Veejay Lakshmi Engineering Works Ltd., CHENNAI V. DCIT, Coimbatore

ITA 913/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5030 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SURESH KUMAR
• Assessee Lawyers: V JAGADISAN
• Keywords: Opportunity of being heard; Wholly owned subsidiary
• Section: 14A; 115JB

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 913 /MDS/2017 / ASSESSMENT YEAR :201 2 - 1 3 M/S. VEEJAY LAKSHMI ENGINEERING WORKS LTD., 1, SENGALIPALAYAM, NGGO COLONY, COIMBATORE 641 022. [PAN: A AACV7207R ] VS. THE DEPUTY COMMISSIONER OF INCO ME TAX, CO RPORATE CIRCLE 1 , C OIMBATORE . ( APPELLANT ) ( R ESPONDENT ) / APPELLANT BY : SHRI V. JAGADISAN, C.A. / RESPONDENT BY : S HRI S. SURESH KUMAR , ADDL. CIT / DATE OF HEARING : 0 2 . 0 1 .201 8 / DATE OF P RONOUNCEMENT : 04 . 0 1 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C OIMBATORE DAT ED 2 7 .0 1 .201 7 RELEVANT TO THE ASSESSMENT YEAR 201 2 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] R.W. RULE 8D OF IT RULE S. I.T.A. NO. 913 /M /17 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF TEXTILE MACHINERY SPARES AND GENERATION OF POWER THROUGH WINDMILL. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.09.2012 FOR THE ASSESSMENT YEAR 2012 - 13 ADMI TTING AN INCOME OF .1, 54 , 4 9, 73 0/ - UNDER NORMAL PROVISIONS AND A SUM OF .59,29,940/ - AS BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 1 3 .08.201 3 AND DULY SERVED ON THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE FILED THE DETAILS. AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE INVESTMENT TO THE TUNE OF .2401.75 LAKHS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE HAS GIVEN A WORKING OF DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE ACT AMOUNTING TO .12,00,875/ - , BEING THE 0.5% OF THE AVERAGE VALUE OF INVESTMENTS , WHICH WAS FOUND TO BE IN ORDER BY THE ASSESSING OFFICER AND ACCORDINGLY DISALLOWED UNDER SECTION 14A R.W. RULE 8D . 3. AGAINST THE DISALLOWANCE OF .12,00,875/ - UNDER SECTION 14A R.W. RULE 8D, T HE ASSESSEE CONTENDED IN APPEAL BEFORE THE LD. CIT(A) THAT IT HAS RECEIVED DIVIDEND OF .47,720/ - AND THEREFORE, THE HUGE DISALLOWANCE IS NOT I.T.A. NO. 913 /M /17 3 JUSTIFIED . AFTER CONSIDERING VARIOUS SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE MADE INVESTMENT IN THE WHOLLY OWNED SUBSIDIARY COMPANY AND THEREFORE, DISALLOWANCE UNDER SECTION 14A OF THE ACT IS NOT WARRANTED AND PRAYED THAT THE DISALLOWANCE SHOULD BE DELETED. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SINCE THE ASSESSEE HAS NOT ADMITTED ANY EXPEND ITURE FOR MAKING HUGE INVESTMENTS AND MAINTAINING THE SAME, THE CALCULATION OF DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE ACT AMOUNTING TO .12,00,875/ - , BEING THE 0.5% OF THE AVERAGE VALUE OF INVESTMENTS, GIVEN BY THE AR OF THE ASSESSEE, WAS ACCEPTE D BY THE ASSESSING OFFICER AND DISALLOWED THE SAME. HOWEVER, BEFORE THE LD. CIT(A), THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF .47,720/ - ONLY AND THE INVESTMENTS MADE IN THE WHOLLY OWNED SUBSIDIARY SHOULD BE EXCLUDED FROM COMPUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. I.T.A. NO. 913 /M /17 4 6. BY RELYING ON VARIOUS DECISIONS, THE LD. CIT(A) HELD THAT SINCE THE ASSESSEE HAS INVESTED .24.00 CRORES IN ASSESSEE S SUBSIDIARY COMPANY M/S. VEEJAY LAKSHMI TEXTILES LTD., THE SAME WILL HAVE TO BE CONSIDERED FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT AND ACCORDINGLY , HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. HOWEVER, THE AUTHORITIES BELOW HAVE NOT EXAMINED THE SOURCE OF INVESTMENT. BEFORE US, BY FILING COPY OF MEMORANDUM OF AGREEMENT, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE, BEING HOLDING COMPANY , WAS HAVING TWO DIFFERENT AND DISTINCT BUSINESSES SUCH AS MANUFACTURE OF TEXTILE MACHINERY SPARES AND MANUFACTURE OF COTTON YARN. AS PER MOA , THE HOLDING COMPANY TRANSFERRED ITS TEXTILE DIVISION VALUING .20,08,59,811/ - AS FIXED ASSETS AND .6,40,31,576/ - AS CURRENT ASSETS TO ITS SUBSIDIARY COMPANY AND IN TURN, THE ASSESSEE RETAINED SHARES WORTH OF .24 CRORES AND PRAYED THAT THE INVESTMENT IN SUBSIDIARY DID NOT WARRANT DISALLOWANCE UNDER SECTION 14A OF THE ACT . HOWEVER, THE ASSESSEE HAS NOT FILED THE BALANCE SHEET , ETC. FOR VERIFICATION. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE D ETAILS AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO FURNISH COMPLETE PARTICULARS BEFORE THE ASSESSING OFFICER FOR VERIFICATION. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 913 /M /17 5 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 04 TH JANUARY , 201 8 AT CHENNAI. SD/ - SD/ - (A.MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVV URU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, 04 . 0 1 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.