The Principal Commissioner Of Income Tax, Central 2, Chennai v. M/S.snj Distillers Pvt. Ltd.,Chennai-35

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.264 of 2018 & CMP.No.4802 of 2018 The Principal Commissioner of Income Tax, Central 2, Chennai....Appellant Vs M/s.SNJ Distillers Pvt. Ltd.,Chennai-35...Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 31.5.2017 passed by the Income TaxAppellate Tribunal, Madras 'B' Bench, Chennai made inI.T.A.No.1044/Mds/2016 for the assessment year 2013-14 againstthe order dated 07/01/16 and made in ITA.No.301/15-16 on thefile of the Commissioner of Income Tax Appeals, Chennai andagainst the order dated 30/03/15 and made in PAN. onthe file of the Income Tax Department, Central Circle 2 (1),Chennai - 34. This appeal, filed by the Revenue under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity), is directedagainst the order dated 31.5.2017 made in I.T.A.No.1044/Mds/2016on the file of the Income Tax Appellate Tribunal, Chennai, 'B'Bench ('the Tribunal' for brevity) for the assessment year 2013-14. 2. The Revenue filed this appeal by raising the followingsubstantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ “i. Whether the Tribunal is correct inlaw in dismissing the appeal of the Revenueon the ground that the disallowance madeunder Section 14A read with Rule 8D is notattracted when there is no exempt income,when the fact remains that the CBDT, videcircular No.5 of 2014 dated 11.2.2014, inexercise of its power under Section 119 ofthe Act, has clarified that Rule 8D readwith Section 14A of the Act provides fordisallowance of such expenditure even beforea tax payer has not earned any exemptincome? ii. Whether the Appellate Tribunal iscorrect in law in dismissing the appeal ofthe Revenue on the ground that theinvestment made by the assessee in groupsubsidiary company is on account ofcommercialexpediencyandexpenditureattributable to such investment does notattract the provisions of Section 14A of theIT Act read with Rule 8D wheras Rule 8D ascontained in the Income Tax Rules, 1962 doesnot provide for any such exclusion for thepurpose of computing disallowance underSection 14A of the Income Tax Act, 1961? and iii. Whether the Appellate Tribunal iscorrect in law in dismissing the appeal ofthe Revenue on the bogus purchase of giftitems on the ground that the same was madeby the Assessing Officer without independentverification without giving credence to thefindings of the Commercial Tax Department,which is another Government Tax EnforcementAuthority, based on which, the said additionwas made by the Assessing Officer ?” 3. We have elaborately heard Mr.T.R.Senthilkumar, learnedSenior Standing Counsel assisted by Mrs.K.G.Usharani, learnedJunior Standing Counsel appearing for the appellant – Revenueand Mr.R. Vijayaraghavan, learned counsel appearing for therespondent – assessee. 4. With regard to substantial question of law Nos.1 and 2,the Revenue has contended that the Tribunal erred in dismissingthe appeal filed by the Revenue on the ground that thedisallowance made under Section 14A of the Act read with Rule 8D https://hcservices.ecourts.gov.in/hcservices/ of the Income Tax Rules, 1962 was not attracted when there is noexempt income. 5. This issue is no longer res integra and has been decidedin favour of the assessee in the decision of the Division Benchof this Court in case of CIT Vs. Chettinad Logistics Pvt. Ltd.[reported in (2017) 248 Taxmann 0055] wherein the relevantportions read thus: “9. In our opinion Section 14A of theAct, can only be triggered, if, the assesseeseeks to square off expenditure againstincome which does not form part of the totalincome under the Act. https://hcservices.ecourts.gov.in/hcservices/ of the Income Tax Rules, 1962 was not attracted when there is noexempt income. 5. This issue is no longer res integra and has been decidedin favour of the assessee in the decision of the Division Benchof this Court in case of CIT Vs. Chettinad Logistics Pvt. Ltd.[reported in (2017) 248 Taxmann 0055] wherein the relevantportions read thus: “9. In our opinion Section 14A of theAct, can only be triggered, if, the assesseeseeks to square off expenditure againstincome which does not form part of the totalincome under the Act. 9.1. The legislature, in order to doaway with the pernicious practice adopted bythe Assessees', to claim expenditure,against income exempt from tax, introducedthe said provision. 10. In the instant case, there is nodispute that no income i.e., dividend, whichdid not form part of total income of theAssessee was earned in the relevantassessment year. 10.1. Therefore, to our minds, theaddition made by the Assessing Officer byrelying upon Section 14 A of the Act, wascompletely contrary to the provisions of thesaid Section. ...... 15. However, it is, our view, asindicated above, independent of thereasoning given in M/s.Redington (India)Limited case that Rule 8D cannot be read ina manner, which takes it beyond the scopeand content of the main provision, which is,Section 14 A of the Act. 15.1. Therefore, as adverted to above,Rule 8D, cannot come to the rescue of theRevenue.” 6. Thus, by applying the law laid down in the saiddecision, substantial question of law Nos.1 and 2 are answeredagainst the Revenue. With regard to substantial question of law https://hcservices.ecourts.gov.in/hcservices/ No.3, on perusal of the impugned order passed by the Tribunal,we find that the entire matter is factual and no question of lawmuch less substantial question of law arises for consideration. 7. Accordingly, the above tax case appeal is dismissed.Substantial question of law Nos.1 and 2 are answered against theRevenue. We hold that no substantial question of law arises forconsideration as raised by the Revenue in so far as the thirdsubstantial question of law is concerned. No costs.Consequently, the connected CMP is also dismissed. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar RS To 1.The Income Tax Appellate Tribunal, 'B' Bench, Chennai.2.The Principal Commissioner of Income Tax, Central 2, Chennai.3.The Commissioner of Income Tax Appeals,Chennai. 4.The Income Tax Department,Central Circle 2(II),Chennai - 34. +1cc to M/s.Subbaraya Aiyar Padmanathan, Advocate, SR.NO.41057+1cc to Mr.T.R. Senthil Kumar, Advocate, SR.NO.41056 TCA.No.264 of 2018&CMP.No.4802 of 2018 VD(CO)KKV/31/12/2020