M/S. STANDARD CHARTERED BANK, MUMBAI V. THE DIT(IT), MUMBAI

ITA 3388/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6265 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L1
• Next Hearing Date: 28-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 14-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH VYAS; SRIHARI M IYER
• Keywords: Tax effect
• Section: 263; 154; 143(3); 244A; 234B

Judgement Text

1 ITA NO3388/MUM/2008 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH L LL L MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI N V VASUDEVAN, JM, & SHRI N V VASUDEVAN, JM, & SHRI N V VASUDEVAN, JM, & SHRI N V VASUDEVAN, JM, & SHRI SHRI SHRI SHRI R R R R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM IT ITIT ITA NO A NO A NO A NO. .. .3388/MUM/2008 3388/MUM/2008 3388/MUM/2008 3388/MUM/2008 (ASSESSMENT YEAR 2002-03) M/S STANDARD CHARTERED BANK TAXATION DEPT 23-25 M G ROAD FORT MUMBAI 400 001 VS THE DIRECTOR OF INCOME TAX(INTERNATIONAL TAXATION) MUMBAI 38 (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AABCS4681D AABCS4681D AABCS4681D AABCS4681D ASSESSEE BY: SHRI DINESH VYAS/MR CHANDRAMANI D GAMARE & SHRI SRIHA RI M IYER REVENUE BY: SHRI SENTHIL KUMAR O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28.3.2008 PASSED U/S 263 OF THE I T ACT OF THE DIR ECTOR OF INCOME TAX (INTERNATIONAL TAXATION) MUMBAI FOR THE ASSESSMENT YEAR 2002-03. 2 THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLEN GED THE ORDER OF THE DIRECTOR OF INCOME (INTERNATIONAL TAXATION) (DIT(IT ) IN INVOKING THE PROVISIONS OF SECTION 263 OF THE I T ACT. 2.1 THE ASSESSEE IN ITS ALTERNATE GROUND HAS ALSO C HALLENGED THE ORDER OF THE DIT(IT) ON MERIT CHALLENGING HIS ORDER IN HOLDING T HAT INTEREST CANNOT BE GRANTED ON REFUND U/S 244A TO THE EXTENT OF MAT CREDIT SET OFF U/S 115JAA(5) BY PLACING RELIANCE ON THE PROVISO TO SEC. 115JAA(2). 2 ITA NO3388/MUM/2008 3 FACTS OF THE CASE, IN BRIEF, ARE THAT IN THE INST ANT CASE THE ORDER U/S 143(3) WAS PASSED ON 31.3.2005. SUBSEQUENTLY, THE SAID ORD ER WAS RECTIFIED VIDE ORDERS U/S 154 OF THE ACT ON 18.5.205 AND 22.3.2006 RESPEC TIVELY. IN THE ORDER U/S 154 OF THE ACT DATED 22.3.2006, THE ASSESSING OFFICER ALLOWED, AMONG OTHER THINGS, MAT CREDIT OF ` 76,68,62,132/- AND ALSO GRANTED INTEREST U/S 244A AMOUNTING TO ` 22,41,96,965/-. 3.1 THE LD DIT(INTERNATIONAL TAXATION) EXAMINED THE RECORDS. ACCORDING TO HIM, PROVISO TO SUB.SEC (2) OF SEC. 115JAA OF THE A CT SPECIFICALLY PROHIBITS ALLOWANCE OF INTEREST ON THE TAX CREDIT ALLOWED UND ER SUB.SEC. (1) OF SEC. 115JAA AND, THEREFORE, IT RESULTED IN EXCESS ALLOWANCE OF INTEREST U/S 244A TO THE EXTENT OF ` 1763.78 LACS. HE, THEREFORE, ISSUED NOTICE U/S 26 3 OF THE I T ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION AND RELIED ON A COUPLE OF DECISIONS AND SUBMITTED THAT THE MAT CREDIT IN THIS CASE HAS BEEN CORRECTLY SET OFF BEFORE THE ADVANCE TAX AND TDS VI DE ORDER U/S 154 DATED 22.3.2006 AND ACCORDINGLY THERE IS NO PREJUDICE TO THE INTEREST OF THE REVENUE BY ALLOWING INTEREST U/S 244A OF THE ACT. 3.2 HOWEVER, THE LD DIT (IT) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE REPRODUCED SCHEDULE-G, WHICH IS T HE STATEMENT OF TAXES FORMING PART OF THE RETURN OF INCOME. ACCORDING TO HIM, IN VIEW OF THE SEQUENCES PROVIDED IN SCHEDULE-G, THE MAT CREDIT ALLOWED BY T HE ASSESSING OFFICER IS NOT IN CONSONANCE WITH THE SEQUENCE. THEREFORE, INTEREST G RANTED U/S 244A ON THE REFUND DETERMINED ON THE BASIS OF AN INCORRECT COMP UTATION OF REFUND IS 3 ITA NO3388/MUM/2008 ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. FURTHER, THE PROVISO TO SUB.SEC. (2) OF SEC. 115JAA SPECIFICALLY PROVIDES THAT NO INTEREST SHALL BE PAYABLE ON THE TAX CREDIT ALLOWED UNDER SUB.SEC. (1). HE DISTINGUISHED VARIOUS DECISIONS RELIED BEFORE HIM AND HELD THAT DEBATABLE ISSUE DOES NOT CALL FOR RECTIFICATION/S 154 OF THE ACT. FURTHER, THE DECISI ON OF THE TRIBUNAL IN THE CASE OF ACIT VS CANDY INDUSTRIES P LTD WHICH IS IN FAVOUR O F THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. HOWEVER, NO APPEAL HAS BEEN FILED DUE TO SMALLNESS OF THE TAX EFFECT. HE ACCORDINGLY HELD THAT THE ORDER U/S 154 OF THE ACT DATED 22.3.2006 PASSED BY THE ASSESSING OFFICER TO THE EXTENT OF ALLOWING INTEREST U/S 244A OF THE ACT IN RESPECT OF MAT CRED IT BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS SET ASIDE AND DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE INTEREST ALLOWED. 4 THE LD COUNSEL FOR THE ASSESSEE REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS APAR INDUS TRIES LTD REPORTED IN 323 ITR 411(BOM) SUBMITTED THAT CREDIT FOR MINIMUM ALTERNAT E TAX HAS TO BE TAKEN INTO ACCOUNT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS MAX INDIA LTD REPORTED IN 295 ITR 282(SC), H E SUBMITTED THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSE SSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. WHEN THE ASSESSING OFFICER ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN SOME LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AS SESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF R EVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. HE SUBMITTED THAT IN THE INSTANT 4 ITA NO3388/MUM/2008 CASE, THE ASSESSING OFFICER HAS TAKEN A VIEW WHICH IS PERMISSIBLE IN LAW; THEREFORE, THE DIT(IT) WAS NOT RIGHT IN ASSUMING JU RISDICTION U/S 263 OF THE ACT. 4.1 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LTD REPORTED IN 203 ITR 108, HE SUBMITTED THAT THE DIT(IT) CANNOT REVISE THE ORDER MERELY BECAUSE HE DISAGREES WITH THE CONCLUSION ARRIVED AT BY THE ASSESSING OFFICER. REFERRING TO THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD VS C IT REPORTED IN 243 ITR 83, HE SUBMITTED THAT FOR ASSUMING JURISDICTION U/S 263 BO TH THE CONDITIONS I.E. THE ORDER IS ERRONEOUS AND THAT IT IS PREJUDICIAL TO TH E INTEREST OF REVENUE MUST BE SATISFIED. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF APAR INDUSTRIES LTD (SUPRA), HE SUBMITTED THAT T AX PAID U/S 115JA AS COMPARED TO U/S 115JAA IS ADVANCE TAX REFUNDED BY THE DEPART MENT FOR SET OFF FOR TAX LIABILITY FOR FUTURE YEARS AND THE ASSESSEE IS ENTI TLED TO ADJUST THE MAT CREDIT FIRST BEFORE CHARGING OF INTEREST U/S 234B AND 234C AND T HE ASSESSEE IS ALSO ENTITLED FOR INTEREST U/S 244A ON THE REFUND GIVEN TO IT. HE ACCORDINGLY SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN THE CORRECT VIEW IN GRA NTING INTEREST U/S 244A OF THE ACT ON MAT CREDIT AND THE DIT(IT) WAS NOT JUSTIFIED IN ASSUMING JURISDICTION U/S 263 OF THE I T ACT. 4.2 THE LD DR, ON THE OTHER HAND RELIED ON THE ORDE R OF THE DIT(IT) AND SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED AN ORDER U/S 154 ON A DEBATABLE ISSUE. REFERRING TO THE DECISION OF THE HONBLE RA JASTHAN HIGH COURT IN THE CASE OF CIT VS EMERY STONE MFG CO REPORTED IN 213 ITR 84 3 HE SUBMITTED THAT EVEN IN A CASE WHERE THE FACTS HAVE BEEN DISCLOSED BY THE A SSESSEE BEFORE THE ASSESSING AUTHORITY AND IF THE CORRECT PROVISIONS OF LAW HAVE NOT BEEN EXAMINED 5 ITA NO3388/MUM/2008 BY THE ASSESSING AUTHORITY, THE POWER U/S 263 OF TH E I T ACT, 1961 CAN BE INVOKED. 4.2 REFERRING TO THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD (SUPRA), HE SUBMITTED TH AT WHERE THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND PROPERLY AND RECTIFICATIO N ORDER HAS BEEN PASSED ON A DEBATABLE ISSUE, THE CIT CAN ASSUME JURISDICTION U /S 263 OF THE I T ACT. 4.3 THE LD COUNSEL FOR THE ASSESSEE IN HIS REJOINDE R SUBMITTED THAT WE ARE CONCERNED WITH THE 263 MATTER AND FOR ASSUMING JUR ISDICTION U/S 263 OF THE I T ACT THE ORDER MUST BE ERRONEOUS. SINCE THE HONB LE BOMBAY HIGH CURT HAS PASSED THE ORDER WHICH IS DIRECTLY AND CLEARLY IN F AVOUR OF THE ASSESSEE; THEREFORE, THE DIT(IT) IS NOT JUSTIFIED IN ASSUMING JURISDICTION U/S 263 OF THE I T ACT. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE DIT(IT) AND THE PAPER BOOK FIELD ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE, WE FIND ON THE BASIS OF THE PETITION U/S 154 OF THE I T ACT THE ASSESSING OFFICER ALLOWED AMON G OTHER THINGS MAT CREDIT OF ` . 76,68,62,132/- AND ALSO GRANTED INTEREST U/S 244 A AMOUNTING TO ` 22,41,96,965/-. ACCORDING TO THE DIT(IT) BECAUSE OF THE MAT CREDIT ALLOWED BY THE ASSESSING OFFICER AS A PRE-PAID TAX, THE SAME RESULTED IN EXCESS ALLOWANCE OF 6 ITA NO3388/MUM/2008 INTEREST U/S 244A TO THE EXTENT OF ` 1763.78 LACS FOR WHICH THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 5.1 WE FIND THAT THE ISSUE NOW STANDS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF APAR INDUSTRIES LTD (SUPRA) WHERE IT HAS BEEN HELD THAT A FORM PROVIDED BY THE RULE-MAKING AUTHORITY, WHICH IS A DELEGATE OF THE LEGISLATURE, CANNOT OVERRIDE A STATUTORY PROVISION. AND IN COMPUTING INTEREST PAYABLE U/S 23 4B, MINIMUM ALTERNATE TAX CREDIT HAS TO BE TAKEN INTO ACCOUNT. THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD AS UNDER: ( SHORT NOTES) AN AMENDMENT WHICH IS INTENDED TO REMOVE AN AMBIGU ITY IN THE INTERPRETATION OF A SECTION MUST OF NECESSITY BE RE GARDED AS CLARIFICATORY. IF IT IS CLARIFICATORY IN NATURE, IT IS EXPRESSIVE OF A POSITION IN LAW WHICH PARLIAMENT INTENDED TO HOLD THE FIELD AT ALL MATERI AL TIMES AD MUST CONSEQUENTLY BE REGARDED AS OPERATING WITH RETROSPE CTIVE EFFECT. CREDIT FOR MINIMUM ALTERNATE TAX U/S 115JAA OF THE I T ACT 1961, COMPRISES THAT PORTION OF THE MINIMUM ALTERNATE TAX WHICH WAS NOT ACTUALLY PAYABLE BY THE ASSESSEE BUT WHICH NEVERTHELESS WAS COLLECTE D BY THE EXCHEQUER. INTEREST U/S 234B IS LEVIABLE ON THE SHORT FALL OF ADVANCE TAX PAID DURING THE PREVIOUS YEAR. THE PROVISIONS OF SEC. 234B ARE COMPENSATORY. WHERE AN ASSESSEE HAS PAID MINIMUM ALTERNATE TAX AND IS I N FACT ENTITLED TO A CREDIT U/S 115JAA IN RESPECT OF EXCESS TAX COLLECTE D BY THE EXCHEQUER, THE BASIS AND FOUNDATION FOR THE LEVY OF COMPENSATORY I NTEREST WOULD NOT EXIST. EXPLANATION 1 TO SEC. 234B AS IT WAS SUBSTITUTED BY THE FINANCE ACT, 2001 WITH EFFECT FROM APRIL 1, 1989, DEFINED THE EXPRESS ION ASSESSED TAX TO MEAN THE TAX ON THE TOTAL INCOME DETERMINED U/S 143 (1) OR ON REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII ON ANY INCOME WHICH IS SUBJECT TO SUCH DEDUCTION OR COLLECTION AN D WHICH IS TAKEN INTO ACCOUNT IN COMPUTING SUCH TOTAL INCOME PARLIAMENT S UBSTITUTED EXPLANATION 1 TO SEC. 234B BY THE FINANCE ACT OF 2 006. THE AMENDMENT WHICH WAS BROUGHT IN TO FORCE WITH EFFECT FROM ARP IL1, 2007, NOW SPECIFICALLY CONTEMPLATES THAT FOR THE PURPOSES OF THE SEC. ASSESSED TAX WOULD BE RECKONED AFTER TAKING DUE ACCOUNT OF THE T AX CREDIT ALLOWED TO BE SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SEC. 1 15JAA. CBDIT CIRCULAR NO.14 OF 2006 DATED 28.12.2006 FURBISHES AN EXPLAN ATION OF THE 7 ITA NO3388/MUM/2008 CIRCUMSTANCES THAT LED TO THE SUBSTITUTION OF EXPLA NATION 1 BY THE FINANCE ACT OF 2006. REPRESENTATIONS WERE RECEIVED TO THE E FFECT THAT THE TAX CREDIT ALLOWED U/S 115JAA IS NOT DIFFERENT FROM THE TAX PAID IN ADVANCE AND CONSEQUENTLY CREDIT FOR THE PAYMENT OF MINIMUM ALTE RNATE TAX SHOULD BE ALLOWED. THE REPRESENTATIONS WERE ACCEPTED AND PAR LIAMENT STEPPED IN TO SUBSTITUTE EXPLANATION 1 SO AS TO SPECIFICALLY PROV IDE FOR ACCOUNT BEING TAKEN OF THE CREDIT ALLOWED TO BE SET OFF U/S 115JA . HAVING REGARD TO THE BACKGROUND IN WHICH THE AMENDMENT WAS BROUGHT INTO FORCE, IT MUST B REGARDED AS BEING CLARIFICATORY IN NATURE. THE AMEN DMENT CLEARLY REMOVES A CAUSE OF AMBIGUITY INT EH INTERPRETATION OF SEC. 234B. THE PROVISIONS OF SEC.234B MORE PARTICULARLY SUB SECTION (2) AS WELL AS THE ENTIRE SCHEME ENVISAGED IN SECS 140A AND 143(1) CLEARLY REQUIRE D UE ACCOUNT BEING TAKEN OF THE MINIM ALTERNATE TAX CREDIT TO WHICH TH E ASSESSEE WAS ENTITLED U/S 115JAA. CONSEQUENTLY, EVEN PRIOR TO THE AMENDME NT THE CREDIT TO WHICH THE ASSESSEE WAS ENTITLED U/S 115JAA COULD NO T BE IGNORED IN DETERMINING THE LIABILITY TO PAY INTEREST U/S 234B. THE AMENDMENT BROUGHT ABOUT BY PARLIAMENT BY THE FINANCE ACT OF 2006 BY S UBSTITUTING EXPLANATION 1 TO SEC.234B WAS CLARIFICATORY OR CURA TIVE IN NATURE. IN THE I T FORM I IN SCHEDULE G THE TAX CREDIT TO B E ALLOWED U/S 115JAA WAS TO BE RECKONED AFTER COMPUTING THE INTEREST LIABILI TY U/S 234B. HOWEVER, A FORM PROVIDED BY THE RULE MAKING AUTHORI8TY WHICH I S A DELEGATE OF THE LEGISLATURE CANNOT OVERRIDE A STATUTORY PROVISION. HELD, DISMISSING THE APPEAL, THAT FOR THE ASSESSMEN T YEARS 1998-99, 1999- 20 AND 2000-01 IN COMPUTING INTEREST PAYABLE U/S 23 4B, MINIMUM ALTERNATE TAX CREDIT HAD TO BE TAKEN INTO ACCOUNT. 5.2 IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICT IONAL HIGH COURT IN THE ABOVE CITED CASE, WE ARE OF THE CONSIDERED OPINION THAT THE MAT CREDIT IN THE INSTANT CASE HAS BEEN CORRECTLY SET OFF BEFORE THE ADVANCE TAX AND TDS. THEREFORE, THE ORDER OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS. 5.3 IT HAS BEEN HELD BY VARIOUS JUDICIAL PRONOUNCEM ENTS THAT FOR INVOKING THE PROVISIONS OF SEC. 263, THE TWIN CONDITIONS I.E. OR DER MUST BE ERRONEOUS AND IT MUST BE PREJUDICIAL TO THE INTEREST OF REVENUE HAVE TO BE SATISFIED. WHEN THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIE WS AND THE CIT DOES NOT AGREE 8 ITA NO3388/MUM/2008 WITH THAT VIEW, NO 263 PROCEEDINGS CAN BE INITIATED . SINCE IN THE INSTANT CASE THE ASSESSING OFFICER HAS TAKEN A VIEW WHICH IS PERMISS IBLE AND WHICH IS HELD TO BE CORRECT IN VIEW OF THE RATIO OF THE DECISION OF THE JURISDICTIONAL HIGH COURT; THEREFORE, IN OUR CONSIDERED OPINION, THE DIT(IT) W AS NOT JUSTIFIED IN THE INVOKING PROVISIONS OF SEC. 263 OF THE I T ACT. WE, THEREFO RE, SET ASIDE THE ORDER OF THE DIT(IT) AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 24 TH , DAY OF NOV 2010. SD/- SD/- ( (( ( N V VASUDEVAN N V VASUDEVAN N V VASUDEVAN N V VASUDEVAN ) )) ) JUDICIAL MEMBER ( (( ( R K PAND R K PAND R K PAND R K PANDA A A A ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 24 TH , NOV 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI