LAKSHMI ELECTRICAL DRIVES LTD,COIMBATORE vs. DCIT CORPORATE CIRCLE 2, COIMBATORE

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ITA 1707/CHNY/2018Status: DisposedITAT Chennai16 February 2021AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal directed the Assessing Officer to examine the assessee's fund sources for investment and pass a detailed speaking order, considering the Delhi High Court's decision in Joint Investments Pvt. Ltd. v. CIT.

What were the facts?

The assessee claimed dividend income as exempt but the PCIT observed that the Assessing Officer did not determine proportionate expenditure under Section 14A r.w. Rule 8D(2)(ii). The PCIT invoked Section 263, setting aside the assessment order and directing a fresh assessment.

What were the issues?

Whether the PCIT was correct in invoking Section 263 to revise the assessment order for not disallowing expenditure under Section 14A r.w. Rule 8D(2)(ii) when the assessee claimed dividend income as exempt.

Which sections of the Income-tax Act were involved?

Section 14A,Section 263,Section 143(1),Section 143(2),Section 143(3),Section 244A

AI-generated summary — verify with the full judgment below

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Before: Shri Duvvuru RL Reddy & Shri S. Jayaraman

Hearing: 03.12.2020Pronounced: 16.02.2021

आयकर अपीलीय अिधकरण, ‘‘सी’’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी धु�ु� आर.एल रे�ी, �ाियक सद� एवं �ी एस जयरामन, लेखा सद� के सम� Before Shri Duvvuru RL Reddy, Judicial Member & Shri S. Jayaraman, Accountant Member आयकर अपील सं./ Year:2013-14 M/s. Lakshmi Electrical Drives Ltd., The Deputy Commissioner of Vs. 504, Avinashi Road, Peelamedu, Income Tax, Coimbatore 641 004. Corporate Circle 2, Coimbatore. [PAN: AAACL5246Q] (अपीलाथ� /Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri K. Raghu, C.A. ��थ� की ओर से/Respondent by : Shri G. Johnson, Addl. CIT सुनवाई की तारीख/ Date of hearing : 03.12.2020 घोषणा की तारीख /Date of Pronouncement : 16.02.2021 आदेश /O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Coimbatore dated 23.03.2018 relevant to the assessment year 2013-14. In the grounds of appeal, the assessee has challenged the order passed under section 263 of the Income Tax Act, 1961 [“Act” in short] and direction for considering the disallowance under section 14A r.w. Rule 8D (2)(ii).

2.

Brief facts of the case are that the assessee filed its return of income for the assessment year 2013-14 on 13.09.2013 declaring total income of ₹.5,28,57,940/- under normal provision and ₹.3,63,37,554/- under MAT computation. The return was processed under section 143(1) of the Act and since the case was selected for scrutiny, notice under section 143(2) of the Act was issued and served on the assessee. After considering the details furnished by the assessee, the assessment under section 143(3) of the Act was completed. Since the assessee had received ₹.4,44,899/- as interest on income tax refund under section 244A of the Act for the assessment year 2011-12 during the financial year relevant to the assessment year 2013-14 and not included in the total income, the same was brought to tax.

2.1 On verification of records, the ld. PCIT has observed that the assessee has earned dividend income of ₹.29,84,927/-, which was claimed as exempt. However, in computing the expenditure incurred in relation to income not includible in total income, the proportionate expenditure under section 14A r.w. Rule 8D(2)(ii) was not determined by the Assessing Officer and brought to tax while completing the assessment, thereby, the assessment order was erroneous and prejudicial to the interest of the Revenue. Thus, by invoking the provisions of section 263 of the Act, the ld. PCIT show-caused the assessee for filing the reply. Since, without proper authorization from the assessee, a letter with arguments was filed before the ld. PCIT, which was rejected and the ld. PCIT determined the disallowance under section 14A r.w. Rule 8D(2)(ii) at ₹.38,70,324/-. Accordingly, by setting aside the assessment order under section 263 of the Act, the Assessing Officer was directed to re-do the assessment afresh.

3.

Against the revision order under section 263 of the Act, the assessee preferred the present appeal before the Tribunal. By filing copy of the computation of income from business, the ld. Counsel for the assessee has submitted that the assessee has already computed the expenses incurred under section 14A of the Act towards earning of exempt income, which was duly verified by the Assessing Officer before concluding the assessment and thus, the ld. PCIT was incorrect to pass the revision order under section 263 of the Act. On the other hand, the ld. DR strongly supported the order passed under section 263 of the Act.

4.

We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. On verification of records, the ld. PCIT has observed that the Assessing Officer has not determined expenditure component under section 14A r.w. Rule 8D(2)(ii) and thereby after determining the disallowance to be made, the Assessing Officer was directed to redo the assessment afresh. On perusal of the computation of income from business filed by the assessee, we find that the assessee has voluntarily disallowed the expenses under section 14A r.w. Rule 8D(2)(iii), which was not disputed by the ld. PCIT while passing the revision order under section 263 of the Act. Further, the assessee has not filed its financials by way of paper book. Under these facts and circumstances, we direct the Assessing Officer to examine as to whether the assessee had sufficient funds for investment, any interest bearing funds were diverted for the purpose of investment, etc. and pass a detailed speaking order in accordance with law keeping in mind the decision of the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. v. CIT 372 ITR 694 after affording an opportunity of being heard to the assessee.

5.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced on the 16th February, 2021 at Chennai.

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