MONSANTO INDIA LTD, MUMBAI V. ADDL CIT RG 8(2), MUMBAI

ITA 4969/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1950 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2013
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A. NO. 4969/M/2013 (ASSESSMENT YEAR : 2008 - 2009 ) MONSANTO INDIA LTD, AHURA CENTRE, 5 TH FLOOR, 96, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI 400 093. / VS. ADDL. CIT - RANGE 8(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. ./ PAN : AAACM2875L ( / APPELLANT) .. ( / RESPONDENT ) I.T.A. NO. 4933/M/2013 (ASSESSMENT YEAR : 2008 - 2009 ) DCIT, 8(2), MUMBAI. / VS. MONSANTO INDIA LTD, AHURA CENTRE, 5 TH FLOOR, 96, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI 400 093. ./ PAN : AAACM2875L ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI RAJAN VORA / REVENUE BY : SHRI N.P. SINGH, CIT - DR / DATE OF HEARING : 24.11.2 015 / DATE OF PRONOUNCEMENT : 18 .12.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING THE AY 2008 - 2009. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE INTER - CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD TOG ETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2 ITA NO. 4933/M/2013 (BY REVENUE) 2. THIS APPEAL FILED BY THE REVENUE ON 28.6.2013 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 18.4.2013 FOR THE AY 2008 - 2009. 3. IN THIS APPEAL, REVENUE RAISED COUPLE OF ISSUES AND THEY ARE (I) THE ALLOWABILITY OF EXEMPTION U/S 10(1) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT) AND (II) THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE ACT INSTEAD OF DISALLOWING AD - HOC AMOUNT APPLYING FLAT RATE OF 2% OF THE EXEMPT INCOME. 4. IN CONNECTION WITH THE FIRST ISSUE IE THE CLAIM OF EXEMPTION U/S 10(1) OF T HE ACT, LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE FACTS WHICH INCLUDE THAT THE ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF PRODUCTION AND SALE OF HYBRID SEED AS WELL AS MANUFACTURING AND SELLING OF AGRO - CHEMICAL BASED PRODUCTS A N D FILED THE RE TURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 64,96,07,840/ - . IN THE ASSESSMENT, AO DENIED THE CLAIM OF DEDUCTION U/S 10(1) OF THE ACT IN RESPECT OF THE I N C O M E F R O M T H E SAID AGRICULTURAL ACTIVITY AND RS. 50,03,24,246/ - IS TREATED AS BUSINESS INCOME OF THE ASSESSEE. AFTER ADJUSTMENT OF THE SAME QUA THE EXPENDITURE OF RS. 2,88,09,147/ - , THE DISALLOWANCE IS COMPUTED TO RS. 47,15,15,099/ - . MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 5. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) ALLOWED THE GROUND IN FAVOUR OF THE ASSESSEE RELYING ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE. PARAS 4.2 AND 4.3 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID RELEVANT PARAS 4.2 AND 4.3 ARE EXTRACTED AS UNDER: 4. 2. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE OWNERSHIP OF LAND IS BASIC PRE - REQUISITE FOR CLAIMING EXEMPTION U/S 10(1) OF THE ACT. THE APPE LLANT IS ONLY A LICENSE HOLDER TO ENTER UPON THE LAND AND CARRIES OUT THE ARICULTURAL OPERATION WITH THE HELP OF FARMERS. THE HIGH COURT OF BOMBAY IN THE APPELLANTS OWN CASE VIDE ORDERS ITA NO. 603 TO 609 AND 633 OF 2010, ITA NOS. 3481, 4074, 1526, 3834 AND 4015 OF 2009 HAD DECIDED THE APPEALS AS UNDER: 1. IN ALL THESE APPEALS, THE AGRICULTURAL LOSSES/PROFITS CLAIMED BY THE ASSESSEE WERE DISALLOWED BY THE AO ON THE GROUND THAT THE AGRICULTURAL LANDS DID NOT BELONG TO THE ASSESSEE. CHALLENGING THE AFORES AID ORDER, THE ASSESSEE FILED APPEALS BEFORE THE CIT (A), WHO ALLOWED THE CLAIM OF THE ASSESSEE. 2. ON FURTHER APPEALS FILED BY THE REVENUE, THE ITAT CONFIRMED THE ORDER PASSED BY THE CIT (A) CHALLENGING THE AFORESAID ORDER, THE REVENUE HAS FILLED THESE AP PEALS. 3 3. PERUSAL OF THE ORDER OF THE ITAT SHOWS THAT THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE CIT (A) BY RECORDING FINDING OF THE FACT THAT THE ASSESSEE IN FACT CARRIED ON AGRICULTURAL OPERATIONS AND THAT THE ORDERS PASSED TO THAT EFFECT IN ASSESSMENT YEARS 1990 - 91 TO 1992 - 93 HAVE BEEN ACCEPTED BY THE REVENUE. FOR EARNING AGRICULTURAL INCOME, IT IS NOT NECESSARY THAT THE ASSESSEE MUST OWN THE LAND AND IT IS ENOUGH IF IT IS ESTABLISHED THAT THE AGRICULTURAL ORGANIZATIONS HAVE BEEN ACTUALLY CARRIED ON BY THE ASSESSEE. IN VIEW OF THE FINDING OF THE FACT RECORDED BY THE ITAT THAT EVEN IN THE PAST, THE ASSESSEE HAS BEEN CARRYING AGRICULTURAL OPERATIONS IN THE OBSENCE OF ANY MATERIAL TO THE CONTRARY, THE DECISION OF THE ITAT CANNOT BE FAULTED. 4. IN THE RES ULT, WE SEE NO MERIT IN ALL THESE APPEALS AND THE SAME ARE HEREBY DISMISSED WITH NO ORDER AS TO COSTS. 4.3. IN VIEW OF THE ABOVE, AND SINCE THERE IS NO CHANGE IN THE FACTS, THE GROUNDS OF APPEAL OF THE ASSESSEE IS ALLOWED FOLLOWING THE HONBLE BOMBAY HIGH COURTS DECISION. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE BINDING JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE. THEREFORE, THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GR OUND NOS.1 AND 2 RAISED BY THE REVENUE ARE DISMISSED. 7. THE SECOND ISSUE RAISED BY THE REVENUE RELATES TO THE DISALLOWANCE U/S 14A R.W. RULE 8D OF THE ACT. DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) DECIDED THIS ISSUE BY RESTRICTING THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. HE CONSIDERED THE SAME AS REASONABLE BASIS. IN SUPPORT OF THE SAME, CIT (A) RELIED ON THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2007 - 2008. OTHERWISE, ASSESSEE EARNED DIVIDEND INCOME AMOUNTING TO RS. 15.71 CRS (ROUNDED OF) AND CLAIMED EXEMPTION BY INVOKING THE PROVISIONS OF SECTION 10(35) OF THE ACT. AO APPLIED THE SAID RULE 8D OF THE IT RULES, 1962 AND DISALLOWED A SUM OF RS. 1.24 CRS (ROUNDED OF). A O R E A S O N E D T H A T T H E ASSESSEE A PPLIED THE SAID RULE WHILE FILING THE RETURN OF INCOME ORIGINALLY. SUBSEQUENTLY, ASSESSEE MADE A REQUEST FOR RESTRICTING THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. AO DENIED THE SAME AND IGNORED THE ASSESSEES REQUEST DURING THE ASSESSMENT PROCEEDINGS. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A) IE RESTRICTING THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME BY RELYING ON THE FINDING OF HIS PREDECESSOR IN THE AY 2007 - 2008, LD DR FOR THE REVENUE SUBMITTED THAT THE SAID PRINCIPLE OF APPLYING THE FLAT RATE OF 2% OF THE EXEMPT INCOME IS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION AS THE SAID RULE 8D IS APPLICABLE FOR THE AY 2008 - 09 ONWARDS. RELYING ON THE DECISION OF THE CIT (A) FOR THE AY 2007 - 08, CIT (A) ERRED IN LAW. THEREFORE, THE LD DR ARGUED FOR RE STORING THE 4 DISALLOWANCE OF RS. 1.24 LAKHS AS WAS ORIGINALLY OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME. 8. RESPONDING TO THE ABOVE LD DRS ARGUMENT, SHRI RAJAN VORA, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAW ON THIS ISSUE HAS UNDER GONE NU MBER OF CHANGES SO FOR AS THE APPLICABILITY OF THE PROVISIONS OF SECTION 14A READ WITH RULE 8D IS CONCERNED. THERE IS A NEED FOR EXAMINING THE VARIOUS A S P E C T S O F T H E I S S U E SUCH AS OWN FUNDS V/S BORROWED FUNDS; DIVIDEND YIELDING INVESTMENT V/S OTHER STRATEGIC INVESTMENT S, THE DIVIDEND INCOME WHICH IS CHARGEABLE TO TAX OTHERWISE ETC . T HEREFORE , HE PLEADED FOR REMANDING THIS ISSUE ALSO TO THE FILE OF THE AO FOR ADJUDICATION. WE ACCORDINGLY FIND MERIT IN THE SAID LD COUNSELS ARGUMENT AND DIRECT THE AO TO EXAMINE AN D DECIDE THE ISSUES RAISED AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NOS. 3 TO 6 RAISED IN THE REVENUES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES . 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ITA NO.4969/M/2013 (ASSESSEES APPEAL) 10. THIS APPEAL FILED BY THE ASSESSEE ON 1.7.2013 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 18.4.2013 FOR THE AY 2008 - 2009. IN THIS APPEAL, ASSESSEE RAISED 4 GROUNDS IN TOTO. 11. AT THE OUTSET, REFERRING TO THE GROUND NOS. 3 AND 4, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) FAILED TO ADJUDICATE THE GROUND NO.3 AND PREMATURELY HELD THAT THE ISSUE RAISED IN GROUND 7 AS CONSEQUENTIAL WITHOUT ADJUDICATING THE ISSU E RELATING TO THE LEVY OF INTEREST U/S 234C OF THE ACT. IN THIS REGARD, HE PLEADED FOR REMANDING THESE TWO GROUNDS (GR. NOS.3 & 4) TO THE FILE OF THE CIT (A) FOR FRESH ADJUDICATION. HE BROUGHT OUR ATTENTION TO PAGE 91 OF THE PAPER BOOK, WHEREIN THE COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.3171/M/2012, DATED 20.10.2015. FURTHER, HE SUBMITTED THAT THE APPEAL FOR THE AY 2007 - 08 WAS DECIDED BY THE TRIBUNAL AND THE SAME SHOULD ALSO BE CONSIDERED WHEREVER REQUIRES AND APPLICABLE. WE ORDER ACCORDINGLY. THU S, GROUND NOS. 3 AND 4 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES . 5 12. REGARDING GROUND NOS.1 AND 2, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE RECEIVED SOME CONSIDERATION ON TRANSFER OF CERTAIN ASSETS TO DEVGEN NV. FURTHER, ASSESSEE ASSESSEE ALSO RECEIVED CONSIDERATION FOR TRANSFER OF OTHER ASSETS FROM SINOCHEM INTERNATIONAL (OVERSEAS PTE LTD). ASSESSEE TREATED THE SAME AS LONG TERM CAPITAL GAINS. IN THE ASSESSMENT, AO TREATED THE SAME AS SHORT TERM CAPITAL GAINS AND THE SAM E IS CONFIRMED BY THE CIT (A). THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL VIDE GROUND NO.1 AND 2 OF ITS APPEAL. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL FOR THE AY 2007 - 2008 (SUPRA) AND SUBMITTED THAT THE GROUND NO.1 OF THE ASSESSEES APPEAL AND GROUND NOS. 5 AND 6 OF THE REVENUES APPEAL ARE RELEVANT. THE SAID DECISION OF THE TRIBUNAL (SUPRA) WILL HELP IN ADJUDICATING THE ISSUE RAISED IN GROUND NO.1 OF THE ASSESSEES APPEAL IN THE SET A SIDE PROCEEDINGS. THEREFORE, LD COUNSEL FOR THE ASSESSEE PLEADED FOR REMANDING THESE ISSUES TO THE FILE OF THE AO FOR FRESH ADJUDICATION ADOPTING THE RATIO LAID DOWN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2007 - 08 (SUPRA). AFTER HEARING BOTH THE PARTIES, WE REMAND THIS ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH AFTER APPLYING THE RATIO OF THE TRIBUNALS DECISION FOR THE AY 2007 - 08 (SUPRA) AND AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NOS. 1 AND 2 OF THE ASSESSEES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES . 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14. CONCLUSIVELY, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN COURT ON 1 8 T H DECEMBER, 2015. S D / - S D / - ( AMARJIT SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 8 /12/2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 6 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI