Income Tax Appellate Tribunal - Chennai
L & T Housing Finance Limited, Mumbai vs Dcit, Chennai on 10 October, 2017
आयकर अपील य अ धकरण, 'डी' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH: CHENNAI
ी चं पज
ू ार , लेखा सद य एवं
ी जॉज माथन, या यक सद!य के सम"
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER आयकर अपील सं./ITA No.468/Mds/2017 नधारण वष /Assessment Year: 2011-12 M/s.L&T Housing Finance Ltd., Vs. The Dy. Commissioner of (formerly known as Indo pacific Income Tax, Housing Finance Ltd.), Corporate Circle-4(1), Unit No.205 & 206, 2nd Floor, Chennai. Kodambakkam High Road, Capital Tower, Chennai-600 034.
[PAN: AAACW 1328 G] (अपीलाथ&/Appellant) ('(यथ&/Respondent) आयकर अपील सं./ITA Nos.488, 489 & 490/Mds/2017 नधारण वष /Assessment Years: 2010-11, 2011-12 & 2012-13 The Dy. Commissioner of Income Vs. M/s.L&T Housing Finance Tax, Ltd., Corporate Circle-4(1), Chennai. (formerly known as Indo pacific Housing Finance Ltd.), Unit No.205 & 206, 2nd Floor, Kodambakkam High Road, Capital Tower, Chennai-600 034.
[PAN: AAACW 1328 G]
(अपीलाथ&/Appellant) ('(यथ&/Respondent)
Assessee by : Mr.Girish S.Sundar, CA &
Mr.R.Venkatesan, CA
Department by : Mrs.Vijayalakshmi, CIT &
Mrs. Vijayaprabha, JCIT
सुनवाई क* तार ख/Date of Hearing : 10.10.2017
घोषणा क* तार ख /Date of Pronouncement : 10.10.2017
ITA Nos.468 &
488 to 490/Mds/2017
:- 2 -:
आदे श / O R D E R
PER BENCH:
ITA No.468/Mds/2017 is an appeal filed by the assessee against the
Order of Commissioner of Income Tax (Appeals)-8, Chennai, in ITA Nos.29/12-13, 92/14-15 & 79/15-16 dated 22.12.2016 for the AYs 2010- 11 to 2012-13. ITA No.488 to 490/Mds/2017 are the appeals filed by the Revenue against the Order of Commissioner of Income Tax (Appeals)- 8, Chennai, in ITA Nos.29/12-13, 92/14-15 & 79/15-16 dated 22.12.2016 for the AYs 2010-11 to 2012-13.
2. Mrs.Vijayalakshmi, CIT & Mrs. Vijayaprabha, JCIT, represented on behalf of the Revenue and Shri Mr.Girish S.Sundar, CA & Mr.R.Venkatesan, CA, represented on behalf of the assessee.
3. As all the issues arise out of the common order of the Ld.CIT(A) and related to the same assessee and are having common issues, all the appeals are disposed off by this common order.
4. At the outset, it must be mentioned here that the assessee has filed multiple Paper Books wherein two Paper Books filed on 20.09.2017 and other Paper Books dated NIL containing pages 649, 467, 23. At the time of the hearing, none of the papers in the Paper Books have been referred to by the Ld.AR or the Ld.DR. Consequently, they are not taken on record. The issues in the appeals of the Revenue are in respect of the ITA Nos.468 & 488 to 490/Mds/2017 :- 3 -:
disallowance u/s.14A r.w.r.8D which has been deleted/reduced by the Ld.CIT(A), the issue in respect of the disallowance in respect of the NPAs, the issue in respect of the disallowance deleted by the Ld.CIT(A) in respect of the provision for expenses and the deletion of the disallowance made by the AO in respect of the delayed payments of the employee's contribution to ESI & PF.
5. In the assessee's appeal, there is only one issue which is against the confirmation by the Ld.CIT(A) of the disallowance made by the AO in respect of the loss arising due to the payment made by the assessee towards premature termination of the securitization agreement with Axis Bank, an unrelated party. Each of the issues is decided in seriatim:
6. First coming to the issue in the assessee's appeal being against the action of the Ld.CIT(A) in confirming the addition made by the AO by disallowance of the loss arising due to the payment made by the Appellant towards the premature termination of the securitization agreement with Axis Bank. It was submitted by the Ld.AR that the assessee had claimed loss on the pre-closure on securitization to an extent of Rs.8,61,13,095/-.
It was a submission that the assessee is in the business of providing housing loans. The assessee had securitized their loan portfolio with Axis Bank during the period from September, 2002 to November, 2005. It was a submission that the assessee had offered the income by way of the securitization of their loans during the AYs 2003-04 to 2006-07. It was a ITA Nos.468 & 488 to 490/Mds/2017 :- 4 -:
submission that the securitization agreement between the assessee and Axis Bank was cancelled in September, 2010 on mutually agreed basis and as per the understanding, the assessee had paid an amount of Rs.8,61,13,095/- to Axis Bank. It was a submission that the AO had disallowed the said loss on account of the cancellation of the securitization agreement on the ground that it was not explained or proved that the said amounts were already offered for taxation. Further, the AO had held that the nature of the outstanding principle could partake the character of the capital loss only and not Revenue loss. It was a submission that the Ld.CIT(A) confirmed the disallowance on the ground that no agreement with regard to the pre-closure of securitization was furnished either before the AO or before the Ld.CIT(A) and the evidence furnished by the assessee only gave the details of what happened consequent to the pre- closure without revealing any details with regard to the actual terms and conditions for pre-closure of the securitization agreement. It was a submission that the assessee having already offered the securitization income to tax in the earlier assessment years and the securitization agreement having been pre-closed by cancellation in September, 2010, the assessee was entitled to the loss as claimed.
6.1 In reply, Ld.DR vehemently supported the order of the AO and the Ld.CIT(A) on this issue. It was a submission that no evidence whatsoever had been produced before the AO or the Ld.CIT(A) nor before the Tribunal and consequently, the disallowance as made by the AO and as confirmed ITA Nos.468 & 488 to 490/Mds/2017 :- 5 -:
by the Ld.CIT(A) was liable to be upheld. It was a submission that no proof whatsoever that the amount had been offered to tax have been shown before any of the authorities nor copies of the agreements or the cancellation of the agreements been produced. It was a submission that only oral arguments have been placed without any supporting documents. In reply, Ld.AR submitted that he had no objection, if the issue is restored to the file of the AO for re-adjudication and to grant the assessee adequate opportunity to produce the evidence as called for. 6.2 We have considered the rival submissions. A perusal of the Assessment Order and also the order of the Ld.CIT(A) clearly shows that no evidence as called for by the AO to substantiate the case has been produced before the AO or before the Ld.CIT(A). Nor has it been produced even before us. Admittedly, if evidences had been produced or referred to, admittedly, natural justice would require, the issue to be restored to the file of the AO for examination of all the evidences, if the same have not been properly considered by him. However, this could be done only if such evidences are at least placed before the Tribunal along with the reasons as to why the same had not been produced before the AO in the course of the original proceedings or before the Ld.CIT(A) in the course of the appeal proceedings. Unfortunately, no evidence as called for by the AO or as has been referred to by the Ld.CIT(A) are produced by the assessee. This being so, we are unable to understand as to what purpose would be served in restoring the issue to the file of the AO as the ITA Nos.468 & 488 to 490/Mds/2017 :- 6 -:
assessee has also not given any reason as to why the evidence was not produced before the lower authorities nor such evidence has been brought to the attention of the Tribunal. In these circumstances, we are not inclined to restore to the file of the AO for re-adjudication. On merits, the assessee has produced no evidence to substantiate his case that the income in respect of the securitization of the said loans has been offered during the relevant assessment years. The assessee is also not in a position to show the agreement with the Axis Bank in respect of the pre- closure of the securitization or the mutually agreed to computation. This being so, we are of the view that the findings of the Ld.CIT(A) on this issue is on right footing and does not called for any interference. 6.3 In the result, the appeal filed by the assessee in ITA No.468/Mds/2017 stands dismissed.
7. In respect of the Revenue's appeal, the first issue raised is against the action of the Ld.CIT(A) in directing the re-computation of the disallowance u/s.14A r.w.r.8D. It was a submission that the assessee has earned dividend income of Rs.75,000/- for each of the relevant assessment years. The said dividend income has been received by the assessee from the investment made in the uncoated equity shares of Kalyan Janatha Sahakari amounting to Rs.5.00 lakhs. It was a submission that the assessee had suo motu made disallowance of 10% of the dividend income u/s.14A r.w.r.8D. However, it was a submission that while ITA Nos.468 & 488 to 490/Mds/2017 :- 7 -:
computing disallowance u/s.14A r.w.r.8D, the AO had under Rule 8D(2)(i) in relation to the direct expenditure relating to the exempt income, the AO had disallowed NIL income. Under Rule 8D(2)(ii) interest relating to the exempt income, the AO had considered the interest debited to the P&L A/c not directly related to the particular income or receipt and under Rule 8D(2)(iii) in respect of the 0.5% of the investments yielding exempted income, the AO had taken average of all the investments by the assessee. It was a submission that on appeal, the Ld.CIT(A) had held that term loans which had been taken from various banks and interest thereon could not be considered in so far as the interest have been, in fact, earned and paid out of the loans extended by the Appellant to the ultimate borrowers. It was a submission that consequently, the Ld.CIT(A) had excluded the interest amounts pertaining to the term loans for the purpose of computing the disallowance u/s.14A r.w.r.8D. It was a further submission that in respect of the Rule 8D(2)(iii), the Ld.CIT(A) had held that the investments made in the government securities had yielded taxable income and therefore they could not be considered as part of the computation under Rule 8D(2)(iii) of the Act. It was a submission that the Ld.CIT(A) had erred in giving relief to the assessee. It was a submission that the evidence produced by the assessee before the Ld.CIT(A) had not been put to the AO for his rebuttal. It was a submission that the order of the Ld.CIT(A) may be reversed.
ITA Nos.468 & 488 to 490/Mds/2017 :- 8 -:
7.1 In reply, the Ld.AR submitted that he had no objection, if the issue of the computation of the disallowance u/s.14A r.w.r.8D is restored to the file of the AO for re-adjudication.
7.2 We have considered the rival submissions. In the present appeal, the issue mainly revolves around the applicability of Rule 8D(2)(ii) and Rule 8D(2)(iii) which shows that the words are "in a case whether the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, amount computed in accordance with the following formula...." 7.3 Here, the assessee is specifically claiming that the interest amounts pertain to term loans which have been, in fact, extended to the Appellant for extending housing loans to the ultimate borrowers. This has also been verified by the Ld.CIT(A). In respect of the provisions of Rule 8D(2)(iii), the words are "a amount equal to 0.5% of the average value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee...." 7.4 The assessee has produced evidence before the Ld.CIT(A) claiming that the investment in the government securities have yielded taxable income and the same have been accepted by the Ld.CIT(A). However, as these evidences have not been verified by the AO, in the interest of natural justice, the issue of the computation of the disallowance u/s.14A ITA Nos.468 & 488 to 490/Mds/2017 :- 9 -:
r.w.r.8D is restored to the file of the AO only because the evidences have been produced before the Ld.CIT(A) and he has done the verification without granting an opportunity to the AO.
8. The second issue in the Revenue's appeal is against the action of the Ld.CIT(A) in deleting the addition being the reversal of the provisions of NPA as made by the AO. It was submitted by the Ld.DR that in the course of assessment, it was noticed that the NPAs were claimed as a provision, which was not allowable under the Act. The assessee had also not shown as to in which year the income was offered to tax also. The assessee had not identified the relatable income and the year in which it was offered.
Consequently, the AO had disallowed the same. It was a submission that on appeal, the assessee had submitted before the Ld.CIT(A) that the assessee had suo motu disallowed the provision for NPA in the year of its creation and reversed, the provision for NPA at the time of write off or recovery. It was a submission before the Ld.CIT(A) that the assessee had produced the evidences to show that the provision for NPA had been reversed back for the AYs 2009-10 & 2010-11 and the reversed amounts had been disallowed for the AYs 2011-12 & 2012-13. It was a submission that consequently the disallowance had been deleted by the Ld.CIT(A). It was a submission that the order of the Ld.CIT(A) was liable to be reversed.
ITA Nos.468 & 488 to 490/Mds/2017 :- 10 -:
8.1 In reply, the Ld.AR submitted that the issue may be restored to the file of the AO for re-verification and that the evidence produced before the Ld.CIT(A) would be produced before the AO.
8.2 We have considered the rival submissions. As it is noticed that the assessee has produced fresh evidence before the Ld.CIT(A) who has considered the same for deleting the disallowance made by the AO without granting the AO adequate opportunity to substantiate his case, the issue is restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity to produce the evidence to substantiate its case.
9. In respect of the issue of the provision for expenses which has been allowed by the Ld.CIT(A). It was submitted by the Ld.DR that in the course of the assessment, the AO had noticed that the assessee had debited the P&L A/c with a sum of Rs.41,37,475/- towards miscellaneous expenses. The assessee had submitted the details of the same. It was a submission that in the details, it was noticed that an amount of Rs.40.00 lakhs has been marked as provision for expenses which was not allowable under the Income Tax Act. Consequently, the AO had disallowed the same. On appeal, the Ld.CIT(A) had deleted the disallowance on the ground that the assessee had disallowed the said amount of Rs.40.00 lakhs suo motu u/s.40(a)(ia) of the Act at the time of filing of the return.
It was a submission that the suo motu disallowance u/s.40(a)(ia) of the ITA Nos.468 & 488 to 490/Mds/2017 :- 11 -:
Act has not been shown to the AO. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.
9.1 In reply, the Ld.AR submitted that the issue could be restored to the file of the AO for re-adjudication.
9.2 We have considered the rival submissions. As it is noticed that the Ld.CIT(A) has deleted the disallowance on the ground that the said amount of Rs.40.00 lakhs was suo motu disallowed by the assessee when filing of its return on account of the non-deduction of TDS and the evidences has not been produced before the AO, this issue to be stored to the file of the AO for re-adjudication after granting the assessee adequate opportunity of being heard.
10. The next issue in the Revenue's appeal, is against the action of the Ld.CIT(A) in deleting the disallowance made by the AO in respect of the delayed payment of employees contribution to ESI & PF. The Ld.DR submitted that in view of the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation in TCA No.437/2013, the order of the Ld.CIT(A) was liable to be reversed. 10.1 In reply, the Ld.AR submitted that the issue was squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of Industrial Security & Intelligence India Pvt. Ltd. in TCA Nos.585 & ITA Nos.468 & 488 to 490/Mds/2017 :- 12 -:
586/2015 dated 24.07.2015 wherein the issue has been held in favour of the assessee. It was a submission that the Ld.CIT(A) has followed the decision of the Hon'ble Jurisdictional High Court and consequently the same was liable to be upheld.
10.2 We have considered the rival submissions. As it is noticed that the Ld.CIT(A) has followed the decision of the Hon'ble Jurisdictional High Court in the case of Industrial Security & Intelligence India Pvt. Ltd., we find no reason to interfere in the order of the Ld.CIT(A) on this issue.
Consequently, the findings of the Ld.CIT(A) on this issue stands confirmed.
ITA No.488/Mds/2017 for the AY 2010-11:
11. In the Revenue's appeal, the only issue is in regard to the disallowance u/s.14A r.w.r.8D. As we have already restored the issue to the file of the AO for re-adjudication, the appeal of the Revenue stands partly allowed for statistical purposes. ITA No.489/Mds/2017 for the AY 2011-12:
12. The issues in this appeal are - Disallowance u/s.14A r.w.r.8D, Reversal of provision for NPA, Disallowance of provisions for expenses and Delayed payment of employee's contribution towards PF & ESI.
ITA Nos.468 & 488 to 490/Mds/2017 :- 13 -:
13. As the issues in respect of u/s.14A r.w.r.8D, reversal of the provisions for NPA and the disallowance of the provisions for expenses has been restored to the file of the AO for re-adjudication and in respect of the issue of the delayed payment of the employee's contribution to PF & ESI, we have upheld the order of the Ld.CIT(A), the appeal of the Revenue stands partly allowed for statistical purposes.
ITA No.490/Mds/2017 for the AY 2012-13:
14. The issues involved in this appeal are in respect of the disallowance u/s.14A r.w.r.8D and reversal of the provisions for NPA. Both issues are restored to the file of the AO for re-adjudication, consequently, the appeal of the Revenue is partly allowed for statistical purposes.
15. In the result, the appeal filed by the assessee in ITA No.468/Mds/2017 stands dismissed and the appeals filed by the Revenue in ITA Nos.488, 489 & 490/Mds/2017 are partly allowed for statistical purposes.
Order pronounced in the Open Court on October 10, 2017, at Chennai.
Sd/- Sd/-
(चं पज
ू ार ) (जॉज माथन)
(CHANDRA POOJARI) (GEORGE MATHAN)
लेखा सद!य/ACCOUNTANT MEMBER या यक सद!य/JUDICIAL MEMBER
ITA Nos.468 &
488 to 490/Mds/2017
:- 14 -:
चे नई/Chennai,
0दनांक/Dated: October 10, 2017.
TLN
आदे श क* ' त1ल2प अ3े2षत/Copy to:
1. अपीलाथ&/Appellant 4. आयकर आयु4त/CIT
2. '(यथ&/Respondent 5. 2वभागीय ' त न ध/DR
3. आयकर आयु4त (अपील)/CIT(A) 6. गाड फाईल/GF