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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
Order of the Commissioner of Income Tax (Appeals)-15, Chennai, in dated 29.10.2016 for the AY 2010-11 and CO No.63/Mds/2017 is a Cross-Objection filed by the assessee in ITA No.938/Mds/2017.
Mr. M.Palanichamy, JCIT, represented on behalf of the Revenue and Ms.Jharna B. Harilal, CA represented on behalf of the assessee.
In the Revenue’s appeal, the Revenue has raised the following grounds:
The order of the Commissioner of Income Tax (Appeals) is contrary to the law and facts of the case.
The Ld CIT(A) erred in directing the AO to consider the deduction of Rs.2,1,4,00,000/- made on account of deemed dividend u/s.2(22)(e) of the IT Act.
2. The Ld CIT(A) under the powers of Rule 46A of the income tax rules, ought to have given the Assessing Officer a reasonable opportunity to examine the fresh material evidence before directing the AO to verify and simultaneously allowed u/s.2(22)(e) of the IT Act. 2.1 The Ld CIT(A) erred in directing the AO to reckon only the investments that have yielded exempt income during the year for the purpose of computation of disallowance under Rule 8D. 2.2 The Ld CIT(A) erred in not considering the clarification in CBDT Circular No.5/2014 that Rule 8D r.w.s 14A provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 2.3 The Ld.CIT(A) failed to appreciate the rationale in the decision of Honourable ITAT Chennai in the case Siva Industries and Holdings Ltd. Vs ACIT in (2011) (taxmann.com 404) (Chennai) wherein it is held that Section 14A read with Rule 8D is applicable even when no exempt income is received during the year.
& CO No.63/Mds/2017 :- 3 -:
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.
At the time of hearing, it was submitted by the Ld.DR that in Ground Nos.1 & 2, the assessee has challenged the action of the Ld.CIT(A) in considering the fresh material in violation of Sec.46A of the Act. The Ld.DR drew our attention to Page No.8 Para No.4.4 of the order of the Ld.CIT(A) to submit that the Ld.CIT(A) had without granting the opportunity to the AO, admitted and examined the fresh stand of the assessee that the moneys which were kept in the share premium account are not in the nature of profits that the company could have distributed to shareholders. It was a submission that he had no objection, if the issues are restored to the file of the AO for re-adjudication.
4.1 In reply, the Ld.AR vehemently supported the order of the Ld.CIT(A) on this issue.
4.2 We have considered the rival submissions. As it is noticed that the Ld.CIT(A) has admitted fresh evidence without granting the AO an opportunity to rebut the same, in the interest of natural justice, the issue of the deemed dividend is restored to the file of the AO for re- adjudication. In the result, Ground Nos.1 & 2 of the Revenue’s appeal stands partly allowed for statistical purposes. & CO No.63/Mds/2017 :- 4 -:
In regard to Ground Nos.2.1 to 2.3, it was submitted by the Ld.DR that the disallowance was in regard to the applicability of Sec.14A read with Rule 8D. It was a submission that the Ld.CIT(A) had directed the AO to consider the only investments which have yielded exempt income during the year for the purpose of computation of disallowance under Rule 8D of the Act. The Ld.DR vehemently supported the order of the AO.
5.1 In reply, the Ld.AR vehemently supported the order of the Ld.CIT(A).
5.2 We have considered the rival submissions. As it is noticed that the Ld.CIT(A) has directed the AO to only consider the investments which have yielded exempt income during the relevant year for the purpose of computation of disallowance under Rule 8D of IT Rules in line with the decision of the Co-ordinate Bench of this Tribunal, Calcutta Benches, in the case of M/s.REI Agro Ltd., we find no reason to interfere with the findings of the Ld.CIT(A). In the result, Ground Nos.2.1 to 2.3 of the Revenue’s appeal stands dismissed.
Ground No.3 is general in nature. & CO No.63/Mds/2017 :- 5 -: CO No.63/Mds/2017:
Cross-Objection filed by the assessee is in support of the order of the Ld.CIT(A). As we have already adjudicated the order of the Ld.CIT(A), the Cross-Objection filed by the assessee becomes infructuous.
Consequently, the same is dismissed as infructuous.
In the result, the appeal filed by the Revenue is partly allowed and the Cross-Objection filed by the assessee is dismissed.
Order pronounced in the Open Court on November 28, 2017, at Chennai.