TWINKE ENVIRO TECH LTD, MUMBAI V. ACIT CEN CIR 14, MUMBAI

ITA 1754/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92899 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 15-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Audit objection; Retrospective amendment; Question of law; Wholly owned subsidiary; Tax effect
• Section: 14A; 260A; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 2099 - 2 1 04 / MUM/20 1 3 ( / ASSESSMENT YEAR S : 200 5 - 06 TO 2010 - 11 ) DCIT, CENTRAL CIRCLE - 14 , MUMBAI VS. M/S TWINKLE ENVIRO TECH LTD., 317/318, PARVATI INDL. ESTATE, S UNMILL COMPOUND, LOWER PAREL (WEST), MUMBAI - 400013 ./ ./ PAN/GIR NO. : A A ACT 4038 N ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 175 2 TO 1754 / MUM/20 13 ( / ASSESSMENT YEARS :200 8 - 09 TO 2010 - 2011 ) M/S TWINKLE ENVIRO TECH LTD., 317/318, PARVATI INDL. ESTATE, SUNMIL L COMPOUND, LOWER PAREL (WEST), MUMBAI - 400013 VS. DCIT, CENTRAL CIRCLE - 14, MUMBAI ./ ./ PAN/GIR NO. : A AACT 4038 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : SHRI HIRO RAI / DATE OF HEARING : 1 5 /0 6 / 2015 / DATE OF PRONOUNCEMENT 15/06 /2015 / O R D E R PER BENCH : ITA NO.2099 - 2104/MUM/2013(AY 2005 - 06 TO 2010 - 11) : THESE ARE THE APPEALS FI LED BY THE REVENUE AGAINST THE ORDER CIT (A), FOR THE ASSESSMENT YEAR S 2005 - 06 TO 2010 - 11 , IN THE MATTER OF ORDER PASSED U/S.1 43 (3) R.W.S.153A OF THE INCOME TAX ACT. ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 2 2 . LD. AR, AT THE OUTSET, SUBMITTED THAT THE TAX EFFECT IN THE APPEALS OF THE REVENUE IS LE SS THAN RS.4 LAKHS, WHICH ARE NOT MAINTAINABLE AS PER THE CBDT CIRCULAR NO. 5/2014 ISSUED ON 10 - 7 - 2014 . 3. LD. DR ALSO AGREED THAT THE TAX EFFECT IN THESE APPEALS OF REVENUE ARE LESS THAN RS.4 LAKHS. 4. I N VIEW OF THE RECENT INSTRUCTION NO. 5/2014 ISSUED BY CBDT ON 10 - 7 - 2014 REVISING MONETARY LIMITS FOR FILING OF APPEAL BEFORE ITAT FIXING THE TAX EFFECT LIMIT OF RS. 4 LACS, THE SAME IS NOT MAINTAINABLE AND LIABLE TO BE DISMISSED IN LIMINE. THE ONLY ISSUE NOW REMAINS BEFORE US IS, WHETHER, THESE APPEAL S OF REVENUE, WHICH ARE BELOW THE PRESCRIBED LIMIT OF TAX EFFECT IN VIEW OF THE BOARD'S INSTRUCTION NO.5/2014 ISSUED ON 10 - 7 - 2014 REVISING THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPARTMENT BEFORE ITAT ARE MAINTAINABLE OR NOT. 5. WE HAVE CONSIDERED T HE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. P.S. JAIN & CO. (2011) 335 ITR 591 HAS HELD AS UNDER: 'THIS COURT CAN VERY WELL TAKE JUDICIAL NOTICE OF THE FACT THAT BY PASSAGE OF TIME MONEY VALUE HAS GONE DOWN, THE COST OF LITIGATION EXPENSE S HAS GONE UP, THE ASSESSEES ON THE FILE OF THE DEPARTMENTS HAVE BEEN INCREASED CONSEQUENTLY, THE BURDEN ON THE DEPARTMENT HAS ALSO INCREASED TO A TREMENDOUS EXTENT. THE CORRIDORS OF THE SUPERIOR COURTS ARE CHOCKED WITH HUGE PENDENCY OF CASES. IN THIS VIEW OF THE MATTER, THE BOARD HAS RIGHTLY TAKEN A DECISION NOT TO FILE REFERENCES IF THE TAX EFFECT LESS THAN RS. 2 LAKHS. THE SAME POLICY FOR OLD MATTERS NEEDS TO BE ADOPTED BY THE DEPARTMENT. IN OUR VIEW, THE BOARD'S CIRCULAR DATED 27 - 3 - 2000 IS VERY MUCH APP LICABLE EVEN TO THE OLD REFERENCES WHICH ARE STILL UNDECIDED. THE DEPARTMENT IS NOT JUSTIFIED IN PROCEEDING WITH THE OLD REFERENCES WHEREIN THE TAX IMPACT IS MINIMAL. THUS, THERE IS NO JUSTIFICATION TO PROCEEDS WITH DECADES OLD REFERENCES HAVING NEGLIGIBLE TAX EFFECT.' ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 3 6. SIMILARLY, HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SURESHCHANDRA DURGAPRASAD KHATOD (HUF) (2014) 363 ITR 556/(2013) 214 TAXMAN 59 HAS SPECIFICALLY CONSIDERED INSTRUCTION NO. 3/2011 AND HELD THAT THE SAME WOULD APPLY TO PENDING CAS ES AS WELL EVEN THOUGH THERE WAS A SPECIFIC CONDITION IN THAT INSTRUCTION ALSO THAT THE SAME WOULD APPLY TO APPEALS FILE ON OR AFTER FEBRUARY, 2011. HON'BLE HIGH COURT HAS CONSIDERED THIS ISSUE AS UNDER: '6. THE QUESTION ABOUT APPLICABILITY OF INSTRUCTION NO.3 OF 2011 HAD BEEN CONSIDERED AND DECIDED BY THE AURANGABAD BENCH OF THE BOMBAY HIGH COURT IN TAX APPEAL NO. 78 OF 2007, THE COMMISSIONER OF INCOME TAX V. SMT. VIJAYA V. KAVEKAR DECIDED ON 29 - 7 - 2011. THE DIVISION BENCH, AFTER CONSIDERING EARLIER INSTRU CTIONS AND VARIOUS DECISIONS OF THE COURTS ON INSTRUCTIONS, RELYING ON THE DECISION IN COMMISSIONER OF INCOME TAX V. MADHUKAR K. INAMDAR (HUF) (2010) 229 CTR (BOM) 77 , HAS HELD IN PARAGRAPHS 9, 10, 11, 14 AND 17 AS UNDER: '9. AS STATED EARLIER, THE INCOME TAX ACT WAS AMENDED AND SECTION 268A HAS BEEN INTRODUCED ON THE STATUTE BOOK WITH RETROSPECTIVE EFFECT. SECTION 268A CARVES OUT AN EXCEPTION FOR FILING OF APPEALS AND REFERENCES UNDER SECTION 260 A OF THE ACT. THE LEGISLATURE HAS PRESCRIBED THAT THE CBDT I S EMPOWERED TO ISSUE CIRCULARS AND INSTRUCTIONS FROM TIME TO TIME, WITH REGARD TO FILING OF APPEALS DEPENDING ON THE TAX EFFECT INVOLVED. THEREAFTER, IN 2008, CBDT INSTRUCTION NO. 5 OF 2008 DATED 15 - 5 - 2008 WAS ISSUED. THIS COURT IN THE CASE OF ' COMMISSIONE R OF INCOME TAX V. MADHUKAR K. INAMDAR (HUF) (2010) 229 CTR (BOM) 77 , INTERPRETED THE AFORESAID CIRCULAR. THE CIRCULAR WAS ISSUED IN SUPERSESSION OF ALL EARLIER INSTRUCTIONS ISSUED BY THE BOARD. THE MONETARY LIMIT WAS INCREASED AND APPEALS WERE TO BE FILED UNDER SECTION 260A, THEREAFTER, ONLY IN CASES WHERE THE TAX EFFECT EXCEEDED RS. 4 LACS. PARAGRAPH 11 OF THAT INSTRUCTION STIPULATED THAT IT WAS APPLICABLE TO APPEALS FILED ON OR AFTER 15 - 5 - 2008. IT WAS FURTHER PROVIDED THAT IN CASES, WHERE APPEALS WERE FI LED BEFORE 15 - 5 - 2008, THEY WOULD BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT WHICH WERE OPERATIVE AT THE TIME WHEN SUCH APPEALS WERE FILED. THE INSTRUCTION WAS ISSUED UNDER SECTION 268A(1) OF THE ACT. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE REVENUE IN THAT CASE WAS, THAT THE INSTRUCTION ISSUED ON 15 - 5 - 2008 DID NOT PRECLUDE THE DEPARTMENT FROM CONTINUING WITH THE APPEALS AND/OR PETITIONS FILED PRIOR TO 15 - 5 - 2008, IF THEY INVOLVED A SUBSTANTIAL QUESTION OF LAW OF A RECURRING NATURE, NOTWITHSTANDING TH E FACT THAT THE TOTAL CUMULATIVE TAX EFFECT INVOLVED IN THE APPEALS WAS LESS THAN RS. 4 LACS. IT WAS SUBMITTED, SUCH APPEALS WHICH ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 4 WERE FILED PRIOR TO THE ISSUANCE OF INSTRUCTION AND WHERE SUBSTANTIAL QUESTIONS OF LAW WERE RAISED, WERE REQUIRED TO BE DECID ED ON MERITS. THE COURT, WHILE CONSIDERING THE ISSUE OBSERVED THAT PARAGRAPH 5 OF THE CIRCULAR MADE IT CLEAR THAT NO APPEALS WOULD BE FILED IN THE CASES INVOLVING TAX EFFECT LESS THAN RS. 4 LACS NOTWITHSTANDING THE ISSUE BEING OF RECURRING NATURE. RELYING ON THE JUDGEMENT IN CIT V. POLYCOTT CORPORATION , THE COURT OBSERVED AS FOLLOWS: '6 THE AFORESAID JUDICIAL VERDICT MAKES IT CLEAR THAT THE CIRCULAR DT. 15 - 5 - 2008 IN GENERAL AND PARA (5) THEREOF IN PARTICULAR LAY DOWN THAT EVEN IF THE SAME ISSUE, IN RESPECT OF SAME ASSESSEE, FOR OTHER ASSESSMENT YEARS IS INVOLVED, EVEN THEN THE DEPARTMENT SHOULD NOT FILE APPEAL, IF THE TAX EFFECT IS LESS THAN RS. 4 LAKHS. IN OTHER WORDS, EVEN IF THE QUESTION OF LAW IS OF RECURRING NATURE EVEN THEN, THE REVENUE IS NOT EXPECTED TO FILE APPEALS IN SUCH CASES, IF THE TAX IMPACT IS LESS THAN THE MONETARY LIMIT FIXED BY THE CBDT.' 7. ONE FAILS TO UNDERSTAND HOW THE REVENUE, ON THE FACE OF THE ABOVE CLEAR INSTRUCTIONS OF THE CBDT, CAN CONTEND THAT THE CIRCULAR DT. 15 - 5 - 2008 ISSUED BY THE CBDT IS APPLICABLE TO THE CASES FILED AFTER 15 - 5 - 2008 AND IN COMPLIANCE THEREOF, THEY DO NOT FILE APPEALS, IF THE TAX EFFECT IS LESS THAN RS. 4 LAKHS; BUT THE SAID CIRCULAR IS NOT APPLICABLE TO THE CASES FILED PRIOR TO 15 - 5 - 2008 I.E. TO THE OLD PENDIN G APPEALS, EVEN IF THE TAX EFFECT IS LESS THAN RS. 4 LAKHS. IN OUR VIEW, THERE IS NO LOGIC BEHIND THIS BELIEF ENTERTAINED BY THE REVENUE.' THE COURT HAS FURTHER HELD THAT THE PREVAILING INSTRUCTIONS FIXING THE MONETARY LIMIT FOR THE TAX EFFECT WOULD HOLD G OOD EVEN FOR PENDING CASES. ACCORDINGLY, THE COURT DISMISSED ALL THE APPEALS HAVING A TAX EFFECT OF LESS THAN RS. 4 LACS. 10. THE NEW CBDT INSTRUCTIONS HAVE BEEN ISSUED ON 9 - 2 - 2011, BEING INSTRUCTION NO. 3 OF 2011 . THE MONETARY LIMIT HAS BEEN RAISED AGAIN AND CLAUSE 3 OF THE INSTRUCTIONS PROVIDES THAT APPEALS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS PRESCRIBED, HENCEFORTH. THE MONETARY LIMITS PRESCRIBED FOR FILING AN APPEAL UNDER SECTION 260A BEFORE THE HIGH COURT HAS BEEN RAISED TO RS. 10 LACS. THIS INSTRUCTION IS IDENTICAL TO THE CBDT INSTRUCTION NO. 5 OF 2008. CLAUSE 10 OF THIS CIRCULAR INDICATES THAT MONETARY LIMITS WOULD NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. IT FURTHER PROVIDE S THAT WHERE THE TAX EFFECT IS NOT QUANTIFIABLE, THE DEPARTMENT SHOULD TAKE A DECISION TO FILE APPEALS ON MERITS OF EACH CASE. CLAUSE 11, AGAIN PROVIDES THAT THE INSTRUCTION WOULD APPLY TO APPEALS FILED ON OR AFTER ....2011 AND APPEALS FILED BEFORE ....201 1 WOULD BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEALS WERE FILED. 11. IN OUR OPINION, WHEN A SIMILAR CLAUSE HAS BEEN INTERPRETED BY THE DIVISION BENCH OF THIS COURT IN CIT V. MADHUKAR INAMDAR (SUPRA), THE SAME PRI NCIPLES MUST APPLY IN THE PRESENT CASES ALSO, AS WE HAVE ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 5 FOUND THAT THE INSTRUCTIONS OF 15 - 5 - 2008 IS PARA - MATERIAL WITH THE INSTRUCTION OF 9 - 2 - 2011. 14. SIMILARLY, THE DELHI HIGH COURT IN THE CASE OF 'COMMISSIONER OF INCOME TAX V. DELHI RACE CLUB LTD.', DE CIDED ON 3 - 3 - 2011, BY RELYING ON ITS EARLIER JUDGEMENT ' COMMISSIONER INCOME TAX DELHI - III V. M/S P.S. JAIN AND CO . DECIDED ON 2 - 8 - 2010 HAS HELD THAT THE CBDT CIRCULAR RAISING THE MONETARY LIMIT OF THE TAX EFFECT TO RS. 10 LACS WOULD BE APPLICABLE TO PENDIN G CASES ALSO. 17. IT IS TRUE THAT THIS JUDGEMENT IN CHHAJER'S CASE (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE DIVISION BENCH, WHILE DECIDING EITHER MADHUKAR'S CASE (SUPRA) OR THE CASE OF POLYCOT CORPORATION (SUPRA). HOWEVER, THE INSTRUCTION OF 2005 WHICH WAS CONSIDERED IN CHHAJER'S CASE HAS ALSO BEEN INTERPRETED IN POLYCOT CORPORATION (SUPRA). THE CONSISTENT VIEW OF THE COURT HAS BEEN THAT THE CBDT INSTRUCTION WOULD APPLY TO PENDING CASES AS WELL. THE MAIN OBJECTIVE OF SUCH INSTRUCTIONS IS TO REDUCE THE PE NDING LITIGATION WHERE THE TAX EFFECT IS CONSIDERABLY SMALL. THEREFORE, IN OUR OPINION, THE TAX APPEALS ARE REQUIRED TO BE DISMISSED, AS THEY ARE NOT MAINTAINABLE IN VIEW OF THE PROVISIONS OF SECTION 268A OF THE INCOME TAX, AND THE CBDT INSTRUCTION NO. 3 OF 2011 .' 7. THE SAME VIEW HAS BEEN TAKEN BY THE KARNATAKA HIGH COURT IN ITA NO. 3191 OF 2005 IN THE COMMISSIONER OF INCOME - TAX V. M/S. RANKA & RANKA DECIDED ON 2 - 11 - 2011 , WHEREIN THE DIVISION BENCH HAS CONSIDERED INSTRUCTION NO.3 AND THE NATIONAL LITIGATION , POLICY, HAD HELD AS UNDER: '(I) INSTRUCTION NO.3/11 IS ALSO APPLICABLE TO THE PENDING APPEALS. (II) AS THE TAX EFFECT IN THE INSTANT CASE IS LESS THAN RS.10 LAKHS, THE APPEAL STANDS DISMISSED ON THE GROUND OF MONETARY LIMIT, WITHOUT EXPRESSING ANY OPINIO N ON THE MERITS OF THE CLAIM, MAKING IT CLEAR THAT THE DEPARTMENT IS AT LIBERTY TO PROCEED AGAINST THE ASSESSEE IN FUTURE, IF THERE ANY AMOUNT DUE FROM THE ASSESSEE, ON SIMILAR ISSUE AND IF IT IS ABOVE THE MONETARY LIMIT PRESCRIBED.'' 7. WE FIND FROM THE A BOVE CASE LAW OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SURESHCHANDRA DURGAPRASAD KHATOD (HUF), (SUPRA) THAT IN THE SIMILAR SITUATION AND EXACTLY IDENTICAL INSTRUCTIONS WERE APPLIED TO THE RETROSPECTIVELY PENDING APPEALS ALSO . HON'BLE GUJARAT HIGH COURT HAS DISCUSSED THAT ALMOST ALL HIGH COURTS ARE OF THE UNANIMOUS VIEW, CONSIDERING THE MAIN OBJECTIVE OF SUCH INSTRUCTIONS THAT TO REDUCE THE PENDING LITIGATION, WHERE THE TAX EFFECT IS CONSIDERABLE LOW OR SMALL, THE ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 6 APPEAL IS NOT MAINTAINABLE. THE RECENT I NSTRUCTION REVISING THE MONETARY LIMIT TO RS. 4 LAKH FOR FILING APPEAL BEFORE ITAT ON INCOME TAX MATTERS, AS ISSUED VIDE INSTRUCTION NO.5/2014 FNO279/MISC.142/2007 - ITJ(PT) DATED 10 - 7 - 2014 WILL APPLY TO PENDING APPEALS ALSO FOR THE REASON THAT THE SAME IS E XACTLY IDENTICAL TO EARLIER INSTRUCTIONS. THE RELEVANT CIRCULAR ISSUED BY CBDT READS AS UNDER: 'REFERENCE IS INVITED TO BOARD'S INSTRUCTION NO 3/2011 DATED 9 - 2 - 2011 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEPARTMENTAL APPEALS (IN INCOME - TAX MATTERS) BEFORE APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT WERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, IT HAS BEEN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BEFORE APPELLATE TRIBUNAL, HIGH COURTS AND SUP REME COURT KEEPING IN VIEW THE MONETARY LIMITS AND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH APPEALS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: - S NO. APPEALS IN INCOME - TAX MATTERS MONETARY LIMITS (IN RS) 1. BEFORE APPELLATE TRIBUNAL 4,00,000 2. UNDER SECTION 260A BEFORE HIGH COURT 10,00,000 3. BEFORE SUPREME COURT 25,00,000 IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRE SCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRED TO AS 'DISPUTED ISSUES'). HOWEVER THE TAX WILL NOT INCLUDE ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS I N DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 7 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EFFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN TH E CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPEAL, CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MON ETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFORTH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT OF AL L SUCH ASSESSMENT YEARS EVEN IF THE 'TAX EFFECT' IS LESS THAN THE PRESCRIBED MONETARY LIMITS IN ANY OF THE YEAR(S), IF IT IS DECIDED TO FILED APPEAL IN RESPECT OF THE YEAR(S) IN WHICH 'TAX EFFECT' EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMP OSITE ORDER/JUDGMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEALT WITH SEPARATELY. 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A COURT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING LESS THAN THE MONETARY LIMIT SPECIFIED ABOVE, TH E COMMISSIONER OF INCOME - TAX SHALL SPECIFICALLY RECORD THAT 'EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FILED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN THIS INSTRUCTION'. FURTHER, IN SUC H CASES, THERE WILL BE NO PRESUMPTION THAT THE INCOME - TAX DEPARTMENT HAS ACQUIESCED IN THE DECISION ON THE DISPUTED ISSUES. THE INCOME - TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM FILING AN APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LIMITS. 7. IN THE PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BARD, WHEREBY AN AS SESSEE HAS CLAIMED RELIEF FROM THE TRIBUNAL OR THE COURT ONLY ON THE GROUND THAT THE DEPARTMENT HAS IMPLICITLY ACCEPTED THE DECISION OF THE TRIBUNAL OR COURT IN THE CASE OF THE ASSESSEE FOR ANY OTHER ASSESSMENT YEAR OR IN THE CASE OF ANY OTHER CASE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. THE DEPARTMENTAL REPRESENTATIVES/COUNSELS MUST MAKE EVERY EFFORT TO BRING TO THE NOTICE OF THE TRIBUNAL OR THE COURT THAT THE APPEAL IN SUCH CASES WAS O TILED OR NOT A DMITTED ONLY FOR THE REASON OF THE TAX EFFECT BEING LESS THAN THE SPECIFIED MONETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT THE DECISIONS RENDERED THEREIN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THEY SHOULD IMPRESS UPON THE TRIBUNA L OR THE COURT THAT SUCH CASES DO NOT HAVE ANY PRECEDENT VALUE. AS THE EVIDENCE OF NOT FILING APPEAL DUE TO THIS INSTRUCTION MAY HAVE TO BE PRODUCED IN COURTS, THE JUDICIAL FOLDERS IN THE OFFICE OF CIT MUST BE MAINTAINED IN A SYSTEMIC MANNER FOR EASY RETRI EVAL. ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 8 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT. (A) WHERE THE CONSTITUTIONAL VALIDI TY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT. 9. THE PROPOSAL FOR FILING SPECIAL LEAVE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION BEFORE THE SUPREME COURT SHOULD, IN ALL CASES, BE SENT TO THE DIRECTORATE OF INCOME - TAX (LEGAL & RESEARCH), NEW DELHI AND THE DECISION TO FILE SPECIAL LEAVE PETITION S HALL BE IN CONSULTATION WITH THE MINISTRY OF LAW AND JUSTICE. 10. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE SHALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. FILING OF APPEALS IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVERNED BY THE RELEVANT PROVISIONS OF STATUTE & RULES. FURTHER FILING OF APPEAL IN CASES OF INCOME TAX, WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUCH AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTION 12 A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PAR 3 ABOVE AND DECISION TO FILE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR CASE. 11. THIS INSTRUCTION WILL APPLY TO APPEALS FILED ON OR AFTER 10 - 7 - 2014. HOWEVER, THE CASES WHERE APPE ALS HAVE BEEN FILED BEFORE 10 - 7 - 2014 WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 12. THIS ISSUE UNDER SECTION 268A (1) OF THE INCOME - TAX ACT 1961.' 8 . CONSIDERING THE ABOVE JUDICIAL PRONOUNCEMENTS , WE FOUND THAT TH ESE APPEAL S OF THE REVENUE ARE NOT MAINTAINABLE AS THE TAX EFFECT IN TH ESE APPEAL S ARE BELOW RS.4 LAKHS. ACCORDINGLY, WE DISMISS ALL THE SE APPEAL S OF THE REVENUE. ITA NOS.1752 TO 1754/MUM/2013(AY 2008 - 09 TO 2010 - 11) 9. THESE APPEALS ARE F ILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEARS 2008 - 09 TO 2010 - 11. COMMON GROUNDS BEEN ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 9 TAKEN IN ALL THE YEARS PERTAIN TO COMPUTATION OF DISALLOWANCE U/S.14A R.W.R.8D. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE A O HAS COMPUTED DISALLOWANCE AS PER RULE 8D BY TREATING ENTIRE INVESTMENT MADE BY THE ASSESSEE WITHOUT EXCLUDING STRATEGIC INVESTMENT MADE IN THE GROUP COMPANIES. IT WAS CONTENDED BY LD. AR THAT THE INVESTMENT WAS MADE AS STRATEGIC INVESTMENT FOR THE PURPOS E OF BUSINESS ONLY, THEREFORE, THE INVESTMENT MADE IN THE GROUP CONCERNS WHICH IS RS.11.30 CRORES IN THE A.Y.2009 - 10, RS.26.44 CRORES FOR A.Y.2008 - 09 AND RS.11.30 CRORES IN A.Y.2010 - 11, RESPECTIVELY, MAY BE EXCLUDED . LD AR ALSO SUBMITTED THAT THE TRIBUNAL IS TAKING CONSISTENT VIEW TO THE EFFECT THAT INVESTMENT MADE FOR STRATEGIC PURPOSE IN THE GROUP CONCERNS ARE NOT MEANT FOR EARNING DIVIDEND INCOME, THEREFORE, THE SAME ARE REQUIRED TO EXCLUDED FROM TOTAL INVESTMENT WHILE COMPUTING DISALLOWANCE U/S.14A. REL IANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS : - I) M/S SMART CHIP LTD. ( ITA NO S . 1923, 5196,5367/MUM/2012, ORDER DATED 28 - 11 - 2014) ; II) GARWARE WALL ROPES LTD., ITA NOS.5408,4957/MUM/2012, 65 SOT 86 ) ; III) M/S JM FINANCIAL LIMITED (ITA NO.4521/MUM/201 2, ORDER DATED 26 - 3 - 2014); 1 1 . WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT AS PER THE AUDITED BALANCESHEET, THE ASSESSEE HAS MADE SUBSTANTIAL INVESTMENT IN GROUP CONCERN AS A STRATEGIC INVESTMENT. AS PER THE DECISION OF COORDIN ATE BENCH, STRATEGIC INVESTMENT ARE REQUIRED TO BE ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 10 EXCLUDED FROM TOTAL INVESTMENT WHILE WORKING OUT DISALLOWANCE UNDER RULE 8D. THE PRECISE OBSERVATION OF THE TRIBUNAL IN CASE OF M/S SMART CHIP LTD. (SUPRA) WAS AS UNDER : - 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY PERUSED THE RECORD, GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE JUDICIAL PRONOUNCEMENT REFERRED BY THE LOWER AUTHORITIES AS WELL AS LD. REPRESENTATIVES OF BOTH THE PARTIES DURING THE COURSE OF HEARING BEFORE US. FROM THE REC ORD WE FOUND THAT THE ASSESSEE HAS MADE INVESTMENT IN GROUP COMPANY WHICH WAS 100% SUBSIDIARY OF THE ASSESSEE. THE INVESTMENT WAS MADE AS STRATEGIC INVESTMENT FOR THE PURPOSE OF BUSINESS WHEREIN THE SOLE INTENTION WAS TO CARRYOUT THE BUSINESS PURPOSE OF TH E ASSESSEE - COMPANY. WITH REGARD TO THE DISALLOWANCE OF INTEREST, THE LD. CIT(A) HAS RECORDED THE CATEGORICAL FINDINGS TO THE EFFECT THAT THE INVESTMENT WAS MADE BY THE ASSESSEE FROM ITS OWN FUND AND NOT FROM ANY BORROWED FUNDS. BY REFEREEING ANNEXURE 'A' F ILED BY THE ASSESSEE, THE LD. CIT(A), OBSERVED THAT AFTER VERIFYING THE BANK STATEMENT AS PLACED ON RECORD, THE ENTIRE FUND WAS SO INVESTED WAS OUT OF THE ASSESSEE'S OWN FUND. THE RELIANCE WAS PLACED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. RELIANCE UTILITIES AND POWER LTD.. [2009] 178 TAXMAN 135 (BOM.) TO THE EFFECT THAT THE PRESUMPTION FOR INVESTMENT WILL BE THAT THE ASSESSEE COMPANY HAS MADE THE INVESTME NT OUT OF ITS OWN FUND RATHER THAN BORROWED FUND. FINDINGS SO RECORDED BY THE LD. CIT(A) WAS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY SUBSTANTIAL EVIDENCE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS.33,90,461/ - MADE BY THE AO ON ACCOUNT OF INTEREST EXPENDITURE BY APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT R.W.R.8D OF THE RULES. IN VIEW OF THE ABOVE, GROUND TAKEN BY THE ASSESSEE IN ALL THE YEARS FOR COMPUTING DISALLOWANCE UNDER RULE 8D IS R ESTORED BACK TO THE FILE OF AO WITH A DIRECTION TO RECOMPUTE THE SAME BY EXCLUDING STRATEGIC INVESTMENT MADE IN THE GROUP CONCERNS WHICH IS RS.11.30 CRORES IN THE A.Y.2009 - 10, RS.26.44 CRORES FOR A.Y.2008 - 09 AND RS.11.30 CRORES IN A.Y.2010 - 11, RESPECT IVELY. WE DIRECT ACCORDINGLY. 12 . IN THE RESULT, APPEAL OF THE REVENUE ARE DISMISSED AND APPEALS OF THE ASSESSEE ARE ALLOWED IN PART FOR STATISTICAL PURPOSES . ITA NO S . 2099 - 2104 /1 3 & ITA NOS.1752 TO 1754/13 11 O RDER PRONOUNCED IN THE OPEN COURT ON THIS 15 /06 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 30 /06 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//