PIEM HOTELS LTD, MUMBAI V. DCIT 3(2)(2), MUMBAI

ITA 4638/MUM/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1300 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 27-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Question of law; Revised return; Rule 8D; Set aside; Capital Gains
• Section: 142(1); 14A; 10B; 143(1); 143(2); 48; 72; 13; 22; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 4638 /MUM/201 8 ( / ASSESSMENT YEAR: 2013 - 14 ) & / I .T.A. NO. 4639 /MUM/20 1 8 ( / A SSESSMENT YEAR: 2012 - 13 ) PIEM HOTELS LTD. TAJ PRESIDENT 90, CUFFE PARADE, COLABA MUMBAI - 400005 . / VS. ACIT RANGE - 3(2) MUMBAI . ./ ./ PAN/GIR NO. : AAACP8376M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 17 / 0 2 / 20 2 1 / DATE OF PRONOUNCEMENT : 22 / 04 / 2021 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE ABOVE MENTIONED APPEAL S AGAINST THE ORDER DATED 18.05.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 08 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2012 - 13 & 2013 - 14 . ITA. NO.4639 /M UM /201 8 2. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 1 8 .0 5 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 08 , ASSESSEE BY : SHRI NIRAJ SHETH (AR) REVENUE BY: MS. SHREEKALA PARDESHI (DR) ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 2 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2013 - 14 . 3 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - . ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - 8 MUMBAI HAS ERRED IN UPHOLDING DISALLOWANCE UNDER SECTION 14A OF RS.41,42,872/ - INSTEAD OF RS.7,20,890/ - OFFERED BY THE ASSESSEE. THE ASSES SEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS.: - 1. THE APPELLATE PRAYS THAT THE LIABILITY FOR EDUCATION CESS ON INCOME TAX PAID FOR THE YEAR OUGHT TO BE ALLOW E D AS TAX DEDUCTIBLE EXPENSE WHILE COMPUTING THE TAXABLE INCOME. 2. THE APPELLATE PRAYS THAT LIABILITY FOR EDUCATION CESS AMOUNTING TO RS. 8,10,101 ON DIVIDEND DISTRIBUTION TAX OUGHT TO BE ALLOWED AS TAX DEDUCTIBLE EXPENSES WHILE COMPUTING THE TAXABLE INCOME . 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 . 11 .20 13 DECLARING TOTAL INCO ME TO THE TUNE OF RS. 58,82,36,770 / - FOR THE A.Y. 2013 - 14 . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2) & 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS HOTELIERING AND CATERING AND COMMENCED ITS OPERATIONS ON 13 TH MARCH, 1968, HAVING OWN FIVE STAR HOTELS WITHIN INDIA AT MUMBAI, BANGALORE, AGRA, NASIK, LUCKNOW AND PUNE. T HE ASSESSEE IS A PART OF THE REPUTED TAJ GROUP OF HOTELS. THE ASSESSEE COMPANY MADE THE INVESTMENT OF RS.1,54,31,31,398/ - . THE ASSESSEE SUO - MOTO DISALLOWED IN ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 3 SUM OF RS.7,20,890/ - IN VIEW OF THE PROVISIONS U/S 14A. THE AO WAS NOT SATISFIED . N OTICE WAS ISSUED AND AFTER THE REPLY OF THE ASSESSEE, THE AO AS SESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME IN VIEW OF THE PROVISIONS U/S 14A R.W. RULE 8D A SUM OF RS. 41,42,872/ - . THE EDUCATION CESS AMOUNTING OF RS.8,10,101/ - ON DIVIDEND DISTRIBUTION TAX WAS ALSO DIS ALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 63,71,49,510/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) WHO PARTLY ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL. ISSUE NO.1 7 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE U/S 14A R.W. RULE 8D IN SUM OF RS. 41,42,872/ - INSTEAD OF RS.7,20,890/ - OFFERED BY THE ASSESSEE. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE INVESTMENT WHICH Y IELDED THE EXEMPT INCOME IS LIABLE TO BE CONSIDERED WHILE ASSESSING THE EXPENDITURE TO EARN THE EXEMPT INCOME AND ACCORDINGLY THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALLOWED . I N SUPPORT OF THESE CONTENTIONS , T HE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLA CED RELIANCE UPON THE DECISION OF THE SPECIAL BENCH DELHI IN THE CASE OF CIT VS. VIREET INVESTMENT (P) LTD (2017) 82 TAXMANN.COM 415 . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. THE SPECIAL BENCH DE LHI HAS GIVEN THE FOLLOWING FINDING ON THIS ISSUE . 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE BASIC ISSUE FOR CONSIDERATION IS THAT THE INVESTMENT, WHICH DID NOT YIELD ANY ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 4 EXEMPT INCOME, SHOULD ENTER OR NOT ENTER INTO THE COMPUTATION UNDER RULE 8D, WHILE ARRIVING AT THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. 11.1 IN THE PRESENT CASE, OUR DECISION IS RESTRICTED ONLY TO THE EXTENT OF INTE RPRETATION OF LANGUAGE EMPLOYED IN RULE 8(2)(III). THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE IS THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. HOFCIN INDIA (P.) LTD. (SUPRA), WHEREIN IT HAS BEEN HE LD THAT IF NO DIVIDEND INCOME WAS EARNED, SECTION 14A COULD NOT BE INVOKED. THE HON'BLE DELHI HIGH COURT HAS REFERRED TO THE DECISIONS, WHICH WE HAVE NOTED EARLIER I.E.: - SHIVAM MOTORS (P) LTD'S. CASE (SUPRA) - WINSOME TEXTILE INDUSTRIES LTD'S. CASE (SUPRA) - LAKHANI MARKETING INC. CASE (SUPRA) - CORRTECH ENERGY (P.) LTD'S. CASE (SUPRA). - CIT V. HERO CYCLES LTD. [2010] 323 ITR 518/189 TAXMAN 50 (PUNJ. & HAR.) . 11.2 THE SUBMISSION OF LD. PRINCIPAL CIT(DR) IS THAT ITAT IN THE CASE OF DELHI SPECIAL BENCH IN THE CASE OF CHEMINVEST LTD. (SUPRA) HAS SPECIFICALLY HELD THAT EVEN IF THERE IS NO EXEMPT INCOME, THE PROVISIONS OF SECTION 14A ARE APPLICABLE IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F RAJEDNRA PRASAD MOODY (SUPRA). HIS SUBMISSION IS THAT THE DECISION OF HON'BLE DELHI COURT REVERSING THE DECISION OF SPECIAL BENCH IN CHEMINVEST SHOULD NOT BE FOLLOWED BECAUSE THAT IS CONTRARY TO THE PRINCIPLES LAID DOWN IN RAJENDRA PRASAD MOODY'S CASE (S UPRA). 11.3 IT IS AGAINST THESE SUBMISSIONS, WE FIRST REFER TO THE FACTS AS WERE OBTAINING IN THESE TWO DECISIONS. ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 5 11.4 IN THE CASE OF CHEMINVEST LTD. (SUPRA), THE ASSESSEE HAD BORROWED FUNDS OF RS. 8,51,65,000/ - AND DURING THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2004 - 05 PAID INTEREST OF RS. 1,21,02,367/ - THEREON. OUT OF THIS UNSECURED LOAN, THE ASSESSEE INVESTED A SUM IN PURCHASE OF SHARES, WHICH WAS SHOWN AS INVESTMENT FOR THE PURPOSE OF LONG TERM CAPITAL GAINS. THE AO DISALLOWED INTEREST PROPORTIONA TE TO THE INVESTMENT IN SHARES, THOUGH NO EXEMPT INCOME WAS EARNED DURING THE YEAR. THE CIT(A) AFFIRMED THIS BUT HELD THAT THE NET INTEREST DEBITED TO THE P&L A/C WAS REQUIRED TO BE APPORTIONED AND NOT THE INTEREST EXPENDITURE. THE TRIBUNAL HELD THAT INTER EST EXPENDITURE INCURRED BY THE ASSESSEE WAS FOR BORROWING USED FOR THE PURPOSES OF INVESTMENT IN SHARES, BOTH HELD FOR TRADING AS WELL AS INVESTMENT PURPOSES. IRRESPECTIVE OF WHETHER OR NOT THERE WAS ANY YIELD OF DIVIDEND ON THE SHARES PURCHASED, THE INTE REST INCURRED WAS RELATABLE TO EARNING OF DIVIDEND ON THE SHARES PURCHASED. THE DIVIDEND INCOME BEING EXEMPTED FROM TAX BY VIRTUE OF SECTION 10(34) OF THE ACT, THE INTEREST PAID ON BORROWED CAPITAL UTILIZED IN PURCHASE OF SHARES, BEING THE EXPENDITURE INCU RRED IN RELATION TO DIVIDEND INCOME NOT FORMING PART OF THE ASSESSEE'S TOTAL INCOME, WAS HELD TO BE NOT AN ALLOWABLE DEDUCTION. IN COMING TO THE CONCLUSION, THE SPECIAL BENCH PRIMARILY RELIED ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA). 11.5 IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA), THE FACTS WERE THAT THE ASSESSEES WERE BROTHERS AND EACH OF THEM HAD BORROWED. MONEYS FOR THE PURPOSES OF MAKING INVESTMENT IN SHARES OF CERTAIN COMPANIES. DURING THE RELE VANT ASSESSMENT YEAR THEY PAID INTEREST ON THE MONEYS BORROWED BUT DID NOT RECEIVE ANY DIVIDEND ON THE SHARES PURCHASED WITH THESE MONEYS. BOTH OF THEM MADE A CLAIM FOR DEDUCTION OF THE AMOUNT OF INTEREST PAID ON BORROWED MONEYS BUT THIS CLAIM WAS NEGATED BY THE ITO AND ON APPEAL BY THE AAC ON THE GROUND THAT DURING THE RELEVANT ASSESSMENT YEAR THE SHARES DID NOT YIELD ANY DIVIDEND AND, THEREFORE, INTEREST PAID ON THE BORROWED MONEYS COULD NOT BE REGARDED AS EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLU SIVELY FOR THE PURPOSES OF MAKING OR EARNING INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES', SO AS TO BE ALLOWABLE AS A PERMISSIBLE DEDUCTION U/S 57(III). THE TRIBUNAL. HOWEVER, ON FURTHER APPEAL, DISAGREED WITH THE VIEW TAKEN BY THE TAXING A UTHORITIES AND UPHELD THE CLAIM OF EACH OF THE TWO ASSESSEES FOR DEDUCTION U/S 57(III). ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 6 11.6 IN THE BACKDROP OF THESE FACTS THE TRIBUNAL'S ORDER WAS UPHELD BY THE HON'BLE HIGH COURT AND HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT, INTER ALIA, HELD THA T IT IS THE PURPOSE OF THE EXPENDITURE THAT IS RELEVANT IN DETERMINING THE APPLICABILITY OF SECTION 57(III) AND THAT PURPOSE MUST BE MAKING OR EARNING OF INCOME. IT WAS FURTHER HELD THAT SECTION 57(III) DOES NOT REQUIRE THAT THIS PURPOSE MUST BE FULFILLED IN ORDER TO QUALIFY THE EXPENDITURE FOR DEDUCTION. IT DOES NOT SAY THAT THE EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF ANY INCOME IS MADE OR EARNED. THERE IS IN FACT NOTHING IN THE LANGUAGE OF SECTION 57(III) TO SUGGEST THAT THE PURPOSE, FOR WHICH THE EXPENDI TURE IS MADE, SHOULD FRUCTIFY INTO ANY BENEFIT BY WAY OF RETURN IN THE SHAPE OF INCOME. 11.7 THUS, IN BOTH THE DECISIONS VIZ. IN THE CASE OF CHEMINVEST LTD. (SUPRA), AND IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA), THE ISSUE RELATED TO ALLOWABILITY OF EXP ENDITURE WHICH HAD DIRECT NEXUS WITH THE EARNING OF INCOME. THE BORROWING IN BOTH THE CASES HAS NOT BEEN DISPUTED BEING FOR ACQUIRING SHARES. HON'BLE DELHI HIGH COURT HAS SPECIFICALLY HELD IN PARA 21 AS UNDER: '21. THERE IS MERIT IN THE CONTENTION OF MR. VOHRA THAT THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MODDY (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF DEDUCTION UNDER SECTION 57(III) OF THE ACT, WHERE THE EXPRESSION USED IS FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME'. SECTION 14A OF THE ACT ON THE OTHER HAND CONTAINS THE EXPRESSION 'IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME.' THE DECISION IN RAJENDRA PRASAD MOODY (SUPRA) CANNOT BE USED IN THE REVERSE TO CONTEND THAT EVEN IF NO INCOME HAS BEEN RECEIVED, THE EXPENDITURE INCURRED CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT. ' 11.8 IN THE CASE OF HOLCIN INDIA (P) LTD. (SUPRA) THE FACTS WERE THAT THE RESPONDENT - ASSESSEE WAS A SUBSIDIARY OF HOLDERIND INVESTMENTS LTD., MAURITIUS, WHICH WAS FORMED AS A HOLD ING COMPANY FOR 'MAKING DOWNSTREAM INVESTMENTS IN CEMENT MANUFACTURING VENTURES IN INDIA. IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2007 - 08, THE RESPONDENT - ASSESSEE DECLARED LOSS OF RS. 8.56 CRORES APPROXIMATELY. THE RESPONDENT - ASSESSEE HAD DEC LARED REVENUE RECEIPTS OF RS. 18,02,274/ - WHICH INCLUDED INTEREST OF RS. 726/ - FROM FIXED DEPOSIT RECEIPTS AND PROFIT ON SALE OF FIXED ASSETS OF RS. 16,52,225/ - . AS AGAINST THIS, THE RESPONDENT ASSESSEE HAD CLAIMED ADMINISTRATIVE AND MISCELLANEOUS EXPENDIT URE WRITTEN OFF AMOUNTING TO RS. 8.75 CRORES. FOR THE ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 7 ASSESSMENT YEAR 2008 - 09, THE ASSESSEE HAD FILED RETURN DECLARING LOSS OF RS. 6.60 CRORES APPROXIMATELY. THE ASSESSEE HAD DECLARED REVENUE RECEIPTS IN THE FORM OF FOREIGN CURRENCY FLUCTUATION DIFFERENCE GAIN OF RS. 12,46,595/ - . IT HAD CLAIMED EXPENSES AMOUNTING TO RS. 7.02 CRORES AS PERSONAL EXPENSES, OPERATING AND OTHER EXPENSES, DEPRECIATION AND FINANCIAL EXPENSES. 11.9 IN BOTH THE ASSESSMENT ORDERS, THE ASSESSING OFFICER HELD THAT THE RESPONDENT - ASSESS EE HAD NOT COMMENCED BUSINESS ACTIVITIES AS THEY HAD NOT UNDERTAKEN ANY MANUFACTURING ACTIVITY OR MADE DOWNSTREAM INVESTMENTS. IT WAS OBSERVED THAT THE RESPONDENT - ASSESSEE, AFTER RECEIVING APPROVAL OF FOREIGN INVESTMENT PROMOTION SOARD (FIPS) DATED 20.12. 2000 ACQUIRED SHARES CAPITAL OF AMBUJA CEMENT INDIA LTD. THIS, THE ASSESSING OFFICER FELT, WAS NOT SUFFICIENT TO INDICATE OR HOLD THAT THE RESPONDENT - ASSESSEE HAD STARTED THEIR BUSINESS. HE, ACCORDINGLY, DISALLOWED THE ENTIRE EXPENDITURE OF RS. 8.75 CRORES FOR THE ASSESSMENT YEAR 2007 - 08 AND RS. 7.02 CRORES FOR THE ASSESSMENT YEAR 2008 - 09. 11.10 LD. CIT(A) DID NOT AGREE WITH THE FINDINGS OF ASSESSING OFFICER THAT THE BUSINESS OF THE RESPONDENT - ASSESSEE HAD NOT BEEN SET UP OR COMMENCED. THE CIT(A) OBSERVED THAT THE RESPONDENT - ASSESSEE HAD BEEN SET UP WITH THE BUSINESS OBJECTIVE OF MAKING INVESTMENT IN CEMENT INDUSTRY AFTER DUE APPROVAL GIVEN BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY VIDE LETTER DATED 18.12.2002 AND 20.12.2012. IT WAS OBSE RVED THAT IN FACT, THE RESPONDENT - ASSESSEE WAS NOT TO UNDERTAKE ANY MANUFACTURING ACTIVITY THEMSELVES. AFTER CONSIDERING THE FIPS APPROVAL AND THE PURCHASE OF SHARES IN THE SAID COMPANY OF RS. 1850.91 CRORES, LD. CIT(A), INTER ALIA, OBSERVED THAT THE ASSES SEE WAS ENGAGED IN THE BUSINESS OF HOLDING OF INVESTMENT AND WAS ENTITLED TO CLAIM EXPENDITURE PROVIDED. THERE WAS A DIRECT CONNECTION BETWEEN EXPENDITURE INCURRED AND BUSINESS OF THE ASSESSEE COMPANY. HOWEVER, HE POINTED OUT THAT SINCE THE BUSINESS OF THE RESPONDENT - ASSESSEE WAS TO ACT AS A HOLDING COMPANY FOR DOWNSTREAM INVESTMENT AND AS IT WAS AN ACCEPTED FACT THAT THEY HAD INCURRED EXPENSES TO PROTECT THEIR BUSINESS AND EXPLORE NEW AVENUES OF INVESTMENT, THE PROVISIONS OF SECTION 14A WERE APPLICABLE. 11 .11 THE HON'BLE HIGH COURT OBSERVED THAT THE REASONING GIVEN BY THE CIT(A) WAS AMBIGUOUS AND UNCLEAR AND ON CLARITY BEING ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 8 SOUGHT FROM THE REVENUE IT WAS POINTED OUT THAT 'THE STAND OF THE ASSESSEE CONTAINED A CONTRADICTION TO THE EXTENT THAT ON THE ISSUE O F SETTING UP OF BUSINESS, IT WAS STATED THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON ACQUIRING THE SHARES, THEREFORE, THE ASSESSEE COULD NOT NOW TAKE DIFFERENT STAND THAN THE ONE TAKEN IN THE FIRST ISSUE'. 11.12 THE HON'BLE HIGH COURT, AFTER CONSIDERING I N DETAIL THE DECISION OF LD. CIT(A) FINALLY OBSERVED IN PARA 13 AS UNDER: '13. WE. ARE CONFUSED ABOUT THE STAND TAKEN BY THE APPELLANT - REVENUE. THUS, WE HAD ASKED SR. STANDING COUNSEL FOR THE - REVENUE, TO STATE IN HIS OWN WORDS, THEIR STAND BEFORE US. DURIN G THE COURSE OF HEARING, THE SUBMISSION RAISED WAS THAT THE SHARES WOULD HAVE YIELDED DIVIDEND, WHICH WOULD BE EXEMPT INCOME AND THEREFORE, THE CIT(A) HAD INVOKED SECTION 14A TO DISALLOW THE ENTIRE EXPENDITURE. THE AFORESAID SUBMISSION DOES NOT FIND ANY SP ECIFIC AND CLEAR NARRATION IN THE REASONS OR THE GROUNDS GIVEN BY THE CIT(A) TO MAKE THE SAID ADDITION. POSSIBLY, THE CIT(A), THOUGH IT IS NOT ARGUED BEFORE US, HAD TAKEN THE STAND THAT THE RESPONDENT - ASSESSEE HAD MADE INVESTMENT AND EXPENDITURE WAS INCURR ED TO PROTECT THOSE INVESTMENTS AND THIS EXPENDITURE CANNOT BE ALLOWED UNDER SECTION 14A.' 11.13 THUS, HON'BLE DELHI HIGH COURT PRIMARILY DECIDED THE ISSUE REGARDING APPLICABILITY OF SECTION 14A EVEN IF NO DIVIDEND INCOME WAS EARNED. THE HON'BLE HIGH COURT IN PARAS 14 TO 16 OF ITS DECISION OBSERVED AS UNDER: '14. ON THE ISSUE WHETHER THE RESPONDENT - ASSESSEE COULD HAVE EARNED DIVIDEND INCOME AND EVEN IF NO DIVIDEND INCOME WAS EARNED, YET SECTION 14A CAN BE INVOKED AND DISALLOWANCE OF EXPENDITURE CAN BE MADE, THERE ARE THREE DECISIONS OF THE DIFFERENT HIGH COURTS DIRECTLY ON THE ISSUE AND AGAINST THE APPELLANT - REVENUE. NO CONTRARY DECISION OF A HIGH COURT HAS BEEN SHOWN TO US. THE PUNJAB AND HARYANA HIGH COURT IN COMMISSIONER OF INCOME TAX, FARIDABAD V. M/S. L AKHANI MARKETING INCL, ITA NO. 970/2008, DECIDED ON 02.04.2014, MADE REFERENCE TO TWO ' EARLIER DECISIONS OF THE SAME COURT IN CITV. HERO CYCLES LIMITED, [2010] 323 ITR 518 AND CITVS. WINSOME TEXTILE INDUSTRIES LIMITED, [2009] 319 ITR 204 TO HOLD THAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. THE SECOND DECISION IS OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX - I V. CORRTECH ENERGY (P.) LTD. [2014] 223 TAXMANN 130 (GUJ.) . THE ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 9 THIRD DECISION IS OF THE ALLAHABAD HIGH COURT IN INCOME TAX APPEAL NO. 88 OF 2014, COMMISSIONER OF INCOME TAX II KANPUR, V. M/S. SHIVAM MOTORS (P) LTD. DECIDED ON 05.05.2014. IN THE SAID DECISION IT HAS BEEN HELD: - 'AS REGARDS THE SECOND QUESTION, SECTION 14A OF THE ACT PROVIDES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THE CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. HENCE, WHAT SECTION 14A PROVIDES IS THAT IF THERE IS ANY INCOME WHICH DOES NOT FORM PART OF THE INCOME UNDER THE ACT, THE EXPENDITURE WHICH IS INCURRED FOR EARNING THE INCOME IS NOT AN ALLOWABLE DE DUCTION. FOR THE YEAR IN QUESTION, THE FINDING OF FACT IS THAT THE ASSESSEE HAD NOT EARNED ANY TAX FREE INCOME. HENCE, IN THE ABSENCE OF ANY TAX FREE INCOME, THE CORRESPONDING EXPENDITURE COULD NOT BE WORKED OUT FOR DISALLOWANCE. THE VIEW OF THE C1T(A), WH ICH HAS BEEN AFFIRMED BY THE TRIBUNAL, HENCE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HENCE, THE DELETION OF THE DISALLOWANCE OF RS. 2,03,752/ - MADE BY THE ASSESSING OFFICER WAS IN ORDER' 15. INCOME EXEMPT UNDER SECTION 10 IN A PARTICULAR ASS ESSMENT YEAR, MAY NOT HAVE BEEN EXEMPT EARLIER AND CAN BECOME TAXABLE IN FUTURE YEARS. FURTHER, WHETHER INCOME EARNED IN A SUBSEQUENT YEAR WOULD OR WOULD NOT BE TAXABLE, MAY DEPEND UPON THE NATURE OF TRANSACTION ENTERED INTO IN THE SUBSEQUENT ASSESSMENT YE AR. FOR EXAMPLE, LONG TERM, CAPITAL GAIN ON SALE OF SHARES IS PRESENTLY NOT TAXABLE WHERE SECURITY TRANSACTION TAX HAS BEEN PAID, BUT A PRIVATE SALE OF SHARES IN AN OFF MARKET TRANSACTION ATTRACTS CAPITAL GAINS TAX: IT IS AN UNDISPUTED POSITION THAT RESPON DENT ASSESSEE IS AN INVESTMENT COMPANY AND HAD INVESTED BY PURCHASING A SUBSTANTIAL NUMBER OF SHARES AND THEREBY SECURING RIGHT TO MANAGEMENT. POSSIBILITY OF SALE OF SHARES BY PRIVATE PLACEMENT ETC. CANNOT BE RULED OUT AND IS NOT ALL IMPROBABILITY. DIVIDEN D MAY OR MAY NOT BE DECLARED. DIVIDEND IS DECLARED BY THE COMPANY AND STRICTLY IN LEGAL SENSE, A SHAREHOLDER HAS NO CONTROL AND CANNOT INSIST ON PAYMENT OF DIVIDEND. WHEN DECLARED, IT IS SUBJECTED TO DIVIDEND DISTRIBUTION TAX. 16. WHAT IS ALSO NOTICEABLE I S THAT THE ENTIRE OR WHOLE EXPENDITURE HAS BEEN DISALLOWED AS IF THERE WAS NO EXPENDITURE INCURRED BY THE RESPONDENT - ASSESSEE FOR CONDUCTING BUSINESS. THE CIT(A) HAS POSITIVELY HELD THAT THE BUSINESS WAS SET UP AND HAD COMMENCED. ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 10 THE SAID FINDING IS ACCEPT ED. THE RESPONDENT - ASSESSEE, THEREFORE, HAD TO INCUR EXPENDITURE FOR THE BUSINESS IN THE FORM OF INVESTMENT IN SHARES OF CEMENT COMPANIES AND TO FURTHER EXPAND AND CONSOLIDATE THEIR BUSINESS. EXPENDITURE HAD TO BE ALSO INCURRED TO PROTECT THE INVESTMENT MA DE. THE GENUINENESS OF THE SAID EXPENDITURE AND THE FACT THAT IT WAS INCURRED FOR BUSINESS ACTIVITIES WAS NOT DOUBTED BY THE ASSESSING OFFICER AND HAS ALSO NOT BEEN DOUBTED BY THE CIT(A).' 11.14 NOW THE POSITION OF LAW AS STANDS IS THAT THE DECISION OF HON 'BLE JURISDICTION HIGH COURT IS DIRECTLY ON THE POINT IN DISPUTE WHEREAS THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJENDRA PRASAD MOODY (SUPRA) HAS BEEN RENDERED IN THE CONTEXT OF SECTION 57(III), THE APPLICABILITY OF WHICH HAS BEEN RULED OUT B Y HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST (SUPRA). 11.15 UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA, THE COURTS FUNCTION UNDER THE SUPERVISORY JURISDICTION OF HON'BLE HIGH COURT. THE DECISIONS RENDERED BY HON'BLE HIGH COURT ARE BINDING ON AL L SUBORDINATE COURTS WORKING WITHIN ITS JURISDICTION. IN THIS REGARD WE MAY REFER TO THE FOLLOWING DECISIONS: '(I) CITV. THANA ELECTRICITY SUPPLY LTD. (1994) 206 ITR 727 (BOM.) , WHEREIN ON THE ISSUE OF 'WHOSE DECISION IS BINDING ON WHOM', THE. HON'BLE BOMBAY COURT CONSIDERED IN DETAIL THE HIERARCHY OF THE COURTS AND HAS OBSERVED AS UNDER: 'IT IS ALSO WELL - SETTLED THAT THOUGH THERE IS NOSPECIFIC PROVISION MAKING THE LAW DECLARED BY THEHIGH COURT BINDING ON SUBORDINA TE COURTS, IT ISIMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON ASUPERIOR TRIBUNAL THAT THE TRIBUNALS SUBJECT TO ITSSUPERVISION WOULD CONFORM TO ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 11 THE LAW LAID DOWN BYIT. IT IS IN THAT VIEW OF THE MATTER THAT THE SUPREME COURT IN EAST INDIA COMMERCIAL CO. LTD. V.COLLECTOR OF CUSTOMS AIR 1962 SC 1893 (AT PAGE1905) DECLARED: 'WE, THEREFORE', HOLD THAT THE LAW DECLARED BY THE HIGHEST COURT IN THE STATE IS BINDING ON AUTHORITIES OR TRIBUNALS UNDER ITS SUPERINTENDENCE, AND THEY CANNOT IGNORE IT. ....' TH IS POSITION HAS BEEN SUMMED UP BY THE SUPREME COURT IN MAHADEOLAL KANODIA V. ADMINISTRATOR GENERAL OF WEST BENGAL AIR 1960 SC 936 (AT PAGE 941) AS FOLLOWS: 'JUDICIAL DECORUM NO LESS THAN LEGAL PROPRIETY FORMS THE BASIS OF JUDICIAL PROCEDURE. IF ONE THI NG IS MORE NECESSARY IN LAW THAN ANY OTHER THING, IT IS THE QUALITY OF CERTAINTY. THAT QUALITY WOULD TOTALLY DISAPPEAR IF JUDGES OF CO - ORDINATE JURISDICTION IN A HIGH COURT START OVERRULING ONE ANOTHER'S DECISIONS. IF ONE DIVISION BENCH OF A HIGH COURT IS UNABLE TO DISTINGUISH A PREVIOUS DECISION OF ANOTHER DIVISION BENCH, AND HOLDING THE VIEW THAT THE EARLIER DECISION IS WRONG, ITSELF GIVES EFFECT TO THAT VIEW, THE RESULT WOULD BE UTTER CONFUSION. THE POSITION WOULD BE EQUALLY BAD WHERE A JUDGE ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 12 SITTING SIN GLY IN THE HIGH COURT IS OF OPINION THAT THE PREVIOUS DECISION OF ANOTHER SINGLE JUDGE ON A QUESTION OF LAW IS WRONG AND GIVES EFFECT TO THAT VIEW INSTEAD OF REFERRING THE MATTER TO A LARGER BENCH.' THE ABOVE DECISION WAS FOLLOWED BY THE SUPREME COURT IN BARADAKANTA MISHRA V. BHIMSEN DIXIT, AIR 1972 SC 2466, WHEREIN THE LEGAL POSITION WAS REITERATED IN THE FOLLOWING WORDS (AT PAGE 2469) : 'IT WOULD BE ANOMALOUS TO SUGGEST THAT A TRIBUNALOVER WHICH THE HIGH COURT HAS SUPERINTENDENCECAN IGNORE THE LAW DECLARED BY THAT COURT AND STARTPROCEEDINGS IN DIRECT VIOLATION OF IT. IF A TRIBUNALCAN DO SO, ALL THE SUBORDINATE COURTS CAN EQUALLY DOSO, FOR THERE IS NO SPECIFIC PROVISION, JUST LIKE IN THECASE OF SUPREME COURT, MAKING THE LAW DECLARED BYTHE HIGH COURT BINDING ON SUBORDINATE COURTS. IT ISIMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON ASUPERIOR TRIBUNAL THAT ALL THE TRIBUNALS SUBJECT TO ITS SUPERVISION SHOULD CONFORM TO THE LAW LAID DOWN BY IT. SUCH OBEDIENCE WOULD ALSO BE CONDUCIVE TO THEIR SMOOTH WO RKING; OTHERWISE THERE WOULD BE CONFUSION IN THE ADMINISTRATION OF LAW AND RESPECT FOR LAW WOULD ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 13 IRRETRIEVABLY SUFFER,' (II) CITV. SVNIL KUMAR (1995) 212 ITR 238 (RAJ.) , IT WAS OBSERVED AS UNDER: 'THE POINT WHICH HAS BEEN RAISED COULD HAVE BEEN CONSIDERED TO BE DEBATABLE BECAUSE OTHER HIGH COURTS HAVE TAKEN A DIFFERENT VIEW. BUT SINCE THE VIEW TAKEN BY THIS COURT IS BINDING ON THE TRIBUNAL AND OTHER AUTHORITIES UNDER THE ACT IN THIS STATE, IT COULD NOT BE CONSIDERE D TO BE A DEBATABLE POINT IN VIEW OF THE DECISION OF THIS COURT IN THE CASE OF CITV. M.L., SANGHI [1988] 170 ITR 670 .' (III) INDIAN TUBE COMPANY LTD. V. CIT & OTHERS (1993) 203 ITR 5 4 (COL.) , IT WAS OBSERVED AS UNDER: 'IN THE IMPUGNED ORDER, RESPONDENT NO.1 HAS REJECTED THE PETITIONER'S CONTENTION BY STATING THAT, ALTHOUGH THE CALCUTTA HIGH COURT HAD HELD THAT AN ASSESSEE WAS ENTITLED TO INTEREST ON SUCH REFUND CALCULATED UP TO THE DATE OF THE ORDER PASSED CONSEQUENT UPON AN APPEAL OR REVISION OF THE ORIGINAL ASSESSMENT, THIS VIEW HAD NOT BEEN ACCEPTED BY THE BOMBAY HIGH COURT, THE ALLAHABAD HIGH COURT AND THE KERALA HIGH COURT. RESPONDENT NO.1, ACCORDINGLY, CHOSE TO ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 14 ACCEPT THE V IEW OF THE BOMBAY, ALLAHABAD AND KERALA HIGH COURTS IN PREFERENCE TO THE VIEW OF THE CALCUTTA HIGH COURT. IN MY VIEW, THE ORDER OF RESPONDENT NO. 1 CANNOT BE SUSTAINED ON THE SIMPLE GROUND THAT RESPONDENT NO. 1 IS AN AUTHORITY OPERATING WITHIN THE STAT E OF WEST BENGAL AND IS BOUND BY THE DECISIONS OF THE HIGH COURT OF THIS STATE (SEE CITV. INDIAN PRESS EXCHANGE LTD. [1989] 176 ITR 331 (CAL) ; EAST INDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUSTOMS AIR 1962 SC 1993, PAR AGRAPH 29). IN THAT VIEW OF THE MATTER, THE IMPUGNED ORDER MUST BE SET ASIDE AND THE COMMISSIONER IS DIRECTED TO CONSIDER THE MATTER AFRESH IN KEEPING WITH THE DECISIONS OF THIS COURT AFTER GIVING THE PETITIONERS AN OPPORTUNITY OF BEING HEARD. AT LEAST 48 HOURS CLEAR NOTICE MUST BE GIVEN TO THE PETITIONERS. THE COMMISSIONER WILL COMMUNICATE THE FINAL ORDER TO THE PETITIONER WITHIN EIGHT WEEKS FROM THE DATE OF HEARING. (IV) CITV. J.K. JAIN [1998] 230 ITR 839 (P&H) , OBSERVING AS UNDER: 'WE HAVE CAREFULLY EXAMINED THE RECORDS AND HAVE HEARD LEARNED COUNSEL REPRESENTING ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 15 THE PARTIES. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW EXPRESSED BY THE ALLAHABAD HIGH COURT IN OMEGA SPORTS AND RADIO WORKS' CASE [1982] 134 ITR 28 , AS ALSO THE DECISION OF THIS COURT IN MOHAN LAL KANSAL'S CASE [1978] 114 ITR 583 . FOLLOWING THE DECISION IN THE TWO CASES REFERRED TO ABOVE, WE HOLD THAT IT WAS NOT A CASE OF DIVE RGENCE OF OPINION INASMUCH AS THE OPINION EXPRESSED BY THIS COURT WAS BINDING UPON THE TRIBUNAL.'' 11.16 THEREFORE, IN OUR CONSIDERED OPINION, NO CONTRARY VIEW CAN BE TAKEN UNDER THESE CIRCUMSTANCES. WE, ACCORDINGLY, HOLD THAT ONLY THOSE INVESTMENTS ARE T O BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME DURING THE YEAR. 11.17 AS FAR AS ARGUMENT RELATING TO MEANING TO BE ASCRIBED TO THE PHRASE 'SHALL NOT' USED IN RULE 8D(2)(III) IS CONCERNED, THE REVENUE'S CONTENTION IS T HAT IT REFERS TO THOSE INVESTMENTS WHICH DID NOT YIELD ANY EXEMPT INCOME DURING THE YEAR BUT IF INCOME WOULD HAVE BEEN YIELDED IT WOULD HAVE REMAIN EXEMPT. THERE IS NO DISPUTE THAT IF AN INVESTMENT HAS YIELDED EXEMPT INCOME IN A PARTICULAR YEAR THEN IT WIL L ENTER THE COMPUTATION OF AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSES OF RULE 8D(2)(III). THE ASSESSEE'S CONTENTION THAT IF THERE IS NO CERTAINTY THAT AN INCOME, WHICH IS EXEMPT IN CURRENT YEAR, WILL CONTINUE TO BE SO IN FUTURE YEARS AND, THEREFORE, THA T INVESTMENT SHOULD ALSO BE EXCLUDED, IS HYPOTHETICAL AND CANNOT BE ACCEPTED. 11.18 IN VIEW OF ABOVE DISCUSSION, THE MATTER IS RESTORED BACK TO THE FILE OF AO FOR RECOMPUTING THE DISALLOWANCE U/S 14A IN TERMS OF ABOVE OBSERVATIONS. THUS, REVENUE'S APPEAL I S DISMISSED AND ASSESSEE'S CROSS - OBJECTION, ON THE ISSUE IN QUESTION, STAND ALLOWED FOR STATISTICAL PURPOSES, IN TERMS INDICATED ABOVE. 12. NOW WE WILL CONSIDER THE OTHER TWO GROUNDS. AS FAR AS GROUND NO. 3 IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERF ERE WITH THE ORDER OF LD. CIT(A) BECAUSE LD. CIT(A) HAS ONLY REFERRED THE MATTER ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 16 TO AO FOR VERIFYING THE REVISED COMPUTATION U/S 94(7) WITH REFERENCE TO RECORD DATE AND NOT WITH RESPECT TO DATE OF RECEIPT OF DIVIDEND. WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) ON THIS ISSUE. 13. AS REGARDS ADDITION OF RS. 4,02,58,032/ - , WE FIND THAT THE ENTIRE ADDITION HAD BEEN MADE BECAUSE ASSESSEE DID NOT CHARGE ANY INTEREST FROM LOANEES. HOWEVER, ADMITTEDLY ASSESSEE HAD NOT CLAIMED ANY INTEREST EXPENDITURE AND, THEREFORE, THERE WAS NO REASON FOR MAKING ANY ADDITION ON THE GROUND OF INTEREST BEING NOT CHARGED BY ASSESSEE. LD. COUNSEL HAS RELIED ON FOLLOWING DECISIONS FOR THE PROPOSITION THAT ONLY REAL INCOME CAN BE TAXED AND NOT NOTIONAL INCOME. - CIT V. SHOORJI VALLABHDAS & CO. [1962] 46 ITR 144 (SC) ; - GODHRA ELECTRICITY CO. LTD.. V. CIT [1997] 225 ITR 746/91 TAXMAN 351 (SC) ; - CIT V. A. RAMAN & CO. [ 1968] 67 ITR 11 (SC) ; - UCO BANK V. CIT [1999] 237 ITR 889/104 TAXMAN 547 (SC) ; - AIRPORT AUTHORITY OF INDIA V. CIT [2012] 340 ITR 407/205 TAXMAN 84 (MAG.)/18 TAXMANN.COM 174 (DELH I) (FB) ; - CIT V. MOTOR CREDIT CO. (P.) LTD. [1981] 127 ITR 572/6 TAXMAN 63 (MAD.) ; - JT. CIT V. PANKAJ OXYGEN LTD. [2003] 130 TAXMAN 120 (MAG.)(NAG.) - ASSTT. CIT V. MANICK CHAND DAMANI [2001] 72 TTJ 675 (CAL.) 13.1 AFTER HEARING BOTH THE PARTIES, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A), BECAUSE THE ISSUE THAT ONLY REAL ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 17 INCOME AND NOT NOTIONAL INCOME IS TAXABLE, I S NO MORE RES - INTGRA IN VIEW OF AFOREMENTIONED DECISIONS, PARTICULARLY WHEN NO INTEREST WAS PAID BY ASSESSEE ON ITS BORROWINGS. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A). THIS GROUND IS DISMISSED. 8. ON APPRAISAL OF THE ABOVE SAID FINDING, IT IS QUIT E CLEAR THAT THE INVESTMENT WHICH YIELDED THE EXEMPT INCOME IS ONLY LIABLE TO BE CONSIDERED TO BE ASSESSED THE EXPENDITURE TO EARN THE EXEMPT INCOME, THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE, IS HEREBY ORDERED TO BE SET ASIDE AND THE ISSUE IS HEREBY RESTORE D BEFORE THE AO TO DECIDE THE MATTER OF CONTROVERSY AFRESH IN VIEW OF THE DECISION OF VIREET INVESTMENT (P) L TD. (SUPRA). ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ADDITIONAL ISSUE NO.2 9. UNDE R THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EDUCATION CESS OF RS. 8,10,101/ - ON DIVIDEND DISTRIBUTION TAX. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ISSUE HAS DULY BEEN COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF SESA GOA LTD. (TAX APPEAL NO. 17 & 18 OF 2013) (BOMBAY HIGH COURT). HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CASE SESA GOA LTD. (SUPRA) ON RECORD : - 7. THE APPELLANT - ASSESSEE, THEN, APPEALED TO THE INCOME - TAX APPELLATE TRIBUNAL (ITAT), WHICH TOO, VIDE JUDGMENT AND ORDER DATED 10 - 3 - 2011 UPHELD THE ORDER OF THE APPELLATE AUTHORITY. 8. THE RELEVANT DISCUSSION IN THE ITAT'S ORDER DATED 10 - 3 - 2011 IS TO BE FOUND IN PARA 11, WHICH READS AS FOLLOWS: ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 18 '11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNTING TO PROD UCTION PRIOR TO A.Y. 2005 - 06, THE DEDUCTION UNDER SECTION 10B WAS NOT CLAIMED BY THE ASSESSEE. THE ASSESSEE WAS CLAIMING DEDUCTION UNDER SECTION 8OHHC. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE CLAIM OF 100% EOU HAS NOT BEEN MENTIONED IN THE ORIGINAL RETURN. THE ASSESSEE IS ENTITLED FOR SUCH CLAIM, WHEN THE ASSESSEE HAS FILED REVISED RETURN, THE ASSESSEE HAS NOT MADE THIS CLAIM. THE CIT(A) HAS NOT ALLOWED THE CLAIM ON THE DECISION RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD . V. CIT 284 ITR 323 WHEREIN THE COURT HAS HELD THAT WHEN AN ASSESSEE HAS CLAIMED DEDUCTION AFTER RETURN HAS BEEN FILED, THE ASSESSING AUTHORITY HAS NO POWER TO ENTERTAIN SUCH CLAIM MADE OTHERWISE THA N BY WAY OF REVISED RETURN. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT, WE ARE OF THE VIEW THAT CIT(A) IS JUSTIFIED IN NOT ALLOWING THE CLAIM OF DEDUCTION OTHERWISE BY THEN THE REVISED RETURN. THEREFORE IN OUR OPINION, LEARNED CIT(A) IS J USTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED.' 9. THE FIRST SUBSTANTIAL QUESTION OF LAW, TO A CERTAIN EXTENT, CAN BE SAID TO BE COVERED BY THE DECISION OF THE HON'BLE APEX COURT IN T HE CASE OF GOETZE (INDIA) LTD . V. CIT [2006] 157 TAXMAN 1/284 ITR 323 (SC) . HOWEVER, ACCORDING TO US, BOTH, THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THE ITAT HAVE ERRED IN RELYING UPON GOETZE (INDIA) LTD . ( SUPRA ) AND HOLDING THAT EVEN THE APPELLATE AUTHORITIES UNDER THE IT ACT COULD NOT HAVE ENTERTAINED THE ASSESSEE'S CLAIM FOR DEDUCTION, INTER ALIA , UNDER SECTION 10B OF THE IT ACT. 10. ACCORDING TO US, THE APPROACH OF THE COMMISSIONER OF THE INCOME TAX (APPEALS) AND THE ITAT IS CONTRARY TO THE LAW LAID DOWN BY THIS COURT IN CIT V. PRUTHVI BROKERS & SHAREHOLDERS [2012] 23 TAXMANN.COM 23/208 TAXMAN 498/349 ITR 336 (BOM), WHICH DECISION HAS BEEN FOLLOWED IN SESAGOALTD . V. JT. CIT [2020] 117 TAXMANN.COM 96 (BOM.) , WHEREIN IT HAS BEEN HELD THUS: '39. IN CIT V. PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD . 349 ITR 336, ONE OF THE QUESTIONS OF LAW WHICH CAME TO BE FRAMED WAS WHETHER ON THE ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 19 FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT, IN LAW, WAS RIGHT IN HOLDING THAT THE CLAIM OF DEDUCTION NOT MADE IN THE ORIGINAL RETURNS AND NOT SUPPORTED BY REVISED RETURN, WAS ADMISSIBLE. THE REVENUE HAD RELIED UPON GOETZE ( SUPRA ) AND URGED THAT THE ITAT HAD NO POWER TO ALLOW THE CLAIM FOR DEDUCTION. HOWEVER , THE DIVISION BENCH, WHILST PROCEEDING ON THE ASSUMPTION THAT THE ASSESSING OFFICER IN TERMS OF LAW LAID DOWN IN GOETZE ( SUPRA ) HAD NO POWER, PROCEEDED TO HOLD THAT THE APPELLATE AUTHORITY UNDER THE IT ACT HAD SUFFICIENT POWERS TO PERMIT SUCH A DEDUCTION. IN TAKING THIS VIEW, THE DIVISION BENCH RELIED UPON THE FULL BENCH DECISION OF THIS COURT IN AHMEDABAD ELECTRICITY CO. LTD . V. CIT 199 ITR 351 TO HOLD THAT THE APPELLATE AUTHORITIES UNDER THE IT ACT HAVE VERY WIDE POWER S WHILE CONSIDERING AN APPEAL WHICH MAY BE FILED BY THE ASSESSEE. THE APPELLATE AUTHORITIES MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR REMAND THE CASE TO THE ASSESSING OFFICER. THIS IS BECAUSE, UNLIKE AN ORDINARY APPEAL, THE BASIC PURPOSE OF A TAX APPEAL IS TO ASCERTAIN THE CORRECT TAX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH LAW. 40. THE DECISION IN GOETZE ( SUPRA ) UPON WHICH RELIANCE IS PLACED BY THE ITAT ALSO MAKES IT CLEAR THAT THE ISSUE INVOLVED IN THE SAID CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWERS OF THE ITAT UNDER SECTION 254 OF THE SAID ACT. THIS MEANS THAT IN GOETZE ( SUPRA ), THE HON'BLE APEX COURT WAS NOT DEALING WITH THE EXTENT OF THE POWERS OF THE APPELLATE AUTHORITIES BUT THE OBSER VATIONS WERE IN RELATION TO THE POWERS OF THE ASSESSING AUTHORITY. THIS IS THE DISTINCTION DRAWN BY THE DIVISION BENCH IN PRUTHVI BROKERS ( SUPRA ) AS WELL AND THIS IS THE DISTINCTION WHICH THE ITAT FAILED TO NOTE IN THE IMPUGNED ORDER.' 11. ACCORDINGLY, THE SUBSTANTIAL QUESTIONS OF LAW AT (2) AND (3) ARE REQUIRED TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 12. ACCORDING TO US, SUBSTANTIAL QUESTION NO. (4) AS FRAMED IN OUR ORDER DATED 25 - 1 - 2012 DOES NOT ARISE OR IN ANY CASE, IS NOT REQUI RED TO BE DECIDED AT THE PRESENT STAGE. THIS IS BECAUSE NEITHER THE COMMISSIONER OF INCOME - TAX (APPEALS) NOR THE ITAT HAVE ADVERTED TO THE PROVISIONS OF SECTION 80A(5) OF THE IT ACT. THERE IS NO DISCUSSION AS TO WHETHER THIS ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 20 PROVISION IS REQUIRED TO BE INT ERPRETED IN ORDER TO HAVE PROSPECTIVE EFFECT AND/OR NOT TO ADVERSELY AFFECT VESTED RIGHTS EXISTING ON THE DATE OF ENACTMENT OF THE FINANCE (NO. 2) ACT OF 2009. 13. SIMILARLY, AT THIS STAGE, WE ARE REALLY NOT REQUIRED TO GO INTO THE ISSUE AS TO WHETHER THE ACTIVITIES UNDERTAKEN BY THE APPELLANT - ASSESSEE AMOUNTS TO PRODUCTION OR NOT, UNDER SECTION 10B OF THE I.T. ACT. 14. BOTH THE AFORESAID ISSUES ALONG WITH OTHER ISSUES, WHICH MAY ARISE IN THE CONTEXT OF ENTITLEMENT OF THE APPELLANT/ASSESSEE'S CLAIM FOR DED UCTION UNDER SECTION 10B OF THE I.T. ACT WILL HAVE TO BE DECIDED BY THE COMMISSIONER OF INCOME - TAX (APPEALS), WHICH, IN OUR OPINION, HAS UNDOUBTED POWER TO CONSIDER THE CLAIM FOR DEDUCTION IN TERMS OF THE LAW LAID DOWN BY THIS COURT IN PRUTHVI BROKERS & SH AREHOLDERS ( SUPRA ). 15. THE CIRCUMSTANCE THAT WE HAVE OBSERVED THAT THE APPELLATE AUTHORITIES HAVE THE POWER TO CONSIDER THE CLAIM FOR DEDUCTION IN TERMS OF SECTION 10B OF THE IT ACT, IS NOT TO BE CONSTRUED AS SOME OBSERVATIONS IN THE CONTEXT OF THE PROVIS IONS OF SECTION 80A(5) OF THE IT ACT. ALL THAT WE HAVE SAID IS THAT GENERALLY, THE APPELLATE AUTHORITIES MAY NOT BE JUSTIFIED IN REFUSING TO EVEN CONSIDER THE ASSESSEE'S CLAIM FOR DEDUCTION ON THE GROUND THAT SUCH CLAIM WAS NOT MADE IN THE ORIGINAL RETURNS OR THE REVISED RETURNS FILED BEFORE THE ASSESSING OFFICER. IF ANY CONTENTION BASED UPON THE PROVISIONS OF SECTION 80A(5) OF THE IT ACT IS RAISED BY THE REVENUE, THEN, OBVIOUSLY, SUCH CONTENTION WILL HAVE TO BE CONSIDERED BY THE APPELLATE AUTHORITY IN ACCO RDANCE WITH LAW. FURTHER THE APPELLANT - ASSESSEE WILL HAVE THE LIBERTY TO MEET SUCH CONTENTIONS, INCLUDING BY WAY OF URGING THE VERY GROUNDS RAISED IN THE PRESENT APPEAL ON THE ASPECT OF PROSPECTIVELY ETC . WE, THEREFORE, CLARIFY THAT WE LEAVE ALL SUCH ISSUE S OPEN FOR THE DECISION OF THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THEREAFTER, IF THE NEED BE, THE ITAT. 16. ACCORDINGLY, WE ANSWER THE FIRST SUBSTANTIAL QUESTION OF LAW AGAINST THE APPELLANT AND IN FAVOUR OF THE RESPONDENT - REVENUE. FURTHER, WE ANSWER THE SECOND AND THE THIRD SUBSTANTIAL QUESTIONS OF LAW IN FAVOUR OF THE APPELLANT - ASSESSEE AND AGAINST THE RESPONDENT - REVENUE. HOWEVER, FOR REASONS INDICATED EARLIER, WE REFRAIN FROM ANSWERING THE ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 21 FOURTH SUBSTANTIAL QUESTION OF LAW, LEAVING THE SAME OPEN F OR THE PRESENT. 17. BASED UPON THE AFORESAID, HOWEVER, WE SET ASIDE THE JUDGMENTS AND ORDERS DATED 31 - 3 - 2010 AND 10 - 3 - 2011, MADE BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THE ITAT RESPECTIVELY, INSOFAR AS THEY CONCERN THE ISSUE OF DEDUCTIONS UNDER SE CTION 10B OF THE IT ACT AND WE RESTORE THE APPELLANT - ASSESSEE'S APPEAL BEARING ITA NO. 158/PNJ/08 - 09 TO THE FILE OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR FRESH ADJUDICATION ON THE ISSUE OF DEDUCTIONS UNDER SECTION 10B OF THE IT ACT, IN ACCORDANCE WI TH LAW AND ON ITS OWN MERITS. 18. WE REQUEST THE COMMISSIONER OF INCOME - TAX (APPEALS) TO DISPOSE OFF THE APPEAL, WHICH WE HAVE NOW RESTORED TO ITS FILE, AS EXPEDITIOUSLY AS POSSIBLE AND IN ANY CASE, WITHIN A PERIOD OF FOUR MONTHS FROM THE DATE THE PARTIES APPEAR AND FILE THE AUTHENTICATED COPY OF THIS JUDGMENT AND ORDER. 19. WE DIRECT THE PARTIES TO APPEAR BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) ON 7 - 4 - 2020 AT 11:00 A.M. AND FILE AUTHENTICATED COPY OF THIS JUDGMENT AND ORDER. 20. THE APPEAL IS DISPO SED OFF IN THE AFORESAID TERMS. THERE SHALL BE NO ORDER AS TO COSTS. 10. SINCE THE ISSUE DULY BEEN COVERED BY THE ABOVE MENTIONED CASE I.E. SESA GOA LTD. (SUPRA), THEREFORE, IT IS QUITE CLEAR THAT THE EDUCATION CESS IN SUM OF RS.8,10,101/ - ON DIVIDEND DIS TRIBUTION TAX IS NOT LIABLE TO BE ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA. NO. 4638 /M/201 8 11 . THE FACTS OF THE PRESENT CASE ARE QUITE SIMILAR TO THE FACT OF THE CASE AS NAR RATED ABOVE WHILE DECID ING THE ITA. NO.4639 /M UM /201 8 , THEREFORE, ITA. NO S.4638 & 4639 / M/201 8 A.Y. 20 12 - 13 & 2013 - 14 22 THERE IS NO NEED TO REPEAT THE SAME. HOWEVER, THE FIGURE IS DIFFERENT. THE MATTER OF CONTROVERSY IS ALSO THE SAME. THE FIN DING GIVEN ABOVE IN ITA. NO.4639 /M UM /201 8 IS QUITE APPLICABLE TO THE FACTS OF THE PRESENT CASE AS MUTATIS MUTANDIS AND ACCORDINGLY WE PARTLY ALLOWED THE CLAIM OF THE ASSESSEE . 12 . IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE ARE HEREBY PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 / 04 / 202 1 SD/ - SD / - ( SHAMIM YAHYA ) (AMARJIT SINGH / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 22 / 04 / 20 2 1 V IJAY PAL SINGH/SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLA NT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, / /TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI