Madras High Court
The Commissioner Of Income Tax vs M/S.Tamil Nadu Industrial ... on 4 July, 2022
T.C.A.Nos.164 and 165 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED 04.07.2022
CORAM
THE HON'BLE Mr. JUSTICE R. MAHADEVAN
AND
THE HON'BLE Mr. JUSTICE MOHAMMED SHAFFIQ
Tax Case Appeal Nos.164 and 165 of 2022
The Commissioner of Income Tax
Corporate Circle-3
Chennai, .. Appellant in both T.C.A.s
Vs.
M/s.Tamil Nadu Industrial Development
Corporation Ltd.
No.19A, Rukmini Lakshmipathy Road
Egmore, Chennai 600 008.
PAN : AAACT3409P .. Respondent in both T.C.A.s
Tax Case Appeals filed under Section 260-A of the Income Tax Act,
1961 against the order dated 19.08.2021 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, Chennai, in I.T.A.No.915/Chny/2018 and
I.T.A.No.854/Chny/2018, respectively.
For Appellant : Ms.V.Pushpa
For Respondent : Mr.R.Vijayaraghavan
For M/s.Subbaraya Aiyar
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.164 and 165 of 2022
COMMON JUDGMENT
(Judgment of this Court was made by R. MAHADEVAN, J.)
These two tax case appeals are filed by the appellant/Revenue, calling in
question the correctness of the common order dated 19.08.2021 passed by the
Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai, in the respective
I.T.A.Nos.915/Chny/ 2018 and 854/Chny/2018, relating to the assessment year
2013-14, by raising the following substantial questions of law :
T.C.A.No.164 of 2022 :
(i) Whether on the facts and circumstances of the case, the Tribunal
was right in remitting the matter back to Assessing Officer with direction to
admit the fresh claim of the assessee, whereas the Hon'ble Supreme Court
held in the case of Goetze (India) Ltd. vs. CIT that only appellate authority
has jurisdiction to adjudicate the fresh claim by the assessee ?
T.C.A.No.165 of 2022 :
(i) Whether on the facts and circumstances of the case, the Tribunal
was right in holding that the strategic investments of the assessee capable of
fetching exempt income do not attract disallowance u/s 14A, even though the
Section 14A read with Rule 8D does not differentiate the investments as
strategic or non-strategic ?
(ii) Whether on the facts and circumstances of the case, the Tribunal
was right in observing that the Assessing Officer has not satisfied the
mandatory requirement of Section 14A?
2. Heard the learned counsel appearing for both sides, who submitted that
the substantial questions of law raised in T.C.A.No.165 of 2022, are covered in
favour of the appellant, as per the judgment dated 07.07.2020 rendered by a Co-
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T.C.A.Nos.164 and 165 of 2022
ordinate Bench of this Court in T.C.A.Nos.509 & 510 of 2018 in respect of the
assessee's own case. The relevant passage of the said judgment can profitably
be extracted below:
"16. Further, the satisfaction of the Assessing Officer has to be arrived
at, having regard to the accounts of the assessee. It was further held that sub
section 2 of Section 14A does not enable the Assessing Officer to apply the
method prescribed by the rules straightaway without considering whether the
claim made by the assessee in respect to the expenditure incurred in relation
to the income which does not form part of the total income, is correct.
Therefore, at the first instance, the Assessing Officer has to determine
whether the claim of the assessee in that regard is correct and that the
determination must be made having regard to the accounts of the assessee.
17. The satisfaction of the Assessing Officer must be arrived at on an
objective basis and it is only when the Assessing Officer is not satisfied with
the claim of the assessee, that the legislature directs him to follow the method
that may be prescribed.
18. Therefore, what we are required to see for the assessment year
2011-12, is whether such procedure was followed by the Assessing Officer.
The Assessing Officer on considering the return of the income failed to note
that the assessee has received income by way of dividend from Indian
companies amounting to Rs.24,83,08,996, which the assessee claimed to be
exempted from tax.
19. Notice dated 27.08.2013 was issued to the assessee calling upon
them to file the working sheet of the working done by them under Rule 8D for
disallowance of the said sum under Section 14A. The assessee in response to
such notice, submitted a letter dated 03.10.2013 giving the working under
Rule 8D. The Assessing Officer after going through the submission made by
the petitioner pointed out that the assessee had computed the disallowance of
dividend by invoking the provisions of Rule 8D, but while doing so, ignored
sub rule iii of the said rule. It appears that this was pointed out to the
assessee. However, the assessee though filed a response on 09.01.2014, the
Assessing Officer states that the assessee did not address the issue of
computation of the third limb of Rule 8D.
20. The finding recorded by the Assessing Officer is sufficient and a
clear indication of his compliance of the procedure under Section 14A(2), the
Assessing Officer at the first instance has considered whether the claim of the
assessee is correct and thereafter only has proceeded to determine the amount
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T.C.A.Nos.164 and 165 of 2022
by adopting the procedure under Rule 8D. Therefore, so far as the assessment
for the year 2011-12, is concerned, it cannot be stated to be the case where
there is a failure to follow the procedure under Section 14A (2) of the Act.
Having held so, we need to point out that the tribunal committed an error in
not only allowing the appeal of the assessee on the said ground, but also
directed the Assessing Officer to accept the figure mentioned by the assessee
in their returns viz., Rs.2,64,14,439/- . If the tribunal was of the view that this
figure is liable to be accepted, then the correctness of the petition should have
been directed to be decided by the Assessing Officer for which purpose the
matter should have been remanded. This in our view is one more error
committed by the tribunal.
21. So far as the order passed for the assessment year 2012-13 is
concerned, we were also of the same view as expressed by
Mr.R.Vijayaraghavan, learned Senior Counsel for the respondent/assessee
and wondered as to why the revenue has preferred the appeal. However, on a
closer reading of paragraph No.7.3 of the impugned order, we find that
though the tribunal directs the assessee to work out the expenditure
component towards administrative and managerial aspect so that the same
shall be disallowed in the computation of income, but has not issued any
specific directions to the Assessing Officer as to what has to be done after the
assessee files the working sheet. Therefore, to that extent the tribunal has
committed an error. Hence, we are of the considered view that the matter
should be remanded for fresh consideration of the Assessing Officer in
accordance with law.
22. For the above reasons, the Tax Case Appeals are allowed and the
Substantial Questions of Law are answered in favour of the revenue and the
matters for both the Assessment years viz., 2011-12 and 2012-13, are remitted
to the Assessing Officer for fresh consideration in accordance with law. No
Costs."
3. In the light of the aforesaid judgment, the substantial questions of law
involved in T.C.A.No.165 of 2022 are answered in favour of the Revenue and
against the assessee. In view of the same, the order passed by the Income Tax
Appellate Tribunal in I.T.A.No.854 of 2018 is set aside and the matter is
remitted to the Assessing Officer for fresh consideration in accordance with
law. Accordingly, TCA No.165 of 2022 stands allowed.
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T.C.A.Nos.164 and 165 of 2022
4. As regards the issue raised in T.C.A.No.164 of 2022, this court is of
the view that no further orders need to be passed herein. Hence, this appeal
stands disposed of accordingly. No costs.
[R.M.D, J.] [M.S.Q, J.]
04.07.2022
Internet : Yes
Index : Yes / No
rns
To
1.The Income-Tax Officer,
Non Corporate Ward-19 (4),
Chennai.
2. The Commissioner of Income Tax
Corporate Circle-3
Chennai,
3. The Income Tax Appellate Tribunal,
Madras 'A' Bench, Chennai
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.164 and 165 of 2022
R. MAHADEVAN, J.
AND
MOHAMMED SHAFFIQ, J.
rns
Tax Case Appeal Nos.164 and 165 of 2022
04.07.2022
https://www.mhc.tn.gov.in/judis
