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TMI Blog2022 (8) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... to reframe the assessment on above lines. - ITA No. 1761/Chny/2018 - - - Dated:- 17-8-2022 - HON BLE SHRI MAHAVIR SINGH , VICE PRESIDENT AND HON BLE SHRI MANOJ KUMAR AGGARWAL , AM Appellant by : Shri R. Vijayaraghavan ( Advocate ) Ld. AR Respondent by : Shri ARV Sreeenivasan ( Addl. CIT ) Ld. DR ORDER Manoj Kumar Aggarwal ( Accountant Member ) 1. By way of this appeal, the assessee contest the validity of revision order passed by Learned Principal Commissioner of Income Tax-10, Chennai [PCIT] u/s 263 on 29-03-2018 for Assessment Year (AY) 2013-14. The assessment order which is subjected to revision was passed by Ld. Assessing Officer (AO) u/s.143(3) of the Act on 31- 03-2016. The grounds taken by the assessee read as under: 1. The impugned order passed by the Commissioner of Income Tax ['CIT'] is contrary to law, facts and circumstances of the case. 2. Impugned order is void and unsustainable 2.1 The impugned order passed by the CIT is grossly erroneous and void since the order passed by the Assessing Officer ['AO'] is not prejudicial to the interests of the revenue. 2.2 The CIT ought to have appreciated that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter perusal of case records, our adjudication would be as under. 3. The assessee was assessed u/s. 143(3) of the Act on 31-03-2016 accepting returned loss of Rs.176.01 Lacs. The assessment order take note of the fact that notice u/s 142(1) was issued on 12.08.2015 which was responded to by the assessee. 4. Subsequently, upon perusal of case records, Ld. PCIT proposed revision u/s. 263 and show-caused assessee on the ground that the assessee claimed expenses for Rs.901.30 Lacs of the subsidiary entities who were independent companies with separate legal status and also assessable to income tax in their own status. When the resulting income was likely to arise in the hands of subsidiary companies, the claim of expenses would not be allowable to the assessee. 5. The assessee pointed out that it carried out two distinct business activities viz. (i) Segment-I: Incubation of new entities; (ii) Segment-II: Providing Shared services Infrastructure services and loans / investments. It was submitted that for AY 2012-13 onwards, the assessee carried out only Segment-II business activities and therefore, the appellate orders for AYs 2009-10 and 2010-11 which were in respect of Segm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in further appeal before us. 7. Upon perusal of notice u/s 142(1) as issued by Ld. AO during the course of regular assessment proceedings, the assessee was, interalia, directed to explain Income from shared services and Income from Infrastructure services. The assessee was also directed to file the details of Space Sharing Cost and Employee sharing Cost. The same was responded to by the assessee vide reply dated 27.08.2015 wherein it was submitted that income from shared services represent income earned by the Trust by providing varied services to group entities. The income from infrastructure services was stated to have arisen from sub-letting of working space to group entities and providing other related services. In subsequent reply, the assessee also provided party-wise break up of income along with agreements. In reply dated 28.03.2016, the assessee submitted working of expenses that were incurred to earn such income. Considering the same, Ld. AO chose to accept the returned loss filed by the assessee. 8. We find that coordinate bench has passed one order in case of this assessee (authored by one of us) for AYs 2011-12, 2012-13 2014-15 vide ITA Nos.233/Chny/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not make any efforts to go through the agreements etc. to render a finding as to whether the streams of income as earned by the assessee could be considered as business income of the assessee. It merely held that these activities were in continuation of incubation activities as evident from the website. Further, the allowability of expenses u/s 57(iii) was not considered by Ld. AO. Therefore, the findings of Ld. AO are bereft of any merits and contrary to the directions of the Tribunal. 12. The Ld. CIT(A), in our opinion, has clinched the issue in correct perspective and diligently examined the main objects of the assessee. Since Ld. AO had failed to carry out the directions of Tribunal, Ld. CIT(A) rightly went ahead to examine the activities carried out by the assessee. After analyzing the Trust Deed, concrete findings were rendered that shared and Infrastructure activities could not be held to be in the nature of business activities and therefore, the same would be assessable under the head income from other sources . As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). Since the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire receipts have been brought to tax as income from other sources and the assessee has been allowed deduction of 2% of the receipts. The Ld. CIT(A) noted that the assessee offered substantial income towards capital gain followed by Segment-II operation. No expenses were incurred for Segment-I activities. Accordingly, the findings of AY 2012-13 were applicable. Aggrieved, the revenue is in further appeal before us. 17. Since we have confirmed first appellate order for AY 2012-13 which has been followed by Ld. CIT(A) in this year, the adjudication of this year would not require any interference on our part. In other words, the revenue s appeal stands dismissed 9. It could thus be seen that for AY 2012-13, the Tribunal has confirmed the first appellate order wherein it was held that the shared and Infrastructure activities could not be held to be in the nature of business activities and therefore, the same would be assessable under the head income from other sources . As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). In AY 2011-12, the assessee had carried out activities under both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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