M/S.spero Foundation Pvt. Ltd., Chennai-18 v. The Deputy Commissioner Of Income Tax, Corporate Ward 6(2), Chennai-34

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMand THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN M/s.Spero Foundation Pvt.Ltd., Chennai-18...Appellant in both appealsVs The Deputy Commissioner of Income Tax, Corporate Ward 6(2),Chennai-34...Respondent in both appeals APPEALS under Section 260A of the Income Tax Act, 1961against the common order dated 04.9.2017 passed by the IncomeTax Appellate Tribunal, Madras 'C' Bench, Chennai made inI.T.A.Nos.1189 and 1572/Mds/2016 for the assessment year 2011-12against the order of the Commissioner of Income Tax (Appeals)-15, Chennai -34, order dated 08/03/2016 made in ITA.No./14/CIT(A)-15/14-15 and against the Order of the Deputy Commissioner ofIncome Tax, Company Circle VI (4), Chennai, order dated28/03/2014 made in PAN.No. for the assessment Year2010-2011. For Appellant: Ms.Sriranjani for Mr.G.Baskar For Respondent: Mr.J.Narayanasamy, SSC These appeals have been filed by the assessee under Section260A of the Income Tax Act, 1961 ('the Act' for brevity)challenging the common order dated 04.9.2017 made inI.T.A.Nos.1189 and 1572/ Mds/2016 on the file of the Income TaxAppellate Tribunal, Chennai, 'B' Bench ('the Tribunal' forbrevity) for the assessment year 2011-12. 2. The assessee has filed these appeals by raising thefollowing substantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ “TCA.No.306 of 2018 : i. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was perverse in upholdingthat disallowance of expenditure asrelatabletorentalincomewithoutappreciating that the expenditure has nonexus to the rental income, but relates tothe newly started service apartment businessduring the year, income on which wasdeclared under the head 'business income'? ii. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in notholding that expenditure incurred for thepurpose of service apartment business,income from which was assessed as businessincome should be allowed under Section 37 ofthe Income Tax Act, 1961 ? and iii. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law inupholding the disallowance of expendituremade on proportionate basis to the rentalincome even though the appellant had serviceapartment business, income from which wasassessed as business income ? TCA.No.307 of 2018 : i. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal is right in law inholding the claim of expenditure by theappellant is subject to disallowance underthe provisions of Section 14A of the IncomeTax Act, 1961 read with Rule 8D of theIncome Tax Rules, 1962 ? ii. Whether the disallowance under theprovisions of Section 14A of the Income TaxAct, 1961 read with Rule 8D of the IncomeTax Rules, 1962 can exceed the exempt incomeearned during the year ? iii. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal is right in law inupholding the disallowance under Section 14Aof the Income Tax Act, 1961 since thedisallowance of 96% of the expendituretowards the personnel and administrative asrelatable to income from house property isupheld, the disallowance once again under Section 14A would amount to doubledisallowance i.e once under Section 24 ofthe Act and again under Section 14A of theIncome Tax Act, 1961 read with Rule 8D ofthe Income Tax Rules, 1962?iv. Whether the provisions of Section14A of the Income Tax Act, 1961 read withRule 8D of the Income Tax Rules, 1962 wouldbe attracted even if there is no expenditureincurred in connection with exempt incomeearned from the investments made out of ownsource of funds?” Section 14A would amount to doubledisallowance i.e once under Section 24 ofthe Act and again under Section 14A of theIncome Tax Act, 1961 read with Rule 8D ofthe Income Tax Rules, 1962?iv. Whether the provisions of Section14A of the Income Tax Act, 1961 read withRule 8D of the Income Tax Rules, 1962 wouldbe attracted even if there is no expenditureincurred in connection with exempt incomeearned from the investments made out of ownsource of funds?” 3. We have heard Ms.Sriranjani, learned counsel appearingfor the appellant/assessee and Mr.J.Narayanasamy, learned SeniorStanding Counsel appearing for the respondent/Revenue. 4. The learned counsel on behalf of the appellant/assesseesubmitsthattheassesseealreadyfiledthedeclaration/undertaking under the Vivad Se Vishwas Scheme on06.12.2020 and is awaiting orders to be passed in Form No.3. 5. In the light of the subsequent event, the CompetentAuthority shall process the applications/declarations inaccordance with the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3of 2020) and pass appropriate orders as expeditiously aspossible. The assessee is given liberty to restore these appealsin the event the ultimate decision to be taken on thedeclarations filed by the assessee under Section 4 of the saidAct is not in favour of the assessee. If such a prayer is made,the Registry shall entertain the prayer without insisting uponany applications to be filed for condonation of delay inrestoration of the appeals and on such request made by theassessee by filing miscellaneous petitions for restoration, theRegistry shall place such petitions before the appropriateDivision Bench for orders. 6. The tax case appeals stand disposed of with theaforementioned liberty. Consequently, the substantial questionsof law raised are left open. No costs. Consequently, theconnected CMP is closed. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 'C' Bench, Chennai. 2.The Deputy Commissioner of Income Tax, Corporate Ward 6(2), Chennai-34. Corporate Ward 6(2), Chennai-34. 3.The Commissioner of Income Tax (Appeals)-15, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. 4.The Deputy Commissioner of Income Tax, Company Circle VI-4, Chennai. Company Circle VI-4, Chennai. RS TCA.Nos.306 & 307 of 2018and CMP.No.6114 of 2018 CP(CO)GN(21/12/2020)