NSL Energy Ventures Private Limited, Hyderabad V. Dy. Commissioner of Income Tax , Circle-16(1), Hyderabad

ITA 972/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7862 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 16-04-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: A V RAGHURAM
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

ITA NO 972 OF 2018 NSL ENERGY VENTURES P LTD HYDER ABAD. PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.972/HYD/2018 (ASSESSMENT YEAR: 2013-14) NSL ENERGY VENTURES P LTD HYDERABAD PAN:AACCV6236C VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 16 (1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI Y.V.S.T. SAI, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)-4, HYDERABAD, DATED 8.3.20 18. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABA D, DISMISSING THE APPEAL OF THE APPELLANT IS ERRONEOUS , ILLEGAL AND UNSUSTAINABLE BOTH ON FACTS AND IN LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE DISALLOWANCE OF RS.12,74,97,099 UNDER SECTION 14A O F THE ACT READ WITH RULES. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THERE IS NO EXEMPT (DIVIDEND INCOME) FROM THE COMPANIES IN WHICH THE INVESTMENT IS MADE INCOME IN THE PREVIOUS YEAR RELEVANT TO ASST. YEAR UNDER CONSIDERATION AND THER EFORE NO DISALLOWANCE COULD HAVE BEEN MADE. 3. THE FINDING OF THE COMMISSIONER (APPEALS) THAT T HE APPELLANT RECEIVED DIVIDEND INCOME OF RS.2,69,773 (WHICH WAS RECEIVED FROM SHORT TERM INVESTMENTS IN MUTUAL FUNDS) AND TH EREFORE THE DATE OF HEARING: 16.04.2019 DATE OF PRONOUNCEMENT : 24.04.2019 ITA NO 972 OF 2018 NSL ENERGY VENTURES P LTD HYDER ABAD. PAGE 2 OF 3 PROVISIONS OF SECTION 14A OF THE ACT SPRING INTO AC TION IS LEGALLY INCORRECT. 4. WITHOUT PREJUDICE TO ABOVE GROUND, THE COMMISSIO NER (APPEALS) FAILED TO APPRECIATE THAT THE INVESTMENT IN DOWNSTR EAM SUBSIDIARY COMPANIES IS OUT OF BUSINESS EXPEDIENCY AND THEREFORE THE PROVISIONS OF SECTION 14A OF THE ACT COULD NOT HAVE BEEN INVOKED. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING IT IS PRAYED THAT THE APPEAL MAY BE ALLOWED . 2. HOWEVER, AT THE TIME OF HEARING, THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE MA DE BY THE ASSESSEE U/S 14A WAS ONLY A SUM OF RS.8,96,66,476/- WHEREAS IN THE GROUND IT WAS ERRONEOUSLY MENTIONED AS RS.12,74 ,97,099/- AND REQUESTED THAT THE CORRECT FIGURES MAY BE ADOPT ED. THEREAFTER, THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO THE EX EMPT INCOME EARNED BY THE ASSESSEE. IN SUPPORT OF THIS CONTENTI ON, HE PLACED RELIANCE UPON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL DATED 15.06.2018 IN THE CASE OF M/S. JASPE R INDUSTRIES (P) LTD VS. DY.CIT IN ITA NO.283/HYD/2017. 3. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F MAXOPP INVESTMENTS LTD VS. CIT REPORTED IN (2018) 91 TAXMA NN.COM 154 (S.C) WHEREIN IT WAS HELD THAT EVEN WHERE THE DOMIN ANT PURPOSE FOR MAKING INVESTMENT IN SHARES IS TO GAIN CONTROL OF THE COMPANY, THE PROVISIONS OF SECTION 14A R.W.R 8D ARE APPLICAB LE. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS RAISED A S PECIFIC GROUND ITA NO 972 OF 2018 NSL ENERGY VENTURES P LTD HYDER ABAD. PAGE 3 OF 3 THAT THE INVESTMENTS WERE MADE TO GAIN CONTROL OF T HE SUBSIDIARY COMPANIES AND THEREFORE, IT IS ITS BUSINESS EXPEDIE NCY. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER, RELIED UP ON THE CONTENTIONS BEFORE THE AUTHORITIES BELOW. THEREFORE , THE GROUND NO.4 ON THIS ISSUE IS REJECTED. AS FAR AS GROUND NO .3 IS CONCERNED, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCHES AT HYDERABAD. WE FIND THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.2,69,77 3/- ONLY. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN THE CASE OF M/S. JASPER INDUSTRIES (CITED SUPRA), WE DI RECT THE AO TO RESTRICT THE DISALLOWANCE U/S 14A R.W.R 8D ONLY TO THE EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE RELEVANT P REVIOUS YEAR. ASSESSEES APPEAL IS ACCORDINGLY PARTLY ALLOWED. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 24 TH APRIL, 2019. VINODAN/SPS COPY TO: 1 SHRI A.V.RAGHURAM & P. VINOD, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500001 2 DY.CIT, CIRCLE 16(1) I.T. TOWERS, AC GUARDS, HYDE RABAD 3 CIT (A)-4 HYDERABAD 4 PR. CIT 4 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER