Appeal details
Counselvise Citation
89321714 RSA 2015
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-07-2015
Appeal Filed By
Assessee
Bench Allotted
A
Next Hearing Date
23-06-2015
Assessment Year
2010-2011
Appeal Filed On
22-04-2015
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.893/MDS/2015 / ASSESSMENT YEAR : 2010-11 M/S SAS HOTELS AND ENTERPRISES LTD. 3, MANGESH STREET T. NAGAR CHENNAI 600 017 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE IV(2) CHENNAI [PAN AAECS 1194 C] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO.964/MDS/2015 / ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE I(2) CHENNAI VS. M/S SAS HOTELS AND ENTERPRISES LTD. 3, MANGESH STREET T. NAGAR CHENNAI 600 017 ( %& / APPELLANT) ( '(%& /RESPONDENT) ASSESSEE BY : SHRI S. RAMACHANDRA RAO, CA DEPARTMENT BY : SHRI P. RADHAKRISHNAN, JCIT / DATE OF HEARING : 23 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 24 - 0 7 - 2015 ITA NO.893 AND 964/15 :- 2 -: /ORDER PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH ASSESSEE AND THE REVENUE FILED APPEAL AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- 18, CHENNAI, DATED 29.1.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. LET US FIRST TAKE UP ASSESSEES APPEAL I.T.A.NO.893 / MDS/2015. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF ` 17,33,899/- U/S 14A OF THE ACT. 4. SHRI S.RAMACHANDRA RAO, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE MADE INVESTME NTS MOSTLY IN ASSOCIATED COMPANIES. THE LD. REPRESENTATIVE HAS ALSO CLARIFIED THAT ASSESSEE IS NOT AN INVESTMENT COMPANY. ALL THESE I NVESTMENTS IN ASSOCIATED COMPANIES, PARTNERSHIP FIRM, AOP ETC. WE RE MADE FOR COMMERCIAL CONSIDERATIONS. PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN EIH ASSOCIATED HOTELS LTD VS DCIT IN I. T.A.NO. 1503/MDS/2012 DATED 17.7.2013, THE LD. REPRESENTATI VE SUBMITTED THAT INVESTMENT OF FUNDS IN SUBSIDIARY COMPANY CANNOT BE SUBJECT MATTER OF DISALLOWANCE U/S 14AA. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, INVESTMENT WAS MOSTLY MADE IN ASSOC IATED COMPANIES ITA NO.893 AND 964/15 :- 3 -: THEREFORE, THE SAME PRINCIPLE LAID DOWN BY THIS TRI BUNAL IN EIH ASSOCIATED HOTELS LTD (SUPRA) WOULD BE APPLICABLE. 5. ALTERNATIVELY, THE LD. REPRESENTATIVE SUBMITTED THA T IN RESPECT OF SOME OF THE INVESTMENTS MADE NO INCOME WAS EARNE D BY THE ASSESSEE, THEREFORE, IT CANNOT BE CONSIDERED FOR DI SALLOWANCE U/S 14A OF THE ACT. THE LD. REPRESENTATIVE FURTHER SUBMITT ED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN RETURN ON THESE INVESTMENTS. THE MONIES WERE INVESTED IN THE ASSOCIATED COMPANIE S WHICH CARRIED ON ITS BUSINESS INDEPENDENTLY WITHOUT ANY INTERFERE NCE BY THE ASSESSEE. THEREFORE, THERE IS NO OCCASION FOR THE ASSESSEE TO INCUR ANY EXPENDITURE FOR EARNING THE TAX FREE INCOME. R EFERRING TO THE PAPER BOOK MORE PARTICULARLY PAGE 34, THE LD. REPRE SENTATIVE SUBMITTED THAT THE ASSESSEE-COMPANY INVESTED IN M/S APPASWAMY REAL ESTATES LTD WHERE THE ASSESSEE WAS HOLDING 68.01% OF THE SHARES. SIMILARLY, IN M/S APA HOTELS PVT. LTD, THE ASSESSE E WAS HOLDING 29.62% OF SHARES. SIMILARLY, IN OTHER COMPANIES AL SO THE ASSESSEE- COMPANY IS HOLDING CONSIDERABLE PERCENTAGE OF SHARE S HENCE, THE INVESTMENT HAS TO BE CONSIDERED ONLY AS COMMERCIAL INVESTMENT FOR EARNING THE INCOME THEREFORE, THE PROVISIONS OF SEC TION 15A MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. ITA NO.893 AND 964/15 :- 4 -: 6. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT ONLY IN M/S APPASWA MY REAL ESTATES LTD, THE ASSESSEE IS HOLDING 68.01% OF SHARES. IN ALL OTHER COMPANIES, PARTNERSHIP FIRM AND AOP, THE ASSESSEE IS NOT HOLD ING ANY CONTROLLING INTEREST. THE ASSESSEE IS A MINOR SHAREHOLDER IN ALL OTHER COMPANIES. THEREFORE, THE INVESTMENT MADE IN OTHER COMPANIES, ACCORDING TO THE LD. DR, IS ONLY FOR THE PURPOSE OF EARNING THE DIVI DEND INCOME. ACCORDING TO THE LD. DR, THE ASSESSEE BORROWED HEA VILY FROM THE BANK AND FINANCIAL INSTITUTION AND PAID INTEREST. THERE FORE, THE ASSESSING OFFICER FOUND THAT THE CLAIM OF THE ASSESSEE TOWAR DS EXPENDITURE FOR EARNING THE EXEMPTED INCOME IS NOT CORRECT, HENCE, HE COMPUTED THE SAME BY APPLYING RULE 8D OF THE INCOME-TAX RULES. REFERRING TO THE CLAIM OF THE ASSESSEE THAT THE INVESTMENTS WERE MA DE OUT OF THE SURPLUS MONEY AVAILABLE WITH THE ASSESSEE, THE LD. DR SUBMITTED THAT THE ASSESSEE COULD NOT ESTABLISH BEFORE THE LOWER AUTHORITIES THAT THE INVESTMENTS WERE MADE FROM THE SURPLUS FUNDS AVAILA BLE WITH THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS RIG HTLY DISALLOWED THE PAYMENT OF INTEREST U/S 14A R.W.R 8D. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT THE ENTIRE INVEST MENT IN THE ASSOCIATED COMPANIES WERE MADE FROM THE AVAILABLE S URPLUS FUNDS. ITA NO.893 AND 964/15 :- 5 -: HOWEVER, THE DETAILS OF THE AVAILABLE SURPLUS FUNDS ARE NOT AVAILABLE ON RECORD. AS POINTED OUT BY THE LD. DR, SUCH DETAILS OF AVAILABILITY OF INTEREST FREE FUNDS ARE NOT FILED BEFORE THE LOWER AUTHORITIES ALSO. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, ONLY IN M/S APPASWAMY REAL ESTATES LTD THE ASSESSEE IS HAVING CONTROLLIN G INTEREST BY HOLDING 68.01% OF THE SHARES. IN ALL OTHER COMPANIES, PAR TNERSHIP FIRM, AOP, OTHER THAN M/S SOUTH EASTERN EXPORTS PVT. LTD, THE ASSESSEE IS A MINOR SHAREHOLDER AND DO NOT HAVE THE CONTROLLING I NTEREST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PRINCIPLE LAID DOWN BY THIS TRIBUNAL IN EIH ASSOCIATED HOTELS LTD (SUPR A) REGARDING THE INVESTMENT MADE IN SUBSIDIARY COMPANIES MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. IN FACT, THE MAJOR INVESTMENTS WERE MADE IN THE COMPANIES, PARTNERSHIP FIRM AND AOP WHEREIN THE AS SESSEE HAS NO CONTROLLING INTEREST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INVESTMENTS WERE MADE WITH THE INT ENTION OF EARNING DIVIDEND INCOME WHICH IS EXEMPTED FROM TAXATION UND ER THE INCOME- TAX ACT. 8. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE IN VESTMENT WHICH DOES NOT EARN ANY INCOME, SHOULD NOT BE CONSI DERED FOR DISALLOWANCE U/S 14A OF THE ACT. WE HAVE CAREFULL Y GONE THROUGH THE DECISION OF THIS TRIBUNAL IN ACIT VS M. BASKARAN, 1 52 ITD 844. THIS TRIBUNAL, AFTER PLACING RELIANCE ON THE DECISION OF HON'BLE PUNJAB & ITA NO.893 AND 964/15 :- 6 -: HARYANA HIGH COURT IN CIT VS WINSOME TEXTILE INDUST RIES LTD[2009] 319 ITR 204 FOUND THAT THERE CANNOT ANY DISALLOWANC E U/S 14A IN CASE THE ASSESSEE HAS NOT EARNED/RECEIVED ANY EXEMPTED INCOME DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IN THE CASE BEFORE US, EVEN THOUGH THE ASSESSEE CLAIM ED THAT CERTAIN INVESTMENT HAS NOT RESULTED ANY INCOME, THE DETAIL S OF SUCH INVESTMENTS WERE NOT FURNISHED EITHER BEFORE THE LO WER AUTHORITY OR BEFORE THIS TRIBUNAL. THEREFORE, THIS TRIBUNAL COU LD NOT FIND OUT THE DETAILS OF SUCH INVESTMENT WHICH DOES NOT RESULT AN Y INCOME AS CLAIMED BY THE ASSESSEE. THE DETAILS OF THE AVAIL ABILITY OF INTEREST FREE FUNDS ARE ALSO NOT AVAILABLE ON RECORD. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER H AS TO EXAMINE THE MATTER AFRESH AND FIND OUT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE INCLUDING THE PROFIT OF THE CURRENT YEAR A ND THE DETAILS OF THE INVESTMENTS WHICH DOES NOT EARN ANY EXEMPTED INCOME . ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE MATTER AFRESH AND DECIDE THE SAME IN ACCORDANCE WITH LAW A FTER GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.893 AND 964/15 :- 7 -: 9. NOW COMING TO REVENUES APPEAL I.T.A.NO.964/MDS/201 4, THE FIRST GROUND OF APPEAL IS WITH REGARD TO DISALL OWANCE MADE U/S 80IA OF THE ACT ON WINDMILL. 10. SHRI P. RADHAKRISHNAN, LD. DR SUBMITTED THAT THE CI T(A) HAS ALLOWED DEDUCTION U/S 80IA BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA RS 2003-04, 2004- 05 AND 2005-06. THE ONLY CONTENTION OF THE LD. DR IS THAT THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HIGH COUR T U/S 260A OF THE ACT. 11. WE HEARD SHRI S. RAMACHANDRA RAO, LD. REPRESENTATIV E ALSO. 12. IT IS NOT IN DISPUTE THAT THIS TRIBUNAL IN ASSESSE ES OWN CASE FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 A LLOWED THE CLAIM OF THE ASSESSEE U/S 80IA OF THE ACT . THE ONLY C ONTENTION OF THE REVENUE IS THAT THE APPEAL FILED BY THE REVENUE IS PENDING BEFORE THE HIGH COURT. IT IS NOT THE CASE OF THE REVENUE THAT OPERATION OF THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEARS 2003-04 , 2004-05 AND 2005-06 IS STAYED BY THE HIGH COURT. MOREOVER, THE REVENUE COULD NOT BRING TO THE NOTICE OF THIS TRIBUNAL ANY CHANGE OF CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION WHEN COMPARED TO ASSES SMENT YEARS 2003-04, 2004-05 AND 2005-06. THEREFORE, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THIS TRIBUN AL FOR ASSESSMENT ITA NO.893 AND 964/15 :- 8 -: YEARS2003-04, 2004-05 AND 2005-06 WOULD BE APPLICAB LE FOR THE YEAR UNDER CONSIDERATION ALSO. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 13. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE U/S 40(A)(IA) OF THE ACT. 14. THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE AMOUNT WITHHELD BY THE TRAVEL AGENTS . ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE TRAVEL AGENTS ARE PRINCIPAL TO PRINCIPAL BASIS AND THERE IS NO PRINCIPAL- AGENCY RELATIONSHIP BETWEEN THE TWO. ACCORDING TO THE LD. REPRESENTATIVE, THE TRAVEL AGENTS FIX THE RATES WIT H THEIR CLIENTS AND PASS ON THE PAYMENTS TO THE ASSESSEE. LD. REPRESE NTATIVE FURTHER SUBMITTED THAT THE ASSESSEE ITSELF IS ENGAGED IN T HE BUSINESS OF HOTEL AND RESTAURANT. THE TRAVEL AGENTS BOOK THE ROOMS O NLINE AND FIX THE RATES WITH THEIR CLIENTS. AFTER TAKING THEIR COMMI SSION THE TRAVEL AGENTS WOULD PASS ON THE PAYMENTS TO THE ASSESSEE. LD. R EPRESENTATIVE CLARIFIED THAT THE ASSESSEE IS NOT PAYING ANY COMM ISSION TO TRAVEL AGENTS, THEREFORE, THERE IS NO REQUIREMENT OF DEDUC TION OF TAX. REFERRING TO THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING PVT. LTD 357 ITR 462, THE LD . REPRESENTATIVE ITA NO.893 AND 964/15 :- 9 -: SUBMITTED THAT THE ALLAHABAD HIGH COURT FOUND THAT THE PROVISIONS OF TDS WOULD BE APPLICABLE ONLY IN RESPECT OF THE AMOU NT WHICH REMAINS PAYABLE ON THE LAST DAY OF THE ASSESSMENT YEAR AN D IT WOULD NOT BE APPLICABLE IN RESPECT OF THE AMOUNT ACTUALLY PAID . THIS JUDGMENT WAS CONFIRMED BY THE HON'BLE APEX COURT BY DISMISSING T HE SPECIAL LEAVE PETITION FILED BY THE REVENUE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, A PART OF THE RECEIPTS FOR BOOKING ROOMS IN THE HOTEL ARE TRE ATED AS COMMISSION BY THE ASSESSEE. ONCE THE PAYMENT WAS TREATED AS COMMISSION AT THE HANDS OF THE TRAVEL AGENTS WHO ARE BOOKING THE ROOM S, THE ASSESSEE HAS TO NECESSARILY DEDUCT TAX U/S 194H OF THE ACT. THE CLAIM OF THE ASSESSEE APPEARS TO BE THAT THE PROVISIONS OF 40(A) (IA) OF THE ACT IS APPLICABLE ONLY IN RESPECT OF THE PAYMENT REMAINS TO BE PAID ON THE LAST DAY OF THE FINANCIAL YEAR. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF M/S VECTOR SHIPPING PVT. LTD (SUPRA). THE ALLAHABAD HI GH COURT AFTER REFERRING TO THE DECISION OF SPECIAL BENCH IN MERIL YN SHIPPING & TRANSPORTS VS ADDL. CIT (2012) 16 ITR (TRIB.) 1 (SB ) ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT ANY REASONING. WE FIND TH AT THE HON'BLE CALCUTTA HIGH COURT IN CIT VS CRESCENT EXPORTS SY NDICATE [2013] 262 CTR 525 AND THE HON'BLE GUJARAT HIGH COURT IN CIT V S SIKANDARKHAN N. ITA NO.893 AND 964/15 :- 10 -: TUNVAR, [2013] 357 ITR 312, EXAMINED THE ISSUE ELAB ORATELY AND AFTER CONSIDERING THE DECISION OF THE SPECIAL BENCH IN ME RILYN SHIPPING & TRANSPORTS (SUPRA), FOUND THAT THE DECISION OF THE SPECIAL BENCH IS NO LONGER A GOOD LAW. IN FACT, THE REVENUE CARRIED TH E MATTER BEFORE THE APEX COURT IN M/S VECTOR SHIPPING PVT. LTD. (SUPRA) . THE APEX COURT WITHOUT GOING INTO MERIT OF THE CASE, DISMISSED THE SLP. IT IS WELL SETTLED PRINCIPLES OF LAW THAT DISMISSAL OF SLP BY THE APEX COURT DOES NOT AMOUNT TO LAYING DOWN ANY LAW. THE MUMBAI BENC H OF THIS TRIBUNAL IN ACIT VS RISHTI STOCK AND SHARES PVT LTD . IN I.T.A.NO. 112/MUM/2012 DATED 2.8.2013 EXAMINED THIS ISSUE AND AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE CALCUTTA HI GH COURT IN CRESCENT EXPORTS SYNDICATE (SUPRA) AND THAT OF HON 'BLE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR(SUPRA) FOUND THAT T HE JUDGMENT OF THE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING PVT . LTD. (SUPRA) IS PER INCURIAM THEREFORE, NOT APPLICABLE TO THE FACTS OF THE CAS E. A SIMILAR VIEW WAS TAKEN BY THE COCHIN BENCH OF THIS TRIBUNAL IN THOMAS GEORGE MUTHOOT V. ACIT IN I.T.A. NO.63 & 64/ COCH/2014. 16. UNDER SECTION 194H OF THE ACT, TAX HAS TO BE DEDUCT ED AT THE TIME OF PAYMENT OR AT THE TIME OF CREDITING THE AMO UNT IN THE ACCOUNT OF THE RECIPIENT. IN CASE THE AMOUNT REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR THEN THERE MAY NOT BE ANY LIABIL ITY TO DEDUCT TAX. PROVISIONS OF SEC. 40(A)(IA) OF THE ACT WOULD BE AP PLICABLE IN CASE THERE ITA NO.893 AND 964/15 :- 11 -: IS A LIABILITY TO DEDUCT TAX AND THE ASSESSEE FAIL ED TO DEDUCT TAX UNDER THE PROVISIONS OF THE INCOME-TAX ACT. BUT THE AMOU NT WAS NOT PAID AND REMAINS PAYABLE ON THE LAST DAY OF THE FINANC IAL YEAR THEN INCOME-TAX ACT DOES NOT EXPECT THE ASSESSEE TO DED UCT TAX, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF T HE ACT. THE DISALLOWANCE HAS TO BE MADE UNDER SOME OTHER PROVIS IONS OF THE ACT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSE E BY FOLLOWING HT JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING PVT. LTD. (SUPRA). BY FOLLOWING THE JUDGMENT OF TH E HON'BLE GUJARAT HIGH COURT IN CIT VS SIKANDARKHAN N. TUNVAR(SUPRA) AND THAT OF HON'BLE CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYN DICATE (SUPRA), THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF THE AS SESSING OFFICER IS RESTORED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES AND THAT OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH OF JULY, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 24 TH JULY, 2015 RD ITA NO.893 AND 964/15 :- 12 -: !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF
