DCIT, CHENNAI vs. EXPRESS NEWSPAPERS PRIVATE LIMITED, CHENNAI

Both the appeals of the Revenue are directed against the respective orders of the Commissioner of Income Tax (Appeals)-9, Chennai, dated 19.12.2016 and pertain to assessment years 2010- 11 and 2012-13. Since common issue arises for consideration in both the appeals, we heard both the appeals together and disposing of the same by this common order.

Shri N. Madhavan, the Ld. Departmental Representative, submitted that the Assessing Officer made addition under Section 14A of the Income-tax Act, 1961 (in short 'the Act') read with Rule 8D(2) of Income-tax Rules, 1962 in respect of the investment made by the assessee in Express Infrastructure Pvt. Ltd. On appeal by the assessee, the CIT(Appeals) deleted the addition made by the Assessing Officer placing reliance on the decision of this Tribunal in EIH Associated Hotels Limited in 2013-TOIL-796-ITAT-MAD dated 17.07.2013. According to the Ld. D.R., the above order of this Tribunal was not accepted by the Department and further appeal is pending before the High Court. According to the Ld. D.R., even if the investment was made in subsidiary company, the expenditure incurred by the assessee has to be computed under Rule 8D(2).

The Ld. D.R. further submitted that in the case before us, the dividend income earned by the assessee from the investment made in so-called subsidiary company is exempted from taxation. Therefore, according to the Ld. D.R., the expenditure has to be computed under Rule 8D(2). The provisions of Rule 8D(2) does not say anywhere that the investment made in subsidiary company has to be excluded while computing the disallowance. Therefore, according to the Ld. D.R., the Revenue is in appeal against the order of this Tribunal in EIH Associated Hotels Limited (supra) before the High Court. Hence, according to the Ld. D.R., the CIT(Appeals) is not justified in placing reliance on the decision of this Tribunal.

On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee-company established Express Infrastructure Pvt. Ltd. In fact, according to the Ld. counsel, the assessee-company was holding 13,999 shares out of 14,000 shares in the said company and one equity share was held by one Kavita Singhania. Therefore, according to the Ld. counsel, Express Infrastructure Pvt. Ltd. is admittedly a subsidiary company of the assessee-company. Hence, the investment made by the assessee is for business purpose and not for earning any dividend income. According to the Ld. counsel, the dividend income earned by the assessee is incidental to the investment made, therefore, there cannot be any disallowance under Section 14A of the Act in view of the decision of this Tribunal in EIH Associated Hotels Limited (supra). According to the Ld. counsel, merely because the appeal is pending before the High Court, that cannot be a reason to take a different view.

We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that Express Infrastructure Pvt. Ltd. is a subsidiary company of the assessee. In fact, the assessee is holding 13,999 equity shares out of 14,000 shares. Therefore, this Tribunal is of the considered opinion that the decision of this Tribunal in EIH Associated Hotels Limited (supra) is squarely applicable to the facts of the case. As rightly submitted by the Ld.counsel for the assessee, mere pendancy of appeal before the High Court cannot be a ground to differ from the decision of the co-ordinate Bench of this Tribunal. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly followed the order of this Tribunal in EIH Associated Hotels Limited (supra). Accordingly, the order of the CIT(Appeals) is confirmed.

In the result, both the appeals filed by the Revenue are dismissed.