DCIT CC 39, MUMBAI v. JAI CORP LTD, MUMBAI

ITA 2156/MUM/2012 | 2005-2006
Pronouncement Date: 17-10-2013 | Result: Dismissed

Appeal Details

RSA Number 215619914 RSA 2012
Assessee PAN AAACJ2591A
Bench Mumbai
Appeal Number ITA 2156/MUM/2012
Duration Of Justice 1 year(s) 6 month(s) 18 day(s)
Appellant DCIT CC 39, MUMBAI
Respondent JAI CORP LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 17-10-2013
Date Of Final Hearing 08-10-2013
Next Hearing Date 08-10-2013
Assessment Year 2005-2006
Appeal Filed On 30-03-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI . . . ! ! ! ! ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA AM AM AM AM ./ I.T.A I.T.A I.T.A I.T.A. NO. . NO. . NO. . NO.2154/MUM/2012 2154/MUM/2012 2154/MUM/2012 2154/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR :2003-04) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2155/MUM/2012 2155/MUM/2012 2155/MUM/2012 2155/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR :2004-05) & ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2156/MUM/2012 2156/MUM/2012 2156/MUM/2012 2156/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR :2005-06) ACIT CIR. -39 R. NO. 32(1) GROUND FLOOR AAYAKAR BHAVAN M. K. ROAD MUMBAI-400020 / VS. M/S JAI CORP. LTD. 11B MITTAL TOWERS B-WING NARIMAN POINT MUMBAI-400021 $' ' ./ ( ./ PAN/GIR NO. :AAACJ2591A ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDEN RESPONDEN RESPONDEN RESPONDENT TT T) ') ') ') ') / APPELLANT BY : SHRI S. D. SRIVASTAVA *+') *+') *+') *+') - -- - /RESPONDENT BY : SHRI ANUJ KISNADWALA - -- - .' .' .' .' / DATE OF HEARING : 8 TH OCTOBER 2013 /0& /0& /0& /0& - -- -.' .' .' .' /DATE OF PRONOUNCEMENT: 17 TH OCTOBER 2013 #1 / O R D E R PER : . . / VIJAY PAL RAO JM THESE THREE APPEALS BY THE REVENUE ARTE DIRECTED A GAINST THE THREE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS) ALL DATED 6.1.2012 FOR THE ASSESSMENT YEARS 2003-04 2004-05 AND 2005-06 RESPECTIVELY. 2. SINCE THE COMMON ISSUES HAVE BEEN RAISED IN THES E APPEALS ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 2 THEREFORE THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OF BY THIS COMPOSITE ORDER. THE FIRST COMMON GROUND RA ISED IN ALL THESE THREE APPEALS IS AS UNDER: WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT F OR COMPUTING DEDUCTION U/S 80HHC ALLOWABLE DEDUCTION U/S 80IB I S NOT TO BE REDUCED FROM BUSINESS INCOME TO COMPUTE PROFIT OF T HE BUSINESS BY FOLLOWING DECISION OF BOMBAY HIGH COURT IN THE C ASE OF ASSOCIATED CAPSULES AS DEPARTMENT HAS NOT ACCEPTED THIS DECISION ON MERIT AND AGITATING ITS CASE BEFORE SUP REME COURT. 3. THE ISSUE INVOLVED IN THIS GROUND IS WHETHER DED UCTION U/S 80IB AND 80HHC HAS TO BE ALLOWED WITH REFERENCE TO THE PROFI TS SIMULTANEOUSLY OR DEDUCTION U/S 80HHC SHOULD BE ALLOWED ON REDUCED PR OFIT AFTER ALLOWING THE DEDUCTION U/S 80IB. AT THE OUTSET WE NOTE THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE JURISDICTION HIG H COURT IN CASE OF ASSOCIATED CAPSULES VS DCIT 332 ITR 42. WE FURTHER NOTE THAT THE CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE DECISION OF HONBLE HIGH COURT IN CASE OF ASSOCIATED CAPSULES (SUPRA) IN PARA 7.4 AS UNDER: 7.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LATE ORDER OF THE AO AND FACTS OF THE CASE CAREFULLY. IT IS NOTIC ED THAT THIS ADDITION WAS ALREADY MADE WHILE PASSING THE ORDER U /S 143(3) OF THE I. T. ACT AND SETTLED IN APPEAL BY THE LD. CIT( A) AND THE HONBLE TRIBUNAL. HOWEVER NOW THE HONBLE MUMBAI H IGH COURT IN THE CASE OF ASSOCIATED CAPSULES PVT. LTD. VS CIT C-IV MUMBAI DATED 10.01.2011 HAS REVERSED THE ORDER OF THE HON BLE TRIBUNAL. SINCE THE FACTS OF THE PRESENT CASE ARE SQUARELY CO VERED BY THE DECISION OF HONBLE MUMBAI HIGH COURT WHICH IS BIND ING ON THE LOWER AUTHORITIES THEREFORE RELIEF HAS TO BE GIVE N ACCORDINGLY. THE RELEVANT EXTRACT OF THE DECISION IS REPRODUCED AS UNDER: IN THE RESULT WE HOLD THAT SECTION 801A(9) DOES N OT AFFECT THE COMPUTABILITY OF DEDUCTION UNDER VARIOUS PROVIS IONS UNDER HEADING C OF CHAPTER VIA BUT IT AFFECTS TH E ALLOWABILITY OF DEDUCTIONS COMPUTED UNDER VARIOUS PROVISIONS UNDER HEADING C OF CHAPTER VIA SO THA T THE ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 3 AGGREGATE DEDUCTION UNDER SECTION 801A AND OTHER PROVISIONS UNDER HEADING C OF CHAPTER VIA DO NOT EXCEED 100% OF THE PROFITS OF THE BUSINESS OF THE ASSESSEE . OUR ABOVE VIEW IS ALSO SUPPORTED BY THE CBDT CIRCULAR N O. 772 DATED 23.12.1998 WHEREIN IT IS STATED THAT SECTION 801A(9) HAS BEEN INTRODUCED WITH A VIEW TO PREVENT THE TAXP AYERS FROM CLAIMING REPEATED DEDUCTIONS IN RESPECT OF THE SAME AMOUNT OF ELIGIBLE INCOME AND THAT TOO IN EXCESS OF THE ELIGIBLE PROFITS. THUS THE OBJECT OF SECTION 801A( 9) BEING NOT TO CURTAIL THE DEDUCTIONS COMPUTABLE UNDER VARI OUS PROVISIONS UNDER HEADING C OF CHAPTER IT IS REAS ONABLE TO HOLD THAT SECTION 801A(9) AFFECTS ALLOWABILITY OF D EDUCTION AND NOT COMPUTATION OF DEDUCTION. TO ILLUSTRATE IF RS.100/- IS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING RS.30/- IS THE PROFITS ALLOWED AS DEDUCTION UNDER SECTION SOIA (1) AND THE DEDUCTION COMPUTED AS PER SECTION 8OHHC IS RS.8 0/- THEN IN VIEW OF SECTION 801A(9) THE DEDUCTION UND ER SECTION 8OHHC WOULD BE RESTRICTED TO RS. 70/- SO T HAT THE AGGREGATE DEDUCTION DOES RIOT EXCEED THE PROFITS OF THE BUSINESS KEEPING IN VIEW THE DECISION OF THE HONBLE MUMBAI HIGH COURT THE AD IS DIRECTED TO RECOMPUTE THE DEDUCTION U/S. 80-HHC AND 80-16 OF THE I.T. ACT AND ALLOW THE RELIEF ACCORDIN GLY. THE GROUND OF APPEAL IS PARTLY ALLOWED. 4. AS IT IS CLEAR THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTION HIGH COURT THEREFORE WE DO NOT FIND A NY MERIT IN THE GROUND RAISED BY THE REVENUE. ACCORDINGLY THIS GROUND OF THE REVENUE IS DISMISSED. 5. THE SECOND COMMON GROUND RAISED BY THE REVENUE F OR THE ASSESSMENT YEARS 2004-05 AND 2005-06 IS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING T HE ASSESSING OFFICER TO RECOMPUTED THE DEDUCTION U/S 14A R.W.R 8 D ON THE BASIS OF DECISION IN THE CASE OF GODREJ & BOYCE LTD . 6. WHILE COMPLETING THE ASSESSMENT U/S 143(3) R.W.S 153A THE ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 4 ASSESSING OFFICER HAS DISALLOWED THE EXPENSES U/S 1 4A BY APPLYING RULE 8D. THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWIN G THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF GODREJ A ND BOYCE MFG. CO. LTD VS DCIT 328 ITR 81 WHEREIN IT HAS BEEN HELD THAT RULE 8D IS APPLICABLE ONLY FROM THE ASSESSMENT YEAR 2008-09 AND NOT RETROSPECT IVE. 7. BEFORE US THE LD. CIT DR HAS FORCEFULLY CONTENDE D THAT THE ISSUE IS REQUIRED TO BE EXAMINED AFRESH BY THE AO TO COMPUTE THE DISALLOWANCE ON REASONABLE BASIS IN THE LIGHT OF THE DECISION OF HO NBLE JURISDICTION HIGH COURT IN CASE GODREJ AND BOYCE MFG. CO. LTD (SUPRA) . THIS CONTENTION OF THE LD. DR HAS BEEN VEHEMENTLY OPPOSED BY THE LD. A R OF THE ASSESSEE WHO HAS POINTED OUT THAT WHILE PASSING THE ORIGINAL ASSESSMENT ORDER U/S 143(3) THE AO MADE A DISALLOWANCE U/S 14A BY APPORT IONMENT OF ` 7 13 782/- AS EXPENDITURE INCURRED FOR EARNING EXEM PT INCOMES. THE APPORTIONMENT OF EXPENDITURE HAS BEEN WORKED OUT AS 3% OF THE EXEMPT INCOME. ON APPEAL THE CIT(A) HAD REDUCED THE DISAL LOWANCE TO ` 4 44 901/- WHICH HAS BEEN WORKED OUT ON THE BASIS O F THE RATIO OF DIVIDEND INCOME TO THE TOTAL RECEIPT OF THE ASSESSEE AND IN THE SAME PROPORTION THE ADMINISTRATIVE EXPENSES WERE DISALLOWED. THUS THE LD. AR HAS SUBMITTED THAT THE ISSUE OF REASONABLE DISALLOWANCE HAD BEEN DECIDED BY THE CIT(A) IN THE APPEAL ARISING FROM THE ORIGINAL ASSESSMENT ORDER. HE HAS FURTHER SUBMITTED THAT IN THE ASSESSMENT U/S 153A THE AO AP PLIED RULE 8D WHICH IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION THEREFORE THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO B Y APPLYING RULE 8D. IN REBUTTAL THE LD. DR HAS SUBMITTED THAT AT THE TIME OF ORIGINAL ASSESSMENT ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 5 U/S 143(3) THE AO WAS NOT HAVING THE BENEFIT OF DEC ISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD (SUPRA) THEREFORE THE REASONABLENESS OF THE BASIS FOR DISA LLOWANCE U/S 14A HAS TO BE CONSIDERED IN THE LIGHT OF THE DECISION OF HONB LE HIGH COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD (SUPRA). THE LD. DR H AS REITERATED HIS SUBMISSIONS THAT THE ISSUE MAY BE REMITTED TO THE R ECORD OF THE AO FOR COMPUTATION OF DISALLOWANCE ON SOME REASONABLE BASI S. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT IN T HE ORIGINAL ASSESSMENT PASSED U/S 143(3) DATED 28.12.2006 THE AO HAS DISAL LOWED THE EXPENSES BY INVOKING SECTION 14A. THE AO HAS COMPUTED THE EX PENSES ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME AT 3% OF THE EXEMPT I NCOME AND THEREBY THE DISALLOWANCE WAS WORKED OUT AT ` 7 13 783/-. IT IS CLEAR FROM THE ASSESSMENT ORDER PASSED U/S 143(3) THAT THE AO HAS CONSIDERED 3% OF THE EXEMPT INCOME AS REASONABLE DISALLOWANCE OF EXPENSE S. ON APPEAL THE CIT(A) FOUND THAT 3% OF THE DIVIDEND INCOME HAS NO BASIS AND ACCORDINGLY THE CIT(A) HAS WORKED OUT THE DISALLOWANCE OF ADMIN ISTRATIVE EXPENSES IN THE RATIO OF DIVIDEND INCOME TO TOTAL INCOME AS UND ER: THE LEARNED COUNSEL OF THE APPELLANT HAS FURTHER A RGUED THAT ADHOC DISALLOWANCE IS NOT JUSTIFIED. I AGREE THAT D ISALLOWANCE @ 3% OF DIVIDEND INCOME HAS NO BASIS AT ALL AND THAT A REASONABLE BASIS IS DEFINITELY RE3QUIRED FOR MAKING THE DISALL OWANCE. ONE SUCH BASIS IS THE RATIO OF DIVIDEND INCOME TO TOTAL RECEIPTS OF APPELLANT. IN THE INSTANT CASE DIVIDEND INCOME IS ` 23792749/- WHEREAS THE TOTAL RECEIPTS OF APPELLANT ARE 2284443 000/-. THIS GIVES A PERCENTAGE OF 1.04. IT IS FURTHER NOTICED T HAT THE ADMINISTRATIVE EXPENSES CONTAINED IN SCHEDULE O T O BALANCE SHEET ARE ` 42779000/-. APPLYING THE PROPORTION OF 1.04% TO ADMINISTRATIVE EXPENSES THE FIGURE OF ` 444901/- I S OBTAINED ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 6 WHICH TO MY MIND IS REASONABLE FIGURE OF DISALLOWAN CE. TO THIS EXTENT THE ADDITION MADE IS CONFIRMED. THE APPELLAN T GETS RELIEF IN RESPECT OF BALANCE AMOUNT. 9. THUS IT IS CLEAR THAT THE ISSUE OF REASONABLE D ISALLOWANCE U/S 14A HAS BEEN DECIDED BY THE CIT(A) WHILE PASSING THE OR DER DATED 28.12.2007 AGAINST THE ORIGINAL ASSESSMENT ORDER PASSED U/S 14 3(3). THE SAID FINDING OF THE CIT(A) HAS BEEN ACCEPTED BY THE REVENUE AND THEREFORE THE ISSUE TO THE EXTENT OF REASONABLENESS OF DISALLOWANCE U/S 14A HAS ATTAINED FINALITY. IN THE RE-ASSESSMENT U/S 153A THE AO MADE DISALLOWANCE BY APPLYING RULE 8D. THE ACTION OF THE AO IS NOT SUSTA INABLE AS RULE 8D IS NOT APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION IN VIEW OF THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD (SUPRA). AS THERE IS NO NEW FACTS OR M ATERIAL EITHER CAME TO THE KNOWLEDGE OF THE AO OR HAS BEEN CONSIDERED AND RELIED UPON BY THE AO WHILE FRAMING REASSESSMENT U/S 153A THEREFORE T HE ISSUE OF REASONABLENESS WHICH WAS DECIDED IN THE ORIGINAL AS SESSMENT BY THE AO AND FURTHER BY THE CIT(A) CANNOT BE REOPENED IN THE PROCEEDINGS BEFORE US WHICH ARE ONLY IN RESPECT OF DISALLOWANCE WORK O UT UNDER RULE 8D. ACCORDINGLY WE ARE OF THE VIEW THAT THE REASONABLE NESS BASIS OF DISALLOWANCE U/S 14A HAS ALREADY BEEN DECIDED IN TH E ORIGINAL ASSESSMENT PROCEEDINGS AS WELL AS IN APPELLATE PROCEEDINGS AND THE SAID ISSUE CANNOT BE RAISED AT THIS STAGE WHEN THE SAME HAS ATTAINED FINALITY. HENCE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF TH E CIT(A) QUA THIS ISSUE. ITA NO.2154 2155 & 2156/M/2012 JAI CORP. LTD. 7 10. IN THE RESULT THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF OCTOBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 17 TH OCTOBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI