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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed an appeal and the assessee filed the CO against the order of the Commissioner of Income Tax (Appeals)-6, Chennai in dated 21.07.2016.
:-2-: CO No. 9/Mds/2017
M/s. Equitas Holding Pvt, Ltd., the assessee, is an investment and holding company with substantial investments in subsidiary companies. In the assessment made for assessment year 2013-14, on perusal of the balance sheet, the AO found that the assessee had an investment of Rs. 406.36 crores which comprised to Rs. 144.96 crores, fresh investment during the assessment year. When he proposed to apply section 14A r.w.r. 8D, the assessee objected primarily on the ground that it did not earn any exempted income and it did not incur any direct/indirect/common expenses. It also relied on various decisions including the Chennai, ITAT decision in the case of M. Baskaran decided on 31.07.2014 and claimed that the expenditure on the investments in subsidiary companies was out of commercial expediency. The AO did not agree that the assessee’s view. Relying on the Board Circular No. 5/2014 dated 11.02.2014, he applied the provisions of section 14A r.w.r. 8D and disallowed Rs. 60,07,048/-. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) relying on the decisions of this tribunal in the cases of M. Baskaran, dated 31.07.2014 and of EIH Associated Hotels Ltd. Vs DCIT in ITA Nos. 1503, 1624/Mds/2012 dated 17.07.2013, held that it is an undisputed that the appellant company has not earned any dividend income during the year. It is also a matter of record that the entire investment of Rs. 406.36 crores are strategic investments in subsidiary companies. Keeping this aspects into consideration and respectively following the binding judicial precedence of ld. Chennai Tribunal
:-3-: CO No. 9/Mds/2017 (supra), the CIT(A) deleted the disallowance. Aggrieved, the revenue filed this appeal pleading that the CIT(A) ought to have appreciated that the investment made by the assessee company in its subsidiary companies is also entitled for dividend and hence, the same should be treated par with other investments, there is no exception provided in Rule 8D(ii) in respect of the investment made in the subsidiary companies, the decisions relied on by the CIT(A) are pending before the Hon’ble High Court and as per the Board Circular No. 5/2014 dated 11.02.2014 and as per Board Circular, the disallowance u/s. 14A is exigible even if there is no exempt income earned during the relevant previous year.
The assessee in its CO pleaded that the CIT(A) failed to appreciate that the AO has not recorded satisfaction for invoking Rule 8D of the Income Tax Rules, the disallowance made u/s. 14A r.w.r. 8D was not warranted as no expenditure was incurred by the assessee for earning exempt income and the AO erred in applying Rule 8D on the investment without considering the fact that the investments did not yield any return in the form of dividend during the impugned assessment year.
We heard the rival contentions. It was brought to our notice that this tribunal in the assessee’s case for assessment year 2012-13 in dated 13.02.2017, on similar facts, dismissed the revenue’s
:-4-: CO No. 9/Mds/2017 appeal, relying on the decisions of this tribunal in the case of EIH Associates Hotel Pvt. Ltd., Vs DCIT and the Hon’ble Jurisdictional High Court in the case of Redington (India) Ltd., Vs Addl. CIT in TCA No. 520 of 2016 dated 23.12.2016. Since, there is no change in the law and the facts, following this tribunal decision in the assessee’s case, supra, the revenue’s appeal is dismissed.
On the undisputed facts, the CIT(A) has correctly applied the ratios of this tribunal and hence, his order does not require any interference. Hence, the assessee’s CO is also dismissed.
Order pronounced on Thursday, the 27th day of July, 2017 at Chennai.