DIVIDEND INCOMES DECLARED BY THE INVESTEE COMPANIES AND ALSO TO KEEP TRACK OF THE D I VIDEND INCOME HAVING BEEN REGULARLY RECEIVED BY THE ASSESSEE. THIS AC TIVITY ITSELF CALLS FOR CONSIDERABLE MANAGEMENT ATTENTION AND CANNOT BE L E FT TO A JUNIOR CLERK THE PROPORTIONATE MANAGEMENT EXPENSES ARE R EQUIRED TO BE DEDUCTED WHILE COMPUT I NG THE DIVIDEND INCOME' . THEREFORE I CONFIRM THE ADDITION TO THE EXTENT OF 2% OF DIVIDEND EARNED. AND DELETE THE REST OF THE ADDITION. ON GOING THROUGH THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS) WE FIND THAT THE COMMISSIONER OF INCOME T AX (APPEALS) FOLLOWED THE ORDER OF THIS TRIBUNAL IN RESTRICTING THE DISALLOWANCE TO 2% OF DIVIDEND INCOME. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF COMMISSIONER OF INCOME TAX (APPEA LS) AS THERE IS NO INFIRMITY IN HIS ORDER. ITA 673/MDS/12 5 5. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. 6. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 26 TH OF NOVEMBER 2012, AT CHENNAI. SD/- SD/- ( DR. O.K. NARAYANAN) (CHALLA NAGENDR A PRASAD) VICE PRESIDENT JUDICIAL MEMBE R CHENNAI, DATED : 26 TH NOVEMBER 2012. JLS. COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT-(A), CHENNAI (4) C.I.T., CHENNAI (5) D.R. (6) GUARD FILE