M/s Manipal Education and Medical Group India Private Limited, Bangalore V. DCIT, Bangalore

ITA 1258/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9382 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 20-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2015
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NOS.1258 TO 1260(BANG) 2015 (ASSESSMENT YEARS : 2010-11 TO 2012-13) M/S MANIPAL EDUCATION AND MEDICAL GROUP INDIA PVT. LTD., NO.70, 2 ND & 3 RD FLOOR, GRACE TOWERS, ABOVE NAVNEETH MOTORS, MILLERS ROAD, BANGFALORE-560 052 PAN NO.AACCM6813A APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(2), BANGALORE RE SPONDENT ASSESSEE BY : SMT SHEETAL BORKAR, ADVOCATE REVENUE BY : SMT. VANDANA SAGAR, CIT DATE OF HEARING : 06-09-2016 DATE OF PRONOUNCEMENT : -09-2016 O R D E R PER SHRI A.K.GARODIA, AM ALL THESE THREE APPEALS ARE FILED BY THE ASAESSEE WHICH ARE DIRECTED AGAINST A COMBINED ORDER OF THE LD.CIT(A)- 11, BANGALORE DATED 30-07-2015 FOR THE ASSESSMENT YEARS : 2010-11 TO 20 12-13. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ALL THESE APPEALS, THE ONLY GRIEVANCE OF TH E ASSESSEE IS REGARDING DISALLOWANCE MADE BY THE AO AND UPHELD BY THE LD.CIT(A) U/S 14A OF THE IT ACT OF RS.16,99,690/- IN AY: 2010 -11,RS.18,03,941/- ITA NOS.1258 TO 1260(BANG)2015 2 FOR AY: 2011-12 AND RS.28,99,172/- FOR AY: 2012-13. THE GROUNDS RAISED IN ALL THE THREE YEARS ARE IDENTICAL EXCEPT THE DIFFERENCE IN AMOUNTS AND HENCE, THE GROUNDS RAISED BY THE ASSESS EE IN ITA NO.1258(B)/2015 FOR AY: 2010-11 ARE REPRODUCED AS U NDER; 1.THE ORDER OF THE LEARNED COMMISSIONER OF IN C O ME TAX (AP P EA LS ) -LL , BANGALORE I S OPPOSED TO LAW AND ON FACTS OF THE CASE . II. A ) THE LEARNED CIT(A)-II , BANGALORE HA S ER R E D IN LAW IN U P HOLDING THE DISALLOWANCE MADE B Y THE ASSESSING OFFIC E R AMOUNT I N G T O R S.16 , 99,69 0 1 - UND E R SE CT I ON 14A OF THE INCOME TA X ACT , 1961 READ W ITH RULE 8D O F IN C O M E T AX RUL ES, 196 2, AS EXPENDITURE PERTAINING TO E X EMPTED INCOME , ON SU O MOTO WIT HO U T A S S I G N I NG AN Y V ALID REASON. B)THE LEARNED CIT(A)-LL , BANGALORE H AS E RRE D ST A T I N G TH A T , APPELLANT FAILED TO DISCHARGE THE ONUS OF PRO V ING T HAT NO E X PENSE S H AVE BE EN I NC U RR ED FOR IN V ESTMENT , INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOM E A ND SH A LL N O T FORM PART OF TOTAL INCOME. C) THE LEARNED CIT(A)-LL , BANGALORE HAS FAILED TO APPRECIATE THAT , THE E NTIRE I NDIRECT E X PENDITURE WERE INCURRED ONLY FOR THE PURP OSE OF BUSINESS AND IS THEREFORE AN ALLOWABLE EXPENSE UNDER INCOME TAX ACT , 1961. D) THE LEARNED CIT(A)-II, BANGALORE HAS O V ERLO OKED DECISIONS OF T H E HO N ' BLE TRIBUNAL IN APPELLANT ' S FOLLOWING CASES . C) MANIPAL PRAK A SHAN PRI V ATE L I M ITED VS. DCIT, CIRCLE - 1 , UDUPI IN IT A NO . 1208 I BANG I 2012 , ORD E R DA TED 3 0 . 8 . 2013 . II) M A N I PAL M E DIA N E TWORK LIM ITED VS . DCIT, C I RCLE - 1 , UDUPI IN IT A N O. 88 9 I BANG I 2013 , ORD E R DA TED 04.3 . 2014 , ASSESSMENT YEAR 20 10-2011. III) MA N I P AL M E DIA N E T W ORK LI MITED VS. DCIT , C I RCLE - 1 , U DUPI IN ITA NO .1 2 66 I BAN G I 2 012 , ORD E R D ATED 25.10 . 2013 , ASSESSMENT YEAR 20 09-2010 . E) T HE L E A R N E D CIT (A) -II , BANGALORE HA S O VE RL OOKED THE FOLLOWING D ECIS IONS RELIED ON B Y TH E A PP ELLA NT . I) CCI LIMI T ED V S . JCIT [250 ITR 291} (K AR) . II) A CIT VS. JINDAL ALUMINIUM LTD. (ITA NO. 7 99 / BANG / 2 012 , DAT E D 30 . 4.2013). III) DCIT VS . A S HI S H JHUNJHUNWALA (ITA NO. 1 8 9 9 / KOL / 2012 , DAT E D 14.5 . 2013). F) THE LEARNED CIT(A)-LL , BANGALORE HAS ERRED IN REL YI NG ON THE DECISION OF THE INCOME TA X APPELLATE TRIBUNAL , BANGALORE BENCH IN THE CAS E OF GMR POW E R CORPORATION LTD . VS . DY . CIT (2014) (TAX PUB(DT) 452 7 ) . ITA NOS.1258 TO 1260(BANG)2015 3 III . THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A N Y OF THE FORGOING GROUNDS. IV . FOR THESE AND ANY OTHER GROUNDS THAT MAY BE URGED B EFORE THE HON'BLE ITAT , IT IS PRAYED THAT THE HON'BLE ITAT MAY ALLOW THE AP PEAL WITH COST . 3. LEARNED AR OF THE ASSESSEE REITERATED THE SAME C ONTENTIONS AS WERE RAISED BEFORE THE CIT(A). 4. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. RELIANCE WAS PLACED ON TWO TRIB UNAL ORDERS RENDERED IN THE CASE OF ACIT VS GOEL INVESTMENT LTD ., REPORTED IN 44 CCH 0213 (LUCKNOW) AND ALSO IN THE CASE OF ACIT VS TRANSFORMERS & RECTIFIERS (IND.)LTD., 32 CCH 0033( AHD.TRIB.). HE SUBMITTED A COPY OF BOTH THESE TRIBUNAL ORDERS. 5. WE HAVE CONSIDERED THE FACTS OF THE PRESENT CAS E AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D THAT THE DISALLOWANCE WAS MADE BY THE AO U/S 14A OF THE IT A CT, READ WITH RULE 8D OF INCOME TAX RULES, 1962 OUT OF ADMINISTRATIVE EXPENSES AND NO DISALLOWANCE WAS MADE BY THE AO OUT OF INTEREST EXP ENDITURE. BUT THERE IS NO FINDING GIVEN BY THE AO OR BY THE CIT(A) AS T O WHETHER THE ASSESSEE HAS INCURRED ADMINISTRATIVE EXPENSES TO TH E EXTENT DISALLOWED BY THE AO IN EACH OF THESE THREE YEARS AND WITHOUT LOOKING INTO THIS ASPECT AS TO WHETHER THE ASSESSEE HAS IN FACT INCUR RED THE ADMINISTRATIVE EXPENSES AND CLAIMED THE SAME AS DED UCTION, NO DISALLOWANCE CAN BE MADE AND IN ANY CASE, THE DISAL LOWANCE MADE BY ITA NOS.1258 TO 1260(BANG)2015 4 THE AO U/S 14A OF THE ACT CANNOT EXCEED THE EXPENSE S CLAIMED BY THE ASSESSEE UNDER VARIOUS HEAD IN THE NATURE OF ADMIN ISTRATIVE EXPENSES BECAUSE SECTION 14A IS A DISALLOWING SECTION IN RES PECT OF THE EXPENSES CLAIMED BY THE ASSESSEE. HENCE, WE FEEL IT PROPER T HAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH DECI SION. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN ALL THE TH REE YEARS AND RESTORE THE ENTIRE MATTER BACK TO THE FILE OF THE AO FOR A FRES H DECISION WITH A DIRECTION THAT HE SHOULD PASS A SPEAKING AND REASON ED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. HE SHOULD GIVE A CLEAR FINDING AS TO HOW MUCH EXPENSES IN THE NATURE OF ADMINISTRATIVE EXPENSES HAS BEEN INCURRED BY THE AS SESSEE IN EACH OF THESE YEARS AND WHETHER THE ASSESSEE IS ABLE TO EST ABLISH OR NOT THAT ANY EXPENDITURE OUT OF THE SAID EXPENSES IS DIRECTL Y RELATABLE TO EARNING OF ANY TAXABLE INCOME AND TO THE EXTENT, THE ASSESS EE IS ABLE TO ESTABLISH THAT THE EXPENSES ARE DIRECTLY RELATED TO EARNING OF TAXABLE INCOME, SUCH EXPENSES CANNOT BE CONSIDERED FOR MAKI NG DISALLOWANCE U/S 14A OF THE IT ACT, 1961 BECAUSE THE DISALLOWANC E U/S 14A CAN BE MADE ONLY TO THE EXTENT OF TOTAL EXPENDITURES WHICH ARE INCURRED BY THE ASSESSEE AND WHICH ARE DIRECTLY RELATABLE TO EARNIN G OF THE TAX FREE INCOME AND THE EXPENSES WHICH ARE COMMON AND ARE NO T HAVING DIRECT NEXUS WITH EARNING OF EITHER THE TAXABLE INCOME OR TAX FREE INCOME, THE DISALLOWANCE HAS TO BE PROPORTIONATE. RULE 8D PRESC RIBES THAT DISALLOWANCE HAS TO BE TO THE EXTENT OF 0.5% OF AVE RAGE INVESTMENT. IN ITA NOS.1258 TO 1260(BANG)2015 5 OUR CONSIDERED OPINION, THIS IS MAXIMUM LIMIT OF TH E DISALLOWANCE AND NOT MINIMUM LIMIT AND THEREFORE, IF THE ACTUAL ADMI NISTRATIVE EXPENSES INCURRED AND CLAIMED AS DEDUCTION IS LESS THAN THE SAME, THE DISALLOWANCE CANNOT BE MORE THAN SUCH ACTUAL EXPENS ES INCURRED AND CLAIMED AS DEDUCTION. THE AO SHOULD PASS NECESSARY ORDER, AS PER LAW AND AS PER THE ABOVE DISCUSSION AFTER PROVIDING REA SONABLE OPPORTUNITY OF BEING HARD TO THE ASSESSEE. 6. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. (VIJAY PAL RAO) (A.K. GARODIA) JUDICAL MEMBER AC C OUNTANT MEMBER BANGALORE: D A T E D : .09.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE ITA NOS.1258 TO 1260(BANG)2015 6 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .