Income Tax Appellate Tribunal - Chennai
Rattha Holding Company Pvt Ltd., ... vs Dcit, Chennai on 24 May, 2019
आयकर अपील य अ धकरण, 'डी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं ी इंटूर रामा राव, लेखा सद य केसम&
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
आयकर अपील सं./ITA Nos.1014, 1015 & 1016/Chny/2017
नधा)रण वष) /Assessment Years: 2009-10, 2012-13 & 2013-14
M/s Rattha Holding Company
Pvt. Ltd., The Deputy Commissioner of
th
6 floor, Tower C, Tek Meadows, v. Income Tax,
No.51, Rajiv Gandhi Salai, Corporate Circle - 5(1),
Sholinganallur, Chennai - 600 119. Chennai - 600 034.
PAN : AACCR 8160 K
(अपीलाथ-/Appellant) (./यथ-/Respondent)
अपीलाथ- क0 ओर से/Appellant by : Sh. B. Ramakrishnan, FCA
./यथ- क0 ओर से/Respondent by : Dr. M. Srinivasa Rao, CIT &
Ms. S. Vijayaprabha, JCIT
सन
ु वाई क0 तार ख/Date of Hearing : 12.03.2019
घोषणा क0 तार ख/Date of Pronouncement : 24.05.2019
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All the three appeals of the assessee are directed against the common order passed by the Commissioner of Income Tax (Appeals) -3, Chennai, dated 28.02.2017 and pertain to assessment years 2009-10, 2012-13 and 2013-14. Since common issues arise 2 I.T.A. Nos.1014 to 1016/Chny/17 for consideration in all these appeals, we heard these appeals together and disposing the same by this common order.
2. The first issue arises for consideration is disallowance made by the Assessing Officer under Section 14A of the Income-tax Act, 1961 (in short 'the Act').
3. Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that for all the three assessment years, the assessee has not earned any dividend income which is exempted from taxation. Placing reliance on the judgment of Madras High Court in CIT v. Chettinad Logistics (P.) Ltd. (2017) 80 taxmann.com 221, the Ld. representative submitted that when the assessee has not earned any exempted income, there cannot be any disallowance under Section 14A of the Act. The Ld. representative has also placed his reliance on the decision of Apex Court in CIT v. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 and submitted that the Special Leave Petition filed by the Revenue was dismissed by the Apex Court.
4. We heard Dr. M. Srinivasa Rao, the Ld. Departmental Representative also. Since, admittedly, there was no dividend 3 I.T.A. Nos.1014 to 1016/Chny/17 income earned by the assessee during the years under consideration, this Tribunal is of the considered opinion that there cannot be any disallowance under Section 14A of the Act. The CIT(Appeals) by placing his reliance on the decision of this Tribunal, dismissed the appeal of the assessee. However, now the Ld. representative for the assessee has brought to the notice of this Bench the judgment of jurisdictional High Court in Chettinad Logistics (P.) Ltd. (supra). In view of this judgment of Madras High Court which is binding on this Tribunal, there cannot be any disallowance when there was no exempted income. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, orders of both the authorities below are set aside and the disallowance made by the Assessing Officer under Section 14A of the Act is deleted.
5. For the assessment year 2013-14, the assessee has raised a ground with regard to advances written off to the extent of ₹7,86,11,656/-.
6. Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that the assessee is in the business of civil construction. During the course of business activity, according to 4 I.T.A. Nos.1014 to 1016/Chny/17 the Ld. representative, the assessee engaged the services of two private companies, namely, M/s Classic Builders (Madras) Pvt. Ltd. and M/s Niwas Foundations Pvt. Ltd. for getting approval of building permit / plan from CMDA and also for getting clearances required for construction of multistoried complex from various other authorities. The assessee, according to the Ld. representative, in fact, deducted tax at the time of payment. Subsequently, there was dispute between the parties and the parties, who received the money, could not obtain the clearances as promised. After settling the dispute, according to the Ld. representative, the assessee paid the amount as advance over and above the amount credited into parties' account and the same was written off as bad debt. On a query from the Bench, for getting clearance and approval of building permit / plan, what is required is the engagement of services of civil engineer or architect or structural engineer, what is requirement for the assessee to pay such a huge money to other private companies? The Ld. representative clarified that the assessee in the course of business activity, thought to pay the money to these companies since they are well versed in getting approval and other clearances required for multistoried building. Therefore, according 5 I.T.A. Nos.1014 to 1016/Chny/17 to the Ld. representative, the CIT(Appeals) is not justified in confirming the disallowance made by the Assessing Officer.
7. On the contrary, Dr. M. Srinivasa Rao, the Ld. Departmental Representative, submitted that the payment was made in the course of creation / construction of capital asset. Therefore, according to the Ld. D.R., it is a capital expenditure. Hence, it cannot be allowed as revenue expenditure. Moreover, according to the Ld. D.R., it is not known why the payment was made to M/s Classic Builders (Madras) Pvt. Ltd. and M/s Niwas Foundations Pvt. Ltd.? Admittedly, the payment was made during the year under consideration. Therefore, according to the Ld. D.R., it cannot be allowed as revenue expenditure during the year under consideration. For the purpose of claiming a debt as bad debt, according to the Ld. D.R., the assessee has to establish the conditions provided in Section 36(2) of the Act. Hence, according to the Ld. D.R., it is not a debt at all. Moreover, according to the Ld. D.R., the above said payment does not reflect as income in the Profit & Loss account for the year under consideration. According to the Ld. D.R., it is not a business outstanding which can become bad. The unilateral written off the advances does not qualify itself 6 I.T.A. Nos.1014 to 1016/Chny/17 for claiming as bad debt under Section 36(2) of the Act. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the disallowance.
8. We have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that the payment was made to two private companies for the purpose of getting clearance from various authorities and also approval for construction of building. For the purpose of construction of a building, the assessee has to submit before the concerned authorities a building plan for approval and pay the development charges and other charges that may be required under the statutory provision. It is not in dispute that the assessee is engaged in the business of construction of multistoried complexes. Therefore, the assessee has to prepare the necessary building plan, consult the structural engineers, architect or expert in civil construction. Therefore, it is obvious that the assessee engaged M/s Classic Builders (Madras) Pvt. Ltd. and M/s Niwas Foundations Pvt. Ltd. and made the payment.
9. The Revenue is not disputing the payment made by the assessee. The main contention of the Revenue is that the condition 7 I.T.A. Nos.1014 to 1016/Chny/17 under Section 36(2) of the Act was not complied with. When the payment was made during the course of business for preparing the necessary plan and getting approval / sanction, the payment made by the assessee is in the revenue field. The payment was made in the course of regular business activity. Hence, it has to be allowed under Section 37 of the Act.
10. We have carefully gone through the provisions of Section 36(2) of the Act. For the purpose of claiming debt as bad debt, the assessee has to establish that the debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt was written off or of an earlier previous year or the money was lent in the ordinary course of money lending business. In this case, the CIT(Appeals) found that the payment was not routed through Profit & Loss account. The CIT(Appeals) also found that the amount shall be reflected as income in the relevant year. Section 36(2) of the Act clearly says that the amount shall be taken into account in computing income of the relevant year or any of the earlier year. It is not the case of the Revenue that the amount did not form part of the income of the assessee in the earlier year. Even otherwise, the 8 I.T.A. Nos.1014 to 1016/Chny/17 advance payment made by the assessee could not be recovered. Therefore, it is trading loss. Hence, both the authorities below are not justified in disallowing the claim of the assessee. Accordingly, this Tribunal is unable to uphold the orders of both the authorities below. Hence, the orders of both the authorities below are set aside and the addition made is deleted.
11. The assessee has also raised grounds with regard to reopening of assessment for the assessment year 2009-10 and also investment made in the group concerns for strategically purposes.
12. These grounds were not argued by the Ld. representative for the assessee even though it was specifically brought to his notice in the course of hearing. We have also carefully gone through the reasons recorded for reopening the assessment and also the fact relating to investment in the group concerns. After going through the material, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
13. In the result, all the three appeals filed by the assessee are partly allowed.
9 I.T.A. Nos.1014 to 1016/Chny/17
Order pronounced in the court on 24th May, 2019 at Chennai.
sd/- sd/-
(इंटूर रामा राव) (एन.आर.एस. गणेशन)
(Inturi Rama Rao) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
चे नई/Chennai,
th
7दनांक/Dated, the 24 May, 2019.
Kri.
आदे श क0 . त8ल9प अ:े9षत/Copy to:
1. अपीलाथ-/Appellant
2. ./यथ-/Respondent
3. आयकर आय; ु त (अपील)/CIT(A)-3, Chennai-34
4. Principal CIT- 5, Chennai
5. 9वभागीय . त न ध/DR
6. गाड) फाईल/GF.