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

ITA 4397/MUM/2012 | 2006-2007
Pronouncement Date: 18-10-2013 | Result: Dismissed

Appeal Details

RSA Number 439719914 RSA 2012
Assessee PAN AAACJ2591A
Bench Mumbai
Appeal Number ITA 4397/MUM/2012
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant DCIT CC 39, MUMBAI
Respondent JAI CORP. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 18-10-2013
Date Of Final Hearing 14-10-2013
Next Hearing Date 14-10-2013
Assessment Year 2006-2007
Appeal Filed On 29-06-2012
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 SANJAY ARORA SANJAY ARORA SANJAY ARORA SANJAY ARORA AM AM AM AM & & & & SHRI SHRI SHRI SHRI VIJAY VIJAY VIJAY VIJAY PAL RAO JM PAL RAO JM PAL RAO JM PAL RAO JM ./ I.T I.TI.T I.T.A. NO. .A. NO. .A. NO. .A. NO.4397/MUM/2012 4397/MUM/2012 4397/MUM/2012 4397/MUM/2012 ( %& %& %& %& ' ' ' ' / ASSESSMENT YEAR :2006-07) DCIT CC-39 ROOM NO. 32(1) GROUND FLOOR AAYAKAR BHAVAN M. K. ROAD MUMBAI-400020 & & & & / VS. M/S JAI CORP LTD. 11B MITTAL TOWER B-WING NARIMAN POINT MUMBAI-400021 ( () / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+() / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) *+ / CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO. 168/MUM/2013 NO. 168/MUM/2013 NO. 168/MUM/2013 NO. 168/MUM/2013 ( %& %& %& %& ' ' ' ' / ASSESSMENT YEAR :2006-07) M/S JAI CORP LTD. 11B MITTAL TOWER B-WING NARIMAN POINT MUMBAI-400021 & & & & / VS. DCIT CC-39 ROOM NO. 32(1) GROUND FLOOR AAYAKAR BHAVAN M. K. ROAD MUMBAI-400020 !( ./ - ./ PAN/GIR NO. :AAACJ2591A ( () / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+() / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ! ! ! ! . / . / . / . / / REVENUE BY : SHRI S. D. SRIVASTAVA %& %&%& %& 01 01 01 01 . / . / . / . / /ASSESSEE BY : SHRI VIJAY MEHTA & & & & . .. . 1 1 1 1 / DATE OF HEARING : 14 TH OCTOBER 2013 2' 2' 2' 2' . .. .1 1 1 1 /DATE OF PRONOUNCEMENT: 18 TH OCTOBER 2013 3 / O R D E R PER : $ . . / VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 23.4.2012 OF C OMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSESSMENT YEAR 2006-07 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: ITA NO.4397/M/2012 & CO NO. 168/M/2013 JAI CORP LTD. 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN LAW IN HOLDING THAT PROVISION OF RULE 8D FOR THE PURPOSE OF DISALLOWANC E OF EXPENSES UNDER SECTION 14A IS NOT APPLICABLE FOR THIS YEAR A S THESE PROVISIONS ARE NOT RETROSPECTIVE IN NATURE AND HENC E CANNOT BE APPLIED TO THE ASSESSMENT YEARS PRIOR TO THE A. Y. 2008-09 IN VIEW OF DECISION OF BOMBAY HIGH COURT IN THE CASE O F GODREJ & BOYCE MANUFACTURING PVT. LTD. 328 ITR 81 IGNORING T HE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION OF BOMBAY HIGH COURT AND HAS FILED SPECIAL LEAVE PETITION BEFORE SUPREME COURT. 1(A) WITHOUT PREJUDICE TO THE ABOVE CIT(A) IS NOT J USTIFIED IN FACTS IN HOLDING THAT ENTIRE DISALLOWANCE MADE BY ASSESSI NG OFFICER IS NOT SUSTAINABLE WHEN ASSESSEE ITSELF HAS MADE DISAL LOWANCE OF ` 1 70 830/- UNDER SECTION 14A WHILE COMPUTING ITS TA XABLE INCOME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN LAW IN HOLDING THAT WHILE WORKING OUT THE BOOK PROFITS OF THE ASSESSEE AS PER PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT ADJUSTMENTS OF AMOUNT DISALLOWABLE UNDER SECTION 14A READ WITH RULE 8D CA NNOT BE MADE SINCE PROVISIONS OF RULE 8D ARE RETROSPECTIVE IN NATURE AND HENCE NOT APPLICABLE TO CURRENT YEARS AS PER THE DE CISION OF BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MAN UFACTURING PVT. LTD. 328 ITR 81 IGNORING THE FACT THAT DEPARTM ENT HAS NOT ACCEPTED THE DECISION OF BOMBAY HIGH COURT AND HAS FILED SPECIAL LEAVE PETITION BEFORE SUPREME COURT. 2(B) WITHOUT PREJUDICE TO THE ABOVE CIT(A) IS NOT J USTIFIED IN FACTS IN HOLDING THAT ENTIRE ADJUSTMENT TO BOOK PROFIT UN DER SECTION 115JB IS NOT SUSTAINABLE WHEN THE ASSESSEE ITSELF H AS MADE DISALLOWANCE OF ` 1 70 830/- UNDER SECTION 14A WHIL E COMPUTING ITS TAXABLE INCOME. 3. GROUND NO. 1 REGARDING DELETION OF DISALLOWANCE MADE BY THE A.O U/S 14A BY APPLYING RULE 8D. THE DISALLOWANCE U/S 1 4A WAS MADE BY THE A.O WHILE COMPLETING THE ASSESSMENT U/S 143(3). SUB SEQUENTLY IN THE REASSESSMENT U/S 153A THE A.O APPLIED RULE 8D AND E NHANCED THE DISALLOWANCE U/S 14A. THE CIT(A) HAS NOTED THAT THE FACTS AND ISSUE ARE IDENTICAL AS IN THE ASSESSMENT YEAR 2003-04 TO 2005 -06 AND BY FOLLOWING ITA NO.4397/M/2012 & CO NO. 168/M/2013 JAI CORP LTD. 3 THE ORDER FOR THE ASSESSMENT YEAR 2005-06 THE DISAL LOWANCE MADE BY THE A.O IN THE ASSESSMENT U/S 153A BY APPLYING RULE 8D HAS BEEN DELETED. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE ORDER FOR THE ASSESSMENT YEAR 2005-06 . WE NOTE THAT FOR THE ASSESSMENT YEAR 2005-06 THE TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA 8 AND 9 OF ORDER DATED 17.1 0.2013 IN ITA NO. 2156/M/2012 AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3) DATED 28.12.2 006 THE AO HAS DISALLOWED THE EXPENSES BY INVOKING SECTION 14A . THE AO HAS COMPUTED THE EXPENSES ATTRIBUTABLE FOR EARNING THE EXEMPT INCOME AT 3% OF THE EXEMPT INCOME 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 EXPENSES. ON APPEAL THE CIT(A) FOUND THAT 3% OF TH E DIVIDEND INCOME HAS NO BASIS AND ACCORDINGLY THE CIT(A) HAS WORKED OUT THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES IN THE RATIO OF DIVIDEND INCOME TO TOTAL INCOME AS UNDER: THE LEARNED COUNSEL OF THE APPELLANT HAS FURTHER A RGUED THAT ADHOC DISALLOWANCE IS NOT JUSTIFIED. I AGREE T HAT DISALLOWANCE @ 3% OF DIVIDEND INCOME HAS NO BASIS A T ALL AND THAT A REASONABLE BASIS IS DEFINITELY RE3QUIRED FOR MAKING THE DISALLOWANCE. ONE SUCH BASIS IS THE RATI O OF DIVIDEND INCOME TO TOTAL RECEIPTS OF APPELLANT. IN THE INSTANT CASE DIVIDEND INCOME IS ` 23792749/- WHERE AS THE TOTAL RECEIPTS OF APPELLANT ARE 2284443000/-. THIS GIVES A PERCENTAGE OF 1.04. IT IS FURTHER NOTICED THAT THE ADMINISTRATIVE EXPENSES CONTAINED IN SCHEDULE O T O BALANCE SHEET ARE ` 42779000/-. APPLYING THE PROPOR TION OF 1.04% TO ADMINISTRATIVE EXPENSES THE FIGURE OF ` 4 44901/- IS OBTAINED WHICH TO MY MIND IS REASONABLE FIGURE OF DISALLOWANCE. TO THIS EXTENT THE ADDITION MADE IS CONFIRMED. THE APPELLANT GETS RELIEF IN RESPECT OF BALANCE AMOUNT. ITA NO.4397/M/2012 & CO NO. 168/M/2013 JAI CORP LTD. 4 9. THUS IT IS CLEAR THAT THE ISSUE OF REASONABLE D ISALLOWANCE U/S 14A HAS BEEN DECIDED BY THE CIT(A) WHILE PASSIN G THE ORDER DATED 28.12.2007 AGAINST THE ORIGINAL ASSESSMENT OR DER PASSED U/S 143(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 CONSIDERATION IN VIEW OF THE DECISION OF HONBLE JURISDICTION HIG H COURT IN CASE OF GODREJ AND BOYCE MFG. CO. LTD (SUPRA). AS THERE IS NO NEW FACTS OR MATERIAL EITHER CAME TO THE KNOWLEDGE OF T HE AO OR HAS BEEN CONSIDERED AND RELIED UPON BY THE AO WHILE FRA MING REASSESSMENT U/S 153A THEREFORE THE ISSUE OF REASO NABLENESS WHICH WAS DECIDED IN THE ORIGINAL ASSESSMENT BY THE AO AND FURTHER BY THE CIT(A) CANNOT BE REOPENED IN THE PRO CEEDINGS BEFORE US WHICH ARE ONLY IN RESPECT OF DISALLOWANCE WORK OUT UNDER RULE 8D. ACCORDINGLY WE ARE OF THE VIEW THAT THE REASONABLENESS BASIS OF DISALLOWANCE U/S 14A HAS AL READY BEEN DECIDED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS W ELL AS IN APPELLATE PROCEEDINGS AND THE SAID ISSUE CANNOT BE RAISED AT THIS STAGE WHEN THE SAME HAS ATTAINED FINALITY. HENCE W E DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 5. MAINTAINING THE RULE OF CONSISTENCY WE AGREE WIT H THE VIEW TAKEN BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06. ACCOR DINGLY WE DO NOT FIND ANY MERIT IN THIS GROUND OF THIS REVENUES APPEAL A ND THE SAME IS DISMISSED. 6. GROUND NO. 2 REGARDING ADJUSTMENT FOR COMPUTING THE BOOK PROFIT IN RESPECT OF THE AMOUNTS DISALLOWED U/S 14A R.W RULE 8D. THIS GROUND IS CONSEQUENTIAL TO THE GROUND NO. 1. IN THE ORIGINAL ASSESSMENT U/S 143(3) THE A.O MADE THE ADJUSTMENT OF THE AMOUNT OF DISALL OWANCE U/S 14A AND SUBSEQUENTLY THE ADJUSTMENT WAS ENHANCED BY THE A.O IN THE ASSESSMENT ORDER U/S 153A AS THE DISALLOWANCE U/S 14A WAS ENHA NCED BY APPLYING RULE 8D. SINCE THE APPLICABILITY OF RULE 8D HAS BEE N DECIDED IN FAVOUR OF ITA NO.4397/M/2012 & CO NO. 168/M/2013 JAI CORP LTD. 5 THE ASSESSEE AND CONSEQUENTLY THIS GROUND OF THE RE VENUES APPEAL IS DISMISSED. CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO. 168/M/2013 NO. 168/M/2013 NO. 168/M/2013 NO. 168/M/2013 7. THERE IS A DELAY OF 8 DAYS IN FILING THE CROSS O BJECTION. THE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF DELAY WHICH IS SUPPORTED BY AN AFFIDAVIT. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE EXPLANATION FOR DELAY IN FILING THE CO. AFTER GOING THROUGH THE PETITION AND AFFIDAVIT WE ARE SATISFIED THAT THE ASSESSEE HAS EX PLAINED A REASONABLE CAUSE FOR FILING THE CROSS OBJECTION LATE BY 8 DAYS . ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTE REST OF JUSTICE WE CONDONE THE DELAY OF 8 DAYS FOR FILING THE CROSS OB JECTION. 8. THE ASSESSEE HAS RAISED THE ONLY GROUND IN THE C ROSS OBJECTION AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSING OFFICE R HAD NO JURISDICTION TO MAKE THE DISALLOWANCE U/S 14A OF TH E ACT TO THE TUNE OF ` 74 48 653/- WHILE PASSING THE ASSESSMENT ORDER U/S 153A OF THE ACT. THE HONBLE CIT(A) FAILED TO APPRE CIATE THE FACT THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATED 11.06.2008 HAD NOT ABATED AND NO INCRIMINATING EVIDENCE/DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH. 9. IN VIEW OF OUR FINDING IN THE REVENUES APPEAL W HEREBY THE ISSUE OF DISALLOWANCE U/S 14A BY APPLYING RULE 8D HAS BEEN D ECIDED IN FAVOUR OF THE ASSESSEE THE CROSS OBJECTION OF THE ASSESSEE B ECOMES INFRUCTUOUS AND HENCE DISMISSED. ITA NO.4397/M/2012 & CO NO. 168/M/2013 JAI CORP LTD. 6 10. IN THE RESULT THE APPEAL OF THE REVENUE AND CR OSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF OCTOBER 2013 SD/- SD/- ( ) ! (SANJAY ARORA) ACCOUNTANT MEMBER ( $ ) % ! (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 18 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 \