Medall Health Care pvt. Ltd., CHENNAI V. ITO Corporate Ward 4(3), CHENNAI

ITA 991/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9262 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 23-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABIJIT RAKSHIT
• Assessee Lawyers: T VASUDEVAN
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , !' , # $ BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBE R ' ./ ITA NO.991/CHNY/2018 !% /ASSESSMENT YEAR: 2014-15 M/S. MEDALL HEALTH CARE PVT. LTD., NO.67, 2 ND FLOOR, TNPL BUILDING, MOUNT ROAD, GUINDY, CHENNAI 600 032. VS. INCOME TAX OFFICER, CORPORATE WARD-4(3), CHENNAI. [PAN: AABCP 9015E] ( & /APPELLANT) ( '(& /RESPONDENT) & ) * / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE '(& ) * /RESPONDENT BY : SHRI ABIJIT RAKSHIT, JCIT + ! ) ,# /DATE OF HEARING : 18.06.2019 -.% ) ,# / DATE OF PRONOUNCEMENT : 20.06.2019 / / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI, IN ITA NO.319/16-17 DATED 15.01.2018 FOR THE ASSESSMENT YEAR (AY) 2014- 15. 2. M/S. MEDALL HEATH CARE LTD., THE ASSESSEE COMPAN Y, ENGAGED IN END-TO END MEDICAL DIAGNOSTIC, TESTING AND ALLIED S ERVICES ON NON-CURE NATURE VIZ. SCANNING, IMAGING, RADIOLOGY AND LABORA TORY REPORTING SERVICES. WHILE MAKING THE ASSESSMENT FOR AY 2014- 15, THE ASSESSING ITA NO.991/CHNY/2018 :- 2 -: OFFICER (AO) NOTICED, INTER ALIA, THAT THE ASSESSEE CLAIMED INTEREST EXPENSES OF RS. 12.11 CR. TOWARDS BORROWED FUNDS OU T OF WHICH IT MADE INVESTMENTS IN EQUITIES. THE ASSESSEE ALSO EARNED R S. 70.73 CR. AS DIVIDEND INCOME AND CLAIMED IT AS EXEMPT INCOME. A FTER DUE DISCUSSION, THE AO MADE A DISALLOWANCE U/S.14A R/W R. 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) AT RS. 2.14 CR. FURTHE R, WHILE MAKING THE COMPUTATION U/S. 115JB, HE ADDED THE DISALLOWANCES MADE U/S. 14A OF THE ACT R/W R. 8D OF THE RULES AND RECOMPUTED THE I NCOME. 3. AGGRIEVED AGAINST THE ORDER OF THE AO, THE ASSES SEE FILED AN APPEAL BEFORE CIT(A). THE LD. CIT(A) DISMISSED THE APPEAL. AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSEE F ILED THIS APPEAL. 4. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE WAS ABSENCE OF RECO RDING OF SATISFACTION THAT THE BORROWED FUNDS HAD BEEN INVESTED IN EARNIN G THE EXEMPT INCOME, THE PREDOMINANT INVESTMENT WAS MADE BY THE ASSESSEE WAS IN THE SUBSIDIARY COMPANY AND THIS CANNOT BE TAKEN AS AN INVESTMENT TO EARN EXEMPT INCOME, THEREFORE, THE RELIANCE PLACED BY THE LD. CIT(A) ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M/S. GODREJ AND BOYCE MANUFACTURING CO. LTD. (CA NO.7020/2011) IS NOT CORRECT. WHEN THE BENCH POINTED OUT TO THE FACT THAT THE HON'BLE APEX COURT HELD THAT ITA NO.991/CHNY/2018 :- 3 -: THE DOMINANT PURPOSE FOR WHICH THE INVESTMENT IS MA DE BY THE ASSESSEE MAY NOT BE RELEVANT AS S. 14A APPLIES IRRESPECTIVE OF THE PURPOSE FOR WHICH THE INVESTMENT IS MADE AND THE EXPENDITURE AT TRIBUTABLE TO THE EXEMPT INCOME HAS TO BE DISALLOWED. THEN, THE LD. AR SUBMITTED RELYING ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN T HE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT [2015] 372 ITR 694 (D EL.) , THE DISALLOWANCE U/S. 14A OF THE ACT R/W R. 8D OF THE RULES MAY BE R ESTRICTED TO THE EXTENT OF EXEMPT INCOME. IN RESPECT OF THE QUANTUM OF DISA LLOWANCE MADE U/S.14A OF THE ACT R/W R. 8D OF THE RULES ADDED TO THE INCOME U/S. 115JB OF THE ACT, THE LD. DR SUBMITTED THAT IN ACCORDANCE WITH THE SPECIAL BENCH DECISION IN THE CASE OF VIREET INVESTMENT PVT. LTD. V. ACIT ITAT DELHI BENCH [2017] 82 TAXMANN.COM 415 (DEL-TRIB.) ( SB) DATED 16.06.2017, THE ADDITION BE DELETED. 5. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE RECEIVED RS. 7,07, 302/- BEING DIVIDEND INCOME FROM VARIOUS INVESTMENTS AND CLAIMED THEM AS EXEMPT INCOME. THE AO RECORDS A FINDING THAT THE ASSESSEE HAS INCU RRED INTEREST EXPENSES AT 12.11 CR. ON THE BORROWED FUNDS AND OUT OF WHICH INVESTED IN EQUITIES. THEREFORE, ON DUE SATISFACTION, HE IN VOKED S. 14A R/W R. 8D RIGHTLY. THE LD. CIT(A) RECORDS A FINDING THAT THE ASSESSEE ALSO CLAIMED EXCLUSION OF LONG TERM CAPITAL GAIN FROM MUTUAL FUN DS TO THE EXTENT OF RS. ITA NO.991/CHNY/2018 :- 4 -: 91,58,329/-. THEREFORE, THE LD. CIT(A) CONFIRMED T HE DISALLOWANCE MADE BY THE AO U/S. 14A OF THE ACT R/W R. 8D OF THE RULE S. IN ACCORDANCE WITH HONBLE HIGH COURT OF DELHI JUDGMENT RELIED ON BY T HE AR, SUPRA, THE DISALLOWANCE U/S. 14A R/W R. 8D HAS TO BE RESTRICTE D THE EXTENT OF EXEMPT INCOME. HOWEVER, IT IS NOT CLEAR FROM THE ORDERS O F THE LOWER AUTHORITIES WHAT IS THE TOTAL QUANTUM OF EXEMPT INCOME ON WHICH THE IMPUGNED DISALLOWANCE HAS TO BE MADE. THEREFORE, WE DIRECT THE AO TO RE- DETERMINE THE DISALLOWANCE, AFRESH. THE ASSESSEE S HALL FURNISH THE RELEVANT MATERIALS IN SUPPORT OF ITS CONTENTION BEF ORE THE AO AND SHALL COMPLY WITH THE REQUIREMENTS OF THE AO IN ACCORDANC E WITH LAW. THE AO, AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE AND ON EXAMINATION OF THE MATERIALS ON WHICH THE ASSESSEE RELIES ON IN SUPPORT OF ITS CONTENTION ETC. SHALL DETERMINE THE DISALLOW ANCE AS DIRECTED, SUPRA. WITH REGARD TO THE ADDITION MADE U/S. 115 JB OF THE ACT, THE SPECIAL BENCH IN THE DECISION, SUPRA, HELD THAT THE COMPUTA TION UNDER CLAUSE(F) OF EXPLANATION 1 TO S. 115JB(2) OF THE ACT IS TO BE MA DE WITHOUT RESORTING TO COMPUTATION AS CONTEMPLATED U/S. 14A OF THE ACT R/W R. 8D OF THE RULES. FOLLOWING THE DECISION OF SPECIAL BENCH, WE FIND ME RIT THE CORRESPONDING GROUNDS RAISED BY THE ASSESSEE AND HENCE, THE ASSES SEE PLEA ON THIS ASPECT IS ALLOWED. ITA NO.991/CHNY/2018 :- 5 -: 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JUNE, 2019 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER /CHENNAI, 0' /DATED: 20 TH JUNE, 2019 . EDN, SR. P.S / ) ',12 32%, /COPY TO: 1. & /APPELLANT 2. '(& /RESPONDENT 3. + 4, ( )/CIT(A) 4. + 4, /CIT 5. 2!56 ', /DR 6. 67 8 /GF