Woodlands Multispeciality Hospital Limited (formerly Woodlands Medical Centre Limited, Kolkata V. D.C.I.T., Circle-11, Kolkata, Kolkata

ITA 2700/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4576 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2013
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANIK
• Assessee Lawyers: PIYUSH DEY
• Keywords: Rule of consistency; Earning of tax free income
• Section: 43B; 143(3); 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM] ITA.2700/KOL/2013 ASSESSMENT YEAR : 2006-07 WOODLANDS MULTISPECIALITY HOSPITAL LTD.-VERSUS- D.C .I.T., CIRCLE-11, (FORMERLY WOODLANDS MEDICAL , KOLKATA CENTRE LIMITED) KOLKATA (PAN:AAACW 4144 Q) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI PIYUSH DEY, FCA FOR THE RESPONDENT : SHRI P.B.PRAMANIK, JCIT, SR. DR DATE OF HEARING : 09.06.2016. DATE OF PRONOUNCEMENT : 08.07.2016. ORDER PER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF T HE ORDER OF THE LEARNED CITA IN APPEAL NO. 581/XII/CIR-11/09-10 DATED 17.09.2013 AGAINST T HE ORDER OF ASSESSMENT FRAMED FOR THE ASST YEAR 2006-07 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE U/S 14A OF THE ACT AMOUNTING TO RS.5,428/- COULD BE MAD E IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AS SESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION HAS EARN ED DIVIDEND AMOUNTING TO RS.1,04,089/- WHICH WAS CLAIMED EXEMPT U/S 10(34) I N THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN. THE LD. AO ADOPTED 0.5 % OF INVESTMENTS IN TERMS OF RULE 8D(2)(III) FOR THE PURPOSE OF DISALLOWANCE U/S 14A OF THE ACT WHICH WAS UPHELD BY LD. CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- ITA NO.1700/KOL/2013 WOODLANDS MULTISPECIALITY HOSPITAL LTD. A.YR.2006-07 2 1. THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A )-XII, KOLKATA HAS ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF TH E INCOME TAX ACT AMOUNTING TO RS.5,428/- MADE BY THE LEARNED. ASSESSING OFFICER I N DISREGARD OF THE JUDICIAL PRONOUNCEMENTS OF THE JURISDICTION OF THE INCOME TA X APPELLATE TRIBUNAL. 2. THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) -XII, KOLKATA HAS ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS.16,40,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 43B OF THE I NCOME TAX ACT IN DISREGARD OF THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F EXIDE INDUSTRIES LTD. (2921TR 470) AND ALSO THE ORDER OF HIS PREDECESSOR, THUS VIOLATI NG THE RULE OF CONSISTENCY. 3. THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) -XII, KOLKATA HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5,428/- ALLEGED TO BE THE EX PENSES IN RELATION TO DIVIDEND INCOME FOR THE PURPOSE OF COMPUTATION OF 'BOOK PROFIT' UND ER SECTION 115JB OF THE INCOME TAX ACT. 4. THAT, ON FACTS AS WELL AS ON LAW, THE LD. CIT(A) -XII, KOLKATA IS PERVERSE AND BAD IN LAW AND THEREFORE LIABLE TO BE QUASHED. 5. THAT YOUR APPELLANT BEGS YOUR LEAVE TO URGE ANY ADDITIONAL GROUND OF APPEAL OR MODIFY ANY GROUND OF APPEAL BEFORE OR AT THE TIME , OF HEARING. 3.1. THE LD. AR ARGUED THAT SINCE THE ASSESSMENT YEAR INVOLVED IS PRIOR TO A.Y.2008- 09 THE PROVISION OF RULE 8D COULD NOT BE MADE APPLI CABLE AS DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE A ND MANUFACTURING LTD. REPORTED IN 328 ITR 81 (BOM). HE FURTHER ARGUED THA T THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS R.R.SEN A ND BROTHERS IN G.A.NO.3019 OF 2012 IN ITAT NO.243 OF 2012 DATED 04.01.2013 HAD HE LD THAT 1% OF THE EXEMPT INCOME NEED TO BE ADOPTED FOR DISALLOWANCE U/S 14A OF THE ACT. IN RESPONSE TO THIS, THE LD. DR FAIRLY AGREED FOR THE SAID PROPOSITION. 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIN D THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS R.R.SEN AND BROTHERS (SUPRA) AND ACCORDINGLY DIRECT THE LD. AO TO ADOPT 1% OF THE EXEMPT INCOME FOR MAKING DISALLOWANCE U/S 14A OF TH E ACT. ACCORDINGLY GROUND NO.1 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.1700/KOL/2013 WOODLANDS MULTISPECIALITY HOSPITAL LTD. A.YR.2006-07 3 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE OF PROVISION OF LEAVE ENCASHMENT AMOUNTING TO RS.16,40 ,000/- COULD BE MADE BY APPLYING THE PROVISION OF SECTION 43B(F) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIN D THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION IN ASSESSEES OWN CASE FOR A.Y.2008 -09 IN ITA NO.1578/KOL/2012 DATED 07.09.2015 WHEREIN IT WAS HELD AS FOLLOWS :- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THE CI TATION QUOTED BY THE LD. AR. WE FIND THAT IT IS RELEVANT TO GET INTO THE OPERATIVE PORTION OF THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED VS UNION OF INDIA 292 ITR 470(CAL). IT WAS HELD AS UNDER :- 11. IN THIS REGARD THE OBSERVATION OF THE APEX COU RT IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) IS QUOTED BELOW: THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DEF INITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REAS ONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIR EMENTS ARE SATISFIED THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THO UGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN.... APPLYING THE ABOVE SAID SETTLED PRINCIPLES TO THE F ACTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVISION MADE BY THE APPELLANT COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PR OPORTIONATE WITH THE ENTITLEMENT EARNED BY EMPLOYEES OF THE COMPANY, INCLUSIVE OF TH E OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RE LEVANT DATE, IS ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPTS FOR THE ACCOUNTING YEAR D URING WHICH THE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY IS NOT A CONTINGENT LI ABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW TO THE CONTRARY. 13. THE APPEAL SUCCEEDS AND IS ALLOWED. SECTION 43B(F) IS STRUCK DOWN BEING ARBITRARY, UNCONSCIONABLE AND DE HORS THE APEX COURT DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA). IT IS OBSERVED THAT THE REVENUE HAD PREFERRED SPECI AL LEAVE PETITION BEFORE THE HONBLE SUPREME COURT AGAINST THE JUDGMENT OF THE HONBLE C ALCUTTA HIGH COURT. THE HIGH COURT IN SPECIAL LEAVE PETITION TO APPEAL (CIVIL) C C.12060/2008 DATED 08.09.2008 HAD HELD AS UNDER :- THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING O RDER. ISSUED NOTICE. ITA NO.1700/KOL/2013 WOODLANDS MULTISPECIALITY HOSPITAL LTD. A.YR.2006-07 4 IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNE D JUDGMENT, UNTIL FURTHER ORDERS. LATER THE HONBLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (CIVIL) NO.(S), CC- 22889/2008 DATED 8.5.2009 HAD HELD AS UNDER :- THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING THE COUNSEL THE COURT MADE THE FOLLOW ING ORDER DELAY CONDONED. LEAVE GRANTED. PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APP EAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH IS APPROVED T ILL DAY. IT IS MADE CLEAR THAT AS FAR AS OUTSTANDING INTEREST PAYMENT AS ON DATE, IT WOULD B E OPEN TO HAVE THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEP ARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STAT UTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. HENCE FROM THE AFORESAID JUDGMENT, IT CAN BE INFERR ED THAT THE HONBLE SUPREME COURT HAD NOT STAYED THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT DURING THE LEAVE PROCEEDINGS. HENCE AS ON DATE, THE HONBLE CALCUTTA HIGH COURT SHALL HAVE TO BE FOLLOWED. ACCORDINGLY, RELIANCE PLACED ON THE CALCU TTA HIGH COURT DECISION BY THE ASSESSEE IS SQUARELY APPLICABLE IN THE FACTS AND CI RCUMSTANCES OF THIS CASE. HOWEVER, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THIS ISSUE TO THE LD. AO TO PASS ORDERS BASED ON THE OUT COME OF THE MAIN APPEAL ON MERITS BY HONBLE SUPREME COURT AS STATED SUPRA. ACCORDINGLY THE APPEAL OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. ACCORDINGLY GROUND NO.2 RAISED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE WHILE COMPUTING THE BO OK PROFIT U/S 115JB OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE LD. AR ARGUED THAT 1% OF EXEMPT INCOME AS DECIDED IN GROUND NO.1 HEREIN ABOVE BY PLACING RELIANCE ON THE HONBLE JURISDICTI ONAL CALCUTTA HIGH COURT MAY BE KINDLY BE ADOPTED BY COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. IN RESPONSE TO THIS, THE LD. DR FAIRLY AGREED TO THIS PROPOSITION. 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HA VE HELD ALREADY IN GROUND NO.1 HEREIN ABOVE THAT 1% OF EXEMPT INCOME BE ADOPTED F OR THE PURPOSE OF DISALLOWANCE U/S 14A OF THE ACT. WE HELD THAT THE SAME DISALLOWA NCE BE MADE WHILE COMPUTING THE ITA NO.1700/KOL/2013 WOODLANDS MULTISPECIALITY HOSPITAL LTD. A.YR.2006-07 5 BOOK PROFIT U/S 115JB OF THE ACT AS REQUESTED BY TH E LD. AR. ACCORDINGLY GROUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 6. THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND HENCE DO NOT REQUIRE ANY ADJUDICATION. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [N.V.VASUDEVAN] [M.BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 08.07.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. WOODLANDS MULTISPECIALITY HOSPITAL LTD. (FORMERL Y WOODLANDS MEDICAL CENTRE LIMITED), 8/5, ALIPORE ROAD, KOLKATA-700027. 2 THE D.C.I.T., CIRCLE-11, KOLKATA. 3. THE CIT-IV, KOLKATA. 4. THE CIT(A) -XII, KOLAKTA 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES