Jubilant Enpro P. Ltd., Noida V. ACIT, Circle- 1, Noida

CO 194/DEL/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 4053 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 11-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 3485/DEL/2014 AY: 2010 - 11 ACIT, CIRCLE 1 NOIDA 201 301 VS . M/S JUBILANT ENPRO P LTD. PLOT NO.1 - A SECTOR 16 A NOIDA 201 301 PAN: AAACE0653L CROSS OBJECTION NO. 194/DEL/2017 (IN ITA NO. 3485/DEL/2014) AY: 2010 - 11 M/S JUBILANT ENPRO P LTD. PLOT NO.1 - A SECTOR 16 A NOIDA 201 301 PAN: AAACE0653L VS . ACIT, CIRCLE 1 N OIDA (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. AMIT JAIN, SR.D.R. ASSESSEE BY : SH. GAURAV JAIN, ADV. & SH. ADITYA VOHRA, ADV. DATE OF HEARING : 04 TH JULY, 2018 DATE OF PRONOUNCEMENT : 16 TH A UGUST , 2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF LD.CIT(A), NOIDA DATED 18.03.2014 FOR A.Y. 2010 - 11 AND ASSESSEE HAS FILED CROSS OBJECTIO NS, ON THE FOLLOWING GROUNDS. ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 2 GROUNDS IN REVENUE S APPEAL: 1 . THE CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.5,79,60,145/ - MADE ON ACCOUNT OF DUTY CREDIT SCRIPS RECEIVED BUT NOT UTILIZED, BY FOLLOWING THE ORDER OF CIT(A)VII , DELHI WHO HAD HIMSELF RELIED ON THE DECISION OF HON BLE APEX COURT IN GODHRA ELECTRICITY CO. LTD. VS C1T[1997] 225 ITR 746, A CASE WHEREIN THE ISSUE DEALT WITH IS NOT EVEN DISTANTLY SIMILAR TO THE ONE INVOLVED IN THIS CASE. 2. THE CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.5,79,60,145/ - MADE ON ACCOUNT OF DUTY CREDIT SCRIPS RECEIVED BUT NOT UTILIZED BY NOT APPRECIATING THAT SUCH DUTY CREDIT SCRIPS FETCH FREE FOREIGN EXCHANGE TO THE ASSESSEE AND SUCH SCRIPS ARE CASH ASSISTAN CE RECEIVED BY THE ASSESSEE AND ARE THEREFORE TAXABLE IN TERMS OF THE PROVISIONS OF CLAUSE (III B) OF SECTION 28 OF THE I.T. ACT., 1961. 3. THAT THE CIT (A) HAS ERRED IN LAW AND ON FACTS BY IGNORING THE FINDINGS RECORDED BY THE ASSESSING OFFICER THAT THE D EPRECIATION ON COMPUTER PERIPHERALS IS ALLOWABLE @ 15% AND NOT AT 60% AS CLAIMED BY THE ASSESSEE. 4. THAT THE APPELLANT CRAVES TO LEAVE, ADD, ALTER AND AMEND ANY OF THE GROUNDS OF APPEAL ON OR BEFORE HEARING. 5. THAT THE ORDER OF CIT (APPEALS) BEING ERRONE OUS IN LAW AND ON FACTS DESERVES TO BE SET ASIDE/CANCELLED AND THE ORDER OF THE AO TO BE RESTORED. GROUNDS IN CROSS OBJECTION : C.O. 194/DEL/2017 (IN ITA 3485/DEL/2014) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, SUO MOTU DISALLOWANCE O F RS. 23.85 CRORES MADE BY THE RESPONDENT UNDER SECTION 14A OF THE INCOME - TAX ACT, 1961 ( THE ACT ) DESERVES TO BE DELETED SINCE SUBSTANTIAL INVESTMENTS HELD BY THE RESPONDENT, AS AT THE END OF THE RELEVANT YEAR, WERE IN GROUP CONCERNS/ SUBSIDIARY COMPANIES , WHICH WERE MADE TO ACQUIRE CONTROLLING INTEREST OR TO SERVE BUSINESS INTERESTS OF THE ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 3 RESPONDENT, INCOME FROM WHICH IS OUTSIDE THE PURVIEW OF DISALLOWANCE UNDER THE SAID SECTION. 2. WITHOUT PREJUDICE, THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, SUO MOTU DISALLOWANCE MADE BY THE RESPONDENT UNDER SECTION 14A OF THE ACT OUGHT TO HAVE BEEN RESTRICTED TO RS. 3.17 CRORES, BEING THE AMOUNT OF EXEMPT DIVIDEND INCOME EARNED BY THE RESPONDENT DURING THE RELEVANT PREVIOUS YEAR. THE RESPONDENT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY FROM T HE ABOVE GROUNDS AT OR BEFORE THE TIME OF HEARING. 2. AT THE OUTSET LD.AR SUBMIT THAT IDENTICAL ISSUE HAS BEEN DECIDED BY COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2006 - 07 IN ITA 4032/DEL/2 011 VIDE ORDER DT. 24.03.2017, WHEREIN IT HAS BEEN HELD AS UNDER. 88. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS AND JUDICIAL DECISION PLACED BEFORE US. 89. ON PERUSAL OF THE SAME, IT IS OBSERVED THAT ASSESSEE HAD NOT UNDE RTAKEN ANY IMPORT OF GOODS DURING YEARS UNDER CONSIDERATION WHICH IS AN ADMITTED POSITION. IN OUR CONSIDERED VIEW, INCOME DOES NOT ACCRUE UNTIL IMPORTS ARE MADE AND RAW MATERIALS ARE CONSUMED BY ASSESSEE. LD.DR HAS NOT BROUGHT ANY MATERIAL CONTRARY ON REC ORD SO AS TO DEVIATE FROM FINDINGS OF LD.CIT(A). RESPECTFULLY, FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES P LTD. (SUPRA), WE ARE INCLINED TO DISMISS THIS GROUND RAISED BY REVENUE. ACCORDINGLY THE APPEAL FILED B Y REVENUE STANDS DISMISSED. 2.1. IT IS OBSERVED FROM THE SUBMISSIONS ADVANCED BY BOTH THE SIDES THAT THIS FACTUAL DIFFERENCE BETWEEN THE YEAR UNDER CONSIDERATION VIS - A - VIS ASSESSMENT YEAR 2006 - 07. HAS NOT BROUGHT ANY MATERIAL CONTRARY TO THE RECORD SO AS T O DEVIATE FROM THE AFORESAID FINDINGS OF COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2006 - 07. ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 4 RESPECTFULLY, FOLLOWING THE SAME WE DISMISS GROUND NO.1 RAISED BY REVENUE. 3. GROUND NO.2 RAISED BY REVENUE RELATES TO DEPRECIAT ION A T 60% OF COMPUTER PERIPHERALS. AT THE OUTSET BOTH THE PARTIES SUBMIT THAT THE ISSUE STANDS COVERED BY DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD . REPORTED IN 258 ITR 47 (DEL.) WHEREIN IT HAS BEEN HELD AS UNDER : 4. WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS, PRINTERS, SCANNERS AND SERVER ETC. FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT, THE COMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WIT HOUT THE COMPUTER. CONSEQUENTLY, AS THEY ARE THE PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60%. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS GROUND RAISED BY REVENUE. IN THE RESULT, APPEAL FILED BY REVENUE ST ANDS DISMISSED. 4. CROSS OBJECTION FILED BY ASSESSEE IS REGARDING RESTRICTING SUO MOTO DISALLOWANCE MADE BY ASSESSEE UNDER SECTION 14 A AT RS. 3.17 CRORES, BEING AMOUNT OF EXEMPT INCOME EARNED BY ASSESSEE DURING YEAR UNDER CONSIDERATION. 4.1. LD.AR, RELY ING UPON DECISION OF HON BLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER COMPANY LTD VS. CIT REPORTED IN (1998) 2 2 9 ITR 383 , SUBMITTED THAT BOTH ASSESSEE AS WELL AS REVENUE CAN RAISE A QUESTION BEFORE THIS TRIBUNAL FOR THE 1 ST TIME, SO LONG AS THE RELE VANT FACTS ARE ON RECORD. REFERRING TO THE ASSESSMENT ORDER, AND THE DISCUSSION MADE REGARDING SUO MOTO ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 5 DISALLOWANCE MADE BY ASSESSEE UNDER SECTION 14A, LD.AR SUBMITTED THAT THE CROSS OBJECTION IS MAINTAINABLE EVEN THOUGH THE ORDER OF LD.CIT (A) ARE ON DIF FERENT GROUNDS. 4.2. IN RESPECT OF THE MERITS OF THE ADDITION WAS CONCERNED LD. AR SUBMITTED THAT BY VIRTUE OF DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF J OINT I NVESTMENTS PVT.LTD ., REPORTED IN (2015) 59 TAXMANN.COM 295 , SUBMITTED THAT DISALLOWANCE IF ANY , THAT COULD BE MADE UNDER SECTION 14 A COULD NOT EXCEED EXEMPT INCOME EARNED BY THE ASSESSEE. ANOTHER GROUND RAISED IN THE CROSS OBJECTION IS REGARDING EXCLUSION OF THE INVESTMENTS MADE BY ASSESSEE IN THE GROUP CONCERNS/SUBSIDIARY S WHICH WERE MADE TO ACQUIRE CONTROLLING INTEREST TO SERVE BUSINESS INTEREST OF ASSESSEE. IT HAS BEEN SUBMITTED THAT SUCH INVESTMENTS WOULD FALL OUTSIDE THE PURVIEW OF SECTION 14 A. 4.3. ON THE CONTRARY LD. DR SUBMITTED THAT ASSESSEE CANNOT RACE THIS ARGUMENT AT THIS STAGE AS IT NEITHER ORIGINATES FROM THE ORDER OF THE AUTHORITIES BELOW. IT WAS FURTHER SUBMITTED BY LD. DR THAT ASSESSEE HAD MADE SUO MOTO DISALLOWANCE OF RS.23,85,68,748/ - , WHICH WAS ACCEPTED BY ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS. LD. DR O BJECTED TO THE PRESENT CROSS OBJECTION OF THE ASSESSEE BY SUBMITTING THAT THE GROUNDS RAISED IN THE CROSS OBJECTION TO NOT ARISE OUT OF THE ORDER OF LD. CIT (A). WE HAVE CONSIDERED RIVAL CONTENTIONS RAISED BY BOTH THE SIDES IN THE LIGHT OF VARIOUS DECISION S OF HON BLE SUPREME COURT AND HON BLE HIGH COURTS . 4.4. IT IS OBSERVED THAT DURING THE YEAR ASSESSEE EARNED EXEMPT INCOME OF RS.3,17,92,844/ - AGAINST WHICH , A SUM OF ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 6 RS.23,85,68,748/ - , WAS OFFERED TO TAX AS DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D. LD. AO PASSED ASSESSMENT ORDER , BY MAKING ADDITIONS IN THE HANDS OF ASSESSEE ON OTHER ISSUES, AGAINST WHICH ASSESSEE HAD FILED APPEAL BEFORE LD. CIT(A). LD.CIT (A) GRANTED RELIEF TO ASSESSEE ON CERTAIN ISSUES AGAINST WHICH REVENUE PREFERRED APPEAL BEFORE THIS TRIBUNAL. 4.5. A CROSS OBJECTION HAS BEEN FILED BY ASSESSEE IN THE APPEAL FILED BY REVENUE . THE ISSUE RAISED IN THE CROSS OBJECTION IS REGARDING RESTRICTING DISALLOWANCE UNDER SECTION 14 A TO THE EXTENT OF EXEMPT INCOME AND TO EXCLUDE THE INVESTMENT S MADE BY TENETS GROUP CONCERNS/SUBSIDIARY COMPANIES WHICH WERE MADE TO ACQUIRE CONTROLLING INTEREST OR TO SERVE THE BUSINESS INTEREST OF ASSESSEE. 4.6. IT IS ALSO OBSERVED THAT REVENUE FILED APPEAL ON 06/06/14 . A SSESSEE HAS STATED TO HAVE RECEIVED INTIMAT ION OF APPEAL FILED BY REVENUE ON 11/09/17. IT IS THEREAFTER THAT PRESENT CROSS OBJECTION HAS BEEN FILED BY ASSESSEE ON 26/09/17. LD.COUNSEL THUS SUBMITTED THAT THERE IS NO DELAY IN FILING PRESENT CROSS OBJECTION , AS IT IS FILED WITHIN 30 DAYS OF RECEIPT O F INTIMATION OF APPEAL BEING FILED BY REVENUE. 4.7. ON PERUSAL OF DECISION OF HON BLE BOMBAY HIGH COURT IN CASE OF B.R BA M SI VS. CIT , REPORTED IN 83 ITR 223 , IT IS OBSERVED THAT HON BLE COURT RELYING UPON VIEW S TAKEN BY VARIOUS H IGH C OURTS OBSERVED AS UND ER : THE ONLY QUESTION IS WHETHER THE TRIBUNAL WAS ENTITLED IN LAW TO REFUSE TO ALLOW THE ASSESSEE TO URGE THAT GROUND IN THE APPEAL BEFORE IT. NOW A DIVISION BENCH OF THIS HIGH COURT IN COMMISSIONER ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 7 OF INCOME - TAX V. HAZARIMAL NAGJI & CO. [1962] 46 ITR 1168 (BOM.), AFTER CONSIDERING THE RELEVANT SECTIONS OF THE INCOME - TAX ACT AND THE RELEVANT RULES MADE THEREUNDER, HELD THAT THE POWERS OF THE APPELLATE TRIBUNAL ARE SIMILAR TO THE POWERS OF AN APPELLATE COURT UNDER THE CIVIL PROCEDURE CODE. IT HAS FURTHER HELD THAT THE RESPONDENT IN AN APPEAL IS UNDOUBTEDLY ENTITLED TO SUPPORT THE DECREE WHICH IS IN HIS FAVOUR ON ANY GROUNDS WHICH ARE AVAILABLE TO HIM, EVEN THOUGH THE DECISI ON OF THE LOWER COURT IN HIS FAVOUR MAY NOT HAVE BEEN BASED ON THOSE GROUNDS. IT HAS FURTHER HELD THAT IF THE APPELLANT IN HIS CHALLENGE TO THE DECREE OF THE LOWER COURT IS ENTITLED TO TAKE A NEW GROUND NOT AGITATED IN THE COURT BELOW BY LEAVE OF THE COURT , THERE APPEARS TO BE NO REASON WHY A RESPONDENT IN SUPPORT OF THE DECREE IN HIS FAVOUR PASSED BY THE LOWER COURT SHOULD NOT BE ENTITLED TO AGITATE A NEW GROUND AND SUBJECT TO THE SAME LIMITATION. A DIVISION BENCH OF THE ALLAHABAD HIGH COURT HAS TAKEN A SI MILAR VIEW IN KANPUR INDUSTRIAL WORKS V. COMMISSIONER OF INCOME - TAX [1966] 59 ITR 407 (ALL.). THAT JUDGMENT HAS CONSIDERED THE POSITION OF AN APPEAL UNDER SECTION 33 OF T HE INCOME - TAX ACT ALONG WITH THE RELEVANT RULES AND THAT OF AN APPEAL UNDER THE CODE OF CIVIL PROCEDURE AND THE PROVISIONS OF ORDER XLI, RULE 22. THE JUDGMENT HOLDS THAT WHEN THE DEPARTMENT FILES AN APPEAL FOR AN INCREASE IN THE ASSESSED INCOME, THE SUBJEC T - MATTER OF THE APPEAL IS THE INCREASE CLAIMED BY THE DEPARTMENT AND THE ASSESSEE CAN URGE ANY GROUND OF DEFENCE EVEN THOUGH IT MIGHT HAVE BEEN REJECTED BY THE APPELLATE ASSISTANT COMMISSIONER FOR SHOWING THAT THERE SHOULD BE NO INCREASE. IT HAS FURTHER HE LD THAT THAT THE ASSESSEE IS NOT LIABLE TO BE ASSESSED AT ALL IS A GROUND FOR SHOWING THAT THERE SHOULD BE NO FURTHER ASSESSMENT AND THE ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 8 DEPARTMENT'S APPEAL CAN THEREFORE BE RESISTED ON THAT GROUND AND THAT THERE IS NO INCONGRUITY IN MAINTAINING THE ASSESS MENT ORDER PASSED AGAINST THE ASSESSEE AND YET REFUSING TO INCREASE IT ON THE GROUND THAT HE WAS NOT LIABLE TO BE ASSESSED AT ALL. THE JUDGMENT POINTS OUT HOWEVER THAT IF THE TRIBUNAL ACCEPTS THE GROUND OF DEFENCE THAT THE ASSESSEE WAS NOT LIABLE TO BE ASS ESSED, IT CAN ONLY REFUSE TO INCREASE THE ASSESSED INCOME AS ONLY SUCH AN ORDER WOULD BE WITHIN THE SCOPE OF THE APPEAL FILED BY THE DEPARTMENT AND ANY OTHER ORDER SUCH AS ANNULLING THE ASSESSMENT WOULD BE OUTSIDE THE SCOPE OF THE APPEAL. THAT JUDGMENT HOL DS THAT THE POSITION OF AN APPEAL UNDER SECTION 33 OF THE INCOME - TAX ACT AND AN APPEAL UNDER THE CODE OF CIVIL PROCEDURE IS IDENTICAL. A FULL BENCH OF THE MADRAS HIGH COURT HAS IN VENKATA RAO V. SATYANARAYANAMURTHY ILR 1944 MAD. 147; AIR 1943 MAD. 698 [FB] , HELD THAT IT WAS OPEN TO A RESPONDENT IN APPEAL WHO HAD NOT FILED CROSS - OBJECTION WITH REGARD TO THE PORTION OF THE DECREE WHICH HAD GONE AGAINST HIM TO URGE IN OPPOSITION TO THE APPEAL OF THE PLAINTIFF A CONTENTION WHICH IF ACCEPTED BY THE TRIAL COURT W OULD HAVE NECESSITATED THE TOTAL DISMISSAL OF THE SUIT, BUT THE DECREE IN SO FAR AS IT WAS AGAINST HIM WOULD STAND. RATIO LAID ON BY HON BLE BOMBAY HIGH COURT IN CASE OF B.R BA M SI VS. CIT (SUPRA ) , SUPPORTS THE ARGUMENT ADVANCED BY LD.AR. WE ARE THEREFORE INCLINED TO CONSIDER THE PLEA OF ASSESSEE BY SETTING ASIDE THE ISSUE BACK TO LD.AO FOR RE - COMPUTATION O F DISALLOWANCE UNDER SECTION 14 A HAVING REGARDS TO THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF MAXXOP INVESTMENTS LTD VS CIT REPORTED IN (2018) 91 TAXMAN.COM 15 4. IN CASE THE DISALLOWANCE SO COMPUTED EXCEEDS THE EXEMPT INCOME, LD. AO IS ALSO DIRECTED ITA 3485/D EL/2014 ACIT VS. JUBILANT ENPRO P LTD. (A.Y. 2010 - 11) AND C.O.194/DEL/17 9 TO RESTRICT THE DISALLOWANCE TO RS.3.17 CRORES, BEING THE AMOUNT OF EXEMPT INCOME EARNED BY ASSESSEE DURING YEAR UNDER CONSIDERATION. ACCORDINGLY , GR OUNDS RAISED BY ASSESSEE IN CROSS OBJECTION STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED AND CROSS OBJECTION BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/08/2018. SD/ - SD/ - (N.K. BILLAIYA ) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 16 TH AUGUST , 2018 M ANGA COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES