Siva Industries & Holdings Ltd vs. ACIT (ITAT Chennai) –Once there is no claim of income which does not form part of the total income under the Act, there cannot be any disallowance in relation to an investment which may or may not give rise to any Oincome which does not form part of the total income. In the present case it is noticed thatnone of the investments made by the assessee has generated any dividend income which has been claimed by the assessee ato be not to form part of the total income. In the circumstances, as it is noticed that the assessee does not have any income which does not form part of the total income nor has the assessee made such a claim, we are of the view that no disallowance under sec. 14A can be made on the assessee for the relevant assessment year.
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘A’ CHENNAI
I.T.A. No. 2148/Mds/2010 Assessment Year: 2006-07
M/s. Siva Industries & Holdings Ltd. (Formerly klnown as Sterling Infotech Ltd.) v. The Assistant Commissioner of Income-tax,
ORDER
PER GEORGE MATHAN, JUDICIAL MEMBER:
This is an appeal filed by the assessee against the assessment order passed by the Assessing Officer under section 143(3) read with section 144C read with section 92CA(4) of the Income Tax Act, 1961dated 26-10-2010 for the assessment year 2006-07.
2. Shri Sriram Seshadri, CA represented on behalf of the assessee and Shri Shaji P. Jacob, learned Sr. DR represented on behalf of the Revenue.
3. It was the submission by the learned authorised representative that the issues in the appeal are three-fold, the first issue being against the disallowance made by the Assessing Officer under section 14A of the Act, the second being the action of the Assessing Officer in bringing to tax the addition of 45,23,817,53 suggested by the TPO on account of the adoption of the prime lending rate in respect of the charging of interest on the loan given by the assessee to its sister concern as against the LIBOR rate and the third issue being against the action of the Assessing Officer in not granting the TDS credit as claimed by the assessee.
4. In regard to the first issue being against the action of the Assessing Officer in making a disallowance u/s. 14A it was submitted by the learned authorised representative that originally the assessee had filed its return of income on 27.11.2006 wherein it had made disallowance u/s. 14A. Subsequently on the basis of expert advice the assessee had filed a revised return on 18.3.2008 wherein the assessee had withdrawn the disallowance made u/s 14A to the extent of 30,89,60,575/- in the original return. It was the submission that as a consequence of the revised return filed wherein the reason for the filing of the revised return was specifically mentioned.
5. There was a survey on the premises of the assessee on 20.8.2009. It was the submission that a draft assessment order was issued on the assessee on 29.12.2009 which was the subject matter of reference before the Dispute Resolution Panel, Chennai. The Dispute Resolution Panel, Chennai vide its order dated 28.9.2010 had approved the additions proposed by the Assessing Officer in the draft assessment order. Consequently, the assessment order in the assessee’s case came to be passed on 26.10.2010. It was the submission that in respect of the disallowance under section 14A the Assessing Officer had made a disallowance of 33,86,85,626/-. The learned authorized representative submitted that the disallowance was out of the interest paid by the assessee on the loans borrowed for business purposes. It was submitted that the total interest payment during the relevant assessment year was about 42 crores. It was the submission that the Assessing Officer had accepted the claim of interest payments as incurred for business purposes and excludible from the disallowance u/s 14A to an extent of 8.14crores. It was the submission that the balance of 33.86 crores was considered for disallowance by the Assessing Officer. The learned authorised representative of the assessee placed before us the chart showing the break up of the interest disallowed by the Assessing Officer to the extent of 33.86 crores. This is as follows:
