Punjab National Bank, New Delhi V. Addl. CIT, New Delhi

ITA 4339/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91064 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 01-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 22-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: KARAN KHANNA
• Keywords: Business income; Earning of tax free income; Revised return
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY, AM ITA NO: 43 3 9 /DEL/20 10 A.Y.: 2004 - 05 PUNJAB NATIONAL BANK VS. ACIT, RANGE 14 (ERSTWHILE PNB ASSET MANAGEMENT CO.LTD.) NEW DELHI HO ACCOUNTS & TAXATION DEPT. 5 SANSAD MARG NEW DELHI PAN: AAACP 0165 G (APPELLANT) (RESPONDENT) APPELLANT BY : SH.KARAN KHANNA, ADV. RESPONDENT BY : SH. VIKRAM SAHAY, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - X VII , NEW DELHI DT. 15.7.2010 PERTAINING TO THE ASSESSMENT YEAR ( A.Y. ) 2004 - 05. 2. FACTS IN BRIEF: - THE ASSESSEE IS A PUBLIC SECTOR COMPANY AND FILED ITS ORIGINAL RETUR N OF INCOME ON 26.10.2004 DECLARING TOTAL INCOME OF RS.1,07,07,720/ - . THE ASSESSING OFFICER ( A.O. ) PASSED AN ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT ) DT. 7 TH DECEMBER,2006 DETERMINING THE LOSS OF BUSINESS AT RS.17,30,513/ - AGAINST A L OSS OF RS.25,37,845/ - CLAIMED BY THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS.1,15,15,049/ - AFTER ACCEPTING INCOME FROM OTHER SOURCES AT RS.1,32,45,562/ - . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST ITA 43 3 9 /DEL/2010 AY: 2004 - 05 PUNJAB NATIONAL BANK 2 APPELLATE AUTHORITY. THE FIRST APP ELLATE AUTHORITY GRANTED PART RELIEF. FURTHER AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS. 1. THAT THE ORDER IS AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 14A OF THE INCOME - TAX ACT ARE APPLICABLE IN THIS CASE AND DIRECTING THE ASSESSING OFFICER TO APPLY THE PROVISIONS OF RULE 80 AND TO CALCULATE THE DISALLOWANCE ACCORDINGLY. NO EXPENDITURE WAS BEING INCURRED TO EARN EXEMPT INCOME. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF RS.72,916/ - ON ACCOUNT OF LEAVE ENCASHMENT MADE BY THE ASSESSING OFFICER. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS WRONGLY TREATED INCOME FROM INTEREST AND DIVIDENDS AS INCOME FROM OTHER SOURCES WHEREAS THIS ARISES OUT OF THE BUSINESS CARRIED OUT BY THE APPELLANT. 5. THAT THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRONEOUSLY DENIED SET OFF OF BROUGHT FORWARD LOSSES OF RS. 1,32,45,562/ - WHICH FINDS PART OF THE BUSINESS INCOME OF THE APPELLANT IN TERMS OF THE MEMORANDAM OF ASSOCIATION OF THE COMPANY AS IT IS DEALING IN A S A PART OF ITS BUSINESS IN BUYING AND SELLING SHARES,BONDS,SECURITIES AND GOVERNMENT PAPER ETC. IT IS PRAYED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO ADJUST BROUGHT FORWARD LOSS AGAINST THIS PROFIT. 6. THAT THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE OTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 3. WE HAVE HEARD SHRI KARAN KHANNA, THE LD.COUNSEL F OR THE ASSESSEE AND SHRI VIKRAM SAHAY, THE LD.SR.D.R. ON BEHALF OF THE REVENUE. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDERS OF AUTHORITIES BELOW, MATERIAL ON RECORD AND CASE LAWS CITED, WE HOLD AS FOLLOWS 5 . GROUND NO .1 IS GENERAL IN NATURE. ITA 43 3 9 /DEL/2010 AY: 2004 - 05 PUNJAB NATIONAL BANK 3 6 . GROUND NO.2 IS AGAINST THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE FIRST APPELLATE AUTHORITY HAD DIRECTED THE AO TO APPLY THE PROVISIONS OF RULE 8D AND CALCULATE THE DISALLOWANCE. 6 .1. THE HON BLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENTS LTD. REPORTED IN 247 CTR 162 (DEL) HAS HELD THAT THE RULE IS NOT RETROSPECTIVE IN NATURE. THUS WE UPHOLD THIS CONTENTION OF THE ASSESSEE. IT WAS SUBMITTED THAT SOME REASONABLE DISALLOWANCE HAS TO BE MADE U/S 14A OF THE ACT. THE ASSESSEE IN THIS CASE HAS NOT MADE ANY DISALLOWANCE. AS IN OUR VIEW A REASONABLE DISALLOWANCE HAS TO BE MADE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. IN THE RESULT GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.3 IS ON THE DISALLOWANCE OF RS.72,916/ - ON ACCOUNT OF LEAVE ENCASHMENT. THE CONTENTION OF THE ASSESSEE IS THAT THE LIABILITY IN QUESTION WAS DISCHARGED BY MAKING PAYMENT BEFORE 30 TH SEPTEMBER, 2004 I.E. BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME. IT WAS ARGUE D THAT THE AMOUNT SHOULD BE ALLOWED AS PER THE PROVISIONS OF S.43B(F) OF THE ACT. THE REVENUE SUBMITS THAT EVIDENCE RELATING TO THE ACTUAL DATE OF PAYMENT OF LEAVE ENCASHMENT WAS NOT PRODUCED. THE ASSESSEE SUBMITS THAT THE REVENUE HAS NOT DIRECTED PRODUCTION OF SUCH EVIDENCE AND HENCE THERE WAS NO OCCASION FOR THEM TO PRODUCE THE SAME. KEEPING IN VIEW THE SMALLNESS OF THE AMOUNT AND THE FACT THAT THIS IS A PUBLIC SECTOR COMPANY , THE STATEMENT MADE AT THE BAR BY THE LD.COUNSEL FOR THE ASSESSEE THAT THE ENTIRE LIABILITY OF LEAVE ENCASHMENT WAS PAID BEFORE 30.9.2004 IS ACCEPTED AND THE AO IS DIRECTED TO ALLOW THIS CLAIM OF THE ASSESSE E. IN THE RESULT THIS GROUND IS ALLOWED. 8. GROUND NO.4 IS AGAINST THE TREATMENT OF INTEREST INCOME AND DIVIDEND INCOME, AS INCOME FROM OTHER SOURCES . THE ASSESSEE COMPANY HAS TREATED THIS INCOME AS INCOME FROM BUSINESS FOR FILING A REVISED RETURN AND CO NSEQUENTLY CLAIMED ADJUSTMENT OF THE CARRY FORWARD BUSINESS LOSSES AGAINST THIS INCOME. THE FIRST APPELLATE AUTHORITY HAS UPHELD THE FINDING OF THE AO THAT THE INCOME IN QUESTION HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA 43 3 9 /DEL/2010 AY: 2004 - 05 PUNJAB NATIONAL BANK 4 9. T HE LD.COUNSEL FOR THE ASSESSEE RELIES UPON THE DECISION OF DELHI F BENCH OF THE TRIBUNAL IN ITA 627/DEL/2005 FOR THE AY 2002 - 03 AND ITA 419/DEL/09 FOR THE AY 2003 - 04 IN THE ASSESSEE S OWN CASE AND ARGUES THAT IN SIMILAR CIRCUMSTANCES THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION. 9.1 . WE FIND THAT THE TRIBUNAL WHILE DISPOSING OF ITA 419/DEL/09 FOR THE AY 2003 - 04 AT PARA 4 HELD AS FOLLOWS. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO SPECIFIC FINDING GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2002 - 03 AS TO WHETHER THE INTEREST AND DIVIDEND INCOME ARE ASSESSABLE AS INCOME FROM OTHER SOURCES OR INCOME FROM BUSINESS AND WHAT ARE TH E BASIS FOR NOT ACCEPTINQ THIS CLAIM THAT THESE INCOMES I.E. INTEREST INCOME AND DIVIDEND INCOME SHOULD BE ASSESSED AS BUSINESS INCOME. IN AY 2003 - 04, THE DECISION OF THE AO IS ON THIS BASIS THAT IT IS NOT THE BUSINESS OF THE ASSESSEE COMPANY TO ADVANCE FUNDS AND EARN INTEREST INCOME THEREON BUT BEFORE US IT WAS THE SUBMISSION OF THE LD.AR OF THE ASSESSEE THAT' THE ASSESSEE IS A ASSET MANAGEMENT CO., AND AS PER THE STATUTORY REQUIREMENTS PRESCRIBED BY RBI AND LATER ON BY SEBI, THE ASSESSEE HAS TO M AINTAIN CERTAIN INVESTMENT IN SHARES, STOCK, BOND 'AND DEBENTURES ETC. ON WHICH THE ASSESSEE EARNS DIVIDEND AND INTEREST INCOME AND HENCE TO THAT EXTENT, THE INCOME ' F THE ASSESSEE IN THE FORM OF DIVIDEND AND INTEREST ON SUCH INVESTMENTS SHOULD BE ASSESSE D AS BUSINESS INCOME. ON THIS ISSUE, THERE IS NO FINDING GIVEN BY THE ASSESSINQ OFFICER OR BY THE LD CIT(A) AND HENCE WE ARE IN AGREEMENT WITH LD. AR OF THE ASSESSEE THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DE CISION. WE, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) IN BOTH YEARS AND RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR FRESH DECISION. THE ASSESSEE SHOULD PRODUCE BEFORE THE AO THE DIRECTION/REQUIREMENT OF RBI/SEBI REGARDING COMPULSORY MAINTENANCE OF CERTAIN IVNESTMENTS AND THE DETAILS OF INVESTMENTS BY THE ASSESSEE AS PER SUCH REQUIREMENT WITHOUT WHICH THE ITA 43 3 9 /DEL/2010 AY: 2004 - 05 PUNJAB NATIONAL BANK 5 BUSINESS OF THE ASSESSEE CANNOT BE RUN. IF THE ASSESSEE ESTABLISH THIS ASPECT THAN TO THE EXTENT OF COMPULSORY MAINTENANCE OF INVESTMENTS REQ UIRED IN ORDER TO BE ELIGIBLE TO RUN, BUSINESS INCOME ON ACCOUNT OF DIVIDEND/INTEREST ON SUCH INVESTMENT MAY BE TREATED AS BUSINESS INCOME. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE A SSESSEE. 9.2 . CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 1 0 . GROUND NO.5 IS A CONSEQUENTIAL ISSUE TO GROUND NO.4. AS WE HAVE SET ASIDE GROUND NO.4, WE ALSO SET ASIDE GROUND NO.5 TO THE FILE OF THE AO FOR FRESH ADJUDICATION. IN THE RESULT GROUND NO.5 IS ALLOWED FOR STATISTICAL PURPOSES. 1 1 . GROUND NO.6 IS GENERAL IN NATURE. 1 2. IN THE RESULT THE APPEA L BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON .MAY, 2015 . ( G.C.GUPTA ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE .............. MAY, 2015 *MANGA ITA 43 3 9 /DEL/2010 AY: 2004 - 05 PUNJAB NATIONAL BANK 6 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT ; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR