The DCIT, Circle-4(1)(2), Ahmedabad V. M/s. Torrent Pvt. Ltd., Ahmedabad

ITA 3427/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8963 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Depreciation; Earning of tax free income; Initiation of penalty proceedings; Rule 8D
• Section: 271(1)(c); 143(3); 234B; 14A; 115JB; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 4(1)(2), AHMEDABAD (APPELLANT) VS TORRENT PVT. LTD. AHMEDABAD , PAN: AAACT5459R (RESPONDENT) TORRENT PVT. LTD. AHMEDABAD , PAN: AAACT54 59R (APPELLANT) VS THE DCIT, CIRCLE - 4(1)(2), AHMEDABAD (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI BIREN SHAH, A.R. DATE OF HEARING : 17 - 06 - 2 019 DATE OF PRONOUNCEMENT : 24 - 06 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - I T A NO . 3427 / A HD/20 15 A SS ESSMENT YEAR 2012 - 13 ITA NO. 3569 /AHD/20 15 ASS ESSMENT YEAR 2012 - 13 I.T.A NO S . 3427 & 3569 /AHD/20 15 A.Y. 2012 - 13 PAGE NO D CIT VS. TORRENT PVT. LTD. 2 THESE TWO APPEALS FILED BY REVENUE AND ASSESSEE AGAINST THE DECISION OF LD. CIT(A), THEREFORE, FOR THE SAKE OF CONVENIENCE BOTH THESE TWO APPEALS ARE ADJUDICATED TOGETHER BY THIS ORDER. 2 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1). WHETHER THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF RS. 9,01,212/ - OUT OF TOTAL DISALLOWANCE OF RS. 1,88,45,888/ - DESPITE THE FACT THAT THE DISALLOWA NCE IS WORKED OUT AS PER THE FORMULA OF RULE 8D PARTICULARLY THE ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(III) WAS BASED ON INVESTMENT, WHERE NO EXPENDITURE COMES INTO FORMULA. 2). WHETHER THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) IS RIGHT IN LAW AND ON FACTS IN DIRECTING TO EXCLUDE THE ADDITION/ADJUSTMENT OF RS. 1,88,45,888/ - MADE ON ACCOUNT OF DISALLOWANCE U/S 14A, WHILE COMPUTING THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT, WHEN THE EXPENDITURE DISALLOWED U/S 14A RELATES TO INCOME EXEMPT U/S 10(34) AS LAID DOWN IN CL. (F) OF EXPLANATION 1 OF SECTION 115JB. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GRO UND NO. 1 OF THE APPELLANT'S APPEAL CHALLENGING THE VERY VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM, AFTER OBSERVING THAT THE GROUND WAS GENERAL IN NATURE AND THE APPELLANT HAD NOT FILED ANY SUBMISSION THEREON. THE LEARNED CIT(A) OUGHT TO HAVE AP PRECIATED, INTER ALIA, THAT THE APPELLANT'S REASON FOR THE CHALLENGE WAS CONTAINED IN THE GROUND ITSELF AND ADJUDICATED UPON IT ON MERITS. 2.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UP HOLDING THE DISALLOWANC E OF RS.1,79,44,676 MADE U/S. 14A READ WITH RULE 8D [SUBJECT TO HIS FAVOURABLE D IRECTIONS ON COMPUTATION OF THE QUANTUM OF THE DISALLOWANCE AS PRAYED FOR IN GROUNDS NO. 3(B) AND 3(C)]. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THE AP PELLANT'S ELABORATE NARRATION OF FACTS AND SUBMISSIONS CONTAINED IN THE STATEMENT OF FACTS ACCOMPANYING THE APPELLANT'S APPEAL AND ORDERED FOR THE DELETION OF THE DISALLOWANCE IN ITS ENTIRETY. 2.2 WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE F ACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN OMITTING TO CONSIDER AND DEAL WITH THE GROUND NO. .3(A) OF THE APPELLANT'S APPEAL BEFORE HIM CHALLENGING DISALLOWANCE OF RS. 1 34,35,686 ON ACCOUNT OF DEPRE CIATION U/S. 14A. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT DEPRECIATION WAS AN ALLOWANCE AND NOT EXPENDITURE WHICH ALONE COULD BE CONSIDERED FOR DISALLOWANCE UNDER A S. 14A AND ACCORDINGLY, ORDERED FOR THE DELETION OF THE IMPUGNED DISALLOWANCE. 3 .1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DEALING WITH GROUNDS NO. 7 AND 8 OF THE APPELLANT'S APPEAL SIMULTANEOUSLY BY OBSERVING THAT LEVY OF INTEREST BOTH U/S. 234B AND 234C WAS MANDA TORY AND CONSEQUENTIAL IN NATURE. HE OUGHT TO HAVE APPRECIATED THAT INSOFAR AS LEVY OF INTEREST U/S. 234C WAS CONCERNED, VIDE GROUND OF APPEAL NO. 7, THE APPELLANT HAD RAISED A DIFFERENT BUT VERY VITAL ISSUE WHICH DESERVED TO BE SPECIFICALLY DEALT WITH BY HIM. 3.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT GROUND NO. 8 OF THE APPELLANT'S APPEAL TOO SIMILARLY DESERVED TO BE DEALT WITH SEPARATELY. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GRO SSLY ERRED IN DISMISSING GROUND NO. 9 OF THE APPELLANT'S APPEAL BEFORE HIM CHALLENGING THE I.T.A NO S . 3427 & 3569 /AHD/20 15 A.Y. 2012 - 13 PAGE NO D CIT VS. TORRENT PVT. LTD. 3 INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) ON THE GROUND THAT MERE INITIATION OF PENALTY PROCEEDINGS IS NOT APPEALABLE. HE OUGHT TO HAVE APPRECIATED, INTER ALI A, THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THERE BEING ABSOLUTELY NO WARRANT/JUSTIFICATION FOR INITIATING THE PENALTY PROCEEDINGS, THEY DESERVED TO BE DROPPED, THEREBY SAVING BOTH THE APPELLANT AND THE DEPARTMENT FROM LONG DRA WN UNNECESSARY LITIGATION. 4. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME AT NIL ON 29 TH SEP, 2012. THE RETURN OF INCOME F ILED WAS SUBJECT TO SCRUTINY AND ASSESSMENT U/S. 143(3) WAS FINALIZED ON 16 TH JAN, 2015. THE FURTHER FACTS OF THE CASE ARE DISCUSSED WHILE ADJUDICATING THE GROUNDS OF APPEALS AS UNDER: - GROUND NO. 1OF REVENUE (DELETING DISALLOWANCE OF RS. 9, 01,212/ - ) AND GROUND NO. 2 .1 & 2.2 OF ASSESS EE ( UPHOLDING THE DISALLOWANCE OF RS. 1,79,44,676/ - MADE U /S. 14A R.W. RULE 8D) 5. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED EXEMPT INCOME TO THE AMOUNT OF RS. 2 , 73 , 56 , 63 , 248/ - . HOWEVER , IT HAS MADE DISALLOWANCE U/S. 14A TO THE AMOUNT OF RS. 15 , 15 , 867/ - ONLY. THEREFORE , THE ASSESSEE WAS SHOW CAUSE D TO EXPLAIN WHY NOT THE DISALLOWANCE U/S. 14A SHOULD BE MADE AS PER PROVISION OF RULE 8D OF IT RULE, 1962. THE ASSESSEE EXPLAINED THAT NO BORROWED FUNDS WERE UTILIZED FOR MAKING INVESTMENT , THEREFORE, NO INTER E ST EXPENDITURE WAS ATTRIBUTABLE TO WARDS EAR NING OF ANY EXEMPT INCOME. THE ASSESSEE ALSO EXPLAINED THAT INVESTMENT TO THE EXTENT OF RS. 84.45% WAS MADE IN THE SUBSIDIARY COMPANIES OF THE ASSESSEE AS A STRATEGIC INVESTMENT WHICH DID NOT REQUIRE ANY MONITORING OR CONSTANT ADMINISTRATION. THE ASSESS ING OFFICER HAS NOT ACCEPTED THE EXP LA NATION OF THE ASSESSEE AND COMPUTED THE DISALLOWANCE U/S. 14A R.W. RULE 8D TO THE AMOUNT OF RS. 1 ,8 8 , 45 , 888/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO S . 3427 & 3569 /AHD/20 15 A.Y. 2012 - 13 PAGE NO D CIT VS. TORRENT PVT. LTD. 4 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 7. D U R IN G THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE US, IT WAS BROUGHT TO OUR NOTICE THAT IDENTICAL ISSUE ON SIMILAR FACTS HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF THE ITAT VIDE ITA NO. 2594/AHD/2014 DATED 1 ST FEB, 2019 WHEREIN THE ADDITION WAS DELETED AFTER FOLLOWING THE DECISION OF CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF ADJUDICATED BY ITA NO. 1777 AND 2028/AHD/201 9. RELEVANT PAR T OF THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT IS REPRODUCED AS UNDER: - 12. AS WE CAN SEE, ASSESSEE HAS RAISED THE ISSUE REGARDING CONFIRMING THE DISALLOWANCE U/S. 14A OF RS. 1, 89,32,077/ - MADE BY A.O. BY FOLLOWING RULE 8D. LD. C1T(A) HAS FOLL OWED THE PRECEDING ASSESSMENT YEAR OF ORDER OF HIS PREDECE SSOR FOR ASSESSMENT YEAR 2010 - 11 AND IT AT IN SIMILAR CIRCUMSTANCES , IN ASSESSEE S OWN CASE GRANTED RELIEF TO THE ASSESSEE IN ITA NO. 177 7 & 2028/AHD/2009 AND DELETED THE ADDIT ION MADE BY THE LOWER AUTHORITIES. THEREFORE , IN PARITY WITH THE BENCH ORDERS, W E ALLOW THIS GROUND OF APPEAL BY THE ASSESS EE AND DIRECTED TO DELETE THE ADDITION OF RS. 1,89,32,077/ - . RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH AS DIRECTED ABOVE, WE ALLOW THIS GROUND O F APPEAL OF THE ASSESSEE. GROUND NO. 2 .OF REVENUE (ADDITION OF RS.1 , 88 , 45 , 888/ - ON ACCOUNT OF DISALLOWANCE U/S. 14A WHILE COMPUTING PROFIT U/S. 115JB) 8. DURING THE COURSE OF ASSESSMENT WHIL E COMPUTING THE BOOK PROFIT U/S . 11 5JB, THE ASSESSING OFFICER HAD ADDED THE AMOUNT OF DISALLOWANCE MADE U/S. 14A OF RS. 1 , 88 , 45 , 888/ - AS PER CLAUSE (F) OF EXPLANATION (1 ) OF SECTION 115JB. THE LD. CIT(A) HAD DELETED THE SAME AFTER FOLLOWING THE DECISION OF I.T.A NO S . 3427 & 3569 /AHD/20 15 A.Y. 2012 - 13 PAGE NO D CIT VS. TORRENT PVT. LTD. 5 HIS PREDECESSOR IN THE CASE OF TH E ASSESSEE ITSELF FOR ASSESSMENT YEAR 201 1 - 12. 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS BROUGHT TO OUR NOTICE THAT CO - ORDINATE BENCH OF THE ITAT VIDE ITA NO. 2587/AHD/2014 FOR ASSESSMENT YEAR 2011 - 12 IN THE CASE OF TH E ASSESSEE ITSELF HAS DECIDED THE SIMILAR ISSUE ON SIMILAR FACTS IN THE CASE OF THE ASSESSEE. WITH THE ASSISTANCE OF LD. REPRESENTATIVES , WE HAVE GONE THROUGH THE ABOVE CITED DECISION OF THE CO - ORDINATE BENCH OF THE ITAT AND NOTICED THAT THE ISSUE WAS DE CIDED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH AFTER FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE ITAT, DELHI IN THE CASE OF VINEET INVESTMENT REPORTED IN 165 ITD 27. RELEVANT PART OF THE DECISION OF THE CO - ORDINATE BENCH IS REPRODUCED AS UNDER: - 8. LD. CIT(A) HAS DELETED THE ADDITION VIDE PARA 5.4 ON PAGES 43 AND 44 OF HIS ORDER. AT THE TIME OF HEARING, LD. A.R. POINTED OUT THAT OVER AND ABOVE DECISION RELIED UPON BY LD. CIT(A) THE ISSUE IS NOW WELL SETTLED BY THE SPECIAL BENCH DECISION IN THE CASE OF VINEET INVESTMENT REPOTTED IN 165 ITD 27. AND IN SIMILAR CIRCUMSTANCES, CO - ORDINATE BENCH GRANTED RELIEF IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11 IN 1TA NO. 1718 & 1648/AHD/2014. THEREFORE, HAVING PARITY WITH THE SAID ORDER, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT AS CITED ABOVE ON SIMILAR FACTS AND SIMILAR ISSUE, THIS GROUND OF APPEAL IS ALLOWED. 10. GROUND NO. 1 OF ASSESSEE IS OF GENERAL NATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION, THEREFORE , THE SAME IS DISMISSED. 11. GROUND NO. 3 OF THE ASSESSEE IS PERTAINED TO CHARGING OF INTEREST U /S. 234B & 234C OF THE ACT . SINCE THE CHARGING OF INTEREST U/S. 234B AND 234C I.T.A NO S . 3427 & 3569 /AHD/20 15 A.Y. 2012 - 13 PAGE NO D CIT VS. TORRENT PVT. LTD. 6 IS MANDATORY AS PER THE PROVISION OF THE ACT, THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 12. GROUND NO. 4 OF THE ASSESSEE REGARDING INITIATION OF PENALTY U/S. 271(1)(C) OF THE ACT IS PREMATURE AT THIS STAGE, THEREFORE, THE SAME IS ALSO DISMISSED. 13. IN T HE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 24 - 06 - 201 9 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 24 /06 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,