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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
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)-6, Chennai, dated 10.12.2015 and pertains to assessment year 2012-13.
The first issue arises for consideration is with regard to disallowance made by the Assessing Officer under Section 14A of the Income-tax Act, 1961 (in short 'the Act').
Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that during the year under consideration, the assessee holds investments in equity shares in the subsidiary companies.
However, the Assessing Officer found that even though no income was earned during the year under consideration, disallowance has to be made under Section 14A of the Act. However, on appeal by the assessee, the CIT(Appeals) found that the investment made by the assessee-company in subsidiary companies are not for earning the dividend income, but, for commercial expediency, therefore, it cannot be construed for disallowance under Section 14A of the Act in view of the decision of this Tribunal in ACIT v. Mr. M. Baskaran in dated 31.07.2014. According to the Ld. D.R., disallowance has to be made even though the assessee has not earned any income.
On the contrary, Shri M. Karunakaran, the Ld.counsel for the assessee, submitted that the assessee invested in sister concerns of the assessee for commercial expediency, therefore, it is not investment for earning any exempted income. The assessee made the investments with an intention to do business. Therefore, according to the Ld. counsel, there cannot be any disallowance in view of the judgment of Apex Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1. In fact, according to the Ld. counsel, the CIT(Appeals) by placing reliance on the decision of this Bench in Mr. M. Baskaran (supra) allowed the appeal of the assessee.
We have considered the rival submissions on either side and perused the relevant material available on record. Investments made by the assessee in subsidiary companies are for commercial expediency with an intention to carry on the business. Such investments in subsidiary companies cannot be considered to be for earning the exempted income. In fact, the Apex Court in S.A.
Builders Ltd. (supra) examined the issue elaborately and found that when the borrowed funds were invested in subsidiary companies, no portion of interest can be disallowed on the ground that the borrowed funds were diverted other than the business of the assessee-company. This Tribunal is of the considered opinion that the same would equally applicable when the investments were made in sister concerns. Therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer.
The next ground of appeal is with regard to belated deposit of employees’ contribution towards Provident Fund and ESI. The CIT(Appeals) by placing reliance on the judgment of Apex Court in CIT v. Alom Extrusions Limited (319 ITR 306) and the judgment of Madras High Court in CIT v. Industrial Security & Intelligence India Pvt. Ltd. in 585 and 586 of 2015 dated 24.07.2015, allowed the claim of the assessee holding that when the assessee has deposited employees’ contribution towards Provident Fund and ESI before the due date for filing of return of income under Section 139(1) of the Act, the same has to be allowed. This Tribunal is of the considered opinion that when the CIT(Appeals) allowed the claim of the assessee on the basis of judgment of Apex Court and judgment of Madras High Court, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 19th May, 2016 at Chennai.