Commissioner Of Income Tax, Chennai v. M/S.sundaram Clayton Ltd., Jayalakshmi Estates

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.08.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP Tax Case Appeal No.836 of 2015 Commissioner of Income Tax,Chennai. ...AppellantVs M/s.Sundaram Clayton Ltd.,Jayalakshmi Estates,No.29, Haddows Road,Nungambakkam, Chennai – 600 006.[PAN: ]...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 22.01.2015 made in ITA.No.2611/Mds/2014 on thefile of the Income Tax Appellate Tribunal, 'C' Bench, Chennaifor the assessment year 2007-2008. Against the order of the Commissioner of Income Tax AppealsVI, Chennai-34 dated 30.07.2014 in I.T.A. No. 1739/2013-2014 A-VI in the assessment year 2007-2008. Against the order of the Assistant Commissioner of IncomeTax, Company Circle VI(4) Chennai dated 27.01.2014 PANAAACS4920J in the Assessment year 2007-2008. For Appellant : Mr.J.NarayansasamyFor Respondent: Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan JUDGMENT (Delivered by T.S.Sivagnanam,J) The appeal has been filed by the revenue under Section 260Aof the Income Tax Act ['the Act' for brevity] against the orderpassed by the Income Tax Appellate Tribunal [hereinafterreferred to as "the Tribunal"], 'C' Bench, Chennai inI.T.A.No.2611/Mds/2014 dated 22.01.2015 for the assessment year2007-2008. 2.The appeal was admitted on 28.09.2015 to decide thefollowing substantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ “(i) Whether on the facts and in thecircumstances of the case, the Tribunal was right indirecting the Assessing Officer to accept thedisallowance arrived by the assessee since thedisallowance of 2% of the dividend income asexpenditure was approved by the jurisdictionalcourt? and (ii) Whether on the facts and in thecircumstances of the case, the Tribunal was right inholding that the computation of expenditure cannotbe made by applying Rule 8D for the purpose ofarriving at the eligible exemption of dividendincome by invoking the provisions of Section 14A forthe present assessment year?” 3.We have elaborately heard Mr.J.Narayanasamy, learnedsenior standing counsel appearing for the appellant/revenue andMr.R.Vijayaraghavan, learned counsel appearing for therespondent/assessee. (ii) Whether on the facts and in thecircumstances of the case, the Tribunal was right inholding that the computation of expenditure cannotbe made by applying Rule 8D for the purpose ofarriving at the eligible exemption of dividendincome by invoking the provisions of Section 14A forthe present assessment year?” 3.We have elaborately heard Mr.J.Narayanasamy, learnedsenior standing counsel appearing for the appellant/revenue andMr.R.Vijayaraghavan, learned counsel appearing for therespondent/assessee. 4.The question involved in the instant case is with regardto the disallowance to be made under Section 14A of the Act.The present round of litigation is the second round as theearlier round of litigation which travelled up to the Tribunal,the Tribunal allowed the appeal and remanded the matter forfresh consideration. Pursuant to which, an order was passed bythe Assessing Officer fixing the disallowance under Section 14Aat Rs.3,96,16,351/-. Aggrieved by the same, the assesseepreffered an appeal before the Commissioner of Income Tax[Appeals]-VI [CIT(A)], Chennai, who by order dated 30.07.2014allowed the appeal filed by the assessee on this issue byholding that the Assessing Officer while making the disallowanceunder Section 14A of the Act has omitted to reduce thedisallowance under Section 14A of the Act already made as perthe earlier assessment order. In view of the same, theAssessing Officer was directed to re-compute the correctdisallowance. So far as the quantum of disallowance isconcerned, the CIT(A) fixed at Rs.40,53,203/- as againstRs.3,96,16,351/- adopted by the Assessing Officer. The reasonshave been given by the CIT(A) for arriving at such a conclusionwhich we find to be cogent and after taking note of all thefactual issues. The revenue challenged the said order beforethe Tribunal and the Tribunal took note of the decision in thecase of M/s.Simpson & Co. Ltd., vs. DCIT [T.C.A.No.2621 of 2006dated 15.10.2012] and restricted the disallowance atRs.33,56,354/- which was disallowed by the assessee himself.The revenue is before us challenging the correctness of the saidorder. 5.With regard to the percentage of disallowance which canbe fixed prior to the amendment, was considered in severaldecisions. One such decision is in the case of EID Parry vs.The Assistant Commissioner of Income Tax, Chennai [T.C.A.No.2511of 2006 dated 30.10.2012] which was followed by the Hon'bleDivision Bench in the case of the Commissioner of Income Tax vs.M/s.Tube Investments of India Ltd., [T.C.A.No.524 of 2007 dated17.12.2014]. The operative portion of the judgment reads asfollows: “8.It is brought to the notice of this Courtthat the 2[nd] question of law has also been decidedagainst the Revenue by this Court in the decisionreported in EID Parry – vs- The Asst. Commissionerof Income Tax, Chennai [T.C.(A).No.2511/06 dated30.12.2012]. In the said judgment, this Courtconsidered two questions of law as under: (i) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in upholding theestimate of expenses at 2% deemed to have beenincurred in respect of dividend income, when nosuch expenses were incurred? (ii) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in upholding theaddition of the estimate expenses at the rateof 2% on dividend income while computing bookprofits, when no such expenses were incurred? and answered the same as under: “2.As far as first and second questionsof law are concerned, learned counsel for theassessee fairly submits that the same iscovered against the assessee by reason ofdecision of this Court renderd in assessee'sown case in T.C.No.2287 of 2006 dated08.08.2012. Accordingly, the above twoquestions of law are answered against theassessee.” (ii) Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in upholding theaddition of the estimate expenses at the rateof 2% on dividend income while computing bookprofits, when no such expenses were incurred? and answered the same as under: “2.As far as first and second questionsof law are concerned, learned counsel for theassessee fairly submits that the same iscovered against the assessee by reason ofdecision of this Court renderd in assessee'sown case in T.C.No.2287 of 2006 dated08.08.2012. Accordingly, the above twoquestions of law are answered against theassessee.” The said judgment squarely applies to the facts ofthe present case and, the 2[nd] question of law isanswered accordingly.” 6.Thus, we find that the Tribunal had followed the decisionof the jurisdictional High Court and fixed the disallowance atRs.33,56,354/- which was already disallowed by the assessee.Therefore, we find that there is no question of law, much lessthe substantial question of law arisen for consideration in thisappeal. Accordingly, the tax case appeal is dismissed. Nocosts. s/d- Assistant Registrar True Copy Sub-Assistant Registrar cseTo1.The Assistant Commissioner Income Tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar'C' Bench, Chennai-90. 2.The Commissioner of Income Tax Appeals-VINo. 121 Mahathma Gandhi RoadChennai 34.3.The Assistant Commissioner of Income TaxCompany Circle VI(4)Nungambakkam , Chennai 34.+1 CC to M/s. Subbaraya Aiyar, Advocate sr 39623. TCA.No.836 of 2015 MG(CO)SP(02/09/2021)