DCIT, New Delhi V. M/s Engineers India Ltd., New Delhi

ITA 5392/DEL/2010

• Counselvise Citation: 539220114 RSA 2010
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Keywords: Earning of tax free income
• Section: 244A; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES : 'B' : NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO. 5392 & 5339/DEL./2010 ASSESSMENT YEAR : 2006-07 & 2007-08 D.C.I.T., CIRCLE 11(1), VS. ENGINEERS INDIA LTD. , NEW DELHI. ENGINEERS INDIA BHAWAN, 1, BHIKAJI CAMA PLACE, R.K. PURAM, NEW DELHI. (PAN : AAACE 5318 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL MISHRA, SR. D.R. RESPONDENT BY : S/SHRI ARIRIT CHAKRAVARTY, MANONEET DALAL, ADV. ORDER PER BENCH: THESE APPEALS BY THE REVENUE FOR THE ASSESSMENT YE ARS 2006-07 AND 2007-08 ARISE OUT OF SEPARATE ORDERS OF CIT(A)-V, NEW DELHI. THES E APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE, ARE DISPOSED OF BY THI S COMMON ORDER. 2. THE GROUNDS OF APPEALS RAISED BY THE REVENUE ARE REPRODUCED AS UNDER : GROUNDS IN ITA NO. 5392/DEL./2010: 1. THE ORDER OF LD. CIT(A) IS WRONG, PERVERSE, ILL EGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASIDE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.68,75,000/- U/S. 14A OF THE ACT. 3. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN ALLOWING INTEREST ON SELF ASSESSMENT TAX. GROUNDS IN ITA NO. 5339/DEL./2010: 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.68,75,000/- ON ACCOUNT OF EXPENDITURE MADE U/S. 14A R.W. RULE 8D O F THE RULES OF THE I.T. ACT. 3. THE FIRST ISSUE FOR CONSIDERATION, WHICH IS COMM ON IN BOTH THE APPEALS, RELATES TO DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE MA DE U/S. 14A OF THE ACT. THE FACTS OF ITA NO.5392, 5339/DEL/2010 2 THE CASE, STATED IN BRIEF, ARE THAT THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKING ESTABLISHED UNDER THE MINISTRY OF PETROLEUM AND NAT URAL GASES. IT IS PRIMARILY ENGAGED IN PROVIDING ENGINEERING AND TECHNICAL CONSULTANCY SER VICE AND EXECUTION OF CONTRACT ON TURNKEY BASIS PREDOMINANTLY IN THE OIL/GAS/HYDRO CA RBON SECTORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUI RED THE ASSESSEE TO SHOW CAUSE AS TO WHY PROPORTIONATE EXPENDITURE IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 14A SHOULD NOT BE DISALLOWED AGAINST TAX-FREE INCOME EARNED BY THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT THERE WAS NO SPECIFIC EXPENDITURE INC URRED IN EARNING THE INCOME. NO SPECIFIC EFFORTS WERE MADE IN TERMS OF MANPOWER COS T. THE INVESTMENTS WERE MADE IN THE PAST YEARS OUT OF THE COMPANYS SURPLUS FUNDS. THE DIVIDEND WARRANTS FROM UTI/CEIL WERE RECEIVED ONLY ONCE IN A YEAR AND WERE DEPOSITE D IN THE BANK ACCOUNT BY THE SAME PERSON, WHO DEPOSITED OTHER BANK CHEQUES OF THE COM PANY. THEREFORE, NO EXTRA COST WAS INCURRED IN RELATION TO DIVIDEND INCOME AND NO DISA LLOWANCE WAS TO BE MADE U/S. 14A OF THE ACT. HOWEVER, THE ASSESSING OFFICER FOLLOWING T HE DECISION OF ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEME NT (P) LTD., ITA NO. 8057/MUM/03 COMPUTED DISALLOWANCE UNDER RULE 8D OF THE ACT. 4. ON APPEAL, AFTER CONSIDERING THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. V. DCIT, 1 94 TAXMAN 203, THE LD. CIT(A) ESTIMATED THE DISALLOWANCE OF RS.25,000/- EACH IN T HE ASSESSMENT YEARS 2006-07 AND 2007-08. 5. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT HON BLE MUMBAI HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. PVT. LTD. (SUPRA) HAS HELD THAT THE PROVISIONS OF RULE 8D OF THE IT RULES, 1962 ARE APPLICABLE FROM THE AS SESSMENT YEAR 2008-09. THE HONBLE BOMBAY HIGH COURT HAS ALSO HELD THAT THE ASSESSING OFFICER IS DUTY BOUND TO COMPUTE DISALLOWANCE BY APPLYING REASONABLE METHOD HAVING R EGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE CASE BEFORE US, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE ON ADHOC BASIS WITHOUT EXAMINING NEXUS WITH THE EXEMPT INCOM E AND EXPENDITURE INCURRED. WE, ITA NO.5392, 5339/DEL/2010 3 THEREFORE, FEEL IT NECESSARY TO SET ASIDE THIS MATT ER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ISSUE IN VIEW OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. PVT. LTD. (SUPRA) AS TO WHETHER ANY EXPENDITURE INCURRED HAS NEXUS WITH THE EXEMPT INCOME. THE ASSE SSING OFFICER WILL DISALLOW THE EXPENDITURE, WHICH HAD DIRECT NEXUS WITH THE EXEMPT INCOME. WE ORDER ACCORDINGLY. 6. THE NEXT ISSUE FOR CONSIDERATION IN ASSESSMENT Y EAR 2006-07 RELATES TO ALLOWING THE INTEREST ON SELF-ASSESSMENT TAX. THE FACTS OF T HE CASE RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER DID NOT ALLOW INTEREST U/S. 2 44A ON THE AMOUNT OF REFUND GRANTED BY THE INTIMATION U/S. 143(1) OF THE ACT. 7. BEFORE THE CIT(A) IT WAS SUBMITTED THAT AS PER T HE INTIMATION MADE U/S. 143(1) OF THE ACT, THE ASSESSEE WAS ELIGIBLE FOR REFUND OF RS .7,81,23,227/- AND SUCH REFUND WAS ON ACCOUNT OF EXCESS SELF ASSESSMENT TAX PAID BY THE A SSESSEE. AS PER THE PROVISIONS OF SECTION 244A(1)(A) OF THE ACT, WHERE TAX WAS PAID B Y WAY OF TAX COLLECTED AT SOURCE OR BY WAY OF ADVANCE TAX OR TREATED AS PAID U/S. 199 O F THE ACT, NO INTEREST SHALL BE PAYABLE IF THE AMOUNT OF REFUND WAS LESS THAN 10% ON REGULAR A SSESSMENT. AS PER PROVISIONS OF SECTION 244A(1)(B), THE INTEREST SHALL BE PAYABLE E VEN IF THE AMOUNT IS LESS THAN 10% AS THE PROVISO ONLY APPLIES TO SECTION 244A(1)(A) OF T HE ACT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. CHOLAMANDALAM INVESTMENT & FINANCE CO. LTD., 166 TAXMAN 132. THE ASSESSEE ACCORDINGLY SUBMITTED THAT IT WAS ENTITLED FOR INTEREST ON REFUND DUE TO EXCESS PAYMENT OF SELF-ASSESSMENT TAX. 8. THE LD. CIT(A) ON CONSIDERATION OF ABOVE FACTS, OBSERVED THAT ON PERUSAL OF PROVISO TO SECTION 244A(1)(A), IT IS EVIDENT THAT I N CASE THE AMOUNT OF REFUND WAS LESS THAN 10% OF TAX DETERMINED IN THE REGULAR ASSESSMENT, TH E INTEREST WAS NOT PAYABLE IF THE REFUND WAS ON ACCOUNT OF TDS/TCS OR ADVANCE TAX. HO WEVER, IN CASE REFUND WAS DUE ON ACCOUNT OF EXCESS PAYMENT OF SELF-ASSESSMENT TAX, S UCH RESTRICTION WAS NOT APPLICABLE. THE LD. CIT(A) RELYING ON THE DECISION OF HONBLE M ADRAS HIGH COURT IN THE CASE OF CIT ITA NO.5392, 5339/DEL/2010 4 VS. CHOLAMANDALAM INVESTMENT & FINANCE CO. LTD. (SU PRA) HELD THAT THE INTEREST U/S. 244A WAS ALLOWABLE ON REFUND DUE ON ACCOUNT OF PAYM ENT OF EXCESS SELF ASSESSMENT TAX. 7. WE HAVE HEARD BOTH THE PARTIES. BEFORE US, THE L D. AR OF THE ASSESSEE RELIED ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ADDL. CIT VS. GRINDWELL NORTON LTD., 100 ITD 245 FOR THE PROPOSITION THAT THE ASSESSEE W ILL BE ENTITLED TO INTEREST U/S. 244A OF THE ACT ON THE EXCESS SELF ASSESSMENT TAX PAID U/S. 140A OF THE ACT. WE HAVE GONE THROUGH THE ORDER PASSED BY THE ITAT, MUMBAI BENCH IN THE CASE OF ADDL. CIT VS. GRINDWELL NORTON LTD. (SUPRA). WE FIND THAT THE ISS UE IS COVERED BY THE DECISION OF MUMBAI BENCH IN FAVOUR OF ASSESSEE. RESPECTFULLY FO LLOWING THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ADDL. CIT VS. GRINDWELL NORTON LTD. (SUPRA), WE HOLD THAT THE ASSESSEE WILL BE ENTITLED TO INTEREST U/S. 244A OF THE ACT ON THE EXCESS SELF-ASSESSMENT TAX PAID U/S. 140A OF THE ACT. ACCORDINGLY, WE DO N OT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) DIRECTING THE ASSESSING OF FICER TO ALLOW INTEREST U/S. 244A OF THE ACT. 8. IN THE RESULT, THE APPEALS FILED BY THE REVENUE FOR BOTH THE YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.2011. SD/- SD/- (RAJPAL YADAV) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 30 TH SEPTEMBER, 2011 *AKS/- COPY OR ORDER FORWARDED TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. D.R., ITAT BY ORDER 6. GUARD FILE ASSISTANT REGISTRAR