Protectron Electromech Private Limited, CHENNAI V. DCIT, CHENNAI

MA 152/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8100 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Rule 8D
• Section: 14A; 254(2)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S. JAYARAMAN, ACCOUNTANT MEMBER M.P. NO. 152/CHNY/2018 [IN I.T.A. NO. 403/CHNY/2017] ASSESSMENT YEAR: 2012-13 M/S. PROTECTRON ELECTROMECH PRIVATE LIMITED, NO. 9, ATHIPATTAN STREET, MOUNT ROAD, CHENNAI 600 002. [PAN:AABCP1103B] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(2), AAYAKAR BHAVAN, CHENNAI 600 034. (PETITIONER) (R ESPONDENT ) PETITIONER BY : SHRI N. DEVANATHAN, ADVOCATE RESPONDENT BY : SHRI GURU BASHYAM, ADDL. CIT / DATE OF HEARING : 29.11.2019 /DATE OF PRONOUNCEMENT : 22.01.2020 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BY MEANS OF PRESENT MISCELLANEOUS PETITION, THE ASSESSEE SEEKS TO RECALL THE ORDER PASSED BY THE TRIBUNAL IN I.T.A. NO.403/CHNY/2017 DATED 20.04.2018. BY REFERRING TO THE PETITION, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE INVESTMENTS HELD BY THE PETITIONER WERE ENTIRELY HANDLED BY PROFESSIONAL PORTFOLIO MANAGERS. THE PETITIONER DURING THE YEAR HAD PAID THE PORTFOLIO MANAGERS, AN AMOUNT OF .1,72,068/-, WHICH HAS ALREADY BEEN DISALLOWED BY THE PETITIONER IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME. M.P. NO. 152/CHNY/19 2 FURTHER, IT WAS THE SUBMISSION THAT THE INTEREST EXPENDITURE FORMS THE CRUX OF THE SECOND LIMB OF RULE 8D FOR THE WORKING OF THE ESTIMATED DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE INTEREST EXPENDITURE OF THE PETITIONER CONSISTS OF INTEREST ON INCOME TAX PAID ON SELF-ASSESSMENT, INTEREST ON WINDMILL PROJECTS. THEREFORE, CONFIRMATION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT IS A MISTAKE APPARENT ON RECORD AND PRAYED FOR RECALLING THE ORDER OF THE TRIBUNAL FOR FRESH ADJUDICATION. 2. PER CONTRA, THE LD. DR HAS SUBMITTED THAT THERE IS NO MISTAKE APPARENT IN THE ORDER PASSED BY THE TRIBUNAL AND REVIEW OF THE ORDER OF THE TRIBUNAL IS NOT PERMISSIBLE UNDER SECTION 254(2) OF THE ACT. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE ORDER PASSED BY THE TRIBUNAL. WHILE DISTINGUISHING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN I.T.A. NO. 157/MDS/2012, THE TRIBUNAL HAS OBSERVED AS UNDER: 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAS EARNED DIVIDEND INCOME OF .51,53,346/- AGAINST THE INVESTMENT AS ON 31.03.2012 OF .16,56,03,048/-. THE ASSESSEE ALSO INCURRED INTEREST EXPENDITURE OF .53,89,477/- AND CLAIMED THE EXPENSES IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSEE MADE THE INVESTMENTS THROUGH PORTFOLIO MANAGERS AND PORTFOLIO MANAGERS WERE PAID AN AMOUNT OF .1,72,068/- AS THEIR FEES. ALONG WITH THIS FEES PAID FOR PORTFOLIO MANAGERS AND AN ESTIMATED EXPENDITURE OF .1,26,353/- TOWARDS EARNING DIVIDEND INCOME TOTALLING TO .2,98,421/- WAS DISALLOWED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME WITHOUT APPLYING ANY PROVISIONS OF M.P. NO. 152/CHNY/19 3 SECTION AND ENUNCIATED IN THE INCOME TAX ACT. ACCORDINGLY, BY APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE COMPONENT TO THE EXTENT OF .21,90,466/-. SINCE THE ASSESSEE HAS ALREADY DISALLOWED A SUM OF .2,98,421/- IN THE COMPUTATION OF INCOME, THE BALANCE AMOUNT ALONE OF .18,92,045/- WAS BROUGHT TO TAX, WHICH WAS CONFIRMED BY THE LD. CIT(A). ON CAREFULLY GOING THROUGH THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT EARNING OF DIVIDEND INCOME, PAYMENT AND CLAIM OF INTEREST EXPENDITURE ON BORROWALS ARE NOT IN DISPUTE. NOWHERE, THE ASSESSEE HAS DISPUTED THAT BORROWED FUNDS WERE NOT UTILIZED FOR MAKING INVESTMENTS. MOREOVER, THE ASSESSEE HAS NOT FURNISHED ANY METHODOLOGY ADOPTED FOR MAKING DISALLOWANCE OF MEAGRE EXPENDITURE OF . 1,26,353/- TOWARDS EARNING OF HUGE DIVIDEND INCOME OF .51,53,346/-. THE RELIANCE PLACED ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN I.T.A. NO.157/MDS/2013 & CO NO. 48/MDS/2013 DATED 11.04.2013 HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE, BECAUSE, IN THAT CASE, AGAINST THE DIVIDEND INCOME OF .21,29,578/-, THE ASSESSEE PAID MANAGEMENT FEE OF .12,90,599/- TO THE PORTFOLIO MANAGERS, WHICH APPEARS TO BE QUITE REASONABLE FOR MAKING INVESTMENT OF .11.89 CRORES. WHEREAS, IN THE PRESENT CASE AGAINST THE DIVIDEND INCOME OF .51,53,346/-, THE ASSESSEE HAS PAID ONLY .1,72,068/- TO THE PORTFOLIO MANAGERS AS THEIR FEES AND NOT FURNISHED ANY METHOD ADOPTED FOR ESTIMATING DISALLOWANCE OF .1,26,353/- TOWARDS EARNING OF DIVIDEND INCOME ON THE HUGE INVESTMENT MADE OF .16,56,03,048/- AS ON 31.03.2012. THEREFORE, WE ARE INCLINED TO ACCEPT WITH THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME OVER AND ABOVE ESTIMATED BY THE ASSESSEE, WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER RIGHTLY DETERMINED THE AMOUNT OF EXPENDITURE IN RELATION TO EARNING OF DIVIDEND INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A R.W. RULE 8D. IN VIEW OF THE ABOVE, THE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED. 4. AS CONTENDED BY THE PETITIONER IN PARA 5 THAT THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. IS BINDING ON THE TRIBUNAL IS NOT CORRECT IN VIEW OF THE DECISION IN THE CASE OF VISVAS PROMOTERS P. LTD. V. ITAT & ANR. 323 ITR 114, WHEREIN, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE DECISION OF ONE HIGH COURT IS M.P. NO. 152/CHNY/19 4 NEITHER BINDING PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUTSIDE ITS OWN TERRITORIAL JURISDICTION, AND IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH COURT, IT MAY, AT BEST, HAVE ONLY PERSUASIVE EFFECT. WHILE ADJUDICATING THE APPEAL, THE TRIBUNAL HAS CONSIDERED ALL THE GROUNDS RELATING THE EFFECTIVE GROUND RAISED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE FIND NO MERIT IN THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE. 4. IN THE RESULT, THE MP FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 22 ND JANUARY, 2020 AT CHENNAI. SD/ - SD/ - (S. JAYARAMAN) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 22.01.2020 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.