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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 15, Chennai, dated 27.06.2016 and pertains to assessment year 2012-13.
Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the first issue arises for consideration is disallowance of interest under Section 36(1)(iii) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the assessee paid interest to the extent of `2.58 Crores to its related company, namely, M/s Shriram EPC Limited. The assessee also advanced loan to M/s Shriram Composites Limited and M/s Strategic Engineering Pvt. Ltd. For the assessment year 2011-12, the assessee received an interest of `1,95,00,529/- which was offered for taxation. During the current assessment year, the assessee has received interest of `33,56,649/- from M/s Strategic Engineering Pvt. Ltd. and no interest was charged from M/s Shriram Composites Ltd. According to the Ld. D.R., the assessee-company is engaged in manufacturing GPR pipes. The assessee claimed that M/s Shriram Composites Ltd. is a wholly owned subsidiary company of the assessee. However, the Assessing Officer found that the investment was not made wholly and exclusively for the assessee’s business. The assessee has not received any advantage from the investment made. Therefore, the interest component corresponding to the investment was disallowed by the Assessing Officer.
On the contrary, Shri R. Sivaraman, the Ld.counsel for the assessee, submitted that the assessee, in fact, paid `2.58 Crores to M/s Shriram EPC Limited. The assessee has advanced money in its subsidiary company, namely, M/s Shriram Composites Limited and M/s Strategic Engineering Pvt. Ltd. In respect of investment made in M/s Shriram Composites Limited, interest was not charged.
According to the Ld. counsel, the advance was made for meeting the raw material requirement of subsidiary company and its overhead cost. According to the Ld. counsel, therefore, the advance made by the assessee is for commercial expediency. The Ld.counsel submitted that in view of judgment of Apex Court in S.A.
Builders Limited v. CIT (288 ITR 1), the CIT(Appeals) has rightly allowed the claim of the assessee.
On a query from the Bench how M/s Shriram Composites Ltd. is a sister company of the assessee? What is the shareholding pattern? Whether the assessee-company is holding major shares in M/s Shriram Composites Ltd.? The Ld.counsel could not furnish any of the details.
We have considered the rival submissions on either side and perused the relevant material available on record. The claim of the assessee is that the investment was made in the subsidiary company, namely, M/s Shriram Composites Ltd. For the purpose of examining the claim, we have to first find out how M/s Shriram Composites Ltd. is the subsidiary company of the assessee- company. For that purpose, we have to examine the shareholding pattern and how many shares were held by the assessee in M/s Shriram Composites Ltd. Since these details were not available on record, 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 interest is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh after bringing on record the shareholding pattern of M/s Shriram Composites Ltd. and shares held by the assessee-company in M/s Shriram Composites Ltd. and thereafter decide the issue afresh, in accordance with law, after giving a reasonable opportunity to the assessee.
The next issue arises for consideration is disallowance made under Section 14A of the Act.
Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the assessee claimed before the Assessing Officer that investment was made in the wholly owned subsidiary company, namely, M/s Shriram Composites Ltd. While discussing the issue in respect of disallowance made by the Assessing Officer towards interest in para 5 of this order, the matter was remitted back to the file of the Assessing Officer to bring on record the shareholding pattern of M/s Shriram Composite Ltd. and the shares held by the assessee-company in M/s Shriram Composites Ltd. In view of this decision, the issue of disallowance under Section 14A of the Act also needs to be re-examined. Accordingly, the orders of the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.