Higginbothams Pvt Ltd., CHENNAI V. ACIT Salary Circle 2, CHENNAI

ITA 727/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4978 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 28-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Search and seizure
• Section: 14A

Judgement Text

, (SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL, A (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.727/CHNY/2018 / ASSESSMENT YEAR : 2011-2012. M/S. HIGGINBOTHAMS PVT. LTD, NO.116, ANNA SALAI, CHENNAI 600 002 . [PAN AAACH 0838G] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE 2, CHENNAI 600 034 . ( !' / APPELLANT) ( #$ !' /RESPONDENT) / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, JCIT. /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 25-07-2018 !' /DATE OF PRONOUNCEMENT : 01-08-2018 % / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS DIR ECTED AGAINST AN ORDER DATED 10.11.2017 OF LD. COMMISSIONER OF IN COME TAX (APPEALS)-13, CHENNAI, IT ASSAILS DISALLOWANCE OF @2,96,841/- MADE U/S.14A OF THE INCOME TAX ACT, 1961 (IN SHORT TH E ACT) READ ALONG WITH RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHO RT THE RULES). 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESS EE HAD CLAIMED DIVIDEND OF @34,252/- AS EXEMPT U/S.10(34 ) OF THE ACT AND MUTUAL FUND INCOME OF @13,60,511/- AS EXEMPT U/S.10 (35) OF THE ACT. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD MADE A SUO- ITA NO.727 /CHNY/2018 :- 2 -: MOTU DISALLOWANCE OF @84,378/- U/S.14A OF THE ACT I N ITS COMPUTATION OF INCOME. HOWEVER, AS PER THE LD. AUTHORISED REPRE SENTATIVE, LD. ASSESSING OFFICER APPLIED CLAUSE (III) OF RULE 8D(2 ) AND COMPUTED A DISALLOWANCE OF @3,81,219/-. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER APPLIED 0.5% ON THE AVERAGE VALUE OF INVESTMENTS, FOR ARRIVING AT THE SUCH AM OUNT. THIS, AS PER THE LD. AUTHORISED REPRESENTATIVE, RESULTED IN AN A DDITION OF @2,96,841/-. CONTENTION OF THE LD. AUTHORISED REPR ESENTATIVE WAS THAT ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT YIELD ANY SUCCESS. ACCORDING TO HIM, IT WAS POINTED OUT TO THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT INVES TMENTS WHICH DID NOT YIELD ANY DIVIDEND INCOME CAME TO @3,32,54,095/ - AND SUCH INVESTMENTS HAD TO BE EXCLUDED WHILE WORKING OUT TH E DISALLOWANCE UNDER RULE 8D(2). AS PER THE LD. AUTHORISED REPRES ENTATIVE, DESPITE POINTING OUT THE DECISION OF CO-ORDINATE OF THIS T RIBUNAL IN THE CASE OF COMPUTER AGE MANAGEMENT SERVICES (P)LTD VS. ACIT (I TA NO.1259 TO 1261/MDS/2014, DATED 28.11.2014 ), WHICH HAD DIRECTED EXCLUSION OF NON-INCOME YIELDING INVESTMENTS, LD.CIT(COMMISSION ER OF INCOME TAX (APPEALS) HAD CONFIRMED SUCH DISALLOWANCE. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT BY VIRTUE OF APEX COURT JUDGMENT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT, CIVIL APPEAL NOS.104 TO 109 /2015, DA TED 12.02.2018 , ITA NO.727 /CHNY/2018 :- 3 -: INVESTMENTS WHETHER IT YIELDED ANY DIVIDEND INCOM E OR NOT HAD TO BE CONSIDERED, WHILE WORKING OUT THE DISALLOWANCE AS PER RULE 8D(2). 4. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ARGUMENT OF THE L D. AUTHORISED REPRESENTATIVE WAS THAT WHILE APPLYING CLAUSE (III) OF RULE 8D(2), INVESTMENTS WHICH DID NOT YIELD ANY DIVIDEND INCOME HAD TO BE EXCLUDED. I AM AFRAID, I CANNOT ACCEPT THIS LINE O F THE ARGUMENT, CONSIDERING THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MAXOPP INVESTMENT LTD.(SUPRA). ONE OF THE CONTENTIONS RAISED IN THE SAID CASE BEFORE THE HONBLE APEX COURT WAS THAT I NVESTMENTS HELD IN GROUP COMPANIES FOR RETAINING CONTROLLING INTEREST HAD TO BE EXCLUDED WHILE WORKING OUT THE DISALLOWANCE U/S.14A OF THE A CT. THEIR LORDSHIPS HELD THAT DOMINANT PURPOSE TEST WAS IRRELEVANT FOR APPLICATION OF SECTION 14A OF THE ACT. THEIR LORDSHIPS ALSO OBSERV ED THAT PURPOSE OF INVESTMENT, WHETHER IT WAS TO GAIN CONTROL OVER THE INVESTEE COMPANY OR NOT WAS AN IRRELEVANT FACTOR, IN COMPUTING THE D ISALLOWANCE. WHAT I CAN DISCERN FROM THE JUDGMENT OF HONBLE APEX COUR T IS THAT QUESTION LIKE PART OF THE INVESTMENTS WHICH EARNED DIVIDEND INCOME, AND PART WHICH DID NOT EARN ANY DIVIDEND INCOME, ARE ALL IRR ELEVANT FACTORS FOR APPLYING SECTION 14A OF THE ACT AND RULE 8D. ONLY C ASE WHERE THERE COULD BE AN EXEMPTION TO THIS, IS WHERE THE SHARES WERE HELD AS STOCK-IN-TRADE. THERE IS NO CASE FOR THE ASSESSEE HERE THAT THE SHARES ITA NO.727 /CHNY/2018 :- 4 -: AND UNITS WERE HELD AS STOCK-IN-TRADE. IN MY OPINI ON BY VIRTUE OF JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MAXOP P INVESTMENT LTD.(SUPRA), DECISION OF THE CO-ORDINATE IN THE CAS E OF COMPUTER AGE MANAGEMENT SERVICES (P)LTD IS NO MORE GOOD LAW. IN THE CIRCUMSTANCES, I DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). SINC E THE DISALLOWANCE MADE U/S.14A OF THE ACT IS IN ACCORDANCE WITH LAW, LOWER AUTHORITIES IN MY OPINION WAS ALSO JUSTIFIED IN MAKING SIMILAR ADD ITION OF SUCH AMOUNT, WHILE COMPUTING BOOK PROFIT U/S.115JB OF T HE ACT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DISMIS SED. ORDER PRONOUNCED ON THE 1 ST DAY OF AUGUST, 2018, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 1 ST AUGUST, 2018 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF