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MA 46/CHNY/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3409 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R ANITA
• Assessee Lawyers: M VISWANATHAN
• Keywords: Depreciation; Earning of tax free income; Revenue expenditure; Rule 8D
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ! . , ! ' BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER MISC. PETITION NO.46/CHNY/2020 [IN ITA NO.840/CHNY/2019] ( / ASSESSMENT YEAR: 2012-13) M/S. TVS SUPPLY CHAIN SOLUTIONS LTD. (FORMERLY KNOWN AS TVS LOGISTICS SERVICES LTD.) 7B, WEST VELI STREET, TVS BUILDING MADURAI-625 001. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MADURAI-625 002. PAN:AACCT 1412E ( /PETITIONER) ( /RESPONDENT) / PETITIONER BY : MR. M.VISWANATHAN, CA /RESPONDENT BY : MS. R. ANITA, JCIT /DATE OF HEARING : 23.04.2021 /DATE OF PRONOUNCEMENT : 23.04.2021 / O R D E R PER G. MANJUNATHA, AM: THE ASSESSEE HAS FILED PRESENT MISCELLANEOUS PETITI ON AGAINST ORDER OF THE TRIBUNAL IN ITA NO.840/CHNY/2 019 DATED 03.01.2020 FOR THE ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS NARRATED FACTS AND MISTAKES ST ATED TO BE APPARENT ON RECORD IN THE ORDER OF THE TRIBUNA L AND RELEVANT CONTENTS OF THE MISCELLANEOUS PETITION FIL ED BY THE ASSESSEE ARE REPRODUCED AS UNDER:- THE HONBLE TRIBUNAL VIDE PARA 7 PAGE 5 & 6 OF ITS ORDER ITA NO.840/CHNY/2019 DATED 3RD JANUARY 2020 OBSERVED AS UNDER WITH REGARD TO ISSUE OF SECTION 14A: 2 M.P NO.46 /CHNY/2020 THERE IS NO MATERIAL ON RECORD INDICATING THE AMOU NT OF EXEMPT INCOME AND ALSO VALUE OF INVESTMENTS WHICH YIELDED TAXABLE INCOME. IN THE LIGHT OF THESE FACTS, WE DO NOT FIND ANY REASONS TO ENTERTAIN THESE NEW PLEAS AND TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE DISMISS GROUND OF A PPEAL NO.1 RAISED BY THE ASSESSEE. THE APPELLANT SUBMITS THAT THE APPELLANT HAS ALREAD Y FILED THE WRITTEN SUBMISSIONS BEFORE THE HONBLE MEMBER DATED 27.12.2019 ATTACHING THE FINANCIALS WHEREIN IT IS C LEAR THAT THE DIVIDEND INCOME EARNED IS RS. 35,99,996/- VIDE NOTE NO.2.20 UNDER THE HEAD OTHER INCOME. APART FROM THE ABOVE, THE HONBLE CIT (A) IN PAGE 2 PARA 2.3 HAS ALSO SPECIFIED THE EXEMPT INCOME OF RS. 35,99,9 96/- WHICH IS ALREADY PLACED BEFORE THE HONBLE TRIBUNAL. THE HONBLE TRIBUNAL VIDE PARA 8 OF ITS ORDER HA NO.840/CHNY/2019 DATED 3 RD JANUARY 2020 OBSERVED AS UNDER WITH REGARD TO ISSUE OF SECTION 14A: GROUND NO.2 RELATES TO DISALLOWANCE OF COST OF INT ANGIBLE ASSETS. THE ASSESSING OFFICER TREATED THIS COST OF INTANGIBLE ASSETS AS CAPITAL BY HOLDING THAT ON ACCOUNT OF ACQ UISITION OF COMMERCIAL RIGHTS, RESULTING IN ACQUISITION OF TANG IBLE DEFINED UNDER SECTION 32(1) (II) AND TREATED AS INTANGIBLE ASSETS AND ALLOWED DEPRECIATION @ 25% APPLICABLE TO INTANGIBLE RATES. NO MATERIAL IS PLACED BEFORE US CONTROVERTING THE FIND INGS OF THE ID. CIT(A). IN THE CIRCUMSTANCES, WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. THE APPELLANT SUBMITS THAT THE APPELLANT HAS ALREAD Y MENTIONED IN THE GROUNDS ITSELF AND HEREBY, FURTHER STATES THAT AS TO WHY THE SAID EXPENDITURE CANNOT BE TREATED AS CAPITAL IN NATURE, FOR THE FOLLOWING REASONS. THE DEFINITION OF WORDS MENTIONED IN THE SECTION SU CH AS KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENCE S, FRANCHISES ARE INDEPENDENT AND NOT INTERRELATED. E ACH WORD IS HAVING THE CAPSULED MEANING AND WELL ESTABLISHED IN THE LAW. 3 M.P NO.46 /CHNY/2020 SUBSEQUENT WORDINGS IN THE SECTION 32(1)(II) READS AS OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE, DERIVES STRENGTH ONLY FROM PRECEDING NOUNS, THEREFORE APPLI CATION OF THOSE WORDS ON THE TRANSACTION UNDER THE SURMISE OF A STANDALONE DEFINITION, IS INCORRECT. WHEREAS, THE A O HAD DERIVED STRENGTH FROM ONLY FROM THE RESIDUAL DEFINITION OF THE SECTION BUT NOT ON THE PRIMARY DEFINITION AND THE APPELLANT HAD DULY CONTESTED IT DURING THE ASSESSMENT PROCEEDINGS AS W ELL AS BEFORE THE 1ST APPELLATE AUTHORITY. THE WORDS SIMI LAR NATURE CANNOT HE IGNORED, TO ARRIVE AT THE PROPER UNDERSTA NDING OF THE DEFINITION PROVIDED IN THE SECTION. WHEREAS THE TRANSACTION UNDER DISPUTE IS PURCHASE O F CUSTOMER CONTRACTS WHICH WAS SECURED BY THE SELLER IN THE NO RMAL COURSE OF BUSINESS AND DID NOT TRANSFER RIGHTS OR OWNERSHI P THROUGH THIS CONTRACT. THEREFORE, THIS TRANSACTION PER SE IS NEI THER SIMILAR NOT IDENTICAL. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED CONT ENTS OF MISCELLANEOUS PETITION FILED BY THE ASSESSEE IN LI GHT OF ORDER OF THE TRIBUNAL IN ITA NO. 840/CHNY/2019 DATED 03.01.2 020 AND FIND THAT THERE IS AN ERROR IN THE ORDER OF THE TR IBUNAL, INASMUCH AS THE TRIBUNAL HAS DECIDED ISSUE OF DISALLOWANCE U/S.14A OF THE ACT, WITHOUT CONSIDERING THE PAPER BOOK FILED B Y THE ASSESSEE ON 27.12.2019, WHERE THE ASSESSEE HAS FILE D FINANCIALS FOR THE RELEVANT ASSESSMENT YEAR TO PROV E THAT DIVIDEND INCOME FOR THE RELEVANT ASSESSMENT YEAR IS ONLY RS.35,99,996/- AND HENCE, DISALLOWANCE CONTEMPLATE D U/S.14A CANNOT EXCEED EXEMPT INCOME. WE FURTHER NOTED THAT ALTHOUGH 4 M.P NO.46 /CHNY/2020 THE ASSESSEE HAS FILED RELEVANT PAPERS, BUT THE TRI BUNAL HAS RECORDED A FINDING THAT THERE IS NO MATERIAL ON REC ORD INDICATING THE AMOUNT OF EXEMPT INCOME AND ALSO VALUE OF INVES TMENTS WHICH YIELDED TAXABLE INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT SAID FINDING OF THE TRIBUNAL C ONSTITUTES A MISTAKE APPARENT ON RECORD, WHICH CAN BE RECTIFIED U/S.254(2) OF THE ACT. 4. AS REGARDS, SECOND CONTENTION OF THE ASSESSEE RE GARDING DISALLOWANCE OF AMOUNT PAID FOR ACQUISITION OF COMM ERCIAL RIGHTS, WE FIND THAT THE TRIBUNAL HAS RECORDED FACT UAL FINDING IN LIGHT OF PROVISIONS OF SECTION 32(1)(II) OF THE ACT AND HELD THAT ACQUISITION OF COMMERCIAL RIGHTS IS IN THE NATURE O F INTANGIBLE ASSET, WHICH IS ELIGIBLE FOR DEPRECIATION, BUT NOT REVENUE EXPENDITURE WHICH CAN BE ALLOWED AS DEDUCTION U/S .37(1) OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW T HAT CONTENTION OF THE ASSESSEE THAT THERE IS AN ERROR I N THE ORDER OF THE TRIBUNAL IS NOT CORRECT. WE ARE FURTHER OF THE OPINION WHAT WAS SOUGHT IN THE MISCELLANEOUS PETITION IS TO REVI EW THE ORDER OF THE TRIBUNAL, WHICH IS NOT PERMISSIBLE U/S.254(2 ) OF THE ACT 5 M.P NO.46 /CHNY/2020 AND HENCE, SECOND CONTENTION RAISED BY THE ASSESSE E REGARDING ACQUISITION OF COMMERCIAL RIGHTS IS REJEC TED. 5. IN THIS VIEW OF THE MATTER AND CONSIDERING FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDER ED VIEW THAT THERE IS AN ERROR IN THE ORDER OF THE TRIBUNAL, IN ASMUCH AS THE FIRST ISSUE OF DISALLOWANCE U/S.14A IS CONCERNED, AND HENCE, ORDER OF THE TRIBUNAL DATED 03.01.2020 IS RECALLED, QUA, THE ISSUE OF DISALLOWANCE U/S.14A READ WITH RULE 8D OF INCOME TAX RULES, 1962. THE REGISTRY IS DIRECTED TO POST THE A PPEAL OF THE ASSESSEE FOR HEARING IN DUE COURSE. 6. IN THE RESULT, MISCELLANEOUS APPLICATION FILED B Y THE ASSESSEE IS DISPOSED OFF IN THE TERMS OF OUR OBSERV ATIONS MENTIONED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD APRIL, 2021 SD/- SD/- ( . ) ( . ) (DUVVURU RL REDDY) ( G.MANJUNATHA ) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER /CHENNAI, % /DATED 23 RD APRIL, 2021 DS )* -* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. . () /CIT(A) 4. . /CIT 5. * 3 /DR 6. /GF .