Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-4, Chennai dated 27.10.2016 in 14/CIT(A)-4 for the assessment year 2013-14 passed U/s.250(6) r.w.s. 143(3) of the Act.
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 order of the Ld.AO
who had disallowed Rs.1,05,05,796/- by invoking the provisions of section14A r.w.r. 8D of the Rules. (ii) The Ld.CIT(A) has erred in confirming the order of the Ld.AO who had disallowed expenses towards security expenses to the tune of Rs.13,20,272/-.
The brief facts of the case are that the assessee is a firm engaged in the activities such as representing manufacturer’s, dealers, importers, exporters, warehouse operators, clearing and forwarding agents, etc., filed its return of income for the assessment year 2013-14 declaring total income of Rs.22,61,25,290/- electronically on 30.09.2013. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and finally assessment order was passed U/s.143(3) of the Act on 07.01.2016, wherein the Ld.AO made several additions.
Ground No.2(i) : Disallowance U/s.14A r.w.r.8D of the Rules amounting to Rs.1,05,05,796/-:-
During the course of scrutiny assessment proceedings it was observed by the Ld.AO that the assessee firm had earned dividend income which is exempt from tax on the substantial investments made in equity shares. Therefore the Ld.AO invoked the provisions of Section 14A r.w.r 8D of the Rules and computed the disallowance at Rs.1,06,13,083/-. Since the assessee had suo- moto disallowed an amount of Rs.1,07,287/- with respect to expenditure incurred towards earning exempt income, the Ld.AO made addition excluding the same amounting to Rs.1,05,05,796/- (Rs.1,06,13,083-Rs.1,07,287). On appeal the Ld.CIT(A) confirmed the order of the Ld.AO by agreeing with his view.
4.1 At the outset the Ld.AR submitted before us that the assessee had made substantial investments in its sister concerns out of its own non-interest bearing fund. Therefore it was argued that the disallowance of the entire amount of Rs.1,06,13,083/- invoking the provisions of Section 14A r.w.r 8D of the Rules is not justifiable. The Ld.AR further submitted that the matter may be remitted back to the file of Ld.AO so that the assessee would be provided with one more opportunity to represent its case before the Ld.AO in order to furnish the details of its investments. The Ld.DR stoutly opposed to the submissions of the Ld.AR and pleaded for confirming the order of the Ld.Revenue Authorities.
4.2 We have heard the rival submissions and carefully perused the materials on record. On several occasions we have held that where the assessee had made investment in its own sister concerns from its non-interest bearing funds then addition cannot be made invoking the provisions of Section 14A r.w.r.8D of the Rules. Though the assessee has faulted by not providing the details of his investment before the Ld.Revenue Authorities on the earlier occasions which is not appreciable, in the interest of justice, we hereby remit the matter back to the file of Ld.AO for fresh consideration with directions to consider the details of the investment submitted by the assessee and thereafter decide the issue in accordance with merit and law. The assessee is also directed to furnish the details of its investments promptly before the Ld.Revenue Authorities in order to expedite their orders failing which the Ld. Revenue Authorities are at liberty to pass appropriate orders based on the materials available before them.
Ground No. 2(ii) : Disallowance of expense amounting to Rs.13,20,272/- incurred towards security charges:-
The assessee had claimed expenses amounting to Rs.17,60,363/- towards security charges for the building located at Santhome Road, Chennai. On scrutiny it was further revealed that the assessee was in occupation of the building only to the extent of 25% of the total area in the building while as 75% of the area in the building was occupied by M/s. TTK Healthcare, a sister company of the assessee. Since the entire expense of Rs.17,60,363/- was booked as assessee’s expenditure the Ld.AO was of the view that only 25% of Rs.17,60,363/- can be allowed as deduction in the case of the assessee because the assessee was in occupation of only 25% of the space in the building. Accordingly he disallowed Rs.13,20,272/- (75% of Rs.17,60,363/-) as the expenditure incurred by the assessee. On appeal the Ld.CIT(A) confirmed the order of the Ld.AO by agreeing with his view.
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.
In the result the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on the 5th February, 2018 at Chennai.