ACIT, CC - 4 (1), CHENNAI V. M/S. L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LTD., CHENNAI

ITA 728/CHNY/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4924 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 16-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D; Set aside
• Section: 14A; 250

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी मनोज क ु मार अĒवाल, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.: 727, 728 & 729/CHNY/2020 िनधाᭅरण वषᭅ /Assessment Years:2013-14, 2014-15 & 2017-18 The ACIT, Corporate Circle 4(1), Chennai – 34. v. L & T Infrastructure Development Projects Ltd., PB.No.979, TCTC Building, 1 st Floor, Mount Poonamallee Road, Manapakkam, Chennai – 600 089. PAN: AAACL 7617D (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri M.Rajan, CIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri N.V.Balaji, Advocate & Ms. N.V. Lakshmi, Advocate स ु नवाई कȧ तारȣख/Date of Hearing : 04.04.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 08.04.2022 आदेश /O R D E R PER MAHAVIR SINGH, VP: These three appeals by the Revenue are arising out of three different orders of the learned Commissioner of Income Tax (Appeals)- 8, Chennai in ITA No.333/CIT(A)-8/2016-17, 76/CIT(A)-8/2017-18 & 49/CIT(A)-8/2019-20 of different dates 21.02.2020 & 17.03.2020. 2 ITA Nos.727 to 729/Chny/2020 The assessments were framed by the DCIT / ACIT, Corporate Circle – 4(1), Chennai for the assessment years 2013-14, 2014-15 & 2017-18 u/s.143(3) of the of the Income Tax Act, 1961 (hereinafter ‘the Act’)vide orders of different dates i.e., 30.12.2016 & 19.12.2019 respectively. 2. At the outset, it is noticed that the two appeals were barred by 98 days and one appeal is barred by 87 days and Revenue has filed condonation petitions stating the reason that the orders of CIT(A) dated 21.02.2020 & 17.03.2020 were received by the PCIT on 12.03.2020 & 23.03.2020 and the due dates for filling of appeals before the Tribunal was 12.05.2020 & 22.05.2020 respectively. The Revenue in its condonation petitions stated the reason that due to Covid-19 pandemic, the appeals could not be filed in time, as the appeal before the Tribunal was to be filed on 12.05.2020 & 22.05.2020 but instead on that actually these appeals were filed only on 17.08.2020 with a delay of 98 days and 87 days. We noted that the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of 3 ITA Nos.727 to 729/Chny/2020 the directions of Hon’ble Supreme Court, we condone the delay in filing of these appeals by Revenue and admit these appeals for adjudication. 3. The only issue in these three appeals of Revenue is as regards to the order of CIT(A) deleting the disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act, read with Rule 8D(2)(iii) of the Income Tax Rules, 1962 i.e., administrative expenses, made by the AO by computing the investments made in Special Purpose Vehicles. The CIT(A) restricted the disallowance at 2% of income derived from investments other than investments in SPV as disallowance u/s.14A r.w.rule 8D. The assessee has filed a chart of computation of disallowance u/s.14A, which reads as under:- AY Exempt Income claimed by assessee Suo Motto Disallowance made by assessee Disallowance u/s 14A as per Assessment Order Outcome of CIT(A) order 2017-18 983000 20,02,219 21,68,10,699 disallow 2% of dividend income 2014-15 983000 16,30,480 13,33,90,378 2013-14 0 14,25,407 10,92,72,713 4. At the outset, the ld.counsel for the assessee stated that as far as assessment year 2013-14 in ITA No.727/CHNY/2020 is concerned there is no exempt income earned by the assessee and 4 ITA Nos.727 to 729/Chny/2020 for this a specific ground has been raised by the assessee before the CIT(A) and despite the fact, that CIT(A) restricted the disallowance @ 2% of the dividend income earned excluding the investments made in SPVs. According to ld.counsel once there is no dividend income earned, the CIT(A) has rightly deleted the disallowance. The ld.DR could not controvert the above fact situation in this year. 5. After hearing both the sides, we noted that for the assessment year 2013-14, the assessee has not earned any exempt income and in view of the decision of Hon’ble Supreme Court in the case of CIT v. Chettinad Logistics (P) Ltd., (2018) 95 taxmann.com 250 (SC). The Hon’ble Supreme Court has dismissed the SLP against decision of Hon’ble Madras High Court in the case of CIT v. Chettinad Logistics (P.) Ltd., (2017) (80 taxmann.com 221) wherein it was held that that section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. In view of the decision of Hon’ble Supreme Court in the case of Chettinad Logistics (P.) Ltd., supra, we dismiss this appeal of the Revenue for the assessment year 2013-14. 5. Coming to ITA Nos.728 & 729/CHNY/2020 for the assessment years 2014-15 & 2017-18, the ld.counsel for the assessee stated 5 ITA Nos.727 to 729/Chny/2020 that the CIT(A) relied on Tribunal’s decision in assessee’s own case for the assessment year 2007-08 in ITA No.2226/Mds/2013 order dated 21.11.2014 and according to Revenue this has not been accepted by Revenue and is pending disposal before Hon’ble Madras High Court in TCA No.757 of 2016. The ld.counsel stated that the CIT(A) has directed exclusion of investments made in Special Purpose Vehicles and for rest of investments he has directed the AO to disallow 2% of interest derived from other investments while computing disallowance under Rule 8D(2)(iii). The ld.counsel stated that according to him, there is no ambiguity in the order of CIT(A). 5.1 On the other hand, the ld. Senior DR stated that there cannot be any estimation that what should be the percentage of disallowance either 2% or 10%, the instruments giving raise to income or investments made in the same has to be excluded while computing disallowance under Rule 8D(2)(iii) i.e., 0.5% of average value of investment and accordingly the disallowance should be made as per rules. 6. After hearing rival contentions and going through the facts of the case, we noted that the CIT(A) erred in holding that only 2% of income deriving from investments is to be disallowed other than 6 ITA Nos.727 to 729/Chny/2020 investments in SPVs under Rule 8D(2)(iii). We set aside this finding and remand the matter back to the AO for deciding afresh but he will consider the investments which are giving rise to exempt income only, for the purpose of computation of disallowance of average value of investments. Hence, for these two assessment years, the matter is restored back to the file of the AO with the above directions. 7. In the result, the appeal filed by the Revenue in ITA No.727/CHNY/2020 is dismissed and in ITA Nos.728 & 729/CHNY/2020 are allowed for statistical purposes. Order pronounced in the court on 8 th April, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 8 th April, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.