Income Tax Appellate Tribunal - Hyderabad
Dy. Commissioner Of Income Tax , ... vs Transport Corporation Of India ... on 15 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE V. DURGA RAO, JUDICIAL MEMBER
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos. 974 & 976/Hyd/2018
(A.Y.: 2012-13) & (A.Y.: 2013-14)
DCIT, Vs. Transport Corporation of
Circle-2(2), India Limited,
Hyderabad. Secunderabad.
PAN: AAACT 7966 R
(Appellant) (Respondent)
ITA No. 975/Hyd/2018 (A.Y.: 2013-14)
Transport Corporation of DCIT,
India Limited, Circle-2(2),
Secunderabad. Hyderabad.
PAN: AAACT 7966 R
Assessee by: Shri Y. Ratnakar
Revenue by: Sri Y.V.S.T. Sai, CIT-DR
Date of hearing: 06/03/2019
Date of pronouncement: 15/03/2019
ORDER
PER V. DURGA RAO, J.M.:
All the three captioned appeals are filed against the different orders of the CIT(A), Guntur-1 commonly dated 13/03/2018 for the assessment years 2012 -13 and 2013-14. ITA Nos. 974 and 976/Hyd/2018 are filed by the Revenue and ITA No.975/Hyd/2018 is filed the assessee for the A.Y. 2013-14. 2
2. At the time of hearing, in so far as the Revenue's appeals are concerned (ITA Nos. 974 and 976/Hyd/2018), Learned Departmental Representative submitted that the tax effect in these appeals is less than Rs. 20 lakhs. The CBDT vide its Circular No.3/2018 dated 11.07.2018 has directed the Revenue to withdraw the appeals before the Tribunal where the tax effect is less than Rs. 20 lakhs. Learned Departmental Representative accordingly sought permission of the Bench to withdraw the appeal of the Revenue.
3. Considering the low tax effect involved in the case, the Revenue's appeal is dismissed as withdrawn with a liberty to file a Miscellaneous Application for recall of the order if the case falls under any of the exceptions set out in the said Board's Circular (supra).
4. In the result, both the Revenue's appals (ITA Nos. 974 and 976/Hyd/2018) are dismissed.
5. As regards the ITA No.975/Hyd/2018 is concerned, the assessee has raised the following grounds of appeal:-
"1. That the Ld. CIT(A) erred in directing the Assessing Off icer to recalculate the disallowance under rule 8D(ii) 3 instead of giving full relief as the appellant's own funds are f ar in excess of the amount of investments made.
2. That there is no direct or even remote connection between the investment in shares and borrowed funds. The borrowings have been used for business purposes and not for making investments in shares. The investments in subsidiaries have also been made for business purposes and not for earning any dividend income or other exempt income.
3. That the Ld. CIT(A) erred in not appreciating where both interest f ree funds and interest bearing funds are available, the presumption should be that the tax exempt investments were made out of interest free funds.
4. That no expenditure has been incurred in relation to earning of dividend income or other income which are exempt from tax.
5. On the f acts and in the circumstances of the case and in law no disallowance could be made in under Rule 8D(2)(ii).
6. That on the f acts and in the circumstances the Ld. CIT(A) erred in directing the Assessing Off icer to apportion the remuneration of the Executive Directors and Non - Executive Directors are in charge of specif ic business divisions and none of the executive directors are in charge of the shipping division and accordingly no part of the remuneration of executive directors can be apportioned to the shipping division.
7. That the Ld. CIT(A) erred in not appr eciating at the entire management expenses relating to the seaways divisions have been charged in the accounts of seaways division."
6. At the outset, Learned Counsel for the Assessee submitted that Grounds No.6 and 7 are not pressed and therefore, the same are dismissed as not pressed.
7. Grounds No. 1 to 5 relate to disallowance u/s 14A read with Rule 8D(ii) of Rs. 39,15,722/-. Brief facts in this regard are that the assessee is engaged in the business of transportation of goods, logistics and generation of power. The assessee filed its return of income for the A.Y. 2013-14 declaring total income of Rs. 63,27,55,000/-. The assessee's case was 4 selected for scrutiny under CASS. During the scrutiny proceedings, it was noticed that the assessee made investment of Rs. 33.22 Crs which are exe mpt from taxation. Therefore, the assessee was asked as to why disallowance u/s 14A of the Act cannot be made on the above investments. In reply the assessee submitted before the A.O. that no part of borrowings have been utilised for the purpose of acquisition of any investments in shares and that the aggregate of assessee's share capital and Reserves and surplus amount to Rs. 404.90 Crs as against investment in shares amounts to Rs. 33.22 Crs as on 31/3/2013, which are far less than our own funds. Ther eore, the assessee has not utilised any borrowed funds for acquisition of investment in shares and thus the provisions of section 14A has no application. Assessee relied on the decision of the Bombay High Court in the case of CIT vs. Reliance Utilities an d Power Ltd 313 ITR 340 in support of its contention. Assessee also relied upon the decision of the Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd [2010] 328 ITR 81 (Bom.); the decision of the ITAT, Delhi Bench in the case of ACIT vs. E.I. Dupont India Ltd [2008] 298 ITR (AT) 296 (Delhi) and the decision of the ITAT, Kolkata Bench in the case of M/s. Bhoruka Investment Ltd vs. DCIT in ITA Nos. 129/Kol/2016 and others dated 29/01/2017. Assessee also submitted that many of the 5 investments in shares are in demat form and dividend thereon is electronically credited to the assessee's bank account directly and therefore, no expenditure was required to be incurred for receipt of dividend income. Not satisfied with the explanation given by the assessee, A.O. came to the conclusion that when there is a direct proximate connection between the investments and borrowed funds, disallowance is warranted and accordingly he computed the disallowance u/s 14A to the extent of Rs. 39,15,722/- and brought it to tax.
8. Aggrieved, assessee carried the matter in appeal before the CIT(A), who confirmed the order of the A.O. Aggrieved, assessee filed the present appeal before us by raising the above mentioned grounds of appeal.
9. Learned Counsel for the Assessee submitted that the assessee is having sufficient own funds for investment in shares and therefore, it can be easily presumed that the assessee must have utilised the own funds and not the borrowed funds and therefore, no disallowance can be made u/s 14A.
10. On the other hand, Learned Departmental Representative submit that the assessee is not able to workout what are the own funds which are available to carry out the business and 6 what are the surplus funds available to invest on shares and therefore, no presumption can be drawn that the funds invested by the assessee are the own funds.
11. We have heard both the parties, perused the material available on record and gone through all the above cases and find that they are not applicable to the present case. In the instant case, the assessee could not establish that what are the surplus funds available with them. That apart, the assessee has borrowed the funds and the assessee is not able to establish that the funds invested by the assessee are interest free funds. The assessee has not filed the cash flow statement to show that what are the funds available with the assessee to carry -out the business and what are the funds available for investment. When the Bench specifically asked the Learned Counsel for the Assessee about the cash flow statement, he submitted that the same is not available. Under these circumstances of the case, no presumption can be drawn in favour of the assessee. We therefore, find no infirmity in the order of the CIT(A) and confirm the same. Accordingly, the Grounds of appeal raised by the assessee are dismissed.
12. In the result, the appeal filed by the assessee is dismissed. 7
13. Conclusively, ITA Nos. 974 and 976/Hyd/2018 filed by the Revenue and ITA No. 976/Hyd/2018 filed by the assessee are dismissed.
Pronounced in the open Court on 15 th March, 2019.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (V. DURGA RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 15 th March, 2019
OKK
Copy to:-
1) M/s. Transport Corporation of India Limited, 1 -8-271 to 273,
Ashoka Bhupal Chambers, S P Road, Secunderabad -500003.
2) DCIT, Circle-2(2), R.No. 513, 5 t h Floor, Signature Towers, Kondapur, Hydeabad.
3) The CIT(A), Guntur-1. 4) The Pr. CIT, Guntur-1. 5) The DR, ITAT, Hyderabad 6) Guard File