L & T INFRASTRUCTURE DEVELOPMENT PROJECTS LIMITED,CHENNAI vs. DCIT, CHENNAI

The assessee’s appeal in is directed against the order of the Principal Commissioner of Income Tax, Chennai, under Section 263 of the Income-tax Act, 1961 (in short 'the Act') and is directed against the order of the Commissioner of Income Tax (Appeals)-8, Chennai, dated 13.02.2017. Since both the appeals are filed by the assessee, we heard the appeals together and disposing of the same by this common order.

Let’s first take I.T.A. No.807/Mds/2017. The only issue arises for consideration is computation of book profit under Section 115JB of the Act.

Shri N.V. Balaji, the Ld.counsel for the assessee, submitted that this Tribunal in Beach Minerals Company (P.) Ltd. v. ACIT (2015) 64 taxmann.com 218 found that the disallowance made under Section 14A of the Act cannot be added to the book profit under Section 115JB of the Act. The Principal Commissioner found that the Assessing Officer has not made any proper enquiry. According to the Ld. counsel, while referring to the order of this Tribunal in the assessee's own group company, the Principal Commissioner found that the appeal was already filed before the High Court, therefore, the order of the Assessing Officer is erroneous and prejudicial to the interests of Revenue. In the case before us, according to the Ld. counsel, the Assessing Officer, in fact, has taken one of the views possible. Therefore, the Principal Commissioner cannot say the order passed by the Assessing Officer is erroneous.

We have heard Smt. Ruby George, the Ld. Departmental Representative, also. This Tribunal in the assessee's own group company, by an order dated 11.08.2016, found that the disallowance made under Section 14A of the Act cannot be added to the book profit computed under Section 115JB of the Act. A similar view was taken by this Tribunal in Beach Minerals Company (P.) Ltd. (supra). Therefore, as submitted by the Ld. counsel for the assessee, when the Assessing Officer has taken one of the possible views under the provisions of Income-tax Act, the Principal Commissioner cannot say that the Assessing Officer has not made any proper enquiry. Therefore, the Principal Commissioner is not justified in exercising his power under Section 263 of the Act. Accordingly, the impugned order of the Principal Commissioner passed under Section 263 of the Act is quashed.

Now coming to the only issue arises for consideration is disallowance made by the Assessing Officer under Section 14A of the Act read with Rule 8D(iii) of the Act.

Shri N.V. Balaji, the Ld.counsel for the assessee, submitted that all the investments were made in subsidiary companies. Therefore, the CIT(Appeals) by placing reliance on the order of this Tribunal in ACIT v. Sun TV Networks Limited in to 1520/Mds/2013 confirmed the disallowance made by the Assessing Officer. The assessee now contends before this Tribunal that this Tribunal in Beach Minerals Company (P.) Ltd. (supra) held that the investment made in sister concern cannot be attributed for management of such funds. Therefore, the Tribunal found that there cannot be any disallowance for expenditure.

We have heard Smt. Ruby George, the Ld. Departmental Representative, also. From the material available on record it is not known how the companies in which the investments were made by the assessee are subsidiary companies of the assessee. The shareholding pattern of the companies in which investments were said to be made has not been brought on record by both the authorities below. It is also not known how the assessee was forced to make investments in those companies. Unless it is brought on record the shareholding pattern of the companies in which the investments were made, this Tribunal is of the considered opinion that the issue raised by the assessee cannot be adjudicated effectively. Accordingly, the orders of both the authorities below are set aside and the issue of disallowance under Section 14A of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the shareholding pattern of the companies in which the investments were said to be made by the assessee-company and also the situation under which the assessee was forced to make investments and thereafter, decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the assessee’s appeals in is allowed and I.T.A. No.808/Mds/2017 is allowed for statistical purposes.