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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
These appeals by the assessee and Revenue are directed against the order passed by the learned Commissioner of Income Tax (Appeals)-4, Chennai, dated 10.07.2017 in 16-17/A.Y.2014-15/CIT(A)-4 for the assessment year 2014-15 passed U/s.250(6) r.w.s. 143(3) of the Act.
Assessee’s Appeal:- The assessee has raised four grounds in its appeal however the cruxes of the issues are that (i) The Ld.CIT(A) has erred in confirming the addition of Rs.17,32,977/- towards disallowance of security charges. (ii) The Ld.CIT(A) as well as the Ld.AO had failed to admit the fresh ground raised by the assessee at the time of assessment and first appellate proceedings.
Revenue’s Appeal:- The Revenue has raised four grounds in its appeal however the crux of the issue is that the Ld.CIT(A) has erred in directing the Ld.AO not to include the value of investments in subsidiary companies while computing disallowance U/s.14A r.w.r. 8D(2)(ii) of the Rules.
The brief facts of the case are that the assessee is a firm engaged as manufacturer’s representatives, dealers, importers, exporters, warehouse operators, clearing and forwarding agents, etc., filed its return of income for the relevant assessment year 2014-15 on 29.09.2014 electronically admitting total income of Rs.35,60,95,890/-. The case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 31.08.2015. Finally the assessment order was passed U/s.143(3) of the Act on 20.12.2016 wherein the Ld.AO made several additions.
Assessee’s Appeal: 5. Ground No. 2(i) : Addition of Rs.17,32,977/- towards disallowance of security charges:- The assessee had claimed expenses amounting to Rs.23,10,636/- towards security charges for the building located at Santhome Road, Chennai. Since there was no proof to establish that the entire expenditure was attributable to the assessee, the Ld.AO disallowed 75% of the same and made addition of Rs.17,32,977/-. On appeal the Ld.CIT(A) confirmed the addition.
5.1 Before us the Ld.AR conceded that the identical issue was decided against the assessee by the Tribunal in vide order dated 05.02.2018 and accordingly the same may be followed. The Ld.DR relied on the orders of the Ld.Revenue Authorities.
5.2 We have heard the rival submissions and carefully perused the materials on record. In the order of the Tribunal cited supra at Para No.5.1, the same issue was decided against the assessee and the order of the Ld.AO was confirmed. The relevant portion of the order of the Tribunal is reproduced herein below for reference:- “5.1 At the outset, we do not find any infirmity in the orders of the Ld.Revenue Authorities on this issue. The amount of Rs.17,60,363/- was incurred with respect to the security charges on the whole of the building. The assessee is in occupation of the building only to the extent of 25% of the area in the building while as 75% of the area is occupied by M/s. TTK Healthcare. Obviously the entire amount of Rs.17,60,363/- has to be apportioned between both the parties in the ratio of the space occupied by them, which the Ld.AO has correctly computed and the Ld.CIT(A) has also confirmed. Therefore we do not find any reason to interfere with the orders of the Ld.Revenue Authorities on this issue.”
Therefore for the relevant assessment year also we do not find it necessary to interfere with the order of the Ld.CIT(A) because the facts are identical in both the assessment years. Accordingly we hereby uphold the order of the Ld.CIT(A) on this issue.
Ground No.2(ii) : Fresh ground raised at the time of assessment and first appellate proceedings:- From the facts of the case, it is apparent that the assessee has raised a fresh ground at the time of assessment proceedings and first appellate proceedings, stating that “Kotak Alternate Opportunities (India) Fund Folio 21 is structured as a determinate irrecoverable trust and hence the trustees ought to be assessed as a representative assessee and not the assessee”. However the Ld.AO as well as the Ld.CIT(A) refused to entertain the ground since the same was not claimed in the return of income relying in the decision of the Hon’ble Apex Court in the case Goetze India Ltd., vs. CIT reported in 284 ITR 323.
6.1 At the outset we find the decision rendered by the Hon’ble Apex Court in the case National Thermal Power Co. Ltd. vs. CIT reported in 229 ITR 383 empowers the Tribunal to admit any fresh legal ground raised before it for the first time during the course of appellate proceedings. Drawing strength from the decision of the Hon’ble Apex Court, we hereby admit the fresh legal ground raised by the assessee and remit the matter back to the file of Ld.AO for fresh consideration.
Revenues’ Appeal: Computation of disallowance U/s.14A r.w.r. 8D of the Rules with respect to investment made in subsidiary companies:- During the course of scrutiny assessment proceedings, the Ld.AO while computing disallowance U/s.14A r.w.r. 8D of the Rules included the value of the investments made in subsidiary companies. On appeal the Ld.CIT(A) directed the Ld.AO not to include the value of investment made in subsidiary companies while computing the average value of investments under Rule 8D relying in the decision of the Tribunal in the case EIH Associates Hotels Ltd., vs. DCIT in ITA No.1503/Mds/2012.
7.1 At the outset we do not find any infirmity in the order of the Ld.CIT(A) because when an entity makes investment in its subsidiary out of its own non-interest bearing funds, there is no cost involved. viz., in such circumstances no cost could be attributable for the decision making process for such investments / dis-investments and maintenance of the investments, etc.
Therefore we find the order of the Ld.CIT(A) to be in order and accordingly we hereby uphold the same. Thus this ground raised by the Revenue is devoid of merits.
In the result the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.
Order pronounced on the 20th June, 2018 at Chennai.