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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SHRI R.K. PANDA & SHRI LALIET KUMAR
सुिवधई की तधरीख/Date of hearing: 29.11.2023 घोर्णध की तधरीख/Pronouncement on: 11.12.2023 O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee feeling aggrieved by the order of Commissioner of Income Tax (Appeals) – 1, Hyderabad dt.16.08.2017 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
The appeal filed by the assessee is barred by limitation by 03 days. It has moved a condonation petition explaining reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
The grounds raised by the assessee read as under : “1) The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and In law. 2). The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition made by the Assessing Officer of Rs.7,61,697/- by applying the provisions of Sec. 14A of the I.T. Act. 3). The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition of Rs.5,83,581/- being the interest receivable from Relysis Medical Devices Limited offered to tax during the financial year 2013-14 relevant for the Asst. Year 2014-15. 4). The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in holding that the provisions of Sec. 194C are applicable to the amount of Rs.3,56,838/- received from Heavy Water Plant, Munuguru and further erred in confirming the addition made. 5). The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in holding that the provisions of Sec.40(a)(ia) of the I.T. Act are applicable to the amount paid to the parties by Quality Care India Limited on behalf of the appellant and further erred in confirming the addition of Rs.10,43,576/-. 6). The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in holding that the provisions of Sec.40(a)(ia) of the I.T. Act are applicable to the amount paid to L & T and further erred in confirming the addition of Rs.6,35,421/-. 7). The learned Commissioner of Income-Tax (Appeals) erred in confirming charging of interest u/s 234B and u/s 234C of the I.T. Act.”
The brief facts of the case are that assessee is a company engaged in the business of providing specialized medical services in the field of Cardiology. The assessee filed its return of income for the A.Y. 2013-14 on 01.10.2013 admitting total income at Rs.7,08,51,770/-. The case was selected for scrutiny under CASS and notices were issued u/s 143(2) and 142(1) of the Act. The assessment was completed u/s 143(3) on 01.03.2016 by determining the total income at Rs.7,43,34,990/-.
4.1. During the course of assessment, Assessing Officer disallowed Rs.7,61,697/- u/s 14A of the Act. Assessing Officer further noticed from 26AS that amount of Rs.5,83,581/- was credited to the account of assessee u/s 194A by M/s. Relisys Medical Devices Ltd and Rs.3,56,838/- was credited u/s 194C by M/s. Heavy Water Plant, Manuguru and that the same were not offered to income. Assessing Officer also noticed from the reconciliation statement that amounts to the extent of Rs.59,350/- and Rs.42,750/- received from Visakha Hospitals and Diagnostics Ltd and M/s. Xenia Hospital, respectively were not offered to income and also observed that assessee has not deducted TDS on Rs.10,43,576/- out of professional charges amounting to Rs.29,16,219/- and also not deducted TDS on Rs.6,35,421/- on the interest paid to L & T u/s 40(a)(ia) of the Act. Thus, in total, the Assessing Officer had disallowed Rs.34,83,213/- and thereby assessed the total income at Rs.7,43,34,983/-.
Feeling aggrieved with the order of Assessing Officer, assessee filed appeal before the ld.CIT(A), who dismissed the appeal of assessee.
Aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
Grounds 3 to 5 were not pressed by the ld. AR for which the ld. DR has no objection. Accordingly, ground nos. 3 to 5 are dismissed as not pressed. Ground nos.1 and 8 are general in nature and require no adjudication.
GROUND NO.2 It was the contention of the ld. AR that no dividend income was earned by the assessee during the assessment year under consideration. The ld. AR has drawn our attention to the order passed by the Assessing Officer. In para 2.2 of the assessment order, the Assessing Officer had mentioned that the AR had agreed for the disallowance of expenditure u/s 14A of the Act and submitted the workings. In the workings, the assessee has reduced an amount of Rs.6,35,421/- from the total interest paid for the purpose of computing the disallowance u/s 14A of the Act. The Assessing Officer had not agreed with the disallowance agreed by the assessee and had computed the disallowance as per Rule 8D of the Act which is Rs.7,61,697/-.
8.1. Feeling aggrieved, the assessee has challenged the order before the ld.CIT(A) and before the ld.CIT(A), it was submitted by the assessee that the investments were not made by the assessee with a view to earn dividend income but were made to acquire the control over the entities which is in furtherance of the assessee’s objectives. In the light of the above said facts, the ld.CIT(A) had confirmed the order passed by the Assessing Officer. Before the ld.CIT(A), it was submitted by the assessee that the “assessee company has not derived any income in the form of dividends
5 from such investments and therefore, does not qualify the application of the provisions of section 14A of the Act.”
8.2. The non-earning of the dividend income by the assessee is not disputed by the Revenue before us and the only contention raised by the ld.DR is relying upon the orders of lower authorities wherein it was the case of the assessee that the investments were made just to gain the control over the entities and not for earning the dividend income. It was further submitted that additions agreed should not be deleted.
We have heard the rival submissions and perused the material on record. The applicability of section 14A of the Act is dependent upon the receipt of exempt income on account of investments made by the assessee. In the present case, the assessee has not derived any dividend income from the investments made by it in the concerns namely, M/s. Relisys Meical Devices Limited (RMDL) and M/s. Bhimavaram Hospitals Limited. Once the assessee has raised contention that no dividend income has been received by it, then no addition can be made in the hands of the assessee. In our view, the disallowance should be based on the parameters mentioned in section 14A of the Act. Once, the assessee had not received any dividend income in the year under consideration, no disallowance can be made by the Assessing Officer. For the above said purposes, we may fruitfully rely upon the decisions in the case of Chemnivest Ltd. Vs. CIT reported in 61 taxmann.com 118 (Del) and CIT Vs. Holcim India Private Limited of Delhi High Courts. Accordingly, this ground is decided in favour of the assessee.
GROUND NO.6 It was submitted by the ld. AR that the assessee obtained its finance from L & T, and the said L & T has issued a certificate to the assessee dt.15.11.2021, placed at page 87 of the paper book, declaring that the interest income of the L & T Finance was offered to the tax. It was submitted that despite the above said certificate being produced by the assessee before the ld.CIT(A), the ld.CIT(A) made the addition in the hands of the assessee u/s 40(a)(ia) of the Act. It was submitted that the order passed by the ld.CIT(A) is required to be cancelled and the above said fact needs to be verified. The certificate issued by L & T Finance reads as under : L & T Finance To The Manager Andhra Cardiology Associates Pvt Ltd 6-3-24811/1A, Care Hospitals Road No-1, Banjara Hills Hyderabad-500 034,
Ref: Interest Income Received—FY 2012-13 Dear Sir, We have given various term loans to M/s. Andhra Cardiology Associates Pvt Ltd bearing PAN-AABCA7642J We hereby confirm that the interest income on said loan received as mentioned below from M/s. Andhra Cardiology Associates Pvt Ltd. During FY 2012- 13 has been reported by us as interest income(Rs. 6,35,421/-) in our IT returns for Assessment year 2013-14 filed by us. We further confirm that we are a regular Income Tax Assessee. Our PAN is AAACL8668G and assessed at circle range DCIT 2(2)— Mumbai. Thanking you, For L & T Finance Limited Sd/- Authorised Signatory.
Per contra, the ld. DR has submitted that whether the interest paid to L & T Finance, Mumbai was reflected in the income of the assessee or not. For this purposes, he requested that the matter be remitted back to the file of Assessing Officer with a direction to the assessee to provide all the requisite details like PAN Number of the L & T Finance, Mumbai etc, which enables to verify whether the said assessee has paid taxes on the interest income.
We have heard the rival submissions and perused the material on record. Undoubtedly, the certificate on page 87 of the paper book has been produced by the assessee before us as well as before the ld.CIT(A). Despite producing the certificate, ld.CIT(A) made addition u/s 40(a)(ia) of the Act. In our view, the same is contrary to law and therefore, we deem it appropriate to remand back the matter to the file of Assessing Officer with a direction to verify from the record whether the L & T Finance has disclosed the income in its books of accounts. Though it is abundantly clear from the certificate reproduced hereinabove that the PAN number of the said L & T Finance was duly provided, and therefore, there cannot be any problem in verifying from the records whether the interest income was shown in the profit and loss account of the said L & T Finance and offered for tax or not. With these directions, the appeal of assessee is remanded back to the file of ld.CIT(A) with a direction to pass a fresh speaking order after giving due opportunity of hearing to the assessee, in accordance with law. The assessee shall be at liberty to file documents, if any, as required for proving its case and the ld.CIT(A) shall consider such evidences, if any, filed by the assessee. Needless to say, the 8 ld.CIT(A) shall examine those documents / evidence filed by the assessee and also the other documents available on record. Accordingly, this ground of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.