DCIT CIR 2(2), MUMBAI V. STATE BANK OF SAURASHTRA, MUMBAI

ITA 4100/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4300 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Keywords: Depreciation; Opportunity of being heard; Proportionate interest
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLA IYA, AM ./I.T.A. NO. 4100/MUM/2012 ( & & & & / ASSESSMENT YEAR :2007-08 THE DCIT, AAYAKAR BHAVAN, MUMBAI-400 020 M/S. STATE BANK OF SAURASHTRA, CENTRAL OFFICE, 19 TH FLOOR, MADAM CAMA ROAD, MUMBAI-400 021 ' $ ./ () ./PAN/GIR NO. : AACCS 9880R ( '* /APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY : ` SHRI GIRIJA DAYAL +,'* . - /RESPONDENT BY : SHRI C. NARESH . /0$ / DATE OF HEARING :09.07.2013 12& . /0$ / DATE OF PRONOUNCEMENT :09.07.2013 3 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE REVENUE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-5, MUMBAI DT.20.3.2012 PERTAINING TO A.Y. 2007-08. 2. THE REVENUE HAS RAISED 5 SUBSTANTIVE GROUND OF A PPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT 3 GROUNDS ARE COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE VIDE ITA ITA NO.4100/M/2012 2 NOS. 6,7,8 & 1477RJT/2005 FOR A.YRS 1999-2000 TO 20 02-03. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THE COPY OF THE ORDER OF THE TRIBUNAL. 3. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONC EDED THAT THREE GROUNDS ARE COVERED BY THE DECISION OF THE TRIBUNAL . 4. GROUND NO. 2 RELATES TO THE ISSUE OF DISALLOWAN CE U/S. 14A R.W.R. 8D OF THE ACT. 5. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED INCOME EXEMPT FROM TAX AMOUNTING TO RS. 4,03,89,927/- WHICH INCLU DED DIVIDEND, INTEREST INCOME ON TAX FREE BONDS/SECURITIES. THE A O OBSERVED THAT IN THE COMPUTATION OF INCOME, AN AMOUNT OF RS. 3,41,32,853 /- HAS BEEN CONSIDERED FOR DISALLOWANCE U/S. 14A OF THE ACT. T HE AO WAS OF THE FIRM BELIEF THAT AS THE METHOD OF COMPUTATION OF DISALLO WANCE IS LAID DOWN IN RULE 8D WHICH HAS SINCE BEEN HELD TO BE APPLICABLE TO EARLIER ASSESSMENT YEARS AS WELL, THE AO WENT ON TO COMPUTE THE DISALL OWANCE BY APPLYING RULE 8D AND COMPUTED THE DISALLOWANCE AT RS. 4,86,1 6,051/-. 6. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) AND SUBMITTED THAT APPLICATION OF RULE 8D IS PROSPE CTIVE AND THEREFORE THE AO HAS GROSSLY ERRED IN COMPUTING THE DISALLOWANCE BY APPLYING RULE 8D. THE LD. CIT(A) WAS CONVINCED THAT APPLICABILIT Y OF RULE 8D IS PROSPECTIVE AS PER THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS DCIT 238 ITR 81 AND DIRECTED THE AO TO RECOMPUTED THE DISALLOWANCE BY ADOPTING A REASON ABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND C IRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON RECORD. ITA NO.4100/M/2012 3 7. AGGRIEVED BY THIS, REVENUE IS BEFORE US. IT IS THE SAY OF THE REVENUE THAT POWERS TO SET ASIDE THE ASSESSMENT HAS BEEN WITHDRAWN WITH EFFECT FROM 1.6.2001 THEREFORE, THE LD. CIT(A) GROS SLY ERRED IN SETTING ASIDE THE ISSUE BACK TO THE FILES OF THE AO. HOWEV ER, CONSIDERING THE FACTS IN ISSUE, WE FIND THAT THE APPLICABILITY OF R ULE 8D HAS BEEN WELL SETTLED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA). THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE FINDINGS OF THE LD. CIT(A). THE AO IS DIRECTED TO RECOMPUTE THE DI SALLOWANCE WITHOUT APPLYING RULE 8D OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 2 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO. 3 RELATES TO DISALLOWANCE OF INTEREST EXPENSES OF RS. 20.20 CRORES. 9. THE AO HAS DISCUSSED THIS ISSUE AT PAGE-3 PARA- 4 OF HIS ORDER AND HAS DISALLOWED PROPORTIONATE INTEREST ON THE BORROW ED FUNDS IN PROBLEM SECURITIES TRANSACTIONS FOLLOWING THE DECISION OF H IS PREDECESSOR. 10. THE LD. CIT(A) DELETED THE ADDITIONS FOLLOWING THE ORDER OF THE ITAT FOR ASSESSMENT YEARS 1999-2000 TO 2002-03. 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE (S UPRA). THE TRIBUNAL HAS DISCUSSED THIS ISSUE FROM PARA-3 ONWARDS AND AT PARA-4 GAVE THE FOLLOWING CATEGORICAL FINDING. ITA NO.4100/M/2012 4 IN VIEW OF THE FOREGOING, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE AS SESSEE. WE, ACCORDINGLY, UPHOLD THE SAME AND ALLOW THE CLAIM OF THE ASSESSEE, IN ALL THE FOUR YEARS UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, GROUND NO. 3 IS DISMISSED. 12. GROUND NO. 4 RELATES TO DISALLOWANCE OF DEPRECI ATION OF INVESTMENT IN SHARES AND SECURITIES. 13. THIS ISSUE HAS BEEN DISCUSSED BY THE AO AT PARA -5, PAGE 5 OF HIS ORDER. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS .87,04,16,728/- ON ACCOUNT OF DEPRECIATION ON INVESTMENT IN SHARES AND SECURITIES. THE AO FURTHER OBSERVED THAT IN THE COMPUTATION OF TOTAL I NCOME, THIS IS SHOWN UNDER THE NARRATION PROVISION FOR DEPRECIATION ON INVESTMENT. IN ADDITION TO THIS, A FURTHER AMOUNT OF RS. 42,83,84, 148/- HAS ALSO BEEN CLAIMED UNDER THE CAPTION PROVISION FOR AMORTIZATI ON ON INVESTMENT. THUS, THE TOTAL AMOUNT CLAIMED ON THIS ACCOUNT IS R S. 129,88,00,876/-. THE AO DISALLOWED THE CLAIM OF DEPRECIATION. 14. THE LD. CIT(A) HAS DISCUSSED THIS ISSUE AT PARA -6 PAGE-4 OF HIS ORDER AND AT PARA 6.3 DELETED THE ADDITIONS FOLLOWI NG THE ORDER OF THE TRIBUNAL FOR A.YRS 1999-2000 AND 2001-02. THE TRI BUNAL IN ASSESSEES OWN CASE FOR A.YRS 1999-2000 TO 2002-03 HAS CONSIDE RED SIMILAR DISALLOWANCE AT PARA-10 PAGE-10 OF ITS ORDER CONFIR MING THE FINDINGS OF THE LD. CIT(A) AT PARA-13 OF ITS ORDER. RESPECTFUL LY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE (SU PRA), FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. GROUND NO. 4 IS ACCORDIN GLY DISMISSED. ITA NO.4100/M/2012 5 15. GROUND NO. 5 RELATES TO THE DISALLOWANCE MADE U /S. 36(1)(VII) OF THE ACT. 16. THE AO HAS CONSIDERED THIS ISSUE AT PARA-6 PAGE -14 OF HIS ORDER. THE LD. CIT(A) HAS DISCUSSED THIS ISSUE AT PAGE-5 P ARA-7 ONWARDS AND DELETED THE ENTIRE DISALLOWANCE MADE BY THE AO FOLL OWING THE RECENT JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS CIT. A SIMILAR ISSUE AROSE IN ASSESSE ES OWN CASE IN ASSESSMENT YEAR 1999-2000 TO 2002-03 WHICH HAS BEEN CONSIDERED BY THE TRIBUNAL AT PARA-5 PAGE-4 OF ITS ORDER WHEREIN THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE KERALA HIGH COURT IN THE CASE O F DHANLAXMI BANK VS CIT 262 ITR 279 AND HELD AS UNDER: IN VIEW OF CLEAR PRONOUNCEMENT OF KERALA HIGH COUR T COUPLED WITH DECISION OF COCHIN BENCH OF THE TRIBUN AL REFERRED TO IN THE ORDER OF THE CIT(A), WE DO NOT F IND ANY MERIT IN THE REVENUES APPEALS ON THIS ISSUE, THE S AME ARE HELD TO BE REJECTED. 17. FACTS AND ISSUES BEING IDENTICAL, WE HAVE NO HE SITATION IN FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES ON CASE. G ROUND NO. 5 IS ACCORDINGLY DISMISSED. 18. GROUND NO. 6 RELATES TO ADDITIONAL DISALLOWANCE IN COMPUTATION OF BOOK PROFIT. 19. WE FIND THAT THE LD. CIT(A) HAS REMITTED BACK THIS ISSUE FINDING THAT THE ISSUE IS CONSEQUENTIAL TO THE GROUND RELA TED TO THE DISALLOWANCE ITA NO.4100/M/2012 6 U/S. 14A OF THE ACT. AS WE HAVE RESTORED THE ISSUE RELATING TO COMPUTATION OF DISALLOWANCE U/S. 14A BACK TO THE FI LES OF THE AO, WE ACCORDINGLY RESTORE THIS ISSUE ALSO BACK TO THE FIL ES OF THE AO. THE AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE AFTER DECIDI NG THE ISSUE RELATING TO THE DISALLOWANCE U/S. 14A. NEEDLESS TO MENTION, TH E AO SHOULD GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9.7.2013 . 3 . 2& $ 4 56 9/7/2013 2 . 7 SD/- SD/ (I.P. BANSAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 09/07/2013 . . ./ RJ , SR. PS ITA NO.4100/M/2012 7 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI