J.K.Fenner (India) Limited, CHENNAI V. DCIT, Madurai

ITA 775/CHNY/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3860 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 10-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Earning of tax free income
• Section: 143(3); 80HHC; 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.775/MDS/2015 ( / ASSESSMENT YEAR: 2004-05) M/S. J.K.FENNER (INDIA) LTD., (FORMERLY M/S. FENNER (INDIA) LTD., 3, MADURAI MELAKKAL ROAD, KOCHADAI, MADURAI - 625 016. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-I MADURAI. PAN: AAACJ7230N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VIJAYARAGHAVAN,ADVOCATE /RESPONDENT BY : MR. P.RADHAKRISHNAN, JCIT /DATE OF HEARING : 21 ST JUNE, 2016 /DATE OF PRONOUNCEMENT : 6 TH SEPTEMBER , 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- I, MADURAI DATED 09.02.2015 IN ITA NO.65/2012-13 PA SSED UNDER SECTION 143(3) / 254 R.W.S 250(6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- (I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 22,57,000/- BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D BEING EXPENDITURE INCURRED TOWARDS INVESTMENT 2 ITA NO.775/MDS/2015 WHEREIN THE INCOME EARNED FROM SUCH INVESTMENT IS EXEMPT FROM TAX. (II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 35,38,210/- MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 80HHC OF THE ACT . (III) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE INTEREST AMOUNTING TO ` 9,71,193/- LEVIED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 220(2) OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURE AND SALE OF V BELT AND OIL SEAL FILED ITS RETURN OF INCOME ON 01.11.2004 FOR THE ASSESSMENT YEAR 2004-05 DECLARIN G INCOME OF ` 14,02,65,870/-. ON THE EARLIER OCCASION THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.1588/MDS/20 07 & 1676/MDS/2007 VIDE ORDERS DATED 31.03.2009 & 9.4.20 09 RESPECTIVELY REMITTED THE ISSUES BACK TO THE FILE O F THE LEARNED ASSESSING OFFICER FOR FRESH CONSIDERATION. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED BY THE L EARNED ASSESSING OFFICER UNDER SECTION 143(3) / 254 OF THE ACT ON 31.12.2010 WHEREIN HE MADE CERTAIN ADDITIONS/ DISAL LOWANCES AND LEVIED INTEREST UNDER SECTION 220(2) OF THE ACT . 3 ITA NO.775/MDS/2015 GROUND NO.1: DISALLOWANCE OF ` `` ` 22,57,000/- BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R 8D: 5.1 THE ASSESSEE HAD MADE INVESTMENTS FOR THE PURPO SE OF EARNING DIVIDEND INCOME WHICH IS EXEMPT FROM TAX DU RING THE RELEVANT ASSESSMENT YEAR AND THEREBY EARNED DIVIDEN D INCOME OF RS.1,51,89,738/-. THEREFORE, THE LEARNED ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A R.W.R 8D OF THE ACT AND COMPUTED THE DISALLOWANCE OF THE EXPENDITUR E OF RS.22,57,000/- RELATED TO EARNING EXEMPT INCOME. 5.2 AT THE OUTSET, THE LEARNED AUTHORIZED REPRESEN TATIVE SUBMITTED BEFORE US THAT RULE 8D CAME INTO EFFECT F ROM 24.03.2008 AND HENCE IT IS NOT APPLICABLE IN THE CA SE OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WHICH IS 2004-05. IT WAS FURTHER SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE HONBLE MADRAS HIGH COURT H AD UPHELD THE DISALLOWANCE AT 2% OF THE EXEMPT INCOME EARNED AS EXPENDITURE RELATED FOR EARNING EXEMPT INCOME IN RESPECT OF THE ASSESSMENT YEARS PRIOR TO 2008-09 BY THE DEC ISION OF THE FOLLOWING CASES : 4 ITA NO.775/MDS/2015 I) SIMPSON & CO., VS. DCIT IN TAX CASE (APPEAL) NO.2621 OF 2006 DATED 15.10.2012 II) INDIAN NIPPON ELECTRICALS LTD. IN TAX CASE (APP EAL) NOS. 1305 & 1306/2007 DATED 02.02.2015. IT WAS THEREFORE PLEADED THAT IN THE ASSESSEES CAS E ALSO THE SAME DECISION MAY BE FOLLOWED. 5.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, ARGUED IN SUPPORT OF THE ORDERS OF THE REVENU E. 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LEA RNED AUTHORIZED REPRESENTATIVE THOUGH HAVE ARGUED STATIN G THAT THE HONBLE MADRAS HIGH COURT HAS SET A PRECEDENT B Y DISALLOWING 2% OF EXEMPT INCOME AS EXPENDITURE INC URRED FOR EARNING EXEMPT INCOME FOR THE ASSESSMENT YEARS PRIO R TO 2008-09 IN THE DECISIONS MENTIONED SUPRA, THE SAME WERE NOT PRODUCED BEFORE US. HOWEVER, IN THE INTEREST OF JUSTICE, WE HEREBY REMIT BACK THE MATTER ONCE AGAIN TO THE F ILE OF THE 5 ITA NO.775/MDS/2015 LEARNED ASSESSING OFFICER TO VERIFY THE CLAIM OF TH E ASSESSEE AND PASS APPROPRIATE ORDERS IN ACCORDANCE WITH MERI TS & AS PER LAW AND IN THE LIGHT OF THE DECISIONS POINTED O UT HEREIN ABOVE BY THE LD.A.R. GROUND NO.2 - DISALLOWANCE OF ` `` ` 35,38,210/- UNDER SECTION 80HHC: 6.1 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREIN HE HAD INCLUDED THE SALE OF RAW MATERIALS, PROCESS WASTE AND SCRAP SALES OF SPARES IN THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECT ION 80HHC OF THE ACT. HE FURTHER SUBMITTED THAT IN T HE DECISION OF THE HONBLE APEX COURT CIT VS.PUNJAB STAINLESS S TEEL INDUSTRIES LTD. REPORTED IN 364 ITR 144 IT WAS HELD THAT WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT TOTAL TURNOVER WOULD NOT INCLUDE SCRAP SALES WHICH IS EIT HER TO BE DEDUCTED FROM COST OF RAW MATERIALS OR TO BE SHOWN SEPARATELY UNDER DIFFERENT HEAD. HOWEVER, ON PERUSI NG THE ORDER OF THE LEARNED ASSESSING OFFICER AS WELL AS T HE LEARNED 6 ITA NO.775/MDS/2015 COMMISSIONER OF INCOME TAX (APPEALS), FACTS ARE NOT CLEARLY BROUGHT OUT CLEARLY FOR US TO EXAMINE THE ISSUE. TH EREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE IS ALSO REMITTE D BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH CON SIDERATION. WE ALSO HEREBY DIRECT THE REVENUE TO CONSIDER THE D ECISION REFERRED BY THE LEARNED AUTHORIZED REPRESENTATIVE HEREINABOVE AND FOLLOW THE RATIO OF THE SAME IF THE ISSUE AND FACTS ARE IDENTICAL IN THAT DECISION SINCE THE ORDE R OF THE HONBLE APEX COURT IS BINDING AND LAW OF THE LAND. GROUND NO.3 - INTEREST OF ` `` ` 9,71,193/- LEVIED UNDER SECTION 220(2) OF THE ACT: 7.1 THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE ASSESSEE IS NOT LIABLE FOR INTER EST UNDER SECTION 220(2) OF THE ACT DURING THE INTERIM PERIOD BETWEEN THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER A ND THE DATE OF REVISION ORDER. HOWEVER ON PERUSING THE OR DER OF THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) WE FIND THAT THE ISSUE HAS NOT BEEN ADDRESSED BY BOTH THE REVENUE AUTHORITIES. THEREFOR E, THIS 7 ITA NO.775/MDS/2015 ISSUE IS ALSO REMITTED BACK TO THE FILE OF THE LEAR NED ASSESSING OFFICER FOR FRESH CONSIDERATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6 TH SEPTEMBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 6 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .