Tca/713/2018 Of Commissioner Of Income Tax v. M/S. Zylog Systems Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.9.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.713 of 2018 The Commissioner of IncomeTax, Corporate Circle-3, Chennai ...Appellant 1. M/s.Zylog Systems Ltd., Chennai-34. .Vs. 2. The Official Liquidator, High Court, Madras, Corporate Bhavan, II Floor, No.29, Rajaji Salai, Chennai-1. (R2 was suo motu impleaded vide order of court dated 29.1.2020 by NKKJ & PVJ) ...Respondents APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 25.4.2018 passed by the Income TaxAppellate Tribunal, Chennai “B” Bench in I.T.A.No.2048/Chny/2017for the assessment year 2011-12. Against the appllate orderpassed by the Commissioner of Income Tax (a)-13, Chennai, dated23.06.2017 in ITA No.230/CIT(A)-13/2011-12 and against theAssessment order passed by the Deputy Commissioner of Income TaxCorporate Circle-3(2), Chennai, dated 30.04.2015 in GIR No./PANNo.AAACZ1086G. For Appellant: Mr.M.Swaminathan, SSC assisted by Mrs.V.Pushpa, SCFor Respondents : No appearance This appeal, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961 (‘the Act’ for brevity), is directedagainst the order dated 25.4.2018 passed by the Income TaxAppellate Tribunal, Bench ‘B’ Chennai (for short, the Tribunal)in I.T.A.No.2048/Chny/ 2017 for the assessment year 2011-12. 2. The above appeal has been admitted on 19.11.2018 on thefollowing substantial question of law: https://hcservices.ecourts.gov.in/hcservices/ “Whether the Tribunal was right andjustified in holding that the disallowanceunder Section 14A read with Rule 8D shouldbe restricted to the extent of exemptedincome especially when neither Section 14Anor Rule 8D provides for any suchrestriction?” 3. The assessee filed their return of income for theassessment year under consideration namely AY 2011-12 disclosinga total income of Rs.1,50,46,75,014/-. The case was selected forscrutiny, during which, the Assessing Officer found that theassessee was in receipt of dividend income of Rs.13,754/- andthat the assessee made an investment of Rs.1,55,24,901/- inshares on 31.3.2012 whereas the total investment as on 01.4.2011was Rs.1,23,54,78,573/-. 4. Not being satisfied with the claim that no expenditurewas incurred for investment during the year for earning exemptedincome, the Assessing Officer disallowed the amount ofRs.3,64,27,793/- as per Rule 8D(2)(ii) of the Income Tax Rules(for brevity, the Rules) and another amount of Rs.69,70,172/- asper Rule 8D(2)(iii) of the Rules and accordingly, the assessmentwas completed by order dated 30.4.2015 under Section 143(3) readwith Section 92CA of the Act. 5. Aggrieved by the said order dated 30.4.2015, the assesseepreferred an appeal before the Commissioner of Income Tax(Appeals)-13, Chennai-34, who partly allowed the appeal by orderdated 23.6.2017. As against the said order dated 23.6.2017, theRevenue preferred an appeal before the Tribunal and it wasdismissed by the impugned order. Challenging the same, theRevenue is before us. 6. We have elaborately heard Mr.M.Swaminathan, learnedSenior Standing Counsel assisted by Mrs.V.Pusha, learnedStanding Counsel appearing for the appellant – Revenue. Therespondents were served. However, none appears for therespondents. 7. Subsequently, it is brought to our notice by the learnedSenior Standing Counsel that the first respondent – assessee isin the process of being liquidated and the Hon'ble Mr.JusticeS.Rajeswaran, former Judge of this Court has been appointed asthe Administrator and one Mr.S.Ulaganathan, advocate isappearing on behalf of the Hon'ble Administrator. In order togive an effective disposal, the learned Official Liquidator wassuo motu impleaded as the second respondent by the earlierDivision Bench by order dated 29.1.2020, notice has been servedand his name has been printed in the cause list. 7. Subsequently, it is brought to our notice by the learnedSenior Standing Counsel that the first respondent – assessee isin the process of being liquidated and the Hon'ble Mr.JusticeS.Rajeswaran, former Judge of this Court has been appointed asthe Administrator and one Mr.S.Ulaganathan, advocate isappearing on behalf of the Hon'ble Administrator. In order togive an effective disposal, the learned Official Liquidator wassuo motu impleaded as the second respondent by the earlierDivision Bench by order dated 29.1.2020, notice has been servedand his name has been printed in the cause list. 8. As we have been informed that the Hon'ble Administratoris now looking after the affairs of the assessee company, it is https://hcservices.ecourts.gov.in/hcservices/ fit and proper that the learned Administrator is heard in thematter. We find that before the Tribunal, none appeared for theassessee. However, the Tribunal recorded that it had heard therival submissions, which would mean that both parties wereheard. However, the preamble portion of the impugned order showsthat none represented the assessee. Since the first respondent –assessee is under liquidation and the Hon'ble Administrator hasbeen appointed and he is also represented through a counsel, weare of the considered view that the Tribunal can decide thematter afresh on merits after giving an opportunity to theHon'ble Administrator represented by his counsel to put forththeir submissions. For such a reason alone, we are inclined tointerfere with the impugned order. 9. Accordingly, the above tax case appeal is allowed, theimpugned order is set aside and the matter is remanded to theTribunal. The Tribunal is directed to issue notice to the saidMr.S.Ulaganathan, learned counsel, office of the OfficialLiquidator, II Floor, Corporate Bhavan, Rajaji Salai, Chennai-1,representing the Hon'ble Administrator for M/s.Zylog SystemsLimited and after hearing the Revenue as well as the Hon'bleAdministrator, the Tribunal is directed to pass fresh orders onmerits and in accordance with law. Consequently, the substantialquestion of law framed is left open. Sd/- Assistant Registrar //True copy// Sub Assistant Registrar To1. The Income Tax Appellate Tribunal, Chennai “B” Bench, Chennai. 2. The Commissioner of Income Tax (A)-13, Chennai. 3. The Deputy Commissioner of Income Tax Corporate Circle-3(2), Chennai. eu(co) rr ii (02/11/2020) TCA.No.713 of 2018