ACIT, New Delhi V. M/s. Indian Farmer Fertilizer Co-Operative Ltd., New Delhi

ITA 5157/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5840 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 14-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief
• Section: 143(3); 14A; 90

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ES D : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 5157 /DEL/201 5 A Y 200 6 - 07 APPELLANT BY : SH. RAKESH KUMAR, SR.D.R. RESPONDENT BY: SH. TARANDEEP SINGH, CA DATE OF HEARING 23 /0 5 /2018 DATE OF PRONOUNCEMENT 07 /0 6 /2018 O R D E R PER BEENA A. PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER DATED 2 0 TH MAY, 2014 PASSED BY LD. CIT (A) 11 , NEW DELHI FOR A SSESSMENT Y EAR 200 6 - 07 ON THE FOLLOWING GROUNDS : 1. WHETHER THE LD.CIT(A), ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, HAS ERRED IN DELETING DISALLOWANCE OF AN AMOUNT OF RS.140.19 LAKHS MADE BY THE A.O. U/S 14A , AS THE ASSESSEE HAS ACIT CIRCLE 31 (1) ROOM NO. - 130 9 , 13 TH FLOOR E - 2,PRATYAKSH A K AR BHAWAN, SPM CIVIC CENTRE NEW DELHI - 110002 VS M/S. INDIAN FARMERS FERTILISER COOPERATIVE LTD., IFFCO SADAN, C - 1, DISTRICT CENTRE, SAKET PLACE, NEW DELHI 110017 PAN AAAAI0050M (APPELLANT) (RESPONDENT) ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 2 O F 8 CLAIMED DEDUCTION OF EXPENSES IN RELATING TO INCOME WHICH IS EXEMPT FROM TAX. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE HON BLE ITAT. 2. FACTS OF THE CASE IN BRIEF : ASSESSEE FILED ITS RETURN OF INCOME ON 3 1.10. 200 6 DECLARING TOTAL INCOME OF RS. 323,56,23,02 1 / - WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) AT THE RETURNED INCOME AND SUBSEQUENTLY CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED AND ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.11.2009 AT AN INCOME OF RS.355,10,00 ,239/ - COMPRISING DISALLOWANCE U/S 14A READ WITH RULE 8D(2)(II) OF RS.11,42,32,000/ - AND RS.3,66,72,225/ - . ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AGAINST THE ABOVE ORDER AND VIDE ORDER IN APPEAL NO. 174/2009 - 10 DATED 24.11.2010, LD. CIT(A) CONFIR MED THE DISALLOWANCE MADE U/S. 14A/36(L)(III). AGAINST THE ORDER PASSED BY THE LD. CIT(A), ASSESSEE MOVED FURTHER APPEAL BEFORE THE HON BLE ITAT IMPUGNING THE CONFIRMATION OF DISALLOWANCE MADE U/S. 14A READ WITH RULE 8D AND HON BLE ITAT VIDE ITS ORDER IN I TA NO. 1087/DEL/2011 DATED 05.09.2011 RESTORED THE MATTER BA CK TO THE FILE OF THE AO FOR RE - E XAMINATION OF THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE HON BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING COMPANY LTD. VS. DC IT IN ITA NO. 626 OF 2010, 234 CTR ). AO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AS REFERRED TO ABOVE AND HE OBSERVED THAT THE DIVIDEND AND LONG ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 3 O F 8 TERM CAPITAL GAIN WHICH SUFFERS DDT/STT ARE FULLY EXEMPT IN THE HANDS OF THE TAX PAYER BUT DIVIDEND INCOME FROM JOINT VENTURE WITH OMIFCO, OMAN WHICH MAY ACCRUE TO IT, ASSESSEE IS NOT EFFECTIVELY PAYING ANY TAX ON THIS INCOME EITHER IN THE SOURCE COUNTRY OR IN INDIA. 2.1. A.O. THEREFORE COMPUTED THE EXPENSES UNDER S.14A R.W. RULE 8D BY INCLUDING INVESTMENTS I N OMIFCO, OMAN. 2.2. AGGRIEVED BY THE ORDER OF LD.AO ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) . LD.CIT(A) BY PLACING RELIANCE ON THE ORDERS OF HIS PREDECESSOR FOR A.Y. 2008 - 09 AND 2009 - 10, DELETED THE INVESTMENTS MADE BY ASSESSEE IN OMAN COMPANY FOR THE PURPOSES OF COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D. 3. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE PREFERRED APPEAL BEFORE THIS TRIBUNAL. 4. LD.DR PLACED RELIANCE UPON THE ORDER OF LD.AO AND SUBMITTED THAT ASSESSEE IS RECEIVING RELIEF U/S 90 R.W. DTAA WITH OMAN AT 30% ON THE DIVIDEND INCOME RECEIVED BY PE FROM OMIFCO, OMAN. 5. ON THE CONTRARY LD.AR PLACED RELIANCE UPON THE ORDERS OF THE COORD INATE BENCH OF THIS TRIBUNAL FOR A.Y. 2006 - 07, 2008 - 09 AND 2009 - 10 WHEREIN DIRECTION HAD BEEN PASSED TO LD.AO TO RE - COMPUTE THE DISALLOWANCE U/S 14A BY EXCLUDING THE INVESTMENTS MADE BY ASSESSEE IN OMIFCO, OMAN. ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 4 O F 8 5.1 . LD.AR HAS PLACED RELIANCE UPON A CHAR T WHEREIN THE DETAILS OF DIVIDEND RECEIVED BY ASSESSEE HA VE BEEN BIFURCATED WHICH IS AS UNDER: SL. NO. PARTICULARS AMOUNT RS. A. 1. 2. 3. DIVIDEND RECEIVED FROM COOPERATIVES : GUJARAT STATE COOPERATIVE BANK LTD. DIVIDEND RECD. F ROM T&C - PHULPUR MAHARASHTRA STATE COOPERATIVE TOTAL INCOME RECEIVED FROM COOPERATIVES 750 675 50,050 51,475 B. 1. 2. 3. 4. DIVIDEND RECEIVED FROM CO MPANIES INDIAN POTASH LIMITED NATIONAL COMMODITY & DERIVATIVES EXCHANGE LTD. DIVIDENDS ON INVESTMENT IN MUTUAL FUNDS GODAVARI FERTILIZER & CHEMICALS LTD. EXEMPTED DIVIDEND RECEIVED FROM COMPANIES INCOME FROM PE IN OMAN 58,32,000 7,20,000 28,67,049 80,01,000 1,74,20,049 197872800 TOTAL AMOUNT: 21,53,44,324/ - 5.2. H E PLACED RELIANCE UPON THE SUBMISSIONS ADVANCED BY HIM FOR ASSESSMENT YEAR 2008 - 09 WHICH IS AS UNDER. 3 3.5 . ON INVESTMENT MADE IN OMIFCO, OMAN, THE LD. AR SUBMITTED THAT THE AO HAD HELD THAT THE DIVIDEND EARNED ON THE SAID INVESTMENT WAS EFFECTIVELY EXEMPT IN VIEW OF DEDUCT ION/RELIEF CLAIMED BY THE ASSESSEE U/S 90(2) OF THE ACT READ WITH INDO - OMAN DTAA BUT THE LD. CIT(A) REVERSED THE FINDINGS OF THE AO. THE LD. AR SUBMITTED THAT THE ASSESSEE BEING A MULTI - STATE COOPERATIVE SOCIETY INCORPORATED IN INDIA, IS RESIDENT IN INDIA IN TERMS OF SECTION 6 OF THE ACT. IN TERMS OF SECTION ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 5 O F 8 2(45) READ WITH SECTION 5 OF THE ACT DEALING WITH SCOPE OF TAXATION, A RESIDENT IS LIABLE TO TAX IN INDIA IN RESPECT OF GLOBAL INCOME, VIZ. INCOME: (I) RECEIVED OR DEEMED TO BE RECEIVED IN INDIA, (II) INCOME RECEIVED OUTSIDE INDIA, (III) INCOME ACCRUING OR ARISING OR DEEMED TO ACCRUE OR ARISE IN INDIA, AND (IV) INCOME ACCRUING OR ARISING OUTSIDE INDIA. THUS, THE ACT PROVIDES FOR LEVYING TAX ON GLOBAL INCOME OF A PERSON RESIDENT IN INDIA. THE PROVISIONS OF THE ACT, INCLUDING SECTION 5, WHICH PROVIDES FOR TAXATION OF GLOBAL INCOME OF A RESIDENT ARE SUBJECT TO THE PROVISIONS OF THI S ACT . IT WAS SUBMITTED THAT THE LEVY OF INCOME TAX ON GLOBAL INCOME OF AN INDIAN RESIDENT IS THUS SUBJECT, INTER - ALIA, TO PROVISIONS OF SECTION 90(2) OF THE ACT, IN TERMS OF WHICH PROVISIONS OF DTAA ENTERED INTO BY INDIA WITH ANY OTHER COUNTRY WOULD APPLY AND PREVAIL OVER THE PROVISIONS OF THE ACT, TO THE EXTENT T HE PROVISIONS OF SUCH DTAA ARE MORE BENEFICIAL TO THE ASSESSEE ENTITLED TO BENEFITS OF THE DTAA. THUS, WHERE THE INCOME IS TAXABLE UNDER THE ACT BUT IS EXEMPT UNDER THE DTAA, TAX UNDER THE ACT IS NOT LEVIABLE THEREON. THE LD. AR SUBMITTED THAT IN THE INSTA NT CASE THE DIVIDEND RECEIVED BY THE ASSESSEE FROM OMIFCO, OMAN THROUGH ITS PE IS CHARGEABLE TO TAX IN INDIA UNDER THE HEAD INCOME FROM OTHER SOURCES AND FORMS PART OF THE TOTAL INCOME AND AFTER SUCH INCLUSION THE REBATE OF TAXES HAS TO BE ALLOWED FROM T HE TOTAL TAXES IN TERMS OF SECTION 90(2) OF THE ACT READ WITH ARTICLE 25 OF THE INDO - OMAN, DTAA WHICH THE AO HAS DONE. IT WAS SUBMITTED THAT ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 6 O F 8 CONSEQUENTLY THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO DIVIDEND RECEIVED FROM OMIF C O, OMAN IN AS MUCH AS THE INCOME IS INCLUDED IN THE TOTAL INCOME OF ASSESSEE. RELIANCE WAS PLACED ON THE DECISION OF THE DELHI BENCH OF THE ITAT IN THE CASE OF KRISHAK BHARTI COOPERATIVE LIMITED VS. ACIT, 158 ITD 77 IN SUPPORT OF THIS CONTENTION. 5.3. LD.AR THUS SUBMITTED TH AT INVESTMENTS MADE IN OMIFCO, OMAN SHOULD BE EXCLUDED FOR THE PURPOSES OF COMPUTING THE DISALLOWANCE U/S 14A R.W. RULE 8D. 5.4. HE SUBMITTED THAT THE DIVIDEND RECEIVED BY ASSESSEE FROM OMIFCO, OMAN IS CHARGEABLE TO TAX IN INDIA UNDER THE HEAD INCOME FROM OTHER SOURCES AND FORMS PART OF TOTAL INCOME, AND, THEREAFTER, A REBATE OF TAX HAS BEEN ALLOWED TO ASSESSEE FROM THE TOTAL TAXES IN TERMS OF S.90(2) OF THE ACT R.W. ARTICLE 25 OF INDO - OMAN DTAA. LD.AR THUS SUBMITTED THAT IT IS IN THIS MANNER THE PRO VISIONS OF S.14A WOULD NOT BE ATTRACTED TO THE INVESTMENTS MADE BY ASSESSEE IN OMIFCO, OMAN. 6. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 6.1. IT IS OBSERVED THAT IT IS A RECURRING ISSUE FROM THE PRECEDING A.YS AND IT HAS BEEN REMITTED TO LD.AO TO EXAMINE AND VERIFY THE AVERAGE VALUE OF INVESTMENTS AFTER EXCLUDING THE INVESTMENT IN OMIFCO, OMAN UNDER RULE 8D(2)(III). WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE OBSERVATIONS OF LD.CIT(A) AND THE SAME ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 7 O F 8 IS UPHELD. ACCORDINGLY THE GROUND RAISED BY REVENUE STANDS DISMISSED. 7. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 T H JUNE , 2018. S D / - S D / - (R.K.PANDA) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 0 7 T H JUNE , 2018 MV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO.5157/DEL/2015 A.Y.:2006 - 07 ACIT VS. INDIAN FARMER FERTILIZER CO - OP. LTD. PAGE 8 O F 8 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER