Income Tax Appellate Tribunal - Chennai
Tvs Logistics Services Limited, ... vs Dcit Corporate Circle 2, Madurai on 9 August, 2021
आयकर अपील य अ धकरण,'ए' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL , 'A' BENCH, CHENNAI
ी महावीर संह, उपा य एवं ी जी. मंजुनाथ, लेखा सद%य के सम
BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT
AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER
आयकरअपीलसं./I.T. A.No.2906/Chny/2018
( नधारणवष / Ass essm ent Year: 2013-1 4)
M/s. TVS Logistics Services Ltd. Vs The Deputy Commissioner of
10, Jawahar Road, Chokkikulam, Income Tax,
Madurai-625 002. Corporate Circle-2
Madurai.
PAN: AACCT 1412E
(अपीलाथ /Appellant) ( यथ /Respondent)
&
आयकरअपीलसं./I.T. A.No.1927/Chny/2018
( नधारणवष / Ass essm ent Year: 2013-1 4)
The Assistant Commissioner of Income Vs M/s. TVS Logistics Services
Tax, Ltd.
Corporate Circle-2 10,Jawahar Road,
Madurai. Chokkikulam,
Madurai-625 002.
PAN: AACCT 1412E
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओरसे/ Assessee by : Mr. R.Viswanathan, Advocate
यथ क ओरसे/Revenue by : Mr.G.Johnson, Addl.CIT
सुनवाईक तार ख/Da t e of h ear in g : 06.07.2021
घोषणाक तार ख /D at e of Pr on o unc e m en t : 09.08.2021
आदे श / O R D E R
PER G.MANJUNATHA, AM:
These cross appeals filed by the assessee as well as Revenue are directed against order of the learned CIT(A)-1, Madurai dated 28.03.2018 and pertains to assessment year 2013-14. Since, facts are identical and issues are common, for the sake of convenience, appeals filed by the assessee as well 2 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 as Revenue were heard together and are being disposed off by this consolidated order.
2. The assessee has raised the following grounds of appeal:-
"1.The order of the Hon'ble Commissioner of Income Tax (Appeal) is against facts and circumstances of the case.
Both the Learned Assessing Officer and the CIT (A) has failed to appreciate the various submissions made in the current perspective.
1. Disallowance under section 14A r.w.Rule 8D - Rs.1,39,49,985/-:
The Commissioner of Income Tax has not justified in disallowing a sum of Rs.1,39,49,985/-. The Appellant submits that Interest expenditure of Rs.1,46,68,335 is incurred Business purpose. Further the Appellant submit that no fresh investment has been made during the current Financial Year and the Investments were made long and therefore the disallowance is not warranted.
Based on the above submission the Appellant prays that appeal be allowed."
3. At the time of hearing, learned AR for the assessee submitted that there is a delay of 135 days in filing appeal for which necessary petition for condonation of delay along with affidavit has been filed explaining the reasons for the delay in filing appeal. The delay in filing the appeal is due to mistake of the Accountant, who was handling papers, but there is no willful 3 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 negligence or intention on the part of the assessee not to file appeal within the time allowed under the Act. Therefore, considering the fact delay may be condoned in the interest of advancement of substantial justice.
4. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeal filed by the assessee may be dismissed as not maintainable.
5. Having heard both sides and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeal is condoned and appeal filed by the assessee is admitted for adjudication.
4ITA No.2906/Chny/2018& ITA No.1927/Chny/2018
6. Brief facts of the case are that the assessee company is engaged in providing logistic service filed its return of income for the assessment year 2013-14 on 29.11.2013 declaring total income of Rs. 1,75,71,40,470/-. The case was taken up for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has earned huge exempt income, however, did not make suo-moto disallowance of any expenditure in relation to said exempt income and hence, called upon the assessee to explain as to why disallowances contemplated under section 14A of the Act shall not be computed by invoking Rule 8D of the Income Tax Rules, 1962. In response, the assessee vide letter dated 22.03.2016 has submitted that it has not incurred any expenses directly relatable to exempt income and further, during the year the company has made investments only in foreign subsidiaries, the income from which is taxable under income-tax law and hence, question of disallowance of exempt income does not arise. The Assessing Officer, after considering relevant submissions of the assessee and also taken note of provisions of section 14A observed that claim of the assessee that it has 5 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 not incurred any expenditure in relation to exempt income is not supported by documentary evidence as mandated under the provisions of section 14A(2)/( 3) of the Act, and hence, there is no merit in the arguments of the assessee that it has not incurred any expenditure, Therefore he has computed disallowance contemplated under provisions u/s.14A by invoking Rule 8D and determined total disallowance of Rs.194,67,563/-.
7. Being aggrieved by the assessment order, the assessee preferred an appeal before learned CIT(A). Before the learned CIT(A), the assessee has reiterated its arguments made before the Assessing Officer and submitted that the Assessing Officer has erred in computing disallowance of expenditure including interest u/s.14A of the Act, by taking into account, interest on loans which has been paid for specific purposes contrary to settled principles of law that only interest paid on loans which has been used for acquiring tax free income can be considered for disallowance u/s.14A of the Act.
6ITA No.2906/Chny/2018& ITA No.1927/Chny/2018
8. The learned CIT(A), after considering relevant submissions of the assessee and also by following decision of the Hon'ble Jurisdictional High Court of Madras in TCA No.2520 of 2016 dated 23.12.2016 in the case of M/s. Redington India Ltd. Vs. Addl.CIT (2016) 97 CCH 219 (Mad) has restricted disallowance computed by the Assessing Officer u/s.14A r.w. Rule 8D to the extent of exempt income of Rs.1,39,49,985/-. Being aggrieved by the learned CIT(A) order, the assessee as well as Revenue are in appeal before us.
9. The learned AR for the assessee, at the time of hearing, submitted that appeal filed by the Revenue does not maintainable, because tax effect involved in said appeal is below the prescribed monetary limit fixed for filing appeal before the Tribunal, therefore, the same may be dismissed as not maintainable. As regards assessee's appeal, the AR for the assessee submitted that the learned CIT(A) has erred in restricting disallowance computed by the Assessing Officer to the extent of exempt income, without appreciating fact that out of total dividend income earned for the year, dividend income from foreign subsidiaries also included which is taxable under 7 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 Indian Income-tax law and hence, while computing disallowance, investments made on overseas subsidiaries needs to be excluded. The AR submitted that the Assessing Officer while computing disallowance of interest expenses under Rule 8D(2)(ii) has considered interest debited into profit & loss account which is not related to exempt income and hence, interest paid on TDS, interest on term loans and interest on other indirect tax payment and processing fee need to be excluded. In this regard, he has filed working of computation of disallowance of expenses u/s.14A of the Act .
10. The learned DR, on the other hand, fairly agreed that tax effect involved in appeal filed the Revenue is below threshold limit of filing appeal before the Tribunal and hence, same maybe dismissed as not maintainable. As regards assessee appeal, the learned DR submitted that the learned CIT(A) has rightly restricted disallowances computed u/s.14A of the Act to the extent of exempt income by following decision of the Hon'ble Jurisdictional High Court of Madras in TCA No.520 of 2016 dated 23.12.2016 in the case of M/s. Redington India Ltd. Vs. Addl. CIT, therefore, there is no merit in the arguments 8 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 of the assessee that Assessing Officer has wrongly computed interest expenses and other expenses by including investments in overseas subsidiaries. However, he fairly agreed that issue may be set aside to the file of Assessing Officer to re-verify claim of the assessee in light of computation filed by the assessee.
11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. It is stated before us that the tax effect in ITA No.1927/Chny/2018 filed by Revenue is less than Rs. 50 lakhs and therefore, the Circular No. 17 of 2019 dated 08.08.2019 issued by the Central Board of Direct Taxes (CBDT) in exercise of its power vested under section 268A(1) of the Income Tax Act, 1961 comes into play wherein, the monetary limit for filing the appeal by the Revenue before the ITAT and various High Courts as well as Apex Court are revised with an object of the reducing the tax litigation. In the said circular, it is stated that in cases where the tax effect in the appeal to be filed before the Appellate Tribunal does not exceed Rs. 50 lakhs appeals should not be filed. Thus, taking note of CBDT Circular No. 17 9 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 of 2019 dated 08.08.2019 and considering the fact that the tax effect in the instant appeal is less than Rs. 50 lakhs, the present appeal deserves to be dismissed as not pressed / not maintainable. However, we make it clear that the issues raised in the instant appeal is left open to be examined in the appropriate proceedings, if arises, in future. At the same time, we also make it clear that if the appeal fall in any of the exceptions referred to in the above said CBDT Circular, the Revenue is at liberty to move an application for recalling the order, if so advised. Accordingly, in the light of CBDT circular No. 17 of 2019 dated 08.08.2019, the appeal stands dismissed.
12. There is no dispute with regard to fact that the assessee has earned exempt income, consequently provisions of section 14A of the Act is applicable. In fact, it is not a case of the assessee that provisions of section 14A of the Act has no application. The grievance of the assessee is that disallowance computed by the Assessing Officer under section 14A of the Act is excessive, when it compared to dividend income earned 10 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 for the year. The assessee has submitted that while computing disallowance the Assessing Officer has considered interest expenses, which is not relatable to exempt income on the ground that those interest expenses are paid on loans which are borrowed for specific purposes. The assessee further claimed that while computing other expenses, the Assessing Officer has considered investments in overseas subsidiaries, income from which is taxable under the Act. The assessee further claimed that it is well principles of law that only those investments which yielded exempt income during the relevant assessment year needs to be considered for disallowance of expenses u/s.14A of the Act.
13. We have gone through arguments of the assessee in light of working of disallowances u/s.14A and find that the assessee has paid interest on certain loans which are borrowed for specific purposes. Therefore, if the assessee is able to prove utilization of loans for specific purposes, then interest relatable to said loans cannot be included for computation of disallowances under Rule 8D(2)(ii) of Income Tax Rules, 1962. Similarly, the assessee claimed that while computing 11 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 disallowance under Rule 8D(2)(iii), the Assessing Officer has included investments made in overseas subsidiaries and income from which is taxable under Indian laws. We find that it is a well settled principles of law that dividend earned from overseas investments is taxable in Indian law, therefore, for the purpose of computing other expenses under Rule 8D(2)(iii), those investments need to be excluded. Similarly, it is well settled principles of law by the decision of ITAT Special Bench in the case of ACIT Vs. Vireet Investments Pvt .Ltd. (165 ITD
27) (SB) that only those investments which yielded exempt income for the year needs to be considered for computation of disallowance of other expenses. The assessee has filed working explaining computation of disallowance u/s.14A r.w. Rule 8D of the Income Tax Rules, 1962. The said computation was not available to the Assessing Officer at the time of assessment proceedings. Therefore, we are of the considered view that the issue needs to go back to the file of the Assessing Officer for re-consideration in light of revised working filed by the assessee. Hence, we set aside the appeal to the file of Assessing Officer and direct him to recompute disallowance of 12 ITA No.2906/Chny/2018& ITA No.1927/Chny/2018 expenses relatable to exempt income u/s.14A of the Act in accordance with our directions given herein above.
14. In the result, appeal filed by the assessee is treated as allowed for statistical purposes and appeal filed by the Revenue is dismissed as not maintainable.
Order pronounced in the open court on 9th August, 2021 Sd/- Sd/-
(महावीर संह) (जी. मंजुनाथ)
(Mahavir Singh) (G. Manjunatha )
उपा य / Vice-President लेखा सद%य / Accountant Member
चे'नई/Chennai,
(दनांक/Dated 9th August, 2021
DS
आदे श क त*ल+प अ,े+षत/Copy to:
1. Appellant 2. Respondent 3. आयकर आयु-त (अपील)/CIT(A)
4. आयकर आयु-त/CIT 5. +वभागीय त न1ध/DR 6. गाड फाईल/GF.