Amway India Enterprises Pvt. Ltd., New Delhi v. ITO, New Delhi

ITA 6096/DEL/2012 | 2008-2009
Pronouncement Date: 11-10-2013 | Result: Dismissed

Appeal Details

RSA Number 609620114 RSA 2012
Bench Delhi
Appeal Number ITA 6096/DEL/2012
Duration Of Justice 10 month(s) 4 day(s)
Appellant Amway India Enterprises Pvt. Ltd., New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-10-2013
Date Of Final Hearing 07-10-2013
Next Hearing Date 07-10-2013
Assessment Year 2008-2009
Appeal Filed On 07-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. S. SYAL ACCOUNTANT MEMBER AND SMT. DIVA SINGH JUDICIAL MEMBER I.T.A .NO.-6096/DEL/2012 (ASSESSMENT YEAR-2008-09) AMWAY INDIA ENTERPRISES PVT. LTD. VS. ITO FIRST FLOOR ELEGANCE TOWER PLOT NO.8 WARD-1(2) NON HIERARCHICAL COMMERCIAL TOWER NEW DELHI. JASOLA NEW DELHI-110025 PAN: AAAC5603Q (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. TARANDEEP SINGH CA. REVENUE BY:-SH. YOGESH KUMAR VERMA CIT. DR ORDER PER R. S. SYAL AM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 28.9.2012 IN RELATION TO TH E AY 2008-09. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.51 12 715/- U/S 14A OF THE AC T. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE 2 BUSINESS OF DIRECT SELLING OF CONSUMER PRODUCTS. DI VIDEND INCOME OF RS.4.98 CRORE WAS EARNED WHICH WAS CLAIMED AS EX EMPT U/S 10(34) OF THE ACT. IN THE ABSENCE OF THE ASSESSEE S HOWING ANY DISALLOWANCE U/S 14A THE AO RELYING ON A JUDGMENT OF THE HONBLE SUPREME COURT AND TWO SPECIAL BENCH DECISIO NS CAME TO HOLD THAT SUCH DISALLOWANCE WAS CALLED FOR AS PER R ULE 8D. THE ABOVE REFERRED DISALLOWANCE AMOUNTING TO RS.51.12 L AC TOWARDS OTHER EXPENSES WAS MADE AS PER CLAUSE (III) OF RULE 8D(2) BEING PER CENT OF AVERAGE VALUE OF INVESTMENT. THE LD. CIT (A) SUSTAINED THE DISALLOWANCE BY NOTICING THAT THE INV ESTMENT IN SHARES/SECURITIES FETCHING EXEMPT INCOME STOOD INC REASED FROM RS.89.99 CRORE AT THE END OF THE PRECEDING YEAR TO RS.114.51/- CRORE AT THE END OF THE FINANCIAL YEAR RELEVANT TO THE AY UNDER CONSIDERATION. IT WAS OBSERVED THAT SUCH A HUGE INV ESTMENT WOULD DEFINITELY REQUIRE INVOLVEMENT OF TOP MANAGEMENT AN D HENCE THE ASSESSEES CONTENTION THAT NO EXPENDITURE WAS INCUR RED IN RELATION TO THE EXEMPT INCOME WAS WITHOUT ANY FORCE. THE ASS ESSEE IS AGGRIEVED WITH SUCH A VIEW OF THE LD. FIRST APPELLA TE AUTHORITY. 3 3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD WE FIND THAT THERE IS CLEAR APP LICATION TO THE FACTS AS ARE OBTAINING BEFORE US OF SECTION 14A R.W .R. 8D AS PER THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N MAXOPP INVESTMENTS LTD. AND OTHERS VS. CIT (2012) 247 CTR (DEL) . IT HAS ALSO BEEN HELD IN THIS CASE THAT RULE 8D IS APPLICA BLE FROM THE AY 2008-09. SIMILAR VIEW WAS EARLIER EXPRESSED BY THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) . IN VIEW OF THESE JUDGMENTS IT IS APPARENT THAT PRESENTLY THE PROVISION OF SECTION 14 A ARE APPLICABLE. 4. THE OBJECTION OF THE LD. AR THAT SINCE T HE AO DID NOT CATEGORICALLY RECORD ANY SATISFACTION ABOUT THE INC URRING OF EXPENSES IN RELATION TO EXEMPT INCOME AND HENCE THE APPLICATION OF SECTION 14A BE ANNULLED IS DEVOID OF MERITS. WE FI ND THAT THE AO DID EMBARK UPON THIS ISSUE AND TOOK ASSISTANCE OF R ELEVANT JUDGMENT/ORDERS WHILE MAKING THE DISALLOWANCE UNDER SECTION 4 14A. EVEN OTHERWISE THE LD. CIT (A) HAS ELABORATEL Y DEALT WITH THIS ISSUE BY CLEARLY NOTICING THAT THERE IS AN INC REASE DURING THE YEAR OF ABOUT RS.25 CRORE IN THE INVESTMENTS IN SHA RES YIELDING EXEMPT INCOME. IT IS BUT NATURAL THAT THE INVESTMEN T OF SUCH A MAGNITUDE CANNOT BE MADE OTHERWISE THAN BY INVOLVEM ENT OF TOP MANAGEMENT OF THE COMPANY. THE LD. CIT (A) RIGHTLY POINTED OUT THAT SOMEBODY HAS TO TAKE DECISIONS REGARDING THE P URCHASE AND SALE OF THE SHARES MONITORING OF THE PORTFOLIO FOR WHICH THE RESOURCES OF THE COMPANY ARE USED AND HENCE SUCH E XPENSES REQUIRE CONSIDERATION UNDER THIS SECTION. IN THAT V IEW OF THE MATTER SUCH IMPLICIT SATISFACTION OF THE AO ABOUT THE INCU RRING OF EXPENSES IN RELATION TO THE EXEMPT INCOME GOT CONVE RTED INTO EXPLICIT SATISFACTION BY REASON OF THE LD. CIT (A) S DISCUSSION AND DECISION ON THE MATTER. 5. IT IS SETTLED LEGAL POSITION THAT THE FI RST APPELLATE AUTHORITY HOLDS THE SAME POWERS IN THE DISPOSAL OF APPEAL WHI CH THE AO POSSESSES. HE CAN DO WHAT THE AO COULD HAVE DONE. T HE HONBLE 5 SUPREME COURT IN CIT VS. KANPUR COAL SYNDICATE (1964) 53 ITR 225 (SC) DEALT WITH THE SCOPE OF THE POWERS OF THE FIRST AP PELLATE AUTHORITY VIS--VIS THAT OF THE ASSESSING OFFICER. IT HELD THAT : `THE SCOPE OF HIS [CIT(A)] POWER IS CO-TERMINOUS WITH TH AT OF ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO D O WHAT HE HAS FAILED TO DO . THE SAME VIEW HAS BEEN REITERATED IN JUTE CORP. OF INDIA LIMITED VS. CIT (1991) 187 ITR 688 (SC) BY AFFIRMING THE EARLIER JUDGMENT IN KANPUR COAL SYNDICATE (SUPRA) HOLDING THAT : ` THE POWER OF THE AAC IS CO-TERMINUS WITH THAT OF TH E ITO .. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF A SUB-ORDINATE AUTHORITY HAS A LL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING T HE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATION IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPELLATE AUTHORITY IS VESTED WITH AL L THE PLENARY POWERS WHICH THE SUB-ORDINATE AUTHORITY MAY HAVE IN THE MATTER. IN VIEW OF THIS LEGAL POSITION EMANATING FROM THE A BOVE DISCUSSED JUDGMENTS OF THE HONBLE SUMMIT COURT IT IS PATENT THAT THE 6 ARGUMENT ABOUT THE NON-RECORDING OF SATISFACTION AB OUT THE INCURRING OF EXPENSES IN RELATION TO EXEMPT INCOME DOES NOT HOLD WATER. 6. THE LD. AR ALSO CONTENDED THAT THE TRIBUNA L WAS PLEASED TO RESTORE THE MATTER OF COMPUTATION OF DISALLOWANCE U /S 14A TO THE AO FOR THE PRECEDING YEARS AND THE SAME VIEW BE TAK EN FOR THE EXTANT YEAR. WE CANNOT ACCEDE TO THIS CONTENTION FO R THE MANIFEST REASON THAT THE AUTHORITIES BELOW UPHELD THE APPLIC ATION OF RULE 8D FOR SUCH EARLIER YEARS AND THE HONBLE JURISDICTION AL HIGH COURT IN MAXOPP (SUPRA) HAS HELD THAT RULE 8D IS PROSPECTIVE AND HENCE APPLICABLE FROM THE A.Y.2008-09. AS PRESENTLY WE AR E DEALING WITH THE A.Y. 2008-09 ITSELF THERE IS NO REASON TO REMIT THE MATTER TO THE AO FOR COMPUTING DISALLOWANCE ON SOME `REASO NABLE BASIS AS WAS THE POSITION ANTERIOR TO THE A.Y. 2008-09. F ROM THIS YEAR ONWARDS THE DISALLOWANCE IS TO BE WORKED OUT AS PE R RULE 8D AND NOT ON SOME `REASONABLE BASIS. AS THE ACTION OF THE LD. AO IN MAKING THE INSTANT DISALLOWANCE IS IN ACCORDANCE WI TH RULE 7 8D(2)(III) THERE IS NO POINT IN MULTIPLYING THE PR OCEEDINGS BY RESTORING THIS MATTER TO THE AO FOR REPEATING HIS V IEW ONCE AGAIN. 7. IN VIEW OF THE FOREGOING DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT (A) WAS FULLY J USTIFIED IN SUSTAINING THIS DISALLOWANCE AS PER CLAUSE (III) OF RULE 8D (2) AT THE RATE OF 0.5% OF THE AVERAGE VALUE OF INVESTMENT. WE THEREFORE UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 8. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/10/2013. SD/- SD/- ( DIVA SINGH ) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED:11/10/2013 *AK VERMA* 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 07-10-2013 PS 2. DRAFT PLACED BEFORE AUTHOR 07-10-2013 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER N/A JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. N/A JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 08/10/2013 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *