Rane Holdings Ltd., CHENNAI V. ACIT, CHENNAI

MA 93/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3582 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-09-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 10-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R VENKATNARAYANAN
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER M.P.NO.93/MDS/2015 & I.T.A.NO.33/MDS/2015 ( / ASSESSMENT YEAR: 2002-03) M/S. RANE HOLDINGS LTD., MAITHRI, NO.132, CATHEDRAL ROAD CHENNAI-600 086. VS ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(3), CHENNAI. PAN: AABCR5136J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VENKATNARAYANAN, ADVOCATE /RESPONDENT BY : MR. A.V.SREEKANTH, JCIT /DATE OF HEARING : 11 TH SEPTEMBER, 2015 /DATE OF PRONOUNCEMENT : 28 TH OCTOBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS MISCELLANEOUS PETITION IS FILED BY THE ASSESS EE REQUESTING TO RECALL THE ORDER PASSED BY THIS TRIBU NAL IN ITA NO.33/MDS/2015 DATED 19.06.2015 FOR THE ASSESSMENT YEAR 2002-03 AND TO ADJUDICATE THE GROUND RAISED BY THE ASSESSEE IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A O F THE ACT. 2. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL DATED 19.06.2015 WE FIND THAT THE TRIBUNAL HAD INADVERTEN TLY OMITTED TO DISPOSE OF THE GROUNDS RAISED BY THE ASS ESSEE IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF T HE ACT. 2 M.P NO.93/MDS/2015 & ITA NO.33/MDS/2015 THUS, WE RECALL THE ORDER OF THE TRIBUNAL FOR THE L IMITED PURPOSE OF DISPOSING OFF THE GROUND WHICH WAS OMITT ED TO DISPOSE OFF. THUS, THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE IS ALLOWED. 3. COMING TO THE MERITS OF THE CASE, ASSESSING OFFI CER WHILE COMPLETING THE ASSESSMENT DISALLOWED 5% OF TH E DIVIDEND INCOME AS EXPENSES ATTRIBUTABLE FOR EARNIN G EXEMPT INCOME. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE SUPPORTING TH E STAND OF THE ASSESSING OFFICER THAT INVARIABLY THERE WILL BE SOME EXPENDITURE INVOLVING EARNING OF DIVIDEND INCOME. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERV ED THAT IN THE ABSENCE OF ANY DETAILS OF DIVIDEND INCOME TH E DISALLOWANCE IS TO BE SUSTAINED. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESS ING OFFICER WAS OF THE VIEW THAT ASSESSEE MIGHT HAVE IN CURRED EXPENSES TOWARDS MANAGEMENT OR ADMINISTRATION IN EA RNING DIVIDEND INCOME OF ` 2,54,23,913/- WHICH WAS CLAIMED AS EXEMPT INCOME UNDER SECTION 10(33) OF THE ACT AND T HEREFORE 3 M.P NO.93/MDS/2015 & ITA NO.33/MDS/2015 HE DISALLOWED 5% OF DIVIDEND INCOME I.E. ` 12,71,196/- AS EXPENSES ATTRIBUTABLE FOR EARNING EXEMPT INCOME UND ER SECTION 14A OF THE ACT. COUNSEL SUBMITS THAT THE A SSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING ANY DIVID END INCOME. THE COUNSEL FOR THE ASSESSEE CONTENDED THAT DISALLOWANCE OF 5% IS ARBITRARY AND ON HIGHER SIDE AND IN ANY CASE NO EXPENDITURE WAS INCURRED BY THE ASSESSEE. 5. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF LOWER AUTHORITIES. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSMENT YEAR UNDER CONSIDERATION BEFORE US I S 2002- 03, THEREFORE PROVISIONS OF RULE 8D READ WITH SECTI ON 14A OF THE ACT HAVE NO APPLICATION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ALSO DID NOT I NVOKE RULE 8D BUT HAS ESTIMATED ONLY EXPENDITURE INCURRED TOWA RDS EARNING EXEMPT INCOME AT 5% OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE. THIS TRIBUNAL IS CONSISTENTLY HOLD ING THAT DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE C ASE 2 TO 5% OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE C AN BE CONSIDERED AS REASONABLE DISALLOWANCE UNDER SECTION 14A OF 4 M.P NO.93/MDS/2015 & ITA NO.33/MDS/2015 THE ACT AS EXPENSES INCURRED TOWARDS EARNING EXEMP T INCOME. THE ASSESSEE EARNED HUGE DIVIDEND OF ` 2,54,23,913/- AND IT WAS CLAIMED AS EXEMPT INCOME UNDER SECTION 10(33) OF THE ACT. THE ASSESSEE HAS NOT PRO DUCED ANY DETAILS IN RESPECT OF DIVIDEND INCOME EARNED. I T CANNOT BE RULED OUT THAT ASSESSEE HAS NOT INCURRED ANY EXPEND ITURE FOR EARNING DIVIDEND INCOME. THE SUBMISSION OF THE ASSE SSEE THAT DISALLOWANCE OF 5% OF DIVIDEND INCOME IS HIGH IS ALSO NOT APPEARS TO BE CORRECT, KEEPING IN VIEW THE HUGE AMO UNT OF DIVIDEND RECEIVED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE OBS ERVING AS UNDER:- 6. DISALLOWANCE U/S 14A: DURING THE YEAR, THE APPELLANT HAD EARNED A SUM OF RS.2,54,23,913/- AS DIVIDEND INCOME AND CLAIMED AS EXEMPT U/S 10(33). THE ASSESSING OFFICER DISALLOWED 5% OF THE SAME AS EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME. THE AR OF THE APPELLANT SUBMITTED THAT THE APPELLAN T HAS NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND INCOME. WITHOUT PREJUDICE TO THE ABOVE THE DISALLOWANCE OF 5% IS HIGH AND ARBITRARY. I HAVE VERIFIED THE ASSESSMENT ORDER AND GROUNDS OF APPEAL CAREFULLY. THE ASSESSING OFFICER ON PERUSAL OF THE MEMO OF ADJUSTMENT OF INCOME AND P & L ACCOUNT, BALANCE SHEET OBSERVED THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME FOR ` 2,54,23,913/- WHICH WAS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 10(33}. EVEN THOUGH, THE ASSESSEE HAS SUBMITTED THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE DIVIDEND, I AM IN AGREEMENT WITH THE DECISION TAKEN BY THE ASSESSING OFFICER THAT INVARIABLY THERE WILL BE SOME EXPENDITURE INVOLVING EARNING OF DIVIDEND 5 M.P NO.93/MDS/2015 & ITA NO.33/MDS/2015 INCOME HENCE, THE ASSESSING OFFICER IS JUSTIFIED IN DISALLOWING AN AMOUNT OF ` 12,71, 196/- BEING 5% OF DIVIDEND INCOME EARNED AS EXPENDITURE LIKELY TO BE INCURRED AND ACCORDINGLY DISALLOWED U/S.14A OF THE IT ACT. THIS ADDITION IS ALSO CONFIR MED AS THE APPELLANT HAS NOT FILED ANY DETAILS OF DIVID END INCOME EARNED. HENCE, THIS GROUND OF APPEAL IS ALS O DISMISSED. 7. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS), WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS ) IN CONFIRMING DISALLOWANCE OF EXPENDITURE OF 5% OF DIV IDEND INCOME. THEREFORE, WE UPHOLD THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS RAIS ED BY THE ASSESSEE ON THIS ISSUE. 8. ACCORDINGLY, FINAL RESULT IN ITA NOS.33/MDS/2015 AND 242/MDS/2015 IN PARA 14 IS AS FOLLOWS:- IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2015. SD/- SD/- ( ' ) ( % '' ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) ) / ACCOUNTANT MEMBER ' ) / JUDICIAL MEMBER ' /CHENNAI, + /DATED 28 TH OCTOBER, 2015 SOMU 6 M.P NO.93/MDS/2015 & ITA NO.33/MDS/2015 ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .