M/S.madras Engineering Industries P. Ltd., Chennai-28 v. The Income Tax Officer, Corporate Ward 4(2), Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.3.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MS.JUSTICE R.N.MANJULA Tax Case Appeal No.636 of 2019 M/s.Madras Engineering IndustriesP. Ltd., Chennai-28...AppellantVs The Income Tax Officer, Corporate Ward 4(2), Chennai...Respondent Prayer: Tax CaseAppeal under Section 260A of the Income TaxAct, 1961 against the order dated 16.11.2018 passed by theIncome Tax Appellate Tribunal, Madras 'C' Bench, Chennai made inI.T.A.No.2320/Chny/2017 for the assessment year 2014-15preferred against the order of the Office of the Commissioner ofIncome Tax (Appeals)-8, Room No. 222, Aayakar Bhavan, MainBuilding, II Floor, No.121, Mahathma Gandhi Road, Nungambakkam,Chennai 600 034 made in I.T.A.No.298/2016-2017, Date of order:18.08.2017, PAN: and year of Assessment 2014-2015. For Appellant : Mr.A.S.SriramanJudgment was delivered by T.S.SIVAGNANAM,J This appeal has been filed by the assessee under Section260A of the Income Tax Act, 1961 ('the Act' for brevity)challengingtheorderdated16.11.2018madeinI.T.A.No.2320/Chny/2017 on the file of the Income Tax AppellateTribunal, Chennai 'C' Bench ('the Tribunal' for brevity) for theassessment year 2014-15. 2. The assessee has filed this appeal by raising thefollowing substantial questions of law : “i. Whether the Income Tax AppellateTribunal is correct in law in sustaining thedisallowance of rent payments made to aDirector based on a valid and enforceableagreement for rent of a house property ownedby the said Director, given the fact thatthe appellant company was bound to provide a https://hcservices.ecourts.gov.in/hcservices/ rent free accommodation to such Directorunder the contract of employment which wasacted upon between the parties by taking thehouse property of the employee on lease,which action was also permitted in law byrecording perverse findings both on factsand in law ? ii. Whether the Income Tax AppellateTribunal is correct in law in accepting thestandtakenbytheOriginalAuthority/Assessing Officer to disregard thetransaction entered by the appellant companyunder Section 40A(2)(a) of the Act withregard to payment of rent to a Director inrespect of premises leased from suchDirector and treating such payment as only apayment of remuneration in another form eventhough the payment of rent is supported byvalid and enforceable agreement? iii. Whether the Income Tax AppellateTribunal is correct in law in sustaining thedisallowance of payment of rent to theDirector even though neither the OriginalAuthority/ Assessing Officer nor theAppellate Authority have not questioned thefair market value of the rent paid to theproperty leased to the appellant company?iv. Whether the Income Tax AppellateTribunal is correct in law in sustaining thedisallowance made by the Original Authority/Assessing Officer with regard to rent paidto Mr.Sriram Sivaram without considering thefact that such payments on similar facts andcircumstances have been allowed by theOriginal Authority/Assessing Officer in theearlier assessment years during theassessments made u/s 143(3) of the Act andthereby not following the principle ofconsistency? andv. Whether the Income Tax AppellateTribunal is correct in law in sustaining theaforesaid disallowance made by the OriginalAuthority/Assessing Officer under Section40A(2)(a) of the Act even though there wasno loss of revenue given the fact that therecipients had included the said sum in histaxable income and was taxed at the maximummarginal rate?” 3. We have heard Mr.A.S.Sriraman, learned counsel for theappellant/assessee. 4. The learned counsel for the assessee submits that theassessee already filed the declaration/undertaking under theVivad Se Vishwas Scheme and orders were passed on 09.12.2020 inForm No.3. 3. We have heard Mr.A.S.Sriraman, learned counsel for theappellant/assessee. 4. The learned counsel for the assessee submits that theassessee already filed the declaration/undertaking under theVivad Se Vishwas Scheme and orders were passed on 09.12.2020 inForm No.3. 5. In the light of the subsequent event, the assessee isgiven liberty to restore this appeal in the event the ultimatedecision taken on the declaration filed by the assessee underSection 4 of the said Act is not in favour of the assessee. Ifsuch a prayer is made, the Registry shall entertain the prayerwithout insisting upon any application to be filed forcondonation of delay in restoration of the appeal and on suchrequest made by the assessee by filing a miscellaneous petitionfor restoration, the Registry shall place such petition beforethe appropriate Division Bench for orders. 6. The tax case appeal stands disposed of with theaforementioned liberty. Consequently, the substantial questionsof law raised are left open. s/d- Assistant Registrar True Copy Sub-Assistant Registrar To 1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Income Tax Officer, Corporate Ward 4(2), Chennai-34. 3.The Commissioner of Income Tax (Appeals)-8Room No. 222, Aayakar BhavanMain Building, II FloorNo.121 Mahathma Gandhi RoadNungambakkam, Chennai 600 034. Copy toThe Assistant RegistrarAppeal Examiner Main SectionHigh Court, Madras 104. +1 CC to Mr.S. Sridhar, Advocate sr 20975. 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