The Commissioner of Income-tax, Corporate Circle-3, Chennai v. Thiru Arooran Sugar Ltd
[Citation -2020-LL-0804-17]

Citation 2020-LL-0804-17
Appellant Name The Commissioner of Income-tax, Corporate Circle-3, Chennai
Respondent Name Thiru Arooran Sugar Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 04/08/2020
Assessment Year 2012-13
Judgment View Judgment
Keyword Tags non-interest bearing funds • earning exempt income • interest incurred • dividend income • exempted income • own fund • surplus • interest-free fund
Bot Summary: Though the Revenue has raised several contentions, the substantial portion of the contentions both advanced before us as well as raised in the memorandum of grounds of appeal is with regard to the order of remand passed by the Tribunal, which is a conditional remand and not an open remand. The relevant portion of the impugned order of the Tribunal namely paragraph 11 reads as follows : In view of the above judgments, the Assessing Officer has to consider the assessee s own fund i.e capital and reserves as available for investment, which yields exempted income and thereafter he shall apply the formula in Rule 8D and also exclude investments in subsidiaries as held by the above order of Coordinate Bench. 289 of 2018 and should not have qualified the remand, which was the decision taken in the case of Beach Miners Co. Pvt. Ltd. Vs. ACIT ITA.No. Per contra, Mr.R.Vijayaraghavan, learned counsel appearing for the respondent assessee has relied upon the decision of the Delhi High Court in the case of Joint Investments Ltd. Vs. CIT reported in 372 ITR 0694; another decision of the Delhi High Court in the case of PCIT Vs. Moderate Leasing and Capital Services Pvt. Ltd. reported in 2018-TIOL-2459-HC-Del-IT; and the order of the Hon ble Supreme Court in the case of PCIT-6 Vs. Moderate Leasing and Capital Services Pvt. Ltd. reported in 2018-TIOL-431-SC-IT wherein the appeal filed by the Revenue against M/s.Moderate Leasing and Capital Services Private Limited was dismissed. The Tribunal, having chosen to remand the matter to the Assessing Officer for a fresh consideration, could have avoided qualifying the remand especially when the questions of law are being raised by both the Revenue as well as the assessee. We are inclined to interfere with that portion of the order passed by the Tribunal and remand the matter for a fresh consideration to the Assessing Officer to enable him/her to consider the entire matter afresh without, in any manner, curtailing exercise of his/her power as an Assessing Officer. In the light of the above discussions, the tax case appeal is allowed, the findings/observations made by the Tribunal in paragraph 11 of the impugned order are set aside and the order of remand is confirmed.


TCA.No.289 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 04.8.2020 CORAM HONOURABLE MR. JUSTICE T.S.SIVAGNANAM AND HONOURABLE MRS. JUSTICE V.BHAVANI SUBBAROYAN TAX CASE APPEAL NO.289 OF 2018 (heard through video conferencing) Commissioner of Income Tax, Corporate Circle-3, Chennai ...Appellant Vs M/s.Thiru Arooran Sugar Ltd., Chennai-34. ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 27.9.2017 made in ITA.No.673/Mds/2017 on file of Income Tax Appellate Tribunal, Chennai C Bench for assessment year 2012-13. For Appellant : Mrs.V.Pushpa, SC For Respondent : Mr.Vijayaraghavan for 1/9 http://www.judis.nic.in TCA.No.289 of 2018 Mr.Subbaraya Aiyer Padmanabhan Judgment was delivered by T.S.SIVAGNANAM,J This appeal by Revenue under Section 260A of Income Tax Act, 1961 (for short, Act) is directed against order dated 27.9.2017 made in ITA.No.673/Mds/2017 on file of Income Tax Appellate Tribunal, Chennai C Bench (for brevity, Tribunal) for assessment year 2012-13. 2. appeal has been admitted on 10.6.2019 on following substantial questions of law : (i) Whether Tribunal was right in holding that investment made in sister concerns by assessee are not liable for disallowance under Section 14A read with Rule 8D when provisions of said section does not provide for any such exception? and (ii) Whether Tribunal was right and justified in remitting back issue of disallowance under Section 14A to Assessing Officer by directing him to exclude own funds in form of reserve and surplus when assessee was maintaining mixed bag of funds and failed to substance that such investment in assets yielding exempt income are out of interest free fund? 2/9 http://www.judis.nic.in TCA.No.289 of 2018 3. When matter was listed before us earlier, it was pointed out that respondent assessee is under liquidation and Insolvency Resolution Professional (IRP) has been appointed by concerned National Company Law Tribunal. We were also informed that one Mr.R.Raghavendar, IRP is representing respondent company. Therefore, we directed learned Standing Counsel appearing for Revenue to take private notice by e-mail to said Mr.R.Raghavendar, IRP about pendency of this appeal. After notice was served on said Insolvency Resolution Professional, he had given instructions to Mr.R.Vijayaraghavan, learned counsel to appear for respondent assessee. 4. We have heard Mrs.V.Pushpa, learned Standing Counsel appearing for Revenue and Mr.R.Vijayaraghavan, learned counsel appearing on behalf of M/s.Subbaraya Aiyer Padmanabhan, learned counsel on record for respondent assessee. 5. Though Revenue has raised several contentions, substantial portion of contentions both advanced before us as well as raised in memorandum of grounds of appeal is with regard to order of remand passed by Tribunal, which is conditional remand and not open remand. Revenue is not very averse to order of remand, but is concerned about observations made by 3/9 http://www.judis.nic.in TCA.No.289 of 2018 Tribunal restricting power of Assessing Officer as to what has to be done during de novo consideration. 6. relevant portion of impugned order of Tribunal namely paragraph 11 reads as follows : In view of above judgments, Assessing Officer has to consider assessee s own fund i.e capital and reserves as available for investment, which yields exempted income and thereafter he shall apply formula in Rule 8D and also exclude investments in subsidiaries as held by above order of Coordinate Bench. With this observation, we remit issue to file of Assessing Officer for fresh consideration. Hence, this ground is allowed for statistical purposes. 7. learned Standing Counsel appearing for Revenue would rely upon decision of Hon ble Supreme Court in case of Maxopp Investment Ltd. Vs. CIT, New Delhi [reported in (2018) 91 Taxmann.com 154] wherein Court held that only expenses proportionate to earning exempt income could be disallowed under Section 14A of Act and that Rule 8D of Income Tax Rules, 1962 is prospective in nature and could not have been made applicable in 4/9 http://www.judis.nic.in TCA.No.289 of 2018 respect of assessment years prior to 2007 when this Rule was inserted. 8. Reliance is also placed on decision rendered by us in case of CIT Vs. M/s.Tamil Nadu Industrial Development Corporation Ltd. [TCA.Nos.509 and 510 of 2018 dated 07.7.2020] and decision of Division Bench of this Court, to which, one of us (TSSJ) was party, in case of Roca Bathroom Products Private Ltd. Vs. PCIT [reported in (2019) 101 Taxmann.com 395] wherein it has been held that where Assessing Officer made observations under Section 14A of Act in respect of dividend income earned by assessee from mutual fund investments, in view of plea raised by assessee that it had utilised only non-interest bearing funds in making investment in mutual funds and interest incurred by assessee was specifically towards acquisition of shares in 'G' Ltd. which company subsequently stood amalgamated with assessee, impugned disallowance was to be deleted and matter was to be remanded back to Assessing Officer for disposal afresh. 9. above decisions were pressed into service by learned Standing Counsel for assessee to state that if Tribunal had chosen to remand matter, it should have made open remand 5/9 http://www.judis.nic.in TCA.No.289 of 2018 and should not have qualified remand, which, in fact, was decision taken in case of Beach Miners Co. Pvt. Ltd. Vs. ACIT [ITA.No.2110/Mds/2014 dated 06.8.2015]. 10. Per contra, Mr.R.Vijayaraghavan, learned counsel appearing for respondent assessee has relied upon (i) decision of Delhi High Court in case of Joint Investments Ltd. Vs. CIT [reported in (2015) 372 ITR 0694]; (ii) another decision of Delhi High Court in case of PCIT Vs. Moderate Leasing and Capital Services Pvt. Ltd. [reported in 2018-TIOL-2459-HC-Del-IT]; and (iii) order of Hon ble Supreme Court in case of PCIT-6 Vs. Moderate Leasing and Capital Services Pvt. Ltd. [reported in 2018-TIOL-431-SC-IT] wherein appeal filed by Revenue against M/s.Moderate Leasing and Capital Services Private Limited was dismissed. 11. learned counsel appearing for respondent assessee has also placed reliance on (i) decision of Delhi High Court in case of M/s.ACB India Limited 6/9 http://www.judis.nic.in TCA.No.289 of 2018 Vs. ACIT [reported in (2015) 374 ITR 108]; (ii) decision of Bombay High Court in case of CIT Vs. Reliance Utilities & Power Ltd. [reported in (2009) 313 ITR 340]; and (iii) judgment of this Court, to which, one of us (TSSJ) was party, in case of CIT Vs. Tidel Park Ltd. [TCA.Nos.732 and 733 of 2018 dated 07.7.2020]. 12. We have perused impugned order passed by Tribunal and more particularly paragraph 11, which we have extracted above. Tribunal, having chosen to remand matter to Assessing Officer for fresh consideration, could have avoided qualifying remand especially when questions of law are being raised by both Revenue as well as assessee. Therefore, we are inclined to interfere with that portion of order passed by Tribunal and remand matter for fresh consideration to Assessing Officer to enable him/her to consider entire matter afresh without, in any manner, curtailing exercise of his/her power as Assessing Officer. Further, we find that Tribunal did not give independent reasons as to why, in its opinion, direction issued in case of Beach 7/9 http://www.judis.nic.in TCA.No.289 of 2018 Miners Co. Pvt. Ltd., should also apply to case of assessee. 13. In light of above discussions, tax case appeal is allowed, findings/observations made by Tribunal in paragraph 11 of impugned order are set aside and order of remand is confirmed. We make it clear that remand is open remand and direction is issued to Assessing Officer to consider all issues that may be raised before him both by Revenue as well as assessee either factual or legal or both and take informed decision in matter after affording opportunity of hearing to IRP representing assessee. We request said Mr.R.Raghavendar, IRP to appear before Assessing Officer and put forth all his submissions bearing in mind interest of shareholders. substantial questions of law framed are left open. No costs. 04.8.2020 To Income Tax Appellate Tribunal, Chennai C Bench. RS 8/9 http://www.judis.nic.in TCA.No.289 of 2018 T.S.SIVAGNANAM, J AND V.BHAVANI SUBBAROYAN, J RS TCA.No.289 of 2018 04.8.2020 9/9 http://www.judis.nic.in Commissioner of Income-tax, Corporate Circle-3, Chennai v. Thiru Arooran Sugar Ltd
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