Income Tax Appellate Tribunal - Chennai
Acit Circle 1, Salem vs M/S Tamilnadu State Transport ... on 5 July, 2019
आयकर अपील य अ धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
' B' BENCH, CHENNAI
ी जॉज माथन, या यकसद य एवं ी #व$म %संह यादव, लेखा सद य केसम(
SHRI GEORGE MATHAN, JUDICIAL MEMBER AND
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ITA Nos. 813 & 814/Chny/2018
नधारण वष / Assessment Years : 2008-09 & 2012-13
The Assistant the Commissioner of v. M/s.Tamil Nadu State Transport
Income Tax, Corporation (Salem) Ltd.,
Circle-1, 12,Ramakrishna Road,
Salem. Salem 636 007.
PAN : AAACT 7678 J
(अपीलाथ-/Appellant) (./यथ-/Respondent)
अपीलाथ- क0 ओर से/Appellant by: Mr.Sridhar Dora,JCIT,D.R
./यथ- क0 ओर से/Respondent by : Ms.S.Sriniranjani,Advocate
सुनवाई क0 तार ख/Date of Hearing : 04.07.2019
घोषणा क0 तार ख/Date of Pronouncement : 05.07.2019
आदे श /O R D E R
PER VIKRAM SINGH YADAV, ACCOUNTANT MEMBER:
These two appeals filed by the Revenue are against the respective orders of CIT(A), Salem, for assessment years 2008-09 & 2012-13.
2. Firstly we will take the Revenue's appeal in ITA No.813/Chny/2018. 2 I.T.A. Nos.813 & 814/chny/2018 2.1 In Grounds No.1, 3 & 4, the Revenue has challenged the action of the ld.CIT(A) in allowing the contribution to Pension Fund Trust amounting to Rs.9,97,52,210/-.
2.2 In this regard, ld.AR submitted that the matter has been decided by the Co-ordinate Bench of this Tribunal in assessee's own case for assessment year 2009-10 in ITA No.1464/Mds/2014 dated 22.08.2014 wherein the relevant finding is contained at paras 6 & 7 of the order of Tribunal which is reproduced as under:-
""6. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also examined the decisions on which the respective sides have placed reliance and the documents placed on record by the ld.Counsel for the assessee in the form of Paper Book. The first issue raised in appeal is with regard to contributions made by the assessee towards Pension Fund Trust. The assessee has contributed a sum of `15.60 Crores (approximately) towards Tamil Nadu State Transport 8 ITA No. 1464/Mds/2014 Corporation Employees Pension Fund Trust, Chennai. The CIT is of the opinion that since the Trust is not approved by the jurisdictional Commissioner or Chief Commissioner, the contributions made by the assessee are not towards approved pension fund. A bare reading of section 36(1)(iv) makes is amply clear that the sum should be contributed by the employer towards a recognized provident fund or approved superannuation funds subject to such limits as may be prescribed for recognizing provident fund or approving the superannuation fund. The section does not lay down any specific condition that the fund should be approved by the jurisdictional Commissioner or Chief Commissioner only.3 I.T.A. Nos.813 & 814/chny/2018
In the present case, the assessee is contributing in the Pension Fund Scheme jointly floated by twelve State Transport Corporations operating in different districts of the state of Tamil Nadu. All the State Transport Corporations are signatories to the Trust Deed for setting up of joint State Transport Employees Pension Fund Scheme. It is not in dispute that the said fund has been recognized by the CIT-VII, Chennai. Once the assessee is contributing towards recognized fund, the assessee is entitled to get the benefit for the contributions made to the said fund.
7. The case of the assessee is supported by the decision of the co- ordinate bench of the Tribunal in the case of Stanmore (Anamallay) Estates Ltd., Vs. ITO (supra). In the said case, the assessee-company along with other four sister companies created a joint gratuity fund for the exclusive benefit of its employees under on irrevocable trust. The CIT in proceedings u/s.263 raised similar objection that the assessee is not contributing towards fund approved by the jurisdictional Commissioner. The co-ordinate bench of the Tribunal held that contributions to approved gratuity fund being a common fund set by the assessee-company along with sister companies cannot be dis-allowed on the ground that it was not exclusive fund for the assessees' employees. The Revenue has placed reliance on the decision rendered by the jurisdictional High Court in the case of CIT Vs. Kattabomman Transport Corporation Ltd., (supra) and CIT Vs. Mica Trading Corporation of India (supra). We find that in both the above said cases, the facts are entirely different from the case in hand. Therefore, the ratio laid down by the Hon'ble High Courts in aforesaid cases cannot be applied in the present case. Accordingly, this ground of appeal of the assessee is allowed."
3. We have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Co-ordinate 4 I.T.A. Nos.813 & 814/chny/2018 Bench of this Tribunal, the issue is decided in favour of the assessee and against the Revenue, and the grounds so taken are dismissed.
4. In respect of Ground Nos.1 & 5 of the Revenue's appeal, the Revenue has challenged the action of the ld.CIT(A) in allowing the damages for remittance to Pension Fund Trust amounting to Rs.52,37,425/-.
4.1 At the outset, ld.AR submitted that the matted has been decided by the Co-ordinate Bench of this Tribunal in assessee's own case for assessment year 2003-04 in ITA No.482/Mds/2018 dated 27.11.2018 wherein the relevant portions are contained at paras 6 & 7 of the order of Tribunal which is reproduced as under:-
"6. Per contra, the Ld. AR submitted a copy of "order giving effect to CIT(A) order" passed by the ACIT, Circle -1, Salem for assessment year 2011-12 dated 15.11.2017, wherein, the AO held as under:
"3. Accordingly, the case was posted for hearing and the assessee was asked cc furnish necessary documents and evidences in support of their claim. In response, the assessee appeared and represented that the damages paid for remittance to Pension fund trust is nothing but interest @ 9.5% on the delayed pay pent monthly contribution and the payments were compensatory in nature and not a penalty In support, the assessee company had furnished Government's order, details of interest paid and detailed explanation in this regard. Considering the reply furnished, the assessee's claim of damages for remittance if Pension fund trust for Rs 2,35,91,384/ is allowed."5 I.T.A. Nos.813 & 814/chny/2018
furnishing a copy of interest rate declared by Pension Fund accumulation since 1952 to 2014, the AR submitted that since the AO has already decided the nature of this payment ie., the damages paid by it in assessment year 2011-12, is compensatory in nature, this appeal may be allowed.
7. We heard the rival submissions and find merit in the submissions made by the ld. AR, supra, and hence, do not find any merit in the submission of the Revenue. The appeal grounds of the Revenue are dismissed."
5. We have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Co-ordinate Bench of this Tribunal, the issue is decided in favour of the assessee and against the Revenue, and the grounds so taken are dismissed.
6. In respect of Ground No.6 of the Revenue's appeal, the Revenue has challenged the action of the ld.CIT(A) in allowing the claim of assessee towards Chairman's Office Expenses amounting to Rs.7,81,274/-. In this regard, our reference was drawn to the findings of the ld.CIT(A) at para-5 of ld.CIT(A)'s order which read as under:-
"5. Disallowance of Chairman's Office Expenses 6 I.T.A. Nos.813 & 814/chny/2018 The Assessing Officer found that assessee company has booked an expenditure of Rs.7,81,274/- under the head on account "Chairman's Office Expenses''. In response to specific query on the nature of this expenditure and the commercial expediency with reference to the business operation of the company, the Appellant failed substantiate the necessity of the expenditure to qualify for the deduction u/s.37 of the I.T.Act,1961. Hence, the Assessing Officer disallowed this expenditure claimed of Rs.7,81,274/- to the income of Appellant. Before me, the Appellant submitted that the Secretary to the Transport Department is the Chairman to all the State Transport Corporation in Tamil Nadu and the office is functioning at the Secretariat, Chennai with a separate Chairman's office comprising of five officers on deputation from various transport corporations. The function of this office is to co=ordinate the details required by the Government and other Govt. departments then and there. Since this is an exclusive nodal and administrative office for all the transport corporations the administrative expenses are shared equally by all the State Transport Corporations, which is being accounted in ou books of accounts as "Chairman's Cell Expenses''. It was neither personal expenses nor capital expenditure enduring benefit to the company. The Appellant produced the break-up of expenses incurred in the Chairman cell, proof for the payment and other relevant particulars in support of its claim. I have perused the submissions of the Appellant and satisfied that the above expenses were incurred for the official purposes and it is allowable. Hence, I allow this ground of appeal of the assessee.
"6.1 It was submitted by ld. D.R that during the course of Appellate proceedings, the assessee has submitted their evidences before the 7 I.T.A. Nos.813 & 814/chny/2018 ld.CIT(A) and the ld.CIT(A) has decided the matter without calling for the remand Report from the ld.Assessing Officer. The ld.AR has not denied the said factual position. We accordingly set aside the matter to the file of ld.CIT(A) to seek the Remand Report from the ld.Assessing Officer and decide the matter afresh as per law. This Ground relating to the expenses incurred for Chairman's Office Expenses is allowed for statistical purposes.
6.2 In the appeal of Revenue in ITA No.813/Chny/2018 is partly allowed for statistical purposes.
7. Next we take the Revenue's appeal in ITA No.814/Chny/2018.
8. We find that in Ground Nos.1 & 2, the Revenue has raised similar grounds relating to damages for remittance to Pension Fund Trust amounting to Rs.1,38,37,508/-. Both the parties fairly submitted that the facts and circumstances of the case are exactly identical as in ITA No.813/Chny/2018 for assessment year 2008-09. Therefore, our findings and directions contained in ITA No.813/Chny/2018 in para Nos.4 & 5 of this order shall apply to Ground Nos.1 & 2 raised in Revenue's appeal in ITA No.814/Chny/2018 for assessment year 2012-13. Hence, the grounds so taken for remittance to Pension Fund Trust by the Revenue are dismissed.8 I.T.A. Nos.813 & 814/chny/2018
9. In respect of Ground No.3 & 4 of the Revenue's appeal, the Revenue has challenged the action of the ld.CIT(A) in restricting the disallowance u/s.14A read with Rule 8D Income Tax Rules,1962 to the extent of exempt income amounting to Rs.6,63,236/-. In this regard we refer to the findings of the ld.CIT(A), who following the decision of the Hon'ble Madras High Court in TCA No.520 of 2016 in the case of M/s.Redington (India) Ltd., Vs.The Addl. C.I.T,Chennai, has partly allowed, the matter is in favour of the assessee and relevant findings ld.CIT(A)'s at para -10 of his order, which reads as under:-
"10. In view of the above, respectfully following the decision of the Hon'ble Madras High Court, cited(supra), and the disallowance u/s.14A should be restricted to the amount of exempt income. On perusal of the assessment order I find that the Appellant has stated that sum of Rs.6,63,236/- had been sanctioned during the year as dividend @ 2.43% of the above investment. Therefore, the disallowance may be restricted to Rs.6,63,236/-. However, if an higher amount is claimed as exempt income in the return of income, the amount may be revised upwards accordingly. Hence, the grounds of appeals are partly allowed."
10. During the course of hearing, ld.AR submitted that the matter is squarely covered by the decision of Hon'ble Delhi High Court in the case of Joint Investments Pvt Ltd., Vs.C.I.T in 372 ITR 694(Delhi) wherein it was held as under:-
'9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs.2,97,440/- as a disallowance under Section 14A had to be rejected. Taikisha says that 9 I.T.A. Nos.813 & 814/chny/2018 the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.8,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case''.
11. We have heard the rival contentions and perused the material available on record. Respectfully following the decision of the Delhi High Court in the case of Joint Investments Pvt Ltd.,(supra), we hereby confirm the findings of the ld.CIT(A) at para-10 of his order. The ground Nos. 3 & 4 so taken by the Revenue are dismissed. Hence, the appeal in ITA No.814/Chny/2018 filed by the Revenue is dismissed. 10 I.T.A. Nos.813 & 814/chny/2018
12. In the result, the appeal in ITA No.813/Chny/2018 filed by the Revenue is partly allowed for statistical purposes and the appeal in ITA No.814/Chny/2018 filed by the Revenue is dismissed. Order pronounced in the open court on 05/07/2019 at Chennai.
Sd/- Sd/-
(जॉज माथन) ( व म संह यादव)
(George Mathan) (Vikram Singh Yadav)
या यक सद य/Judicial Member लेखा सद य/Accountant Member
चे नई/Chennai,
6दनांक/Dated, the 05th July, 2019.
Ks sundaram
आदे श क0 . त%ल#प अ8े#षत/Copy to:
1. अपीलाथ-/Appellant
2. ./यथ-/Respondent
3. आयकर आयु9त (अपील)/CIT(A)
4. आयकर आयु9त/CIT
5. #वभागीय . त न ध/DR
6. गाड फाईल/GF.