Shriram Investments, CHENNAI V. DCIT, CHENNAI

MA 171/CHNY/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5571 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-07-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R SIVARAMAN
• Keywords: Depreciation; Business expenditure; Rule of consistency; Additional depreciation; Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER M.P. NO. 1 7 1/MDS/2016 [IN I.T.A.NO. 21 12 /MDS/2015 ] ASSESSMENT YEAR : 201 0 - 1 1 M/S. S HRIRAM INVESTMENTS, MOOKAMBIKA COMPLEX, NO.4, LADY DESIKA ROAD, MYLAPORE, CHENNAI 600 0 04 . [PAN: A A A F S 2590M ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , NON CO RPORATE CIRCLE 2 , CHENNAI 600 0 34 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. SIVARAMAN , ADVOCATE / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 0 6 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 04 .0 4 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BY MEANS OF PRESENT MISCELLANEOUS PETITION, THE ASSESSEE SEEKS TO RECALL /RECTIFY THE ORDER OF THE TRIBUNAL IN I.T.A. NO. 21 12 / MDS/201 5 D ATED 1 0.03 .2016 RELEV ANT TO THE ASSESSMENT YEAR 20 1 0 - 11 . THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL ON THE ISSUE OF DELETION OF DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] R.W. RULE 8D OF IT RULES. THE LD. AR HAS SUBMITTED THAT THE SHARE APPLICATION MONEY WILL NOT YIELD ANY INCOME M.P. NO. 1 7 1/M/16 2 TILL CONVERTED INTO SHARES, WHETHER EXEMPT OR NOT. AS THERE IS NEITHER ANY POSSIBILITY OF EARNING INCOME NOR ANY RIGHT TO A BENEFIT IS VESTED TILL SHARES ARE ALLOTT ED, THE PROVISIONS OF SECTION 14A READ WITH RULE 8D WILL NOT APPLICABLE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE RELIED ON THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A. NO. 1690/MDS/2013 DATED 27.11.2013 FOR THE ASSESSMENT YEAR 2009 - 10 AND ALS O THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL IN I.T.A. NO. 1523/MDS/2012 IN THE CASE OF MSA SECURITY SERVICES & I.T.A. NO. 1524/MDS/2012 IN NMS CONSULTANCY VIDE ORDER DATED 17.12.2012 FOR THE PREPOSITION THAT MERE SHARE APPLICATION MONEY PLACED BY THE ASSESSEE IN HIS SISTER CONCERNS PENDING FOR ALLOTMENT, THE PROVISIONS OF SECTION 14A WILL NOT APPLY. IT WAS FURTHER SUBMITTED THAT CONTRARY TO THIS ORDER OF THE TRIBUNAL, WHICH ARE DIRECTLY ON THE ISSUE, THE TRIBUNAL RELIED ON VARIOUS DECISION OF T HE TRIBUNAL AND HON BLE HIGH COURT WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE FOR COMMENTS ON THE SAME. AS SUCH, THERE WAS MISCARRIAGE OF JUSTICE. FURTHER, IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE HAS RELIED ON THE JUDGEMENT IN THE CASE OF CHEMI NVEST LIMITED V. CIT [2015] 378 ITR 33 (DELHI), WHICH WAS ALSO NOT FOLLOWED. ACCORDINGLY, HE SUBMITTED THAT THE RULE OF CONSISTENCY AND PRECEDENT HAS TO BE FOLLOWED AS HELD BY THE FOLLOWING JUDGEMENTS: I) HINDUJA GLOBAL SOLUTIONS LTD. V. UOI [2016] 381 ITR 518 II) HONDA SIEL POWER PRODUCTS LTD. V. CIY 165 TAXMAN 307(SC) III) ACIT V. SAURASHTRA KUTCH STOCK EXCHANGE LTD. 173 TAXMAN 322(SC) IV) DLF UNIVERSAL LTD. V. CIT 172 TAXMAN 107 (DEL) V) AFFECTION INVESTMENTS LTD. V. ACIT 320 ITR 255(GUJARAT) M.P. NO. 1 7 1/M/16 3 VI) PROMIN LTD. V. CIT (2016) 382 ITR 25 (DELHI). ACCORDINGLY, HE PRAYED THAT THE ORDER OF THE TRIBUNAL DATED 10.03.2016 MAY BE RECALLED. 2. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER PASSED BY THE TRIBUNAL. 3. WE HAVE HEARD BOTH SIDES AND PERUSED THE O RDER OF THE TRIBUNAL. ADMITTEDLY, IN THIS CASE, THE ASSESSEE HAS SHOWN IN THE BALANCE SHEET A SUM OF .69,39,16,000/ - AS SHARE APPLICATION MONEY. TILL 31.03.2010, NO SHARES WERE ALLOTTED TO THE ASSESSEE AND ALSO THE ASSESSEE INCURRED INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT OF .95,41,875/ - . IN VIEW OF THIS, THE ASSESSING OFFICER INVOKED THE PROVIS IONS OF SECTION 14A OF THE ACT AND MADE DISALLOWANCE S . ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OF .7,78,51,402/ - . HOWEVER, THE TRIBUNAL CONFIRMED THE DISALLOWANCE BY PLACING VARIOUS JUDGEMENTS AND NOT FOLLOWING THE EAR LIER ORDER OF THE TRIBUNAL. THE TRIBUNAL ALSO GIVEN THE REASON FOR NOT FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL AND ALSO PLACED RELIED ON THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. HI TECH ARAI LTD. 321 ITR 477, WHEREIN IT WAS HELD AS UNDER: WE ARE NOT IN A POSITION TO APPRECIATE EITHER OF THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE PETITIONER. AS FAR AS THE FIRST CONTENTION IS CONCERNED, WHEN THE TRIBUNAL BY THE IMPUGNED ORDER HAS APPLIED SECTION 32(1)(IIA) OF THE ACT, TO THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE AND HAS FOUND THAT THE ASSESSEE IS ENTITLED FOR THE ADDITIONAL DEPRECIATION CLAIMED UNDER THE SAID M.P. NO. 1 7 1/M/16 4 PROVISION, IT CANNOT BE HELD THAT SIMPLY BECAUSE A CO - ORDINATE BENCH OF THE TRIBUNAL HAD EARLIER TAKEN A DIFFERENT VIEW, THE TRIBUNAL ON THIS OCCASION ALSO OUGHT TO HAVE FOLLOWED THE SAME. WHEN WE FIND THAT THE TRIBUNAL HAS APPLIED THE LAW CORRECTLY IN THE IMPUGNED ORDER, THERE IS NO GAIN SAYING THAT THERE WAS AN EAR LIER ORDER BY THE CO - ORDINATE BENCH AND THEREFORE, FOR THAT REASON, THIS TIME ALSO THE TRIBUNAL SHOULD HAVE BLINDLY FOLLOWED ITS OWN EARLIER DECISION EVEN IF SUCH EARLIER DECISION DID NOT REFLECT THE CORRECT POSITION OF THE LAW . NOW, THE LD. AR MADE A PL EA OF ERROR CREPT IN THE ORDER OF THE TRIBUNAL, WHICH SHOULD BE RECALLED SO AS TO PASS FRESH ORDER . 4. THE SECTION 14A OF THE ACT READS AS FOLLOWS: (1) FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN R ESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. AS SEEN FROM THE ABOVE SECTION 14A(1), IF AN EXPENSE IS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOT AL INCOME UNDER THIS ACT, THEN DEDUCTION IS NOT ALLOWABLE FOR COMPUTING TAXABLE INCOME UNDER CHAPTER IV. THIS IS A FACT THAT FOR MAKING INVESTMENT IN SHARES ONLY, MONEY IS PAID AS SHARE APPLICATION MONEY AND THEREFORE, EVEN IF THE ALLOTMENT OF SHARES IS MA DE AFTER THE END OF THE FINANCIAL YEAR IN WHICH THE SHARE APPLICATION MONEY IS PAID, IT HAS TO BE ACCEPTED THAT THE EXPENSES INCURRED IN MAKING PAYMENT OF SHARE APPLICATION MONEY IS RELATES TO EARNING OF EXEMPT DIVIDEND INCOME BECAUSE, THERE CANNOT BE ANY OTHER PURPOSE FOR MAKING THE SHARE APPLICATION MONEY. BY THE SAME LOGIC, EVEN IF THE SHARES ARE NOT ALLOTTED AND SHARE APPLICATION MONEY IS NOT REFUNDED THEN ALSO, THE EXPENDITURE INCURRED TILL REFUND OF SHARE APPLICATION MONEY IS EXPENSES INCURRED FOR EAR NING M.P. NO. 1 7 1/M/16 5 EXEMPT DIVIDEND INCOME ALTHOUGH THE SAME MAY NOT BE ACTUALLY EARNED AT ANY POINT OF TIME. BEING SO, THE TRIBUNAL HAS HELD THAT EVEN THE INVESTMENT IN SHARE APPLICATION MONEY WARRANT DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D. NOW THE CONTENTION OF TH E LD. AR IS THAT THE ORDER OF THE TRIBUNAL BE RECALLED SO AS TO RECTIFY THE SAME. IN OUR OPINION, WE FIND NO MERIT IN THE ARGUMENT OF THE LD. AR AT THIS STAGE IS AMOUNT TO REVIEW THE ORDER OF THE TRIBUNAL, WHICH IS NOT PERMISSIBLE UNDER SECTION 254(2) OF T HE ACT. THE ORDER OF THE TRIBUNAL SHOULD BE READ IN WHOLE AND NOT IN PIECEMEAL MANNER. IF THE READING OF THE ORDER IN WHILE GIVES THE MEANING THAT THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE UNDER SECTION 14A OF THE ACT THEN NO INTERRUPTION IS REQUIRED IN T HE ORDER OF THE TRIBUNAL. IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE INVESTMENT IN SHARE APPLICATION MONEY, WHICH IS PENDING FOR ALLOTMENT AND AS DISCUSSED EARLIER, IT WARRANT DISALLOWANCE UNDER SECTION 14A OF THE ACT AND VIEW OF THE TRIBUNAL WAS FURTHER FORTIFIED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF SRI RATAN HOUSING DEVELOPMENT LTD. IN I.T.A. NO. 594/LKW/2013 FOR THE ASSESSMENT YEAR 2009 - 10 VIDE ORDER DATED 24.07.2015 AND BEING SO, THE ISSUE RAISED BY THE ASSESSEE IN THIS MISCELLANEOUS PETITION IS VERY MUCH DEBATABLE AND DEBATABLE ISSUE CANNOT BE CONSIDERED UNDER SECTION 254(2) OF THE ACT. 5. FURTHER, THE HEAD NOTES IN THE CASE OF INSAALLAH INVESTMENTS LTD. V. ITO [2008] 23 SOT 130(DELHI) READS AS UNDER: M.P. NO. 1 7 1/M/16 6 SECTION 14A, READ WITH SECTION 36(1)(II I), OF THE INCOME - TAX ACT, 1961 - EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME - ASSESSMENT YEAR 2000 - 01 - WHETHER PHRASE 'INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME' USED IN SECTION 14A IS NOT LIMITED TO ONLY CASES WHERE SOME INCOME HAS ACTUALLY BEEN RECEIVED BUT IT ALSO APPLIES TO CASES WHERE INCOME CANNOT BE INCLUDED IN TOTAL INCOME, WHETHER RECEIVED OR NOT - HELD, YES - WHETHER PROVISIONS OF SECTION 14A WOULD APPLY TO ALL INCOME WHICH IS EXEMPT, WHETHER INCOME IS ASSESSED UNDER HEAD 'INCOME FR OM OTHER SOURCES' OR UNDER HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' - HELD, YES - ASSESSEE, AN INVESTMENT COMPANY, BORROWED MONEY AND UTILIZED SAME FOR PURCHASE OF SHARES OF FOUR COMPANIES - IT PAID INTEREST ON BORROWED MONEY AND CLAIMED DEDUCTIO N OF SAME A BUSINESS EXPENDITURE - ASSESSING OFFICER, HOWEVER, HELD THAT INVESTMENTS IN SHARES WERE LONG - TERM INVESTMENTS WHICH COULD EITHER YIELD INCOME FROM DIVIDEND OR FROM LONG - TERM CAPITAL GAIN - HE FURTHER HELD THAT THERE WAS NO PROVISION FOR ALLOWIN G DEDUCTION ON ACCOUNT OF INTEREST AGAINST CAPITAL GAIN AND INTEREST COULD ALSO NOT BE ALLOWED AGAINST DIVIDEND INCOME AS SAME WAS EXEMPT FROM TAX IN VIEW OF PROVISIONS OF SECTION 14A - HE, THEREFORE DISALLOWED DEDUCTION CLAIMED ON ACCOUNT OF INTEREST PAYM ENT WHETHER ASSESSING OFFICER WAS JUSTIFIED - HELD, YES. WORDS AND PHRASES: THE PHRASE 'INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME AS APPEARING IN SECTION 14A OF INCOME - TAX ACT, 1961. 5.1 MOREOVER, THE HEAD NOTES IN THE CASE OF ABAN INVESTMENTS (P.) LTD. V. DCIT [2012] 52 SOT 36 (CHENNAI) READS AS UNDER: I. SECTION 14A OF THE INCOME - TAX ACT, 1961, READ WITH RULE 8D OF THE INCOME - TAX RULES, 1962 - EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME NOT INCLUDIBLE IN TOTAL INCOME - ASSESSMENT YEAR 2007 - 08 - ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 10(34) ON AN AMOUNT OF RS. 1.56 CRORES RECEIVED AS DIVIDEND - TOTAL INTEREST PAYMENT FOR IMPUGNED ASSESSMENT YEAR WAS RS. 3.39 CRORES - ONLY A SUM OF RS. 82.58 LAKHS WAS CONSIDERED BY ASSESSEE FOR DISA LLOWANCE UNDER SECTION 14A - SUBMISSION OF THE ASSESSEE WAS THAT NO SHARES WERE ALLOTTED TO IT FOR INVESTMENTS MADE WITH COMPANY 'N' AND MONEY INVESTED WAS LYING AS SHARE APPLICATION MONEY - ASSESSEE CLAIMED THAT AS NO SHARES WERE ALLOTTED, THERE SHOULD NOT BE ANY DISALLOWANCE UNDER SECTION 14A ON INTEREST PAID ON BORROWED CAPITAL USED TO MAKE SUCH INVESTMENT - ASSESSING OFFICER, HOWEVER, HELD THAT SINCE THIS INVESTMENT WAS MADE FOR ALLOTMENT OF SHARES TO EARN DIVIDEND, DISALLOWANCE UNDER SECTION 14A WAS TO BE MADE IN RESPECT OF INTEREST PAID ON BORROWED FUNDS WHETHER INTENTION OF ASSESSEE FOR EARNING DIVIDEND INCOME COULD NOT BE ATTRIBUTED TO AMOUNTS INVESTED IN SHARE APPLICATION MONEY UNLESS AND UNTIL THERE WAS A COMMITMENT ON PART OF COMPANY 'N' FOR ALLOT MENT OF SHARES - HELD, YES - WHETHER SINCE SUCH ASPECTS HAD NOT BEEN LOOKED INTO BY AUTHORITIES BELOW, MATTER WAS TO BE REMITTED BACK FOR FRESH CONSIDERATION - HELD, YES [MATTER REMANDED] M.P. NO. 1 7 1/M/16 7 II . SECTION 2(28A), READ WITH SECTIONS 194A AND 40(A)(IA), OF THE INCOME - TAX ACT, 1961 - INTEREST - ASSESSMENT YEAR 2007 - 08 - WHETHER LOAN PROCESSING FEES PAID IN RESPECT OF LOANS FALLS WITHIN DEFINITION OF 'INTEREST' UNDER SECTION 2(28A) - HELD, YES - WHETH ER INTEREST MENTIONED IN SECTION 194A HAS TO BE UNDERSTOOD IN ACCORDANCE WITH DEFINITION OF 'INTEREST' UNDER SECTION 2(28A) AND, HENCE, SUCH LOAN PROCESSING FEES WOULD BE LIABLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194A - HELD, YES [IN FAVOUR OF REV ENUE] 6 . IN OUR OPINION, A FAIR READING OF THE ORDER OF THE TRIBUNAL, WE FIND TH A T IT HAS TAKEN INTO ACCOUNT ALL RELEVANT MATERIAL AND HAS NOT TAKEN INTO ACCOUNT ANY IRRELEVANT MATERIAL IN BASING ITS CONCLUSIONS, THE DECISION OF THE TRIBUNAL IS NOT LI ABLE TO BE INTERFERED WITH AS THE CONCLUSION REACHED BY THE TRIBUNAL IS NOT PERVERSE. BEING SO, WE DO NOT FIND ANY MERIT IN THE ARGUMENTS OF THE LD. AR AND IF THERE IS A REMEDY, IT LIE ELSEWHERE AND NOT AT THE LEVEL OF TRIBUNAL. ACCORDINGLY, THE MISCELLANE OUS PETITION FILED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THE 04 TH APRIL, 2017 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUD ICIAL MEMBER CHENNAI, DATED, THE 04 . 0 4 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.