Transport Corporation of India Limited, Secunderabad V. Asst. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 952/Hyd/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4967 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 952 /HYD/ 2018 ASSESSMENT YEAR: 20 12 - 13 TRANSPORT CORPORATION OF INDIA LIMITED, SECUNDERABAD. PAN: AAACT 7966 R VS. ACIT, CIRCLE - 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI Y. RATNAKAR REVENUE BY: SMT. S. PRAVEENA, DR DATE OF HEARING: 03.10 .2018 DATE OF PRONOUNCEMENT: 24 . 10 .2018 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2012 - 13 AGAINST THE ORDER OF THE CIT(A), GUNTUR - 1 DATED 13.03.2018. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO RECALCULATE THE DISALLOWANCE UNDER RULE 8D(II) INSTEAD OF GIVING FULL RELIEF AS THE APPELLANTS OWN FUNDS ARE FAR IN EXCESS OF THE AMOUNT OF INVESTMENTS MADE. 2. THAT THERE IS NO DIRECT OR EVEN REMOTE CONN ECTION BETWEEN THE INVESTMENT IN SHARE S AND BORROWED FUNDS. THE BORROWINGS HAVE BEEN USED FOR BUSINESS PURPOSES AND NOT FOR MAKING INVESTMENTS IN SHARES. THE INVESTMENTS IN SUBSIDIARIES HAVE ALSO BEEN MADE FOR BUSINESS PURPOSES AND NOT FOR EARNING ANY D IVIDEND INCOME OR OTHER EXEMPT INCOME. 3. THAT THE LD. CIT(A) ERRED IN NOT APPRECIATING WHERE BOTH INTEREST FREE FUNDS AND INTEREST BEARING FUNDS ARE AVAILABLE, THE PRESUMPTION SHOULD BE THAT THE TAX EXEMPT INVESTMENTS WERE MADE OUT OF INTEREST FREE FUNDS. 4. THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO EARNING OF DIVIDEND INCOME OR OTHER INCOME WHICH ARE EXEMPT FROM TAX. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW NO DISALLOWANCE COULD BE MADE IN UNDER RULE 8D(2)(II). 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO APPORTION THE REMUNERATION OF THE EXECUTIVE DIRECTORS AND NON - EXECUTIVE DIRECTORS TO THE SHIPPING DIVISION. IT IS CONTENDED TH A T THE EXECUTIVE DIRECTORS ARE IN CHARGE OF SP ECIFIC BUSINESS DIVISIONS AND NONE OF THE EXECUTIVE DIRECTORS ARE IN CHARGE OF THE SHIPPING DIVISION AND ACCORDINGLY NO PART OF THE REMUNERATION OF EXECUTIVE DIRECTORS CAN BE APPORTIONED TO THE SHIPPING DIVISION. 7. THAT THE LD. CIT(A) ERRED IN NOT APPRECI ATING THAT THE ENTIRE MANAGEMENT EXPENSES RELATING TO THE SEAWAYS DIVISION HAVE BEEN CHARGED IN THE ACCOUNTS OF SEAWAYS DIVISION. 2. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS THE GROUNDS NO. 6 AND 7. THEY ARE ACCORDINGLY REJECTED AS NOT PRESSED. 3. AS REGARDS GROUNDS NO.1 AND 5 ARE CONCERNED, THE BRIEF FACTS ARE THAT THE ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS, LOGISTICS, SHIPPING BUSINESS AND GENERATION OF E NERGY, FILED ITS RETURN OF INCOME FOR THE A.Y. 2011 - 12 ON 28/09/2012 DECLARING TOTAL INCOME OF RS. 63,93,68,810/ - AFTER CLAIMING DEDUCTION UNDER CHAPTER VI - A OF RS. 2,25,19,122/ - . SUBSEQUENTLY, THE RETURN WAS REVISED BY THE ASSESSEE ON 25.03.2014 REVISING ITS INCOME TO RS. 59,22,21,639/ - AFTER CLAIMING DEDUCTION UNDER CHAPTER VI - A OF RS. 6,26,92,533/ - . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAS MADE INVESTMENTS OF RS. 12,96,20,496/ - , THE INCOME FROM WH ICH IS EXEMPT FROM TAXATION. THEREFORE, HE COMPUTED THE DISALLOWANCE IN ACCORDANCE WITH RULE 8D (2)(II) AND MADE AN ADDITION OF RS. 41,19,483/ - . 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO GRANTED PARTIAL RELIEF BY COMPUTING THE DISALLOWANCE UNDER RULE 8D IN ACCORDANCE WITH THE DIRECTIONS OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011 - 12. AGAINST THE CONFIRMATION OF THE BALANCE OF DISALLOWANCE, ASSESSEE IS IN APPEAL BEFORE US. 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS COMPUTED THE DISALLOWANCE ONLY ON THE INVESTMENTS WHICH YIELDED EXEMPT INCOME AND AS SUCH THE ORDER OF THE CIT(A) IS CONCERNED, THE ASSESSEE DOES NOT HAVE ANY GRIEVANCE. HOWEVER, HE SUBMITTED THAT WITH REGARD TO BALANCE ALSO WHERE THE ASSESSEE HAS HUGE AND OWN SUFFICIENT FUNDS TO MAKE INVESTMENTS , NO DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE. IN SUPPORT OF THIS CONTENTION, LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF C IT VS. SUZLON ENERGY LTD (354 ITR 630 (GUJARAT). 6. LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER SUPPORTED THE ORDERS OF THE CIT(A). 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT IN THE ASSESSEES OWN CASE, THIS TRIBUNAL HAS ALREADY HELD THAT THE DISALLOWANCE UNDER RULE 8D IS TO BE COMPUTED ONLY ON THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME AND NOT ON THE ENTIRE INVESTMENTS. THE CIT(A) HAS ACCORDINGLY COMPUTED THE DISALLOWANCE. RULE 8D HAS COME INTO FORCE W.E.F 24 TH MARCH, 2008 AND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ITO VS. DAGA CAPITAL HA S HELD THAT THE S AID PROVISION IS APPLICA BLE P ROSPECTIVELY. THE DECISION RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS FOR THE A.Y . 2005 - 06 AS IS EVIDENT FROM PARA 3.1 OF THE SAID JUDGM E NT, THEREFORE, THE SAID DECISION IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE AND WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, GROUNDS NO. 1 TO 5 ARE ALSO REJECTED. 8. I N THE RESULT, ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24 TH OCTO BER, 2018. SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 24 TH OCTO BER, 2018 OKK COPY TO: - 1) TRANSPORT CORPORATION OF INDIA LIMITED, 1 - 8 - 271 TO 273, FLAT NOS. 306 & 307, 3 RD FLOOR, ASHOKA BHOPAL CHAMBERS, SP ROAD, SECUNDERABAD - 500 003. 2) ACIT, CIRCLE - 2(2), HYDERABAD. 3) THE CIT(A) , GUNTUR - 1. 4) THE PR. CIT - 1, GUNTUR. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE