THE COMMISSIONER OF INCOME T vs. M/S.CONTINUUM WIND ENERGY(IN

T.C.A.No.373 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.10.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.373 of 2020 and C.M.P.No.10937 of 2020

The Commissioner of Income Tax Chennai .. Appellant Versus M/s.Continuum Wind Energy (India) Pvt Ltd South Wing, 4th floor, No.15, Khader Nawaz Khan Road Nungambakkam, Chennai – 600 006 PAN: AAKCS8353F .. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 16.06.2017 made in I.T.A.No.211/Mds/2017 relating to the Assessment Year 2013-14. For Appellant : M/s.R.Hemalatha Senior Standing counsel 1/6 http://www.judis.nic.in T.C.A.No.373 of 2020 JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

This appeal has been filed by the Revenue under Section 260 A of the Income Tax Act, 1961 ('the Act' for brevity), challenging the order dated 16.06.2017 passed by the Income Tax Appellate Tribunal, Chennai, 'A' Bench ('the Tribunal' for brevity) in I.T.A.No.211/Mds/2017 for the Assessment Year 2013-14. The Revenue has raised the following Substantial Questions of Law for consideration: “1.Whether the provisions of Section 14A read with Rule 8D has no application if there is no exempt income received even if the investments have been made in the subsidiary company of the Assessee? 2. Whether the provisions of Section 43A gets attracted in the event the Assessee is acquiring the assets in India and in consequence of loan taken in Indian currency for acquisition of such asset which was converted into foreign currency loan increasing the liability as expressed in Indian Currency?” 2. We have heard M/s.R.Hemalatha, learned Senior Standing counsel for the appellant / Revenue. 2/6 http://www.judis.nic.in T.C.A.No.373 of 2020 3. The assessee filed its return of income on 30.11.2013, admitting a loss of Rs.36,45,17,202/-. The case was selected for scrutiny and after discussing the matter with the assessee, the Assessing Officer completed the assessment under Section 143(3) by order dated 05.06.2016. With regard to the disallowance under Section 14A of the Act Read with Rule 8D of the Income Tax Rules ('Rules' for brevity). A sum of Rs.7,41,93,117/- was disallowed by the assessee. With regard to the other issues, both the assessee as well as the Revenue were on appeal and with regard to the plea that the premium paid by the assessee for converting an Indian Currency loan into a Foreign currency loan was argued to be a Revenue expenditure, which was rejected by the Tribunal and We have confirmed the order passed by the Tribunal by dismissing the assessee's appeal in T.C.A.No.171 of 2019. With regard to the relief of depreciation granted by the Tribunal in favour of the assessee under Section 43A of the Act, the Revenue filed appeal before us in T.C.A.No.345 of 2020 which was dismissed by judgment dated 16.10.2020. 4. The present appeal by the Revenue is with regard to whether the provisions of Section 14A read with Section 8D has no application to 3/6 http://www.judis.nic.in T.C.A.No.373 of 2020 the assessee's case. This contention was considered by the Tribunal and held in favour of the assessee and against the Revenue by recording the following reasons: “12. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the investments were made in subsidiary companies. When the investments were made in wholly owned subsidiary companies, this Tribunal is consistently taking a view that it cannot be construed that investment is made for earning exempt income. Investment made in wholly owned company is only for the purpose of business. Moreover, the Madras High Court in Redington (supra) held that when there was no exempt income, there cannot be any disallowance under Section 14A of the Act. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed.” 5. M/s.R.Hemalatha, learned Senior Standing counsel for the appellant / Revenue placed reliance on the decision of the High Court of Delhi in Indiabulls Financial Services Ltd., Vs. DCIT Circle-11(1) in I.T.A.No.470 of 2016 dated 21.11.2016 and has drawn our attention to paragraphs 7 and 8 of the judgment. 4/6 http://www.judis.nic.in T.C.A.No.373 of 2020 6. In our considered view, the said decision is factually distinguishable since in the said case, the assessee had reported Tax Exempt Income to the tune of Rs. 105.24 crores, during Assessment Year (‘AY’) 2009-10 and offered disallowance of Rs. 25,19,380/- as expense attributable to that exempt income. In the background of those facts, the Court considered the applicability of Rule 8D and held that the Assessing Officer is bound to follow the methodology in Rule 8D, there can be no quarrel in that said opposition, more particularly, the Constitutional validity of the provision was upheld by the Hon'ble Supreme Court of India in the case of Godrej & Boyce Manufacturing Company Limited Vs. Deputy Commissioner of Income Tax, [2017 81 taxmann.com 111(SC)] 7. In the instant case on facts, the Tribunal found that the investments were made in by their assessee and this cannot be construed that investment is made for earning exempt income. 8. In the light of the said factual decision, in our considered view, the Tribunal rightly held that the provisions of Section 14A of the Act would not stand attracted. Therefore, the order passed by the Tribunal requires to 5/6 http://www.judis.nic.in T.C.A.No.373 of 2020 T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. Kak be confirmed. With regard to the Second Substantial Question of Law is concerned, We have decided the said position against the Revenue in the assessee's own case in T.C.A.No.345 of 2020 dated 16.10.2020. 9. In the light of the above, the Tax Case Appeal is dismissed and the Substantial Questions of Law are answered against the Revenue. No costs. Consequently, connected miscellaneous petition is closed. (T.S.S.,J) (V.B.S.,J) 16.10.2020 Kak Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order To The Income Tax Appellate Tribunal, 'A' Bench, Chennai. T.C.A.No.373 of 2020 6/6 http://www.judis.nic.in