Assistant Commissioner of Income tax, Pune V. Persistent Systems Pvt.Ltd, Pune

ITA 1232/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4081 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 16-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Assessee Lawyers: DINESH SUPEKAR
• Keywords: Transfer pricing; Earning of tax free income; Question of law; Rule 8D
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO.1232 /PUN/20 17 / ASSESSMENT YEAR : 2013 - 14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 4, PUNE. ....... / APPELLANT / V/S. PERSISTENT SYSTEMS PVT. LTD. BHAGEERATH, 402, SENAPATI BAPAT MARG, PUNE - 411 016 PAN: AABCP1209Q / RESPONDENT . /CO NO. 4 0 /PUN/2019 /ASSESSMENT YEAR : 2013 - 14 (ARISING OUT OF ITA NO . 1 232 /PUN/2017) PERSISTENT SYSTEMS PVT. LTD. BHAGEERATH, 402, SENAPATI BAPAT MARG, PUNE - 411 016 PAN: AABCP1209Q .. / CROSS OBJECT OR / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 4, PUNE. / RESPONDENT 2 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 A SSESSEE BY : SHRI DINESH SUPEKAR REVENUE BY : SHRI ALOK MALVIYA / DATE OF HEARING : 2 5 .0 2 .2020 / DATE OF PRONOUNCEMENT : 28 .02 .2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 13, PUNE DATED 23.02.2017 FOR THE ASSESSMENT YEAR 201 3 - 1 4 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S . 10AA(9) R.W.S 80IA(10) OF THE INCOME TAX ACT, 1961 OF RS.2,33, 23,142/ - WITHOUT APPRECIATING THE FACT T HE ASSESSEE ITSELF IN THE COMPARABLES FURNISHED IN ITS TRANSFER PRICING REPORT HAS SHOWN 'ORDINARY PROFIT' TO BE OF 11.34% (AS OBSERVED BY THE AO IN THE ASSESSMENT ORDER) AS AGAINST THE NET PROFIT MARGIN OF 31.27% SHOWN BY THE ASSESSEE. 2. ON THE FACTS A ND CIRCUMSTANCE OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF DISALLOWANCE MADE U/S . 14A OF THE INCOME TAX ACT READ WITH RULE 8D(2)(II) &(III) OF THE INCOME TAX RULE, 1962 WITHOUT APPRECIATING THE FACT THAT THE AO HAS RECORDED HER DISSATISFA CTION REGARDING THE CLAIM OF THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS. 3. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF DISA LLOWANCE MADE U/S. 14A OF THE INCOME TAX ACT READ WITH RULE 8D(2)(II) OF THE I NCOME TAX RULE, 1962 WITHOUT APPRECIATING THE FACT THAT THE TERM EXPENDITURE FOR APPLICATION OF SECTION 14A OF THE INCOME TAX ACT WOULD INCLUDE NOT ONLY DIRECT EXPENDITURE BUT ALSO ALL FORMS OF EXPENDITURE REGARDLESS OF WHETHER THEY ARE FIXED, VARIABLE, DI RECT, INDIRECT, ADMINISTRATIVE, MANAGERIAL OR FINANCIAL. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF THE ABOVE ISSUE BE HELD TO BE BAD IN LAW AND QUASHED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT PRAYS TO BE ALLOWED TO ADD, MODIFY, RECTIFY, DELETE OR RAISE ANY GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS. 3 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 2. THE ASSESSEE HAS PREFERRED CROSS OBJECTION IN CO NO.40/PUN/2019 FOR ASSESSMENT YEAR 2013 - 14 AGAINST T HE APPEAL FILED BY THE REVENUE. FIRST, WE WOULD TAKE UP REVENUES APPEAL IN ITA NO.1232/PUN/2017 FOR ADJUDICATION. ITA NO.1232/PUN/2017 ( BY REVENUE) A.Y.2013 - 14 3. GROUND NO.1 RAISED IN REVENUES APPEAL PERTAINS TO DELETION OF DISALLOWANCE U/S.10AA(9) R.W.S.80IA(10) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) OF RS.2,33,23,142/ - . 4. THE BRIEF FACTS ON THE ISSUE ARE THAT D URING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS EARNED PROFIT OF 31.27% AS AGAINST THE AVERAGE NET MARGIN OF THE COMPARABLE COMPANIES OF 11.34%. ACCORDING TO THE ASSESSING OFFICER THE AVERAGE NET MARGIN OF THE COMPARABLE COMPANIES OF 11.34% REPRESENTS 'ORDINARY PR OFIT' WHEREAS, THE ASSESSEE 'S NET MARGIN OF 31.27% IS MORE T HAN, ORDINARY PROFIT' WITHIN THE MEANING OF SECTION 10AA(9) R . W . S 80 - IA(1 0). ACCO RDINGLY , THE ASSESSING OFFICER DENIED THE ASSESSEE THE DE DUCTION CLAIMED U/S . 10AA(9) R . W . S 80 - IA(10) OF THE ACT ON THE AMOUNT OF THE NET PRO FIT EQUIVALENT TO TH E DIFFERENCE BETWEEN THE NET MARGI N OF 31.27% AND 11.34% AMOUNTING TO R S.2,33,23,142/ - . 5. DURING THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APPEALS) HAS DELETED THE DISALLOWANCE AND PROVIDED RELIEF TO THE AS SESSEE BY OBSERVING AS 4 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 FOLLOWS: 2.2.2. I DO NOT REPRODUCE THE LEARNED AO S ARGUMENTS AND THE APPELLANT'S AR GUM ENTS ADVANCED BEFORE THE LEARNED AO AND BEFORE ME IN THIS ORDER AS I HAVE DEALT WITH THESE ARGUMENTS IN MY DECISION ON IDENTICAL DISALLOWANCE [SECTION 10A(7) R . W . S 80 - IA(10)] IN THE APPELLANT' APPE AL FOR THE AY 2002 - 03, AY 2006 - 07, AY 2007 - 08, AY 2008 - 09, AY 2009 - 1 0 , AY 2010 - 1 1 AND AY 2011 - 12. FURTHER, THE HONOURABLE ITAT, PUNE IN THE APPELLA NT 'S OWN CASE, VIDE ITS ORDER ITA NO 946 TO 948 / PN / 201 3 ELATED 23.12.2016 HAS DECID ED THE APPE AL IN THE FAVOUR OF THE PERSISTENT SYSTEMS PRIV A TE LIMITED WHEREIN IT WAS HELD THAT A MERE EXISTENCE OF THE CLOSE CONNECTION AND 'MORE THAN ORDINARY PROFITS' ARE NOT ENOUGH TO ASSUME AN ARRANGEMENT AS CONT E MPLATED U/S . 80 - IA (10 ) OF THE ACT. THE ASSESSING OFFICER IS ALSO REQUIRED TO PROVE ANY SUCH ARRANGEMENT EXISTING WHICH RESULTED IN MORE THAN ORDINARY PROFITS. THE LEARNED AO HAS NOT PROVED ANY ARRANGEMENT BETWEEN THE PARTIES IN THE FACTS OF THE CASE. THEREFORE, T HE APPELLANT PRAYED THAT IN VIEW OF THE FAVOURABLE ORDERS OF THE HONOURABLE ITAT AND OF THE CIT(A) IN THE EARLIER YEARS ON THIS GROUND, THE DISALLOWANCE MADE BY THE LEARNED AO U/S.10AA(9) R.W.S.80 - IA(10) BE DELETED. 2.2.3 AS STATED ABOVE, IN MY APPELLAT E ORDER IN THE APPELLANT'S OWN CASE FOR THE AY 2002 - 03, AY 2006 - 07, AY 2007 - 08, AY 2008 - 09, AY 2009 - 10, AY 2010 - 11 AND AY 2011 - 12 AND ALSO IN THE HONOURABLE ITAT, PUNE'S ORDER ITA NO 946 TO 948 / PN / 2013 DATED 23.12.2016 FOR THE AY 2006 - 07 TO 2008 - 09, SIMILAR DISALLOWANCE MADE BY THE LEARNED AO U/S 10A(7) IS DELETED. I DO NOT FIND ANY DIFFERENCE IN THE FACTS OF THIS YEAR REQUIRING RECONSIDERATION OF MY EARLIER .DECISION. THEREFORE, ON SIMILAR GROUNDS, BY FOLLOWING THE ABOVE MENTIONED ITAT PUNE'S DECISIO N AND ALSO MY OWN DECISION IN THE APPELLANT'S CASE FOR THE EARLIER YEARS, I DELETE THE DISALLOWANCE OF RS . 2,33,23,142 / - MADE U/ S . 10AA(9) R.W.S. 80 - IA (10). 6. WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE LD. CIT(APPEALS). IT IS EVIDENT FROM THE FINDINGS OF THE LD. CIT(APPEALS) THAT IDENTICAL DISALLOWANCE MADE IN EARLIER ASSESSMENT YEARS 2009 - 1 0 , 2010 - 1 1 & 2011 - 12 IN ASSESSEES OWN CASE AND THE LD. CIT(APPEALS) HAS PLACED RELIANCE ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.946 TO 948/PN/2013 DATED 23.12.2016 WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE CRUX OF THE DECISI ON OF THE TRIBUNAL HELD IN FAVOUR OF THE ASSESSEE WAS THAT MERE EXISTENCE OF THE CLOSE CONNECTION AND 'MORE THAN ORDINARY PROFITS' 5 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 ARE NOT ENOUGH TO ASSUME AN ARRANGEMENT AS CONTEMPLATED U/S. 80 - IA(10) OF THE ACT. THE ASSESSING OFFICER IS ALSO REQUIRED TO PROVE ANY SUCH ARRANGEMENT EXISTING WHICH RESULTED IN MORE THAN ORDINARY PROFITS. THE LEARNED AO HAS NOT PROVED ANY ARRANGEMENT BETWEEN THE PARTIES IN THE FACTS OF THE CASE. THEREFORE, FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA.), WE ARE OF THE OPINION THAT THE ORDER OF THE LD. CIT(APPEALS) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. HENCE, RELIEF PROVIDED TO TH E ASSESSEE BY THE LD. CIT(APPEALS) IS HEREBY SUSTAINED. THUS, GROUND NO.1 RAISED IN APPEAL BY THE REVENUE IS DISMISSED. 7. GROUND NO S . 2 AND 3 ARE INTERCONNECTED AND THESE GROUNDS PERTAINS TO THE DELETION OF ADDITION OF DISALLOWANCE MADE U/S.14A R.W.R. 8D(2)(II) & (III) OF THE INCOME TAX RULES, 1962. 8. THE BRIEF FACTS ON THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HAS DISALLOWED RS.1,34,39,970 / - UNDER RULE 8 D AGAINST THE EXEMPT DIVIDEND INCOME AND INTEREST INCOME ON TAX FREE BONDS EARNED BY THE ASSESSEE AMOUNTING TO RS. 1 5,52,29,378 / - AND RS .1,06,15,439/ - RESPECTIVELY. THE SAID DISALLOWANCE IS DETAILED AS BELOW: RS.7,75,000/ - UNDER RULE 8D(2)(I) RS.86,416/ - UNDER RULE 8D(2)(II) RS.1,25,78,550/ - UNDER RULE 8D(2)(III) 6 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 OUT OF THE TOTAL AMOUNT OF RS. 1,34,39,970 / - , THE ASSES SEE SUO - MOTTO OFFERED THE DISALLOWANC E OF RS. 7,75,000 / - U/S . 14A R . W . R 8D(2)(I) DURING THE ASSESSMENT PROCEEDINGS. THEREAFTER, ASSESSING OFFICER MADE THE ADDITIONAL DISALLOWANCE U/S . 14A OF RS.1,26,64,970/ - . THE ASSESSING OFFICER ADDED THE TOTAL DISALLOWANCE OF RS.1,34,39,970 TO THE ASSESSEES BOOK PROFIT. 9. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE HAS FILED DETAILED WRITTEN SUBMISSIONS. THE LD.CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, ASSESSMENT ORDER AND FACTS OF THE CASE HELD AS FOLLOWS: 2.3.4 I HAVE CONSIDERED THE FACTS AND ARGUMENTS OF THE APPELLANT. THE APPELLANT HAS STATED THAT IT HAS NOT INCURRED ANY SPECIFIC DIRECT EXPENDITURE TO EARN THE EXEMPT INCOME OF R S.16,58,44,817/ - . THEREFORE, THE LEARNED AO HAS DISALLOWED THE AMOUNT OF RS.1,34,39,970 UNDER RULE 8D. HOWEVER, OUT OF THIS AMOUNT, THE APPELLANT HAS MADE THE DISALLOWANCE AMOUNTING TO RS.7,75,000/ - DURING THE ASSESSMENT PROCEEDING ON SUO - MOTO BASIS. THE A PPELLANT HAS RAISED SEVERAL ARGUMENTS SUPPORTED BY THE NUMBER OF DECISIONS TO ARGUE THAT THE ADDITIONAL DISALLOWANCE MADE BY THE LEARNED AO U/S.14A AMOUNTING TO RS.1,26,64,970/ - (1,34,39,970 - 7,75,000) SHOULD BE DELETED. 2.3.5 THE APPELLANT HAS STATED THAT THE AO HAS TO RECORD DISSATISFACTION OF THE METHOD FOLLOWED BY IT. SECTION 14(2) REQUIRES THE AO TO ARRIVE AT THE SATISFACTION HAVING REGARD TO THE ASSESSEES ACCOUNTS THAT ITS CLAIM OF EXPENSES IS NOT CORRECT. TH E APPELLANT H AS RELIED ON MANY JUDGMENTS IN A RGUMENT. I AGR EE WITH THE APPELLANT THAT THE LEARNED AO HAS NOT RECORDED HIS SATISFACTION TO THE EFFECT THAT THE APPELLANT'S CLAIM OF EXPENDITURE OF A LESSER AMOUNT HAVING REGARD TO IT S ACCOUNTS IS INCORRECT. THE LEARNED AO WITHOUT DISCUSSING THE ISSUE HAS MERELY STATED IN TILE ASSESSMENT ORDER THAT APPROPRIATE DISALLOWANCE SHOULD BE MAD E U/S. 14A ACCORDINGLY, HE HA S DISALLOWED THE ADDITIONAL AMOUNT OF RS 1,26,64,970 U/S 14A. 2.3.6 IT IS SETTLED THAT THE COMPUTATION OF DISALLOWANCE UNDER RULE 8D IS NOT AUTOMATIC BUT AFTER THE AO IS SATISFIED THAT THE APPELLANTS CLAIM IS INCORRECT. IN THIS CASE, THE LEARNED AO OUGHT TO HAVE DISCUSSED AS TO HOW HE CONSIDERS THE APPELLANTS CLAIM OF EXPENDITURE OF A LESSER A MOUNT TO BE INCORRECT. IN THE ABSENCE OF THE SATISFACTION OF THIS MANDATORY PRE - CONDITION FOR INVOKING THE PROVISIONS OF THE RULE 8D, THE DISALLOWANCE MADE BY THE LEARNED AO CANNOT BE SUSTAINED. ACCORDINGLY, I DELETE THE ADDITIONAL DISALLOWANCE OF RS.1,26, 64,970/ - MADE U/S.14A. 7 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 10. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO ANALYZED THE FACTS AND CIRCUMSTANCES IN THIS CASE. THE FACTS ARE THAT THE ASSESSEE HAS STATED, HE HAS NOT INCURRED ANY SPECIFIC DIRECT EXPENDITURE T O EARN THE EXEMPT INCOME OF RS.16,58,44,817/ - . THEREFORE, THE A SSESSING O FFICER HAS DISALLOWED THE AMOUNT OF RS.1,34,39,970 UNDER RULE 8D. HOWEVER, OUT OF THIS AMOUNT, THE ASSESSEE HAS MADE THE DISALLOWANCE AMOUNTING TO RS.7,75,000/ - DURING THE ASSESSMENT PROCEEDING ON SUO - MOTO BASIS. THE ASSESSING OFFICER, HOWEVER, MADE ADDITIONAL DISALLOWANCE AMOUNTING TO RS.1,26,64,970/ - . 10.1 THE ARGUMENT MADE BY THE ASSESSEE BEFORE US IS THAT THE A SSESSING O FFICER HAS TO RECORD DISSATISFACTION OF THE METHOD FOLLOWED BY IT. SECTION 14(2) REQUIRES THE A SSESSING O FFICER TO ARRIVE AT THE SATISFACTION HAVING REGARD TO THE ASSESSEES ACCOUNTS THAT ITS CLAIM OF EXPENSES IS NOT CORRECT. IN SUPPORT OF HIS CONTENTIONS, THE A SSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (2017) 81 TAXMANN.COM 111(SC) WHEREIN THE HONBLE APEX COURT HAS HELD AS FOLLOWS: 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUATION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESSMENT YEAR 2002 - 2003. SUB - SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A FORMULA FOR DETERMINATION OF EX PENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATION IS TO BE MADE ON APPLICATION OF THE F ORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, WHAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSS IBLE TO GENERATE THE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF 8 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAIL ING, WOULD BECOME APPLICABLE. 38. IN THE PRESENT CASE, WE DO NOT FIND ANY MENTION OF THE REASONS WHICH HAD PREVAILED UPON THE ASSESSING OFFICER, WHILE DEALING WITH THE ASSESSMENT YEAR 2002 - 2003, TO HOLD THAT THE CLAIMS OF THE ASSESSEE THAT NO EXPENDITURE W AS INCURRED TO EARN THE DIVIDEND INCOME CANNOT BE ACCEPTED AND WHY THE ORDERS OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS WERE NOT ACCEPTABLE TO THE ASSESSING OFFICER, PARTICULARLY, IN THE ABSENCE OF ANY NEW FACT OR CHANGE OF CIRCUMSTANCES. NEITHER AN Y BASIS HAS BEEN DISCLOSED ESTABLISHING A REASONABLE NEXUS BETWEEN THE EXPENDITURE DISALLOWED AND THE DIVIDEND INCOME RECEIVED. THAT ANY PART OF THE BORROWINGS OF THE ASSESSEE HAD BEEN DIVERTED TO EARN TAX FREE INCOME DESPITE THE AVAILABILITY OF SURPLUS OR INTEREST FREE FUNDS AVAILABLE (RS. 270.51 CRORES AS ON 1.4.2001 AND RS. 280.64 CRORES AS ON 31.3.2002) REMAINS UNPROVED BY ANY MATERIAL WHATSOEVER. WHILE IT IS TRUE THAT THE PRINCIPLE OF RES JUDICATA WOULD NOT APPLY TO ASSESSMENT PROCEEDINGS UNDER THE ACT , THE NEED FOR CONSISTENCY AND CERTAINTY AND EXISTENCE OF STRONG AND COMPELLING REASONS FOR A DEPARTURE FROM A SETTLED POSITION HAS TO BE SPELT OUT WHICH CONSPICUOUSLY IS ABSENT IN THE PRESENT CASE. IN THIS REGARD WE MAY REMIND OURSELVES OF WHAT HAS BEEN O BSERVED BY THIS COURT IN RADHASOAMI SATSANG VS. COMMISSIONER OF INCOME - TAX[6]. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 39. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE SECOND QUESTION FORMULATED MUST GO IN FAVOUR OF THE ASSESSEE AND IT MUST BE HELD THAT FOR THE ASSESSMENT YEAR IN QUESTION I.E. 2002 - 2003, THE ASSESSEE IS ENTITLED TO THE FULL BENEFIT OF THE CLAIM OF DIVIDEND INCOME WITHOUT ANY DEDUCTIONS. THE SPIRIT OF THE JUDGMENT OF THE HONBLE SUPREME COURT ON THE ISSUE IS THAT THE ASSESSING OFFICER OUGHT TO RECORD HIS SATISFACTION TO THE EFFECT THAT ASSESSEES CLAIM OF EXPENDITURE OF LESSER AMOUNT HAVING REGARD TO ITS ACCOUNT IS INCORRECT. IN THIS CASE, THE ASSESSING OFFICER WITHOUT DISCUSSING THE ISSUE HAS MERELY STATED IN T HE ASSESSMENT ORDER THAT APPROPRIATE DISALLOWANCE SHOULD BE MAD E U/S. 14A OF THE ACT AND A CCORDINGLY, DISALLOWED THE ADDITIONAL 9 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 AMOUNT OF RS 1,26,64,970 / - U/S 14A OF THE ACT WHICH WA S DELETED BY THE LD. CIT(APPEALS). 11. TAKING GUIDANCE FROM THE DECISION OF THE HONBLE APEX COURT AND THE REQUIREMENTS OF SECTION 14A(2) OF THE ACT, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) AND RELIEF PROVIDED TO THE ASSESSEE BY THE LD. CIT(APPEALS) IS HEREBY SUST AINED. THUS, GROUND NOS. 2 AND 3 RAISED IN APPEAL BY THE REVENUE ARE DISMISSED. 12. GROUND NOS. 4 AND 5 ARE GENERAL IN NATURE AND HENCE, NO ADJUDICATION IS REQUIRED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. CO NO.40/PUN/2019 ( BY ASSESSEE) A.Y. 2013 - 14 14. IN CROSS OBJECTION (CO NO.40/PUN/2019), THE ASSESSEE HAS RAISED FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, EDUCATION CESS AND SECONDARY & HIGHER EDUCATION CESS OF INR 2,11,88,562/ - P AID ON THE INCOME TAX AND SURCHARGE DURING THE YEAR, OUGHT TO BE ALLOWED AS DEDUCTION WHILE COMPUTING THE TAXABLE INCOME. YOUR RESPONDENT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE THE AFORESAID GROUND OF CROSS OBJECTIONS OR ADD A NEW GROUND OR G ROUNDS OF CROSS OBJECTIONS AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL AS THEY MAY BE ADVISED. 15. THE LD. AR OF THE ASSESSEE SUBMITTED THAT GROUND WITH REGARD TO EDUCATION CESS AND SECONDARY & HIGHER EDUCATION CESS HAS BEEN RAISED FOR 10 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 THE FIRST TIME BEFORE THE TRIBUNAL AND THEY HAVE NOT CLAIMED THIS DEDUCTION IN THE RETURN OF INCOME ALSO. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT SINCE IT IS A LEGAL GROUND, IT DOES NOT REQUIRE ANY FRESH VERIFICATION OF FACTS. THE LD. AR HAS ALS O FILED AN APPLICATION PRAYING FOR ADMISSION OF THIS GROUND BASED ON THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF NTPC VS. CIT REPORTED IN 229 ITR 383 (SC) WHERE THE ITAT IS EMPOWERED TO ADMIT SUCH GROUND. 16. THE LD. DR DID NOT RAIS E ANY OBJECTION WITH REGARD TO ADMISSION OF THE GROUND RAISED IN CROSS OBJECTION BY THE ASSESSEE FOR ADJUDICATION. 17. HAVING HEARD THE SUBMISSIONS OF BOTH THE PARTIES HEREIN, WE FIND THE GROUND RAISED BY ASSESSEE IN CROSS OBJECTION IS LEGAL IN NATURE, HE NCE, THE SAME IS ADMITTED IN LINE WITH THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF NTPC LTD. VS. CIT (SUPRA .) 18. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE OF DEDUCTION OF EDUCATION CESS AND SECONDARY & HIGHER EDUCATION CESS IS SQUARELY COVERED BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S. BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED, ITA NOS.1111 & 1112/PUN/2017 DATED 25.07.2019. 19. HAVING HEARD THE SUB MISSIONS OF THE PARTIES HEREIN, WE FIND THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE 11 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 OF DCIT VS. BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED (SUPRA.), IN FAVOUR OF THE ASSESSEE WHEREIN THE TRIBUNAL ON THE ISSUE HAS HELD AS FOLLOWS: 12. REFERRING TO GROUND NO.4 , THE LD. COUNSEL SUBMITTED THAT THIS GROUND RELATES TO THE ALLOWABILITY OF DEDUCTION IN RESPECT OF THE EDUCATIONAL CESS PAID BY THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THIS ISSUE IS COVERED IN NATURE BY VIRTUE OF THE DECISION OF THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR IN THE CASE OF CHAMBAL FERTILISERS AND CHEMICALS LTD. VS. JCIT, RANGE - 2, KOTA. 13. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND THAT THIS ISSU E IS COVERED ONE BY THE DECISION OF THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR IN THE CASE OF CHAMBAL FERTILISERS AND CHEMICALS LTD. VS. JCIT, RANGE - 2, KOTA WHEREIN SUBSTANTIAL QUESTION OF LAW NO.3 IS RELEVANT IN THIS REGARD (PARA 3) AND THE SAME WAS ADJUDICATED BY THE HONBLE HIGH COURT AT PARA 12 OF THE JUDGMENT. THE HONBLE HIGH COURT ON THIS ISSUE HELD THE SAID QUESTION NO.3 IS ANSWERED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, THE SAID PARAGRAPH IS EXTRACTED AS U NDER: 12. WE HAVE HEARD CONSEL FOR THE PARTIES. ON THE THIRD ISSUE IN APPEAL NO.52/2018, IN VIEW OF THE CIRCULAR OF CBDT WHERE WORD CESS IS DELETED, IN OUR CONSIDERED OPINION, THE TRIBUNAL HAS COMMITTED AN ERROR IN NOT ACCEPTING THE CONTENTION OF THE ASSESSEE. APART FROM THE SUPREME COURT DECISION REFERRED THAT ASSESSMENT YEAR IS INDEPENDENT AND WORD CESS HAS BEEN RIGHTLY INTERPRETED BY THE SUPREME COURT THAT THE CESS IS NOT TAX IN THAT VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE VIE W TAKEN BY THE TRIBUNAL ON ISSUE NO.3 IS REQUIRED TO BE REVERSED AND THE SAID ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE. FROM THE ABOVE, IT IS EVIDENT THAT EDUCATION CESS, WHICH IS NOT DISALLOWABLE ITEM, ON ITS PAYMENT, THE CESS IS AN ALLOWABLE EXPEND ITURE AS PER PROVISION OF SECTION 40(A)(II) OF THE ACT. CONSIDERING THE SETTLED NATURE OF THE ISSUE AS PER THE RATIO LAID DOWN IN THE ABOVE REFERRED CASE BY THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR, GROUND OF CROSS OBJECTION NO.4 IS ALLOWED . RESPECTFULLY, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL, PUNE IN THE ABOVE REFERRED CASE, WE ALLOW THIS GROUND IN FAVOUR OF THE ASSESSEE. THUS, GROUND RAISED IN CROSS OBJECTION BY THE ASSESSEE IS ALLOW ED. 12 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 20. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSESSEE IN CO NO.40/PUN/2019 IS ALLOWED. 21. IN THE COMBINED RESULT, APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED ON 28 TH DAY OF FEBRUARY , 20 20 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 28 TH FEBRUARY , 2020. SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS) - 13, PUNE. 4. THE PR. CIT - 2, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 13 ITA NO. 1232/PUN/2017 CO NO.40/PUN/2019 A.Y . 2013 - 14 DATE 1 DRAFT DICTATED ON 25 .02 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 26 . 0 2 .20 20 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER