Goetez (India) Ltd., V. DCIT, Circle-12(1),

ITA 208/DEL/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 6900 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2009
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 10-12-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 14-01-2005
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Section: 143(3); 14A; 263

Judgement Text

1 ITA NOS. 409/D EL/2007 & 208/DEL/2005 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-409/DEL/200 7 (A.Y 2000-01) I.T.A .NO.-208/DEL/200 5 (A.Y 2000-01) FEDERAL MOGUL GOETZE(INDIA) LTD. (FORMERLY KNOWN AS GOETZE (INDIA) LIMITED A-26/3, MOHAN COOPERATIVE, INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI-110044 (APPELLANT) V S DY. COMMISSIONER OF INCOME TAX CIRCLE-12(1) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 29/11/2006 PASSED BY LD. CIT (A), XV, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- GROUNDS OF ITA NO. 409/DEL/2007 1.0 THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS OF THE APPELLANTS CASE IN UPHOLDING THE ACTION OF THE A.O. APPELLANT BY SH. PRADEEP DENODIA, ADV. R. K. KAPOOR, CA RESPONDENT BY SH. AMRIT LAL, SR. DR, DATE OF HEARING 10.12.2015 DATE OF PRONOUNCEMENT 04.01.2016 2 ITA NOS. 409/D EL/2007 & 208/DEL/2005 OF NOT REDUCING THE AMOUNT OF RS.1.53 CRORES OUT OF THE BOOK PROFITS FOR THE PURPOSE OF SECTION 115JA WHICH REPRESENTED THE AMOUNT TRANSFERRED FROM REVALUATION RESERVE. 1.1 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT THE A MOUNT OF RS. 1.53 CRORES OUGHT TO HAVE BEEN REDUCED AS PER T HE PROVISIONS OF SECTION 115JA READ WITH ITS EXPLANATI ON. IN VIEW OF THE FACT THAT THE REVALUATION RESERVE WAS C REATED IN 1985 WHICH PERIOD DID NOT FALL BETWEEN 1/4/1997 TO 1/4/2000. THE REDUCTION OF THE AMOUNT FROM THE BOO K PROFIT FOR THE PURPOSE OF CALCULATING MAT U/S 115JA MAY PLEASE BE ALLOWED. 1.2 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT CALCUL ATION OF MAT AFTER REDUCTION OF RS. 1.53 CRORES WAS IN ACCOR DANCE WITH LAW AND COULD NOT BE ADDED BACK FOR THE PURPOS ES OF CALCULATING BOOK PROFITS U/S 115JA OF THE INCOME TA X ACT. 1.3 1.3 THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE TH AT AS PER PROVISIONS OF SECTION 115JA AND THE EXPLANATION THERETO RS. 1.53 CRORES COULD NOT FORM PART OF THE BOOK PROFITS OF THE COMPANY FOR THE PURPOSES OF APPLICAT ION OF MINIMUM ALTERNATIVE TAX (MAT) U/S 115JA OF THE INCO ME TAX ACT AS WAS APPLICABLE TO THE ASSESSMENT YEAR IN QUESTION I. E. ASSESSMENT YEAR 2000-01. 2.0 THAT THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AN D ON FACT & IN THE CIRCUMSTANCES OF THE APPELLANTS CASE IN ALL OCATING A SUM OF RS. 1,57,853/- U/S 14A OF THE INCOME TAX ACT . 2.1 THAT THE LD. CIT(A) OUGHT TO HAVE APPRECIATED T HAT NO EXTRA COST IS INVOLVED IN EARNING DIVIDEND INCOME AND NO AMOUNT SHOULD HAVE BEEN ALLOCATED TOWARDS EARNING OF TAX F REE INCOME U/S 14A OF THE INCOME TAX ACT. 2.2 WITHOUT PREJUDICE, THE AMOUNT ALLOCATED BY THE LD. CIT (A) U/S 14A OF THE INCOME TAX ACT IS HIGHLY EXCESSIVE. 3.0 THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING A SUM OF RS. 1,57,853/- ALLEGEDLY ON ACCOUNT OF EXPENSES ON DIVI DEND INCOME FOR PURPOSES OF CALCULATING BOOK PROFITS U/S 115JA 3 ITA NOS. 409/D EL/2007 & 208/DEL/2005 IS ILLEGAL, ERRONEOUS, UNTENABLE AND ARBITRARY IN L AW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3.1. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE T HAT AS PER THE MANDATE OF SECTION 115JA OF THE INCOME-TAX ACT, NO SUCH ADJUSTMENT COULD HAVE BEEN MADE IN THE BOOK PROFITS OF THE COMPANY CALCULATED AS PER AUDITED PROFIT & LOSS ACCOUNT AND BALANCE SHEET IN ACCORDANCE WITH THE COMPANIES ACT, IN WHICH THERE WAS NO ALLOCATION OF ANY EXPENDITURE FOR EARNING OF DIVIDEND INCOME. 4.0. THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. GROUNDS OF ITA NO. 208/DEL/2005 1) THAT THE LD. CIT DELHI-IV HAS ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN PASSING THE ORDER REVISING ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER I.E DCIT CIRCLE 12(1) DATED 28/2/2003 FOR A.Y 2000-01, U/S 263 OF THE INCOME-TAX ACT, ON WHOLLY ILLEGAL, ERRON EOUS AND UNTENABLE GROUNDS. 2) THAT THE ORDER PASSED BY THE CIT DELHI-IV DATED 22/12/2004 IS BAD IN LAW AND BE CANCELLED. 3) THAT THE ORDER PASSED BY THE CIT DELHI-IV DATED 22/12/2004 U/S 263 IS BEYOND THE POWERS GRANTED TO THE CIT U/S 263 OF THE INCOME-TAX ACT; AND THEREFORE, B E CANCELLED. 4) THAT THE ORDER OF THE ASSESSING OFFICER I.E DCI T CIRCLE 12(1) U/S 143(3) DATED 28/2/2003 WAS NEITHER ERRONE OUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IN ANY CASE THE TWIN CUMULATIVE CONDITIONS FOR ASSUMPTION OF JURISDICTION U/S 263 WERE NOT FULFILLED, THE REVISI ON ORDER PASSED BY THE CIT DELHI-IV DATED 22/12/2004 MAY THEREFORE BE CANCELLED. 4 ITA NOS. 409/D EL/2007 & 208/DEL/2005 5A). THAT THE CIT DELHI-IV HAS ERRED IN LAW, ON FAC TS AND IN THE CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS IN S FAR AS, HE PE RMITTED THE REDUCTION OF RS. 1.53 CRORES FROM THE BOOK PROF ITS CALCULATED FOR THE PURPOSES OF SECTION 115JA OF THE INCOME TAX ACT. 5B). THE LEARNED CIT DELHI-IV HAS FAILED TO APPRECI ATE THAT AS PER PROVISIONS OF SECTION 115JA AND THE EXPLANATION THERETO RS. 1.53 CRORES COULD NOT FORM PART OF THE BOOK PROFITS OF THE COMPANY FOR THE PURPOSES OF APPLICAT ION OF MINIMUM ALTERNATIVE TAX (MAT) U/S 115JA OF THE INC OME- TAX ACT AS WAS APPLICABLE TO THE ASSESSMENT YEAR IN QUESTION I.E ASSESSMENT YEAR 2000-01. 5C) THE LEARNED CIT DELHI-IV HAS FAILED TO APPRECIA TE THAT THE ASSESSING OFFICER HAD ALREADY QUERIED, EXAMINED TH E ISSUE AND TAKE A POSSIBLE VIEW UNDER THE LAW; AND THEREFORE THE CIT DELHI-IV HAD NO JURISDICTION TO I MPOSE HER VIEW UPON THE VIEW OF THE A.O. 5D). THE LEARNED CIT DELHI-IV HAS FAILED TO APPRECI ATE THAT CALCULATION OF MAT AFTER REDUCTION OF RS.1.53 CRORE S WAS IN ACCORDANCE WITH LAW AND COULD NOT BE ADDED BACK FOR THE PURPOSES OF CALCULATING BOOK PROFITS U/S 115JA OF T HE INCOME TAX ACT. 5E). THAT THE ORDER OF THE CIT DELHI-IV REVISING TH E ORDER OF THE ASSESSING OFFICER TO THE EXTENT OF ADDING RS. 1.53 CRORES TO THE BOOK PROFITS U/S 115JA BE REVERSED AND THE O REDER OF THE A.O BE RESTORED. 6A). THE ORDER OF THE LEARNED CIT DELHI-IV IN DIRE CTING THE A.O TO ADD BACK A SUM OF RS.183.60 LAKHS FOR PURPOSES O F CALCULATING BOOK PROFITS U/S 115JA I ILLEGAL, ERRON EOUS, UNTENABLE AND ARBITRARY IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 6B). THE LEARNED CIT DELHI-IV HAS FAILED TO APPRECI ATE THAT AS PER THE MANDATE OF SECTION 115JA OF THE INCOME-TAX ACT, NO SUCH ADJUSTMENT COULD HAVE BEEN MADE IN THE BOOK 5 ITA NOS. 409/D EL/2007 & 208/DEL/2005 PROFITS OF THE COMPANY CALCULATED AS PER AUDITED PR OFIT & LOSS ACCOUNT AND BALANCE SHEET IN ACCORDANCE WITH T HE COMPANIES ACT, IN WHICH THERE WAS NO ALLOCATION OF ANY EXPENDITURE OF EARNING OF DIVIDEND INCOME. 6C). THAT THE ORDER OF THE CIT DELHI-IV DIRECTING T HE A.O TO RECALCULATE THE PROFIT U/S 115JA BY ADDITION TO THE BOOK PROFIT, A SUM OF RS. 183.60 LAKHS BE REVERSED AND O RDER OF THE A.O BE RESTORED. 7A). THE LEARNED CIT DELHI-IV HAS ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING THE A.O TO DISALLOW A SUM OF RS. 183.60 LAKHS AND DEBIT THE SA ME AGAINST DIVIDEND INCOME, ON WHOLLY ILLEGAL, ERRONEO US AND UNTENABLE GROUNDS. 7B). THE LEARNED CIT DELHI-IV HAS INCORRECTLY ASSUM ED JURISDICTION TO ADJUDICATE ON THE ISSUE U/S 263 WHI CH HAD ALREADY BEEN QUERIED, REPLIED TO AND A VIEW TAKEN B Y THE LEARNED A.O DURING REGULAR ASSESSMENT PROCEEDING U /S 143(3) OF THE INCOME-TAX ACT. 8A). THE LEARNED CIT DELHI-IV HAS COMPLETELY IGNORE D THE SUBMISSIONS MADE BEFORE HER DURING PROCEEDINGS U/S 263 THAT THE COMPANY HAD HUGE AMOUNTS OF CAPITAL AND FR EE RESERVES AND NO PART OF THE DIVIDEND EARNING INVEST MENT HAD BEEN MADE OUT OF INTEREST BEARING FUNDS AND REV ENUE HAD NOT POINTED OUT ANY SUCH CIRCUMSTANCES WHEN THE SE INVESTMENTS WERE MADE. 8B). THE LEARNED CIT DELHI-IV HAS ERRONEOUSLY SHIFT ED THE ONUS UPON THE ASSESSEE WHICH LAY HIGHLY UPON THE REVENUE FOR MAKING ANY DISALLOWANCE U/S 14A. 8C). THE LEARNED CIT DELHI-IV HAS FAILED TO APPLY T HE JUDGMENTS CITED BEFORE HER OF THE JURISDICTIONAL HI GH COURT AS WELL AS THE HON'BLE SUPREME COURT. 8D). THAT THE FORMULA ADOPTED BY THE LEARNED CIT DE LHI-IV TO THE EXTENT OF RS.183.63 ON AN ADMITTED INCOME OF RS.1.5743 CRORES IS WHOLLY ILLEGAL, ERRONEOUS AND A RBITRARY. 6 ITA NOS. 409/D EL/2007 & 208/DEL/2005 9A). THAT THE DISALLOWANCE ORDERED BY THE CIT DELHI -IV TO THE EXTENT OF RS. 183.63 ON AN ADMITTED INCOME OF RS. 1.5743/- CRORES IS WHOLLY ILLEGAL, ERRONEOUS AND AR BITRARY. 9B). THAT THE APPLICATION OF SECTION 14A OF THE FAC TS OF CASE IS WHOLLY UNCALLED FOR ESPECIALLY WHEN IT DID NOT APPL Y TO THE ASSESSMENT YEAR IN QUESTION. 9C). THAT THE DIRECTION TO DISALLOWANCE OF DEDUCTIO N OF RS.183.63 LAKHS IN THE NORMAL COMPUTATION OF INCOME UNDER THE PROVISIONS OF THE INCOME-TAX ACT BY APPLI CATION OF SECTION 14A OF THE INCOME-TAX ACT DOES NOT FULFI LL THE CUMULATIVE TEST OF THE SAME BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, AND THE REFORE THE REVISION U/S 263 IS BAD IN LAW AND BE ORDERED TO BE DELETED. 10A). THE LEARNED CIT DELHI-IV HAS ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING THAT PEN ALTY U/S 271(1) (C) BE INITIATED WITH REFERENCE TO THE REVIS ION OF THE ASSESSMENT ORDER U/S 263. 10B). THE LEARNED CIT DELHI-IV HAS FAILED TO APPREC IATE THAT DIRECTING THE A.O TO INITIATED PENALTY U/S 271(1) ( C) IS NOT AS PER THE MANDATE OF LAW AND BEYOND THE JURISDICTI ON AND POWERS U/S 263 OF THE INCOME-TAX ACT. 11). THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. 3. THIS MATTER IS REMITTED BACK BY THE HON'BLE HIGH COURT VIDE ORDER DATED 9 TH DECEMBER, 2013. THE HON'BLE HIGH COURT HAS REMITTED THE MATTER TO THIS TRIBUNAL AS RELATES TO THE QUESTION OF QUANTUM OF DEDUCTION TO BE MADE U/S 14A. 4. THE LD. AR AT THE TIME OF HEARING SUBMITTED THAT THE HON'BLE HIGH COURT HAS DECIDED THE MATTER AGAINST THE ASSES SEE FOR THE 7 ITA NOS. 409/D EL/2007 & 208/DEL/2005 SUBSEQUENT YEAR 2001-02 WHICH IS INCORPORATED IN TH E SAME ORDER OF THE HON'BLE HIGH COURT MADE BY THE ASSESSING OFF ICER U/S 14A AMOUNTS TO RS.88,000/- AND DOES NOT WARRANT MUCH FO OTING. THE LD. AR FURTHER SUBMITTED THAT AS RELATES TO THE QUA NTUM FOR A.Y 2000-01 ONLY 1% DISALLOWANCE SHOULD BE GIVEN FOR TH E DIVIDEND INCOME AS PER THE JUDGMENT OF MAXCOPP. IN VIEW OF THIS, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. AS RELATES TO APPEAL NO. 208/DEL/2005, THE SAME PERTAINS TO ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 . THE MAIN QUANTUM APPEAL IS DECIDED, THEREFORE SAME BECOMES I NFRUCTUOUS. THEREFORE, THIS APPEAL IS ALSO STANDS DISMISSED. 6. IN RESULT, BOTH APPEALS ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 4TH OF JANUARY, 2016. SD/- SD/- ( S. V. MEHROTRA) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04 /01/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 8 ITA NOS. 409/D EL/2007 & 208/DEL/2005 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 10.12.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 11.12.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .12.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. .12.2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 04.01.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON .01.2016 PS 7. FILE SENT TO THE BENCH CLERK 05.01.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.