ACIT, CHENNAI vs. ANAND TRANSPORT, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

Both the assessee and Revenue have filed appeals against

the respective orders of the Commissioner of Income Tax

(Appeals)-2, Chennai, for the assessment years 2010-11 and 2011-

2009-10. Since common issues arise for consideration in all these

appeals, we heard these appeals together and disposing of the

same by this common order.

Let’s first take Revenue’s appeal for assessment year 2009-

10.

Section 40(a)(i) of the Income-tax Act, 1961 (in short 'the Act').

Representative, submitted that the payment made by the assessee to M/s Jaldhi Overseas Pvt. Ltd. to the extent of `33.92 Crores was

disallowed by the Assessing Officer on the ground that tax was not

deducted. The CIT(Appeals), however, allowed the claim of the

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assessee on the ground that M/s Jaldhi Overseas Pvt. Ltd. has no

permanent establishment in India. The CIT(Appeals) has also

found that the permanent establishment of M/s Jaldhi Overseas Pvt.

Ltd. is at Singapore. Referring to Explanation to Section 195(1) of

the Act, the Ld. D.R. submitted that the payment made by the

assessee to M/s Jaldhi Overseas Pvt. Ltd. is taxable in India,

therefore, irrespective of the permanent establishment of the non-

resident, the payment is taxable. Therefore, according to the Ld.

D.R., the assessee is liable to deduct tax. The Ld. D.R. further

submitted that the assessee has not filed any application under

Section 195A of the Act before the Assessing Officer.

assessee, submitted that the very same issue was considered by

the Madras High Court in the assessee's own case in Anand

Transport (P.) Ltd. v. ACIT (2015) 370 ITR 524. The Madras High

Court found that an identical payment made to M/s Jaldhi Overseas

Pvt. Ltd. was held to be not falling within the ambit to deduct tax. In

view of this decision of Madras High Court, according to the Ld.

counsel, the CIT(Appeals) has rightly deleted the addition made by

the Assessing Officer.

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perused the relevant material available on record. As rightly

submitted by the Ld.counsel for the assessee, the Madras High

Court in the assessee's own case for assessment year 2010-11,

considered the issue in a writ proceeding and the Division Bench of

the High Court found that the income earned by M/s Jaldhi

Overseas Pvt. Ltd. is taxable at Singapore. Moreover, the High

Court observed that Double Taxation Avoidance Agreement

between Government of India and Singapore would come to rescue

of M/s Jaldhi Overseas Pvt. Ltd. Therefore, it was ultimately

concluded by the High Court that the payment made by the

assessee to M/s Jaldhi Overseas Pvt. Ltd. will not come within the

ambit of deduction at source. In view of this finding of Madras High

Court, this Tribunal is of the considered opinion that the

CIT(Appeals) has rightly deleted the addition made by the

Assessing Officer.

proportionate interest on the advance made to sister concern,

namely, M/s MGM Logistics and Shipping Pvt. Ltd.

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Representative, submitted that the assessee advanced a sum of `20 Crores to M/s MGM Logistics and Shipping Pvt. Ltd., therefore,

the Assessing Officer found that the borrowed funds were diverted for non-business purpose. Accordingly, he disallowed `1.36 Crores.

On further appeal by the assessee, the CIT(Appeals) allowed the

claim of the assessee on the ground that there was commercial expediency in advancing `20 Crores by the assessee. According to

the Ld. D.R., M/s MGM Logistics and Shipping Pvt. Ltd. entered into

a joint venture agreement in a listed business with M/s PR

Developers & Builders Pvt. Ltd. The assessee is in the transport

business. According to the Ld. D.R., the money was advanced to

M/s MGM Logistics and Shipping Pvt. Ltd. for entering into a joint

development business with another company which is totally not

connected with the assessee’s business. Therefore, according to

the Ld. D.R., the advance made by the assessee cannot be

construed for business purpose. The agreement entered into

between M/s MGM Logistics and Shipping Pvt. Ltd. and M/s PR

Developers & Builders Pvt. Ltd. had already expired and barred by

limitation. Moreover, there was violation of Rule 46A of the Income-

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tax Rules, 1962. According to the Ld. D.R., the Assessing Officer

was not given any opportunity to examine the so-called agreement

which was said to be produced before the CIT(Appeals).

assessee, submitted that during the course of appellate proceeding,

the assessee also filed a stay petition praying for recovery of

outstanding amount during the pendency of appeal before the

CIT(Appeals). According to the Ld. counsel, the CIT(Appeals), in

fact, gave a copy of agreement to the Assessing Officer Shri K.

Rohan Raj. The said Shri Rohan Raj also appeared before the

CIT(Appeals) and admitted that the said copy of agreement was

available with him. Therefore, according to the Ld. counsel, it

cannot be said that there was violation of Rule 46A. Furthermore,

the assessee-firm advanced the borrowed funds to sister company

wherein there are common shareholders and partners for the

purpose of engaging in business jointly with other company. Since

the partners of the assessee-firm and directors of M/s MGM

Logistics and Shipping Pvt. Ltd. are common, according to the Ld.

counsel, there was commercial expediency in advancing money,

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therefore, the CIT(Appeals) has rightly allowed the claim of the

assessee.

perused the relevant material available on record. The assessee

admittedly is a partnership firm and the money was advanced to M/s

MGM Logistics and Shipping Pvt. Ltd., wherein the partners of the

assessee-company and some of the Directors/shareholders are

common. The question arises for consideration is whether merely

because there were some partners of assessee firm and

shareholders of M/s MGM Logistics and Shipping Pvt. Ltd. are

coomon, can it be considered to be a sister concern of the

assessee? This fact was not examined by any of the authorities

below.

M/s MGM Logistics and Shipping Pvt. Ltd. and M/s PR Developers

& Builders Pvt. Ltd. for joint business was filed before the

CIT(Appeals), the CIT(Appeals) observed in the impugned order

that a copy of the said agreement was given to Shri Rohan Raj, the

Assessing Officer. Rule 46A requires the CIT(Appeals) to give an

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opportunity to the Assessing Officer to contradict the contents of

additional evidence filed before him. Mere furnishing of a copy of

agreement would not be sufficient for compliance of Rule 46A of

Income-tax Rules, 1962. This Tribunal is of the considered opinion

that the CIT(Appeals) ought to have given an opportunity to

examine the contents of agreement. Since such an opportunity was

not given, this Tribunal is of the considered opinion that the matter

needs to be re-examined. Accordingly, the orders of the authorities below are set aside and the issue of disallowance of `1.36 Crores

towards interest on the amount borrowed and advanced to M/s

MGM Logistics and Shipping Pvt. Ltd. is remitted back to the file of

the Assessing Officer. The Assessing Officer shall re-examine the

matter afresh in the light of the agreement said to be entered into by

the assessee and also examine whether M/s MGM Logistics and

Shipping Pvt. Ltd. is a sister company of the assessee-firm merely

because there were common partners/shareholders.

is partly allowed for statistical purposes.

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the Revenue’s appeal is depreciation claimed by the assessee on

boat jetty.

Representative, submitted that the assessee has erected jetty for

transport of iron ore in Ennore Port trust. According to the Ld. D.R.,

the structure cannot be construed as temporary structure, therefore,

not eligible for 100% depreciation.

assessee, submitted that this issue was examined by this Tribunal

for assessment year 2005-06 in I.T.A. No.737/Mds/2014. This

Tribunal found that the jetty erected by the assessee is only a

temporary structure, therefore, eligible for depreciation at the rate of

100%. In fact, an appeal was filed by the Revenue before Madras

High Court in TCA 82 of 2017. The Madras High Court, after

referring to dictionary meaning of the word “jetty” found that jetty is

nothing but a structure which is used either as a landing stage, a

small pier, a bridge or a staircase or a construction, built into the

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water to protect the harbour. Finally, the Madras High Court

confirmed the order of this Tribunal.

perused the relevant material available on record. As rightly

submitted by the Ld.counsel for the assessee, this Tribunal in the

assessee's own case, for the assessment year 2005-06, examined

this issue elaborately and found that the assessee erected a

temporary structure for loading and unloading of goods in Ennore

Port Trust, therefore, eligible for 100% depreciation. The order of

this Tribunal for assessment year 2005-06 was confirmed by the

Madras High Court. Therefore, this Tribunal do not find any reason

to interfere with the order of the lower authority and accordingly the

same is confirmed.

made by the Assessing Officer under Section 40(a)(i) of the Act in

respect of payment made to M/s Jaldhi Overseas Pvt. Ltd.

Departmental Representative and Shri G. Baskar, the Ld.counsel

for the assessee. The Ld.counsel for the assessee pointed out that

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the assessee in fact withdrew this ground of appeal on the basis of

the judgment of Madras High Court in the assessee's own case for

assessment year 2010-11 in a writ proceeding and the CIT(A) has

not adjudicated this ground at all. Therefore, the appeal filed by the

Revenue is not maintainable. This Tribunal is of the considered

opinion that when the Madras High Court in a writ proceeding found

that the payment made by the assessee to M/s Jaldhi Overseas Pvt.

Ltd. will not come within the ambit of deduction at source, the

ground of appeal raised by the Revenue has no merit at all.

Accordingly, the same is dismissed.

ground of appeal is with regard to disallowance of interest on the

advance made to M/s MGM Logistics and Shipping Pvt. Ltd.

Revenue’s appeal, this Tribunal remitted the matter back to the file

of the Assessing Officer. Since the facts are identical for

assessment year 2010-11 also, this issue is remitted back to the file

of the Assessing Officer with same direction.

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Section 40(a)(i) of the Act in respect of payment made to Port Trust.

that the Port Trust, in fact, included this amount in the return of

income and paid the taxes. Therefore, there cannot be any

disallowance in the hands of the present assessee.

Departmental Representative, submitted that this issue may be

remitted back to the file of the Assessing Officer for verification.

perused the relevant material available on record. The Assessing

Officer disallowed the claim of the assessee to the extent of `83,77,966/- under Section 40(a)(i) for non-deduction of tax at

source. Now the assessee claims that Chennai Port Trust paid the

taxes by including the amount received from the assessee in their

return of income. Therefore, as rightly submitted by the Ld.

Departmental Representative, the matter needs to be verified.

Accordingly, the orders of the authorities below are set aside and the issue of disallowance of `83,77,966/- under Section 40(a)(i) of

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the Act is remitted back to the file of the Assessing Officer. The

Assessing Officer shall re-examine the issue afresh and find out

whether the recipient, namely, Chennai Port Trust has paid the

taxes on the amount received by them and thereafter decide the

same in accordance with law, after giving a reasonable opportunity

to the assessee.

by the Assessing Officer under Section 80G of the Act.

The Assessing Officer disallowed `3,08,500/- on the ground 25.

that the assessee could not substantiate the payment by producing

necessary evidence. The CIT(Appeals) confirmed the same since

there was no material evidence. Even before this Tribunal, no

material was produced. Therefore, the disallowance made under

Section 80G of the Act is confirmed.

12, the first issue arises for consideration is with regard to

depreciation on the temporary erection, namely, jetty. The second

issue arises for consideration is in respect of payment made to M/s

Jaldhi Overseas Pvt. Ltd.

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2009-10. By following the judgment of Madras High Court, this

Tribunal allowed the claim of the assessee for assessment year

2009-10 in the earlier part of this order. For the same reason, this

Tribunal do not find any reason to interfere with the order of the

lower authority and accordingly the same is confirmed.

2011-12, the only issue arises for consideration is disallowance of

interest paid on advances made to sister company.

of this order for assessment year 2009-10 and 2010-11. This

Tribunal has remitted back the matter to the file of the Assessing

Officer for reconsideration. For the year under consideration also,

for the reason stated for assessment years 2009-10 and 2010-11 in

the earlier part of this order, the orders of the authorities below are

set aside and the issue is remitted back to the file of the Assessing

Officer.

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Order pronounced on 31st May, 2017 at Chennai.

sd/- sd/- (�ड.एस. सु�दर �संह) (एन.आर.एस. गणेशन) (D.S. Sunder Singh) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 31st May, 2017.

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. �नधा�रती /Assessee 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-2, Chennai 4. Principal CIT-1, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.