M/s Manipal Technologies Limited, Manipal V. DCIT, Udupi

ITA 1222/BANG/2012

• Counselvise Citation: 122221114 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L V BHASKAR REDDYDR
• Keywords: Business income; Earning of tax free income; Revised return
• Section: 143(3); 14A; 115JB

Judgement Text

ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 1222/BANG/2012 (ASSESSMENT YEAR: 2009-10) MANIPAL TECHNOLOGIES LTD (FORMERLY KNOWN AS MANIPAL PRESS LTD) UDAYAVANI BUILDING, MANIPAL-576104 PAN: AABCM 9516 H VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-1 UDUPI 576 103 (APPELLANT) (RESPONDENT) ASSESSEE BY: MS. SHEETAL BORKAR, ADVOCATE DEPARTMENT BY: SHRI L.V.BHASKAR REDDY,(DR) DATE OF HEARING: 23/07/2014 DATE OF PRONOUNCEMENT: 25/07/2014 O R D E R PER RAJPAL YADAV, J.M. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE LEARNED CIT (A) DATED 30.05.2012 PASSED FOR ASSESSM ENT YEAR 2009-10. THOUGH THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL WHICH FURTHER CONTAINS SUB-GROUNDS ALSO, BUT ITS GR IEVANCE REVOLVES AROUND TWO ISSUES NAMELY: (A) LEARNED CIT (A) ERRED IN LAW IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.35,67,544/- WITH THE AID OF SECTION 14 OF I.T. ACT, 1961, R.W.RULE 8D OF IT RULES, 1962 . ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 2 OF 7 (B) LEARNED CIT (A) ERRED IN CONFIRMING INCLUSION OF TH IS AMOUNT IN THE ADJUSTED BOOK PROFIT COMPUTED FOR THE PURPOSE OF SECTION 115JB. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY HAS FILED ITS RETURN OF INCOME ON 28.09.2009 DECLARING NIL INCOME AND BOOK PROFIT U/S 115JB OF THE I.T. ACT HAS BEEN SHOW N AT RS.17,66,70,618/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) WAS ISSUE D AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF PRINTING ACTIVITIES. WHILE SCRUTINI SING THE ACCOUNT, THE LEARNED ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN INVESTMENT IN SHARES AS ON 31.03.2009 AT RS.12,68,99,367/-. THE ASSESSEE HAD EARNED DIVIDEND INCOME ON THIS INVESTMENT WHICH IS CLAIMED AS EXEMPT U/S 10(3 4). THE ASSESSEE HAS DISALLOWED A SUM OF RS.1,28,507/- FOR EARNING THE EXEMPT INCOME. IN THE OPINION OF THE ASSESSING OFFI CER, THE DISALLOWANCE MADE BY THE ASSESSEE IS NOT IN CONSONA NCE WITH THE SPIRIT OF SECTION 14A R.W. RULE 8D. HE CONFRONTED T HE ASSESSEE AS TO WHY THE DISALLOWNCE MAY NOT BE COMPUTED AS PER R ULE 8D. THE ASSESSEE HAD FILED WRITTEN SUBMISSION WHICH HAS BEE N REPRODUCED BY THE ASSESSING OFFICER ON PAGE-2 OF TH E ASSESSMENT ORDER. THE ASSESSING OFFICER HAS ULTIMATELY ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.6,19,90,114/- DURING THE YEAR. IT HAS DRAWN FROM ITS OD ACCOUNT WITH THE SYNDICATE BANK. THEREFORE, THERE I S A NEXUS WITH THE INTEREST EXPENSES, ASSESSEE INCURRED ON TH E LOAN AVAILED FOR BUSINESS INCOME VIS--VIS ITS INVESTMENT. THE L EARNED ASSESSING OFFICER HAS NOTICED THE DETAILS OF INTERE ST EXPENDITURE ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 3 OF 7 IN PARA 6 & 7 AND ACCORDING TO THE FORMULA PROVIDED IN RULE 8D, HE WORKED OUT THE DISALLOWANCE OF RS.36,96,051/-. S IMILARLY HE MADE ADDITION OF THIS AMOUNT IN THE BOOK PROFIT COM PUTED FOR THE PURPOSE OF SECTION 115JB. 3. APPEAL TO THE CIT (A) DID NOT BRING ANY RELIEF T O THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE LEARNED COUN SEL FOR THE ASSESSEE POINTED OUT THAT IN THE SUBSEQUENT YEAR I. E. ASSESSMENT YEAR 2010-11, SIMILAR DISALLOWANCE WAS MADE IN THE CASE OF THE ASSESSEE. ITAT HAS SET ASIDE THE ORDERS OF THE REVE NUE AUTHORITIES AND REMITTED BACK THE ISSUE TO THE ASSE SSING OFFICER FOR RE-ADJUDICATION. SHE EMPHASISED THAT BOTH THE I SSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THIS ORDER. TH E LEARNED DR ON THE OTHER HAND POINTED THAT IN THIS YEAR, THE AS SESSING OFFICER HAS CONSIDERED THE DETAILS OF INTEREST EXPENSES. HE RECORDED A FINDING THAT THE CLAIM OF THE ASSESSEE FOR DISALLOW ANCE OF RS.1,28,507/- IS BEING NOT SUBSTANTIATED WITH MATER IAL. THUS THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORREC TNESS OF THE ACCOUNT MAINTAINED BY THE ASSESSEE AND HE HAS RIGHT LY APPLIED THE FORMULA PROVIDED IN RULE 8D. WITH REGARD TO SEC OND ISSUE, HE RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFI CER. 5. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CESM, WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY THE TRI BUNAL IN ASSESSMENT YEAR 2010-11 IN ASSESSEES OWN CASE IN I TA ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 4 OF 7 NO.890/BANG/2013. THE FINDINGS RECORDED BY THE TRIB UNAL READ AS UNDER: THIS IS AN APPEAL BY THE ASSESSEE AND IS DIRECTED A GAINST THE ORDER OF THE CIT(A), MYSORE, DATED 14-3-2013 FOR TH E ASSESSMENT YEAR 2010-11. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO U/S 14A OF THE INCOME-TAX ACT, 1961[HEREINAF TER REFERRED TO AS 'THE ACT'] READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 [HEREINAFTER REFERRED TO AS THE RULES ]. THE ASSESSEE HAS ALSO RAISED A GROUND THAT THE CIT(A) H AS ERRED IN NOT CONSIDERING THE FACT THAT THE AO IS NOT JUST IFIED IN MAKING ADDITIONS OF DISALLOWANCE MADE BY HIM U/S 14 A OF THE ACT R.W. RULE 8D OF THE RULES TO THE ADJUSTED BOOK PROFITS COMPUTED U/S 115JB OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY HAD FILED ITS RETURN OF INCOME ON 30-9-2010 DECLARI NG LOSS OF RS.13,52,48,391/- AND BOOK PROFITS U/S 115JB OF RS.5,24,71,734/-. SUBSEQUENTLY, REVISED RETURN WAS FILED ON 30-10-2010 DECLARING THE SAME QUANTUM OF LOSS AS WE LL AS BOOK PROFIT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED FROM THE BALANCE-SHEET OF THE ASSESSEE AS ON 31-3-2010 THAT THE ASSESSEE HAS INVE STED IN SHARES/MUTUAL FUNDS AT RS.19,35,58,090/- ON WHICH D IVIDEND INCOME OF RS.18,30,232/- IS CLAIMED AS EXEMPT U/S 1 0(34) OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE U/S 14A AS EXPENSES INCURRED ON EA RNING OF THE EXEMPT INCOME. THEREFORE, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. THE ASSESSEE FILED ITS REPLY STATI NG THAT THE INVESTMENT IN SHARES OF INDIAN COMPANIES AND THE MU TUAL FUNDS TILL 31-3-2010 IS LESS THAN 15% OF THE NET OW NED FUNDS AND THE BORROWED FUNDS HAD NOT BEEN UTILIZED FOR MA KING THESE INVESTMENTS. THE ASSESSEE CLAIMED THAT NO EX PENSES HAD BEEN INCURRED BY THE ASSESSEE TO EARN INCOME OF RS.18,30,232/- AND THEREFORE NO DISALLOWANCE IS NEC ESSARY. HOWEVER, THE AO, FOLLOWING THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG . CO. LTD. VS. DCIT REPORTED IN 328 ITR 1, HAS HELD THAT DISALLOWANCE U/S 14A HAS TO BE MADE. ACCORDINGLY, HE MADE THE DISALLOWANCE OF A SUM OF RS.83,74,057/- U/S 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES. FURTHER, WH ILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT, TH E AO MADE THE ADDITION OF DISALLOWANCE MADE U/S 14A OF T HE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO AND THE AS SESSEE IS IN SECOND APPEAL BEFORE US. ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 5 OF 7 3. LEARNED COUNSEL FOR THE ASSESSEE, SMT.SHEETAL, WH ILE REITERATING THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT IN THE CASE OF TH E SISTER CONCERN OF THE ASSESSEE VIZ. M/S.MANIPAL MEDIA NETW ORKS LTD., IN ITA NO.889/BANG/2013 DATED 4-3-2014 FOR THE ASSE SSMENT YEAR 2010-11, B BENCH OF THIS TRIBUNAL HAD REMAND ED THE ISSUE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATI ON IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F GODREJ & BOYCE MFG. CO. LTD. (CITED SUPRA). A COPY OF THE S AID ORDER IS PRODUCED BEFORE US. PARA.6 OF THE SAID ORDER IS AS UNDER: 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS, WE FIND THAT THIS TRIBUNAL, IN ITA NO.1266/BANG/2012 DATED 25-10-2013, IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2009-10, HAS CONSIDERE D THE ISSUE AT LENGTH AND AFTER CONSIDERING THE JUDICIAL PRECED ENT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT(SUPRA) AND THE PROVISIONS OF RULE 8D, HAS REMANDED THE ISSUE TO TH E FILE OF THE AO FOR RE-EXAMINATION. THE RELEVANT PORTION OF THE ORDER AT PARA.5.3.5 AT PAGE 7 IS REPRODUCED HEREUNDER: 5.3.5 IN THIS APPEAL, THE DISPUTE IN RESPECT OF THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D IS WITH REGARD TO EXPENDITURE UNDER RULE 8D(2)(II) I.E. EXPENDITURE WHICH IS NOT DIRECTLY ATTRIBUTABLE TO A NY PARTICULAR INCOME OR RECEIPT AND RULE 8D(2)(III) I. E. OTHER INDIRECT EXPENDITURE THAN THAT REFERRED TO IN RULE 8D(2)(I) AND 8D(2)(II). IT IS SEEN FROM THE FACTS ON RECORD THAT THE ASSESSEE HAS NOT DEDUCTED ANY EXPENSES DIRECT OR INDIRECT, WHILE COMPUTING ITS INCOME FROM DIVIDEND INCOME WHICH IS EXEMPT UNDER SECTION 10(34) OF THE ACT. IN THIS REGARD ON A SIMILAR ISSUE, A CO-ORDINATE BE NCH OF THIS TRIBUNAL IN THE CASE OF JINDAL ALUMINIUM LTD. IN ITA NOS.799 & 864/BANG/2012 DT.30.4.2012 CITED BY THE ASSESSEE (SUPRA) HAS HELD THAT IT IS NECESSARY FOR THE ASSESSEE TO POINT OUT HOW EACH ITEM OF EXPENSE DEBI TED TO ITS PROFIT AND LOSS ACCOUNT IS WHOLLY INCURRED F OR THE PURPOSE OF EARNING INCOME WHICH IS TAXABLE AND THER EFORE REMANDED THE MATTER FOR RE-EXAMINATION TO THE FILE OF THE ASSESSING OFFICER. IN THE CASE ON HAND TOO, SIMILA RLY, WE FIND THAT THE POSITION IS THAT THE ASSESSEE HAS MER ELY TAKEN THE STAND THAT IT HAS NOT INCURRED ANY DIRECT OR INDIRECT EXPENDITURE IN EARNING ITS DIVIDEND INCOME WHICH IS EXEMPT UNDER SECTION 10(34) OF THE ACT. WE ARE THEREFORE OF THE VIEW THAT IT WOULD BE IN THE INTER EST OF EQUITY AND JUSTICE IF THE ASSESSEE MAKES ITS CLAIM IN THIS REGARD BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER WILL EXAMINE THE CLAIM OF THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AND AS EXPLAINED IN THE JUDICIAL DECISIONS REFERRED TO (SU PRA). IT IS ORDERED ACCORDINGLY. ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 6 OF 7 SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US ARE SIMILAR, WE REMAND THIS ISSUE BACK TO THE FILE OF T HE AO FOR RE-EXAMINATION WITH SIMILAR DIRECTIONS. THE FIRST GROUND OF APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPO SES. 4. AS REGARDS THE ADDITION OF DISALLOWANCE U/S 14A OF THE ACT, WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE A CT IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE D BENCH OF THE TRIBUNAL AT MUMBAI IN THE CASE OF RELIANCE INDUSTRIAL INFRASTRU CTURE LTD. VS. ADDL.CIT IN ITA NOS.69 & 70/MUM/2009 DATED 5-4- 2013 WHEREIN, BY FOLLOWING THE DECISION OF THE DELHI BEN CH OF THE TRIBUNAL IN THE CASE OF GOETZE (INDIA) LTD,. IT WAS HELD THAT WHILE COMPUTATION OF ADJUSTED BOOK PROFITS, THE PRO VISIONS OF SEC.14A CANNOT BE IMPORTED INTO CLAUSE (F) OF THE E XPLANATION TO SEC.115JB OF THE ACT. COPY OF THE SAID ORDER IS PRODUCED BEFORE US. LEARNED DEPARTMENTAL REPRESENTATIVE, SHRI BALAKRISH NAN, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORI TIES BELOW. 5. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IS A LSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL AT MUMBAI CITED SUPRA. THEREFORE, WE DIRECT THAT THE ADDITION OF DISALLOWANCE MADE U/S 14A CANNOT BE MADE WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THE AO IS DIRECTED ACCORDINGLY. THIS GROUND OF APPEAL IS ACC ORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN ADDITION TO THE ABOVE, WE OBSERVED THAT THE A SSESSING OFFICER HAS TO RECORD A CATEGORICAL FINDING AS TO H OW HE WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE REGARDING THE EXPENDITURE INCURRED FOR EARNING THE EXEMPT INCOME. THE LEARNE D ASSESSING OFFICER SHALL EXAMINE THIS ISSUE AS PER THE OBSERVA TIONS OF THE TRIBUNAL IN ASSESSMENT YEAR 2010-11 AND ALSO CONSID ER THE JUDGMENTS OF THE HON'BLE DELHI HIGH COURT IN THE CA SE OF MAXOPP ITA NO.1222 OF 2012 MANIPAL TECHNOLOGIES LTD MANIPA L. PAGE 7 OF 7 INVESTMENTS LTD V. CIT REPORTED IN 347 ITR 272. WIT H REGARD TO THE 2 ND ISSUE, THERE IS NO DISPARITY ON FACTS. THE DISALLO WANCE MADE U/S 14A CANNOT BE INCLUDED IN THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB. 7. IN VIEW OF THE ABOVE, APPEAL FILED BY THE ASSESS EE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD/- SD/- (JASON P. BOAZ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 25 TH JULY, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE