TTK HEALTHCARE LIMITED,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

PER INTURI RAMA RAO, ACCOUNTANT MEMBER These are appeals filed by the Assessee directed against common orders of the Commissioner of Income Tax (Appeals)-11, Chennai (‘CIT(A)’ for short) dated 25.09.2018 for the Assessment Years 2013-14 & 2014-2015.

ITA Nos.3270 &3271/2018 :- 2 -:

The Assessee raised the following grounds of appeal: 4.

‘’1. The order of the Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case.

2.1 The Commissioner of Income tax (Appeals) ought to have appreciated that the appellant had apportioned expenditure in respect of dividend income and the appellant and offered a sum of Rs.6685/- as expenditure in its return of income and hence no further notional expenditure could be deducted from the said income.

2.2 The Appellant submits that it has not utilized borrowed funds for making the investments and hence no portion of the interest expenditure is disallowable under Rule 8D.

2.3 The Commissioner of Income tax (Appeals) ought to have appreciated that section. 14A r.w. Rule 8D can be invoked only if the assessing officer is not satisfied with the correctness of the claim of the Appellant in respect of such expenditure in relation to income which does not form part of the total income.

2.4 The Commissioner of Income tax (Appeals) ought to have appreciated that as per section 14A(2) the assessing officer has not given cogent reasons or detailed reasoning while recording

ITA Nos.3270 &3271/2018 :- 3 -: his dis-satisfaction with the correctness of the claim of the assessee in respect of such expenditure which does not form part of total income under this Act.

2.4 The Commissioner of Income tax (Appeals) erred in confirming the disallowance of proportionate interest expenditure of Rs 477206 under Rule 8D(2)(ii), on the presumption that the assessee has utilized borrowings for making the investments.

2.5 The Commissioner of Income tax (Appeals) ought to have appreciated that only interest free surplus funds with the assessee is utilized for making investments in Mutual funds.

2.6 The Appellant relies on the decisions of the Hon’ble Madras High Court in CT Vs. Hotel Savera 239 ITR 795 and Gujarat High Court in CT Vs Gujarat State Fertilizers & Chemicals Ltd 85 CCH 273 Guj HC where it was held that no ad-hoc disallowance of expenditure u/s 14A was warranted where the assessee had sufficient funds available with it, which was more than the amount it invested for earning dividend income.

2.7 The Commissioner of Income tax (Appeals) ought to have appreciated that the Hon’ble Punjab & Haryana High Court in the case of CIT Vs M/s. Hero Cycles Limited - reported in 323 ITR 518 has held that “Disallowance u/s.14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance uls.14A cannot stand.”

3. The Appellant craves leave to file additional grounds of appeal at the time of hearing’’.

The appellant namely M/s. TTK Healthcare Limited is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing pharmaceuticals formulations, bulk drugs, ready to eat products etc. The return of ITA Nos.3270 &3271/2018 :- 4 -: income for the AY 2013-14 was filed on 30.11.2013 disclosing total income of Rs. 21,99,32,100/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Corporate Circle 3(1), Chennai (hereinafter called “AO”) vide order dated 23.03.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) after making several disallowances at �24,71,44,050/-. The disallowances inter alia includes addition u/s.14A r.w.Rule 8D of �6,58,926/- with which we are concerned. The Assessing Officer during the course of assessment proceedings having noticed that assessee made investment of �76,81,000/-, invoked the provisions of Section 14A r.w.r8D and computed the amount of disallowance under Rule 8D at �6,58,926/-.

Being aggrieved by the above addition, an appeal was 6. preferred before ld. CIT(A), who vide impugned order confirmed the addition.

ITA Nos.3270 &3271/2018 :- 5 -:

High Court in the case of ACB India Limited vs. ACIT, (2015) 374 ITR 108.

Since, the facts in the present appeal are identical to the facts 10. in , for the reasons mentioned therein, we remit the issue back to the file of the Assessing Officer as in the same lines indicated in appeal supra. Hence, the ITA Nos.3270 &3271/2018 :- 6 -: above captioned appeal filed by the assessee is partly allowed for statistical purpose.

In the result, the appeals filed by the assessee in 11.

& 3271/CHNY/2018 for assessment years 2013-14 and 2014-15 are partly allowed for statistical purpose.

Order pronounced on 12th day of September, 2019, at Chennai.