Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad V. Ocean Sparkles Limited, Hyderabad

ITA 492/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1274 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 06-02-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: VARSHA CHAWDA
• Keywords: Earning of tax free income; Retrospective amendment; Revised return; Rule 8D
• Section: 143(3); 14A; 115JB; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE S MT. P. MADHAVI DEVI , JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 4 92 / HYD/201 8 ASSESSMENT YEAR: 20 13 - 14 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 16(2), HYDERABAD. VS. OCEAN SPARKLES LTD., HYDERABAD. PAN AAACO 2519H APPELLANT RESPONDENT REVENUE BY: S HRI PHANI RAJU ASSESSEE BY: MS. VARSHA CHAWDA DATE OF HEARING: 0 6 / 0 2 / 201 9 DATE OF PRONOUNCEMENT: 20 / 0 3 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) 4 , HYDERABAD, DATED, 15 / 1 2 /201 7 FOR AY 20 13 - 14 . 2. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF OPERATING SHIPS AND PORT SERVICES, FILED ITS RETURN OF INCOME FOR THE A.Y.2 013 - 14 DECLARING TOTAL INCOME OF RS. 18,23,24,970/ - UNDER NORMAL PROVISIONS AND MAT INCOME OF RS. 21, 57,75,784/ - U/S 115JB OF THE I.T. ACT. LATER, THE ASSESSEE COMPANY FILED REVISED RETURN OF INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER ACCORDINGLY ISSUED THE NOTICES. IN RESPONSE TO THE NOTICES, THE AR OF THE ASSESSEE COMPANY APPEA RED AND FILED THE INFORMATION. AFTER GOING THROUGH THE INFORMATION, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE I.T. ACT BY MAKING ADDITIONS OF RS. 1,40,99,414/ - TOWARDS DISALLOWANCE I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 2 U/S 80IA, RS. 38,82,230/ - TOWARDS DISALLOWANCE U/S 1 4A OF THE I.T. ACT, RS. 19,611/ - TOWARDS INTEREST INCOME, RS. 8,414/ - TOWARDS DISALLOWANCE OF EXPENDITURE U/S 36(1)(VA) AND ASSESSED THE TOTAL INCOME AT RS. 20,03,34,640/ - . 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED DI SALLOWANCE OF DEDUCTION U/S 80IA OF THE ACT AND U/S 14A OF THE ACT. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION U / S 80IA OF IT ACT, OF RS.1,40,99,414/ - . 2. THE CIT(A) ERRED IN IGNORING THE FA CT THAT REVENUE'S APPEALS ON IDENTICAL ISSUE IN THE ASSESSEE'S OWN CASE FOR A.YS 2009 - 10 & 2010 - 11 ARE PENDING BEFORE HON'BLE HIGH COURT. 3. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 14A OF RS. 38,82,230/ - 4. THE CIT (A) ERRED IN IGNORING CED I'S CIRCULAR NO.5 OF 2014 DATED 11 - 02 - 2014 . 5. THE CIT (A) ERRED IN IGNORING THE SUPREME COURT DECISION IN THE CASE OF CIT VS WAL F ORT SHARE OF STOCK BROKERS P LTD [326 ITR 1], WHEREIN IT WAS HELD THAT THE MANDATE OF SECTION 14A WAS TO CURB THE PRACTICE OF CLAIMING DEDUCTION OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME AGAINST TAXABLE INCOME AND AT THE SAME TIME AVAIL OF THE TAX INCENTIVE BY WAY OF EXEMPT INCOME WITHOUT MAKING ANY APPORTIONMENT OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME. ANY O THER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. AS REGARDS GROUND NOS. 1 & 2 REGARDING DISALLOWANCE OF DEDUCTION U/S 80IA OF THE ACT, THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA OF RS. 1,40,99,414/ - FOR THE AY UNDER I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 3 CONSIDERATION FROM THE GROSS TOTAL INCOME IN RESPECT OF THE FOLLOWING PORTS. 1. GUJARA T CHEMICAL TERMINAL COMPANY LTD., DAHEJ RS. ( - ) 77,79,953 2. KARAIKAL PORT COMPANY LTD., KARAIKAL RS. 1,06,25,438 3. CHENNAI PETROLEUM CORPN. LTD., NAGAPATNAM RS. 1,11,58,810 5.1 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE AO CONCLUDED THAT AS PER THE AMENDMENT MADE IN THE FINANCE BILL, 2009, WITH A VIEW TO PREVENTING THE MISUSE OF TAX HOLIDAY U/S 80IA, IT HAS BEEN PROVIDED TO CLARIFY WITH RETROSPECTIVE EFFECT THAT THE BENEFIT U/S 80IA(4) WILL NOT BE AVAILABLE IN THE CASE OF A WORKS CONTRACT AWARDED BY ANY PERSON AND EXECUTED BY AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80IA(1) OF THE ACT. AS THE ASSESSEES NATURE OF ACTIVITY IS EXECUTION OF CONTRACT WORKS, THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR C LAIMING DEDUCTION U/S 80IA OF THE ACT. ACCORDINGLY, HE DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF RS. 1,40,99,414/ - . 6. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE ITAT IN ASSESSEE S OWN CASE FOR EARLIER YEARS GRANTED RELIEF AND ALLOWED DEDUCTION U/S 80IA OF THE ACT. 7. THE CIT(A) FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN ITA NOS. 1615 AND 1625/HYD/2014 FOR THE AYS 2009 - 10 AND 2010 - 11 ALLOWED THE DEDUCTION U/S 8 0IA. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A YS 2009 - 10 AND 2010 - 11 (SUPRA) WHEREIN THE COORDINATE BENCH OBSERVED AS UNDER: I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 4 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD. LD. DR RELYING UPON THE REASONING OF AO SUBMITTED THAT ASSESSEE HAVING NOT FULFILLED THE CONDITIONS OF SECTION 80IA(4), IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. LD. AR, ON THE OTHER HAND, SUBMITTED BEFORE US, AS FAR AS JAMNAGAR, KAKINADA AND DAHEJ PORTS ARE CONCERNED, THE ISSUE RELATING TO THE CLAIM OF DEDUCTION U/S 80IA IS SETTLED IN FAVOUR OF ASSESSEE BY VIRTUE OF ORDERS PASSED BY ITAT IN ASSES SEES OWN CASE FROM AY 2000 - 01 TILL 2008 - 09. TO SUBSTANTIATE ITS CLAIM, LD. AR PLACED ON RECORD THE ORDERS PASSED BY THE COORDINATE BENCHES FOR DIFFERENT AYS. ON PERUSAL OF THE ORDERS OF ITAT, HYDERABAD BENCHES PASSED IN CASE OF ASSESSEE IN RESPECT OF THE AYS BEGINNING FROM 2000 - 01 AND LATEST BEING AY 2008 - 09 IN ITA NOS. 301/HYD/2012 DATED 08/06/12 WE FIND THAT THE ISSUE RELATING TO CLAIM OF DEDUCTION IN RESPECT OF JAMNAGAR, KAKINADA AND DAHEJ PORTS ARE DECIDED IN FAVOUR OF ASSESSEE, HENCE, DO NOT REQUIRE A NY MORE DELIBERATION. THE ORDER OF LD. CIT(A) IN ALLOWING DEDUCTION TO ASSESSEE U/S 80IA IN RESPECT OF JAMNAGAR, KAKINADA AND DAHEJ PORTS BEING IN CONSONANCE WITH THE VIEW EXPRESSED BY ITAT IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER . AS FAR AS NAGAPATTINAM PORT IS CONCERNED, ON PERUSAL OF THE CERTIFICATE ISSUED BY THE CHENNAI PETROLEUM CORPORATION LTD., A COPY OF WHICH IS AT PAGE 68 OF THE PAPER BOOK, IT IS EVIDENT THAT ASSESSEE HAS ENTERED INTO CONTRACT WITH CPCL FOR O&M OF THE POR T. THEREFORE, THE ALLEGATION OF THE AO THAT ASSESSEE IS NOT ENGAGED IN OPERATION AND MAINTENANCE ACTIVITY IS WITHOUT ANY BASIS. IT IS FURTHER OBSERVED THAT AO WHILE DENYING ASSESSEES CLAIM OF DEDUCTION HAS OBSERVED THAT NATURE OF WORK CARRIED OUT BY ASSES SEE CANNOT BE CONSIDERED AS O&M. HOWEVER, AS COULD BE SEEN, ITAT IN ASSESSEES OWN CASE FOR AY 2000 - 01 AND 2001 - 02 IN ITA NOS. 1049 & 1050/HYD/2003 DATED 05/02/2008, WHICH IS THE FIRST YEAR OF CLAIM OF DEDUCTION U/S 80IA, HAS OBSERVED THAT SUCH ALLEGATION OF AO IS NOT WELL FOUNDED. ITAT CATEGORICALLY OBSERVED THAT THE ACTIVITIES CARRIED ON BY ASSESSEE BEING IN THE NATURE OF O&M OF INFRASTRUCTURE FACILITY, IT IS ELIGIBLE FOR DEDUCTION U/S 80IA(4). THOUGH THE AFORESAID OBSERVATION OF ITAT IS IN RESPECT OF JAM NAGAR, KAKINADA AND DAHEJ PORTS, BUT, SINCE THE FACTS IN RELATION TO OTHER PORTS ARE ALSO MORE OR LESS SIMILAR, THESE OBSERVATIONS OF ITAT WILL ALSO APPLY TO THE OTHER PORTS IN RESPECT OF WHICH ASSESSEE HAS CLAIMED OF DEDUCTION U/S 80IA. IN FACT, IN THE AS SESSMENT ORDER, AO HIMSELF HAS STATED THAT THERE IS NO CHANGE IN THE ACTIVITY OF ASSESSEE FROM AY 2000 - 01 ONWARDS. THEREFORE, THERE BEING NO MATERIAL CHANGE I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 5 EITHER IN THE FACTS RELATING TO ASSESSEES CLAIM OF DEDUCTION U/S 80IA OR THE NATURE OF ACTIVITY OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR, THE DECISIONS OF THE COORDINATE BENCHES ON THE ISSUE IN ASSESSEES OWN CASE WOULD SQUARELY APPLY. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUNDS RAISED. 8. AS FAR AS AY 2010 - 11 IS CONCERNED, THE ISSUE IS MORE OR LESS IDENTICAL, EXCEPT, THE FACT THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA FOR THE FIRST TIME IN RESPECT OF KARAIKAL PORT BEING OPERATED BY KARAIKAL PORT COMPANY PVT. LTD. IN THIS REGARD, ASSESSEE HAS SUBMITTED A CERTIF ICATE FROM THE PORT AUTHORITY CERTIFYING THAT THEY HAVE ENTERED INTO AN AGREEMENT WITH ASSESSEE FOR O&M OF THE PORT. THAT BEING THE CASE, THE DECISION RENDERED IN RESPECT OF AY 2009 - 10 EQUALLY APPLIES TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) IN ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 80IA. THEREFORE, UPHOLDING THE ORDER OF LD. CIT(A), WE DISMISS THE GROUNDS RAISED BY DEPARTMENT. AS THE ISSUE IN THIS YEAR IS MATERIALLY IDENTICAL T O THAT OF THE SAID YEARS, FOLLOWING THE DECISION THEREIN, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO U/S 80IA AND DISMISS THE GROUND S RAISED BY THE REVENUE IN THIS REGARD. 9. AS REGARDS GROUND NOS. 3 TO 5 REGARDING DISALLO WANCE U/S 14A, THE AO DISALLOWED AN AMOUNT OF RS. 38,82,230/ - BY OBSERVING THAT THE PROVISIONS OF RULE 8D(2)(III) OF THE ACT R.W.S. 14A ARE ATTRACTED IN THE CASE OF EXPENDITURE ON THE BASIS OF INVESTMENTS MADE. 10. BEFORE THE CIT(A), THE ASSESSEE CONTEND ED THAT IT HAS NOT EARNED ANY DIVIDEND INCOME OUT OF SUCH INVESTMENTS, THEREFORE, NO DISALLOWANCE U/S 14A CAN BE MADE. THE CIT(A) FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF PRATHISTA INDUSTRIES LTD., IN ITA NO. 1302/HYD /2015, ORDER DATED 29/04/2016 FOR THE AY 2011 - 12, I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 6 DELETED THE DISALLOWANCE BY HOLDING THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDED DURING THE RELEVANT AY, HENCE, THE PROVISIONS OF SECTION 14A RWR 8D ARE NOT APPLICABLE. 11. CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. IT IS SETTLED POSITION OF LAW THAT THE PROVISIONS OF SECTION 14A CAN BE APPLIED TO QUANTIFY THE EXPENSES IN RELATION TO EXEMPT INCOME. SINCE THE EXEMPT INCOME IS NIL, SECTION 14A WILL NOT APPLY. THE RULE 8D CAN BE APPL IED ONLY WHEN THERE IS DIFFICULTY IN FINDING THE EXPENDITURE RELATING TO EXEMPT INCOME. THE PROVISIONS OF SECTION 14A AND RULE 8D WILL NOT APPLY TO THE PRESENT CASE. IT IS THE CONSISTENT VIEW OF THE HYDERABAD BENCHES AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH MARCH , 201 9. KV COPY FORWARDED TO: 1. DCIT, CIRCLE 16(2), 2 ND FLOOR, B BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD. 2 . M/S OCEAN SPARKLES LTD., 126, SRINAGAR COLONY, HYDERABAD 500 073. 3 . CIT (A) - 4 , HYDERABAD 4. PR. CIT 4 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE DESCRIPTION DATE INTLS I.T.A. NO. 492 /HYD/1 8 OCEAN SPARKLES LTD., HYD. 7 S.NO. 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER