Medall Scans and Labs Pvt. Ltd., CHENNAI v. ITO Corporate Ward 4(1), CHENNAI

ITA 2337/CHNY/2018 | 2015-2016
Pronouncement Date: 29-11-2019 | Result: Partly Allowed

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Appeal Details

RSA Number 233721714 RSA 2018
Assessee PAN AAHCM2252J
Bench Chennai
Appeal Number ITA 2337/CHNY/2018
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant Medall Scans and Labs Pvt. Ltd., CHENNAI
Respondent ITO Corporate Ward 4(1), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-11-2019
Last Hearing Date 10-01-2019
First Hearing Date 10-01-2019
Assessment Year 2015-2016
Appeal Filed On 10-08-2018
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH CHENNAI . BEFORE SHRI RAMIT KOCHAR ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY JUDICIAL MEMBER ./ I.T.A. NO. 2337/CHNY/2018 / ASSESSMENT YEAR: 2015-16 M/S. MEDALL SCANS AND LABS PVT. LTD. NO. 67 2 ND FLOOR TNPL BUILDING MOUNT ROAD GUINDY CHENNAI 600 032. [PAN:AAHCM2252J] VS. THE INCOME TAX OFFICER CORPORATE WARD 4(1) CHENNAI. ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI T. VASUDEVAN ADVOCATE / RESPONDENT BY : SHRI GURU BASHYAM ADDL. CIT / DATE OF HEARING : 26.11.2019 /DATE OF PRONOUNCEMENT : 29.11.2019 / O R D E R PER DUVVURU RL REDDY JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 8 CHENNAI DATED 25.05.2018 RELEVANT TO THE ASSESSMENT YEAR 2015-16. THE GROUNDS RAISED IN THE APPEAL OF THE ASSESSEE ARE THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D AS WELL AS CONFIRMING DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D IN COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE INCOME TAX ACT 1961 [ACT IN SHORT]. I.T.A. NO. 2337/CHNY/18 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 WITH NIL INCOME. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MEDICAL DIAGNOSTIC TESTING AND ALLIED SERVICES. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AGAINST THE STATUTORY NOTICES THE ASSESSEE FURNISHED THE DETAILS AS CALLED FOR. FROM THE BALANCE SHEET FILED BY THE ASSESSEE THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS MADE AN INVESTMENT OF .7 50 10 100/- IN EQUITY SHARES OF VARIOUS COMPANIES. THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME EARNED DURING YEAR UNDER CONSIDERATION AND HENCE NO EXEMPT INCOME WAS CLAIMED BY ASSESSEE IN RETURN OF INCOME. HOWEVER BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D OF THE INCOME-TAX RULES 1962 DETERMINED THE DISALLOWANCE OF .4 47 618/- AND ALSO DISALLOWED THE SAME WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. ON APPEAL THE LD. CIT(A) CONFIRMED THE DISALLOWANCE AGAINST WHICH THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR ASSESSEE HAS SUBMITTED BEFORE THE BENCH THAT ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION AND HENCE NO EXEMPT INCOME WAS CLAIMED BY IT IN RETURN OF INCOME. THE LD. COUNSEL FOR ASSESSEE WOULD SUBMIT THAT IN VIEW OF NO EXEMPT INCOME EARNED BY ASSESSEE NO DISALLOWANCE OF EXPENDITURE IS WARRANTED UNDER SECTION 14A OF THE ACT. THE ASSESSEE HAS RELIED UPON DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS (P.) LTD. REPORTED I.T.A. NO. 2337/CHNY/18 3 IN [2017] 80 TAXMANN.COM 221 (MADRAS) WHEREIN HONBLE MADRAS HIGH COURT HAS HELD THAT NO DISALLOWANCE OF EXPENDITURE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT WHEN THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE. THE SLP FILED BY REVENUE BEFORE HONBLE SUPREME COURT IN THE CASE OF CIT V. CHETTINAD LOGISTICS (P.) LTD. REPORTED IN [2018] 95 TAXMANN.COM 250 (SC) HAS SINCE BEEN DISMISSED BY HONBLE SUPREME COURT. SIMILARLY IT WAS SUBMITTED THAT NO ADDITION CAN BE MADE TO BOOK PROFIT UNDER SECTION 115JB AS THE ASSESSEE HAS NOT EARNED AN EXEMPT INCOME. ON MERITS LD. DR SUBMITTED THAT DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT IS TO BE MADE EVEN IF NO EXEMPT INCOME IS EARNED BY THE ASSESSEE. THE LEARNED DR WOULD RELY ON ORDERS OF AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE SIDES PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE THE ASSESSEE HAS MADE INVESTMENTS TO THE TUNE OF .7 50 10 100/- IN EQUITY SHARES OF VARIOUS COMPANIES. THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME EARNED DURING YEAR UNDER CONSIDERATION AND HENCE NO EXEMPT INCOME WAS CLAIMED BY ASSESSEE IN RETURN OF INCOME. HOWEVER BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R.W. RULE 8D MADE DISALLOWANCE OF EXPENDITURE TO THE TUNE OF .4 47 618/- WHICH WAS CONFIRMED BY LD. CIT(A). NOW IT IS A WELL SETTLED PROPOSITION THAT IN CASE NO EXEMPT INCOME IS RECEIVED DURING YEAR UNDER CONSIDERATION NO DISALLOWANCE OF EXPENDITURE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT. IT IS A MATTER OF FACT THAT THE ASSESSEE I.T.A. NO. 2337/CHNY/18 4 EARNED NO EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION. FURTHER IT IS OBSERVED THAT ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION BEFORE INVOKING RULE 8D OF THE 1962 RULES AND HAS SIMPLY INVOKED PROVISIONS OF SECTION 14A OF THE ACT R.W.R. 8D.. THE ASSESSING OFFICER HAS NOT ANALYSED MODUS OPERANDI FOLLOWED BY THE ASSESSEE IN MAKING INVESTMENTS PERSONNEL DEPLOYED NOR HAS LOOKED INTO BOOKS OF ACCOUNTS OF THE ASSESSEE TO COMPUTE EXPENDITURE INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME. 5. WE FIND THAT THE IN THE CASE OF CHETTINAD LOGISTICS PRIVATE LIMITED(SUPRA) THE HONBLE MADRAS HIGH COURT HAS HELD THAT NO DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT CAN BE MADE WHEN NO EXEMPT INCOME IS EARNED BY THE ASSESSEE. THE SLP FILED BY REVENUE AGAINST DECISION OF HONBLE MADRAS HIGH COURT DECISION IN CASE OF CHETTINAD LOGSITICS PRIVATE LIMITED (SUPRA) HAS BEEN DISMISSED BY HONBLE SUPREME COURT. IT IS ALSO RELEVANT HERE TO MENTION DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF REDINGTON (INDIA) LIMITED V. ADDL. CIT 392 ITR 633 WHEREIN SIMILAR VIEW WAS TAKEN AND IN FACT THE HONBLE MADRAS HIGH COURT IN CASE OF CHETTINAD LOGISTICS PRIVATE LIMITED (SUPRA) RELIED UPON THIS DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF REDINGTON INDIA LIMITED (SUPRA) TO HOLD AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THUS KEEPING IN VIEW DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CITED ABOVE WE ARE OF CONSIDERED VIEW THAT NO DISALLOWANCE OF EXPENDITURE BY INVOKING PROVISIONS OF SECTION 14A OF THE ACT IS WARRANTED AS THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION AND HENCE THE I.T.A. NO. 2337/CHNY/18 5 DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT STANDS DELETED 6. SO FAR AS ADDITIONS TO BE MADE IN COMPUTING BOOK PROFITS U/S 115JB OF THE ACT THE DECISION OF SPECIAL BENCH OF DELHI-TRIBUNAL IN THE CASE OF ACIT V. VIREET INVESTMENT PRIVATE LIMITED REPORTED IN (2017) 165 ITD 27(DELH-TRIB.)(SB) IS RELEVANT WHEREIN IT IS HELD AT PARA 6.22 THAT COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A READ WITH RULE 8D OF THE 1962 RULES. THE MATTER IS REMITTED TO AO TO COMPUTE BOOKS PROFITS U/S 115JB OF THE ACT IN ACCORDANCE WITH RATIO OF DECISION OF SPECIAL BENCH OF DELHI-TRIBUNAL IN THE CASE OF VIREET INVESTMENTS (SUPRA) READ WITH CLAUSE(F) OF EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT. WE ORDER ACCORDINGLY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER INDICATED ABOVE. ORDER PRONOUNCED ON THE 29 TH NOVEMBER 2019 IN CHENNAI. SD/ - SD/ - (RAMIT KOCHAR) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI DATED 29.11.2019 VM/- /COPY TO: 1. / APPELLANT 2. / RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR & 6. /GF.