Madras High Court
Principal Commissioner Of Income vs M/S.Tamil Nadu State Transport on 11 January, 2021
TCA.No.31 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 11.1.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Tax Case Appeal No.31 of 2021
Principal Commissioner of Income
Tax-I, Coimbatore ...Appellant
Vs
M/s.Tamil Nadu State Transport
Corporation (Coimbatore Division)
Ltd., Coimbatore-43 ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against
the order dated 19.7.2019 passed by the Income Tax Appellate
Tribunal, Madras 'B' Bench, Chennai made in I.T.A.No.2213/Chny/2017
for the assessment year 2010-11.
For Appellant: Mr.T.R.Senthilkumar, SSC
For Respondent: Mr.R.Vijayaraghavan for
M/s.Subbaraya Aiyer Padmanabhan
Judgment was delivered by T.S.SIVAGNANAM,J
This appeal has been filed by the assessee under Section 260A of
the Income Tax Act, 1961 ('the Act' for brevity) challenging the order
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TCA.No.31 of 2021
dated 19.7.2019 made in I.T.A.No.2213/Chny/2017 on the file of the
Income Tax Appellate Tribunal, Chennai, 'B' Bench ('the Tribunal' for
brevity) for the assessment year 2010-11.
2. The Revenue has filed this appeal by raising the following
substantial questions of law:
“i. Whether, on the facts and
circumstances of the case, the Appellate
Tribunal was right in law in deleting the
addition made on account of disallowance
under Section 14A of the Income Tax Act ?
ii. Whether the Tribunal is right in law in
overlooking the observation made by the
Hon'ble Supreme Court in the case of Maxopp
Investment Ltd Vs. CIT [reported in (2018) 91
Taxmann.com 154] wherein it was held that
'the purpose behind Section 14A of the Act by
not permitting deduction of the expenditure
incurred in relation to income, which does not
form part of total income, is to ensure that the
assessee does not get double benefit and that
once a particular income itself is not to be
included in the total income and is exempted
from tax, there is no reasonable basis for
giving benefit of deduction of the expenditure
incurred in earning such an income' ? And
iii. Whether the expenditure under
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TCA.No.31 of 2021
Section 14A of the Income Tax Act in respect
of investment in shares can be claimed against
the taxable income on the ground that no
exempt income received from the investment
during the financial year?”
3. We have heard Mr.T.R.Senthilkumar, learned Senior Standing
Counsel appearing for the appellant/Revenue and Mr.R.Vijayaraghavan,
learned counsel appearing on behalf of the respondent/assessee.
4. It is not disputed by the Revenue that an identical issue was
considered by this Court in the decision in the case of CIT Vs.
Celebrity Fashion Ltd. [reported in (2020) 119 Taxmann.com
426], to which, one of us (TSSJ) was a party, wherein it was held
that in terms of Section 14A of the Act, only expenditure, which was
proved to be incurred in relation to earning of tax free income, could
be disallowed and such provision could not be extended to disallow
expenditure, which was assumed to have been incurred for earning tax
free income. It was further held that to apply provisions of Section 14A
of the Act, the Assessing Officer should have recorded a finding as to
how Sub-Section (1) of Section 14A of the Act would stand attracted
and in absence of any such finding, the disallowance made was not
justifiable.
5. The relevant portions in the said decision read as follows :
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“24. We had an occasion to consider a
similar question in the case of CIT, Corporate
Circle-3, Chennai v. Visual Graphics Computing
Services India Pvt. Ltd. [TCA.No.414 of 2018
dated 19-8-2020]. In the said appeal, question
of law No.5, which was framed for
consideration, was as to whether the Tribunal
was right in holding that the provisions of
Section 14A of the Act read with Rule 8D of the
said Rules will have no applicability if there is
no exempt income earned or received during
the previous year though the disallowance is
linked to expenditure incurred on investment
fetching exempt income. The said case was
decided in favour of the assessee and against
the Revenue and in doing so, we have followed
the decision of the Hon'ble Division Bench of
this Court in the case of CIT v. Chettinad
Logistics Pvt. Ltd. [reported in (2017) 80
Taxmann.com 221]. This decision would come
to the aid and assistance of the assessee.
..........
28. In fact, an identical argument was
raised for consideration before the Hon'ble
Division Bench of this Court in the case of
Chettinad Logistics Pvt. Ltd., and such a
contention was rejected by rendering the
following findings :
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TCA.No.31 of 2021
'13. Mr.Senthil Kumar, seeks to
distinguish the judgment in Redington (India)
Ltd. case (supra) based on the fact that Rule
8D had not kicked-in by AY 2007-08, which
was the AY being considered in the said case.
14. According to us, this was not the
argument, put forth, before the Division
Bench. As a matter of fact, the Revenue relied
heavily on Rule 8D.
14.1 Mr.Ravikumar, who appeared for
the Revenue, in that matter and who is
present in this Court, informs us that he had in
fact argued that the Rule was clarifactory in
nature and would apply retrospectively, and
that, the Division Bench, therefore, discussed
the impact of Rule 8D of the Rules.
15. However, it is, our view, as indicated
above, independent of the reasoning given in
Redington (India) Ltd. case (supra) that Rule
8D cannot be read in a manner, which takes it
beyond the scope and 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 the
Revenue.
15.2 In any event, the Tribunal, via, the
impugned judgment has remitted the matter to
the Assessing Officer.
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TCA.No.31 of 2021
15.3 Therefore, for the foregoing
reasons, we are of the view, that no
interference is called for qua the impugned
judgment."
As against the decision of this Court in
the case of Chettinad Logistics Pvt. Ltd., the
Revenue preferred appeals before the Hon'ble
Supreme Court and the special leave petitions
were dismissed on the ground of delay as well
as merits in the decision reported in (2018) 95
Taxmann.com 250.'
6. In the instant case also, the facts are identically cogent and
there is no opinion recorded by the Assessing Officer as to how Sub-
Section (1) of Section 14A of the Act would stand attracted.
7. Thus, by following the said decision, the above tax case
appeal is dismissed and the substantial questions of law raised are
answered against the Revenue. No costs.
11.1.2021
To
The Income Tax Appellate Tribunal, 'B' Bench, Chennai.
RS
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TCA.No.31 of 2021
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
RS
TCA.No.31 of 2021
11.1.2021
https://www.mhc.tn.gov.in/judis/
