HOMI C.H. BHABHA, MUMBAI V. DCIT WD 12(2), MUMBAI

ITA 5511/MUM/2010

• Counselvise Citation: 551119914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 07-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Rectification of order; Double taxation relief
• Section: 143(3); 234B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, H, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI P M JAGTAP, ACCOUNTANT MEMBER I T A NO: 5511/MUM/2010 (ASSESSMENT YEAR: 2004-05) MR HOMI C H BHABHA, MUMBAI APPELLANT (PAN: AACPB2851Q) VS DEPUTY COMMISSIONER OF INCOME TAX RESPONDENT 12(2), MUMBAI ASSESSEE BY: MR NISHANT THAKKAR REVENUE BY: MR V V SHASTRI DATE OF HEARING: 8 TH SEPTEMBER 2011 DATE OF PRONOUNCEMENT: 14 TH SEPTEMBER 2011 O R D E R R V EASWAR, PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN IN THIS APPEA L FILED BY THE ASSESSEE, WHICH RELATES TO THE ASSESSMENT YEAR 2004-05: - 1. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING AND THE ASSESSING OFFICER ERRED IN HOLDING THAT DOUBLE TAX RELIEF OF ` 12,23,598/- IS NOT TO BE REDUCED WHILE COMPUTING ASSESSED TAX FOR THE PURPOSE OF LEVY OF INTEREST UNDER SECTION 234B OF THE ACT. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO REDUCE THE DOUBLE TAX RELIEF AVAILABLE U/S. 90 OF THE ACT WHILE COMPUTING INTEREST LEVIABLE UNDER SECTION 234B OF THE ACT. 2 ITA NO: 5511/MUM/2010 2. THE LEARNED CIT (APPEALS) FURTHER ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF HOLDING THAT THE AMENDMENT TO SECTION 234B BROUGHT OUT BY FINANCE ACT, 2006 IS PROSPECTIVE AND DOES NOT APPLY TO THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2004-2005. 2. THE ASSESSEE IS A CHARTERED ACCOUNTANT IN PRACTI CE. HE HAD RENDERED CERTAIN SERVICES IN UK IN RESPECT OF WHICH HE WAS IN RECEIPT OF FEES OF ` 14,86,905/-. IN THE ASSESSMENT COMPLETED UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961, THIS AMOUNT WAS INCLUDED AS HIS TOTAL INCOME, WHICH WAS ULTIMATELY COMPUTED AT ` 1,41,43,428/-, WHICH INCLUDED LONG TERM CAPITAL GAINS AND INCOME FROM OT HER SOURCES. IN THE INCOME TAX COMPUTATION FORM (ITNS 150) WHICH ACCOMP ANIED THE ASSESSMENT ORDER, THE ASSESSING OFFICER CALCULATED THE TAX PAYABLE BY THE ASSESSEE. WE ARE NOT CONCERNED IN THIS APPEAL WITH ALL THAT IS COMPUTED IN THE SAID FORM. WHAT WE MUST HOWEVER NO TICE IS THAT THE ASSESSING OFFICER CHARGED INTEREST UNDER SECTION 23 4B AND IN DOING SO DEDUCTED A SUM OF ` 12,23,598/-, WHICH WAS THE DOUBLE INCOME TAX RELIEF (DITR) TO WHICH THE ASSESSEE WAS ENTITLED ON ACCOUNT OF TAXES PAID IN UK IN RESPECT OF THE PROFESSIONAL RECEIPTS, FROM THE ASSESSED TAX BEFORE CHARGING INTEREST UNDER SECTION 234B OF THE ACT. 3. ON 18.01.2008 THE ASSESSING OFFICER ISSUED NOTIC E UNDER SECTION 154 OF THE ACT, WHICH IS AS UNDER: - SUB: NOTICE U/S. 154 OF THE I T ACT FOR AY 2004-05 REG *** 3 ITA NO: 5511/MUM/2010 IT HAS BROUGHT TO MY ATTENTION THAT IN THE ORDER PASSED U/S. 143(3) DTD. 20.10.2006 WHILE COMPUTING THE INTEREST U/S. 234B THE SAID INTEREST WAS MISTAKENLY CHARGED AT ` 1,48,739/- AND THERE WAS A SHORT LEVY OF INTEREST OF ` 3,79,315/- ON ACCOUNT OF DIT RELIEF OF ` 12,23,598/- CONSIDERED INADVERTENTLY IN THE COMPUTATION OF THE SAID INTEREST U/S. 234B. THE DIT RELIEF WAS CONSIDERED AS ADVANCE TAX PAYMENTS AND THE INTEREST LEVIED U/S. 234B WAS REDUCED. SINCE DIT RELIEF IS NOT TO BE CONSIDERED AS ADVANCE TAX PAYMENT, THE SAID MISTAKE IN THE INTEREST COMPUTATION HAD OCCURRED. YOUR OBJECTIONS IF ANY IN RECTIFYING THE SAID ORDER U/S. 154 MAY PLEASE BE COMMUNICATED IN WRITING TO THIS OFFICE ON OR BEFORE 06.02.2008 FAILING WHICH IT WILL BE CONSTRUED THAT YOU HAVE NO OBJECTION FOR THE SAID RECTIFICATION. YOURS FAITHFULLY, SD/- ( K G KUTTY ) DY. CIT CIR. 12(2), MUMBAI. THE ASSESSEE WOULD APPEAR TO HAVE OBJECTED TO THE A FORESAID NOTICE BY POINTING OUT THAT UNDER EXPLANATION 1 BELOW SECT ION 234B, ANY RELIEF OF TAX ALLOWED UNDER SECTION 90 ON ACCOUNT OF TAX P AID IN A COUNTRY OUTSIDE INDIA SHOULD BE REDUCED FROM THE TAX DETERM INED ON THE TOTAL INCOME IN THE ASSESSMENT ORDER AND THAT SINCE IN TH E INCOME TAX COMPUTATION FORM IN ITNS 150 THE TAXES PAID IN UK A MOUNTING TO ` 12,23,598/- WAS DEDUCTED FROM THE ASSESSED TAX BEFO RE CHARGING INTEREST UNDER SECTION 234B, THERE WAS NO MISTAKE A PPARENT FROM THE RECORD WHICH REQUIRE RECTIFICATION. 4. THE ASSESSING OFFICER WAS, HOWEVER, NOT CONVINCE D BY THE ASSESSEES STAND. ACCORDING TO HIM EXPLANATION 1 B ELOW SECTION 234B 4 ITA NO: 5511/MUM/2010 WAS SUBSTITUTED BY THE FINANCE ACT, 2006, WITH EFFE CT FROM 01.04.2007 AND THEREFORE THE NEW EXPLANATION ON WHICH THE ASSE SSEE PLACED RELIANCE WAS APPLICABLE ONLY FROM THE ASSESSMENT YE AR 2007-08 AND THAT AS PER THE EXPLANATION WHICH EXISTED PRIOR TO THE SUBSTITUTION, THE DITR WAS NOT TO BE REDUCED FROM THE ASSESSED TAX BE FORE CHARGING INTEREST UNDER SECTION 234B OF THE ACT. HE THEREFO RE HELD THAT INASMUCH AS THE DITR HAD BEEN REDUCED FROM THE ASSE SSED TAX BEFORE CHARGING INTEREST, THERE WAS A MISTAKE APPARENT FRO M THE RECORD WHICH REQUIRED RECTIFICATION. ACCORDINGLY HE RECALCULATE D THE INTEREST UNDER SECTION 234B OF THE ACT. IT IS SEEN FROM THE ORDER S OF THE DEPARTMENTAL AUTHORITIES THAT AS A RESULT OF THE ORDER PASSED UN DER SECTION 154 ON 19.03.2009, THERE WAS AN ENHANCEMENT OF THE INTERES T BY ` 3,79,315/-. 5. THE ASSESSEE FILED AN APPEAL TO THE CIT(A) AGAIN ST THE ORDER PASSED UNDER SECTION 154 OF THE ACT, AND CONTENDED THAT THE EXPLANATION 1 BELOW SECTION 234B AS SUBSTITUTED BY THE FINANCE ACT, 2006, WITH EFFECT FROM 01.04.2007 WAS CLARIFICATORY IN NATURE AND THAT IT ONLY EXPLAINED WHAT THE POSITION WAS RIGHT FROM THE INCEPTION AND IN THIS VIEW OF THE MATTER THE DITR OUGHT TO HAVE BEEN REDUCED FROM THE ASSESSED TAX EVEN FOR ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2007-08. CERTAIN ORDERS OF THE COCHIN AND CHENNAI BENCHES OF THE TRIBUNAL WERE CITED IN SUPPORT OF THE CONTENTION. 6. THE CIT(A), HOWEVER, DID NOT ACCEPT THE ASSESSEE S SUBMISSION. ACCORDING TO HIM, THE EXPLANATION 1 SU BSTITUTED BY THE FINANCE ACT, 2006, DID NOT TAKE RETROSPECTIVE EFFEC T AND SINCE BEFORE 5 ITA NO: 5511/MUM/2010 THE SUBSTITUTION THERE WAS NO PROVISION FOR REDUCIN G THE DITR FROM THE ASSESSED TAX, THE ASSESSING OFFICER WAS RIGHT IN RE CTIFYING THE ASSESSMENT ORDER AND IN ENHANCING THE INTEREST UNDE R SECTION 234B BY ` 3,79,315/-. HE THUS DISMISSED THE ASSESSEES APPEA L. 7. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. THE MATTER IS NOW CONCLUDED BY THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT IN CIT VS. APAR INDUSTRIES LTD. (2010) 323 IT R 411 (BOM). IN THIS CASE THE HIGH COURT WAS CONCERNED WITH EXPLANATION 1 BELOW SECTION 234B AS SUBSTITUTED BY THE FINANCE ACT, 2006. IN T HAT CASE THE SUBMISSION OF THE ASSESSEE WAS THAT ANY TAX CREDIT ALLOWED TO BE SET OFF IN ACCORDANCE WITH SECTION 115JAA SHOULD BE RED UCED FROM THE ASSESSED TAX BEFORE CHARGING INTEREST UNDER SECTION 234B OF THE ACT. THE CASE RELATED TO THE ASSESSMENT YEARS 1998-99 TO 2000-01. IN THESE ASSESSMENT YEARS EXPLANATION 1 DID NOT CONTAI N ANY PROVISION TO THE EFFECT THAT THE TAX CREDIT ALLOWED TO BE SET OF F UNDER SECTION 115JAA SHOULD BE REDUCED FROM THE ASSESSED TAX BEFORE CHAR GING THE INTEREST. EXPLANATION 1, BEFORE ITS SUBSTITUTION BY THE FINAN CE ACT, 2006, WITH EFFECT FROM 01.04.2007 STOOD AS FOLLOWS: - EXPLANATION 1 IN THIS SECTION, ASSESSED TAX MEANS THE TAX ON THE TOTAL INCOME DETERMINED UNDER SUB- SECTION (1) OF SECTION 143 OR ON REGULAR ASSESSMENT AS REDUCED BY THE AMOUNT OF TAX DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII ON ANY INCOME WHICH IS SUBJECT TO SUCH DEDUCTION OR COLLECTION AND WHICH IS TAKEN INTO ACCOUNT IN COMPUTING SUCH TOTAL INCOME. 6 ITA NO: 5511/MUM/2010 UNDER THE ABOVE EXPLANATION THERE WAS NO PROVISION TO DEDUCT THE MAT CREDIT FROM THE ASSESSED TAX BEFORE CHARGING IN TEREST UNDER SECTION 234B OF THE ACT. ONE OF THE CONTENTIONS OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT, HOWEVER, WAS THAT TH E AMENDMENT MADE TO THE EXPLANATION WAS CLARIFICATORY IN NATURE AND HAD BEEN MADE AFTER RECEIVING REPRESENTATIONS FROM THE ASSES SEES TO THE EFFECT THAT THE MAT CREDIT IS NO WAY DIFFERENT FROM THE TA X PAID IN ADVANCE AND CONSEQUENTLY CREDIT FOR MAT PAYMENT SHOULD BE A LLOWED. THE HONBLE HIGH COURT EXAMINED THE BACKGROUND OF THE A MENDMENT MADE TO THE EXPLANATION WITH EFFECT FROM 01.04.2007 AND HELD THAT IT MUST BE REGARDED AS BEING CLARIFICATORY IN NATURE AS IT REM OVES A CAUSE OF AMBIGUITY IN THE INTERPRETATION OF SECTION 234B. I T WAS THEREFORE HELD THAT EVEN PRIOR TO THE AMENDMENT THE MAT CREDIT TO WHICH THE ASSESSEE WAS ENTITLED COULD NOT BE IGNORED IN DETER MINING THE LIABILITY TO PAY INTEREST UNDER SECTION 234B OF THE ACT. SIN CE THERE WAS A CERTAIN ELEMENT OF AMBIGUITY, PARLIAMENT CONSIDERED IT APPROPRIATE TO STEP IN AND RESOLVE THE SAME. THE NEW EXPLANATION WHICH CAME INTO EFFECT FROM 01.04.2007 WAS HELD TO BE EXPRESSIVE OF A POSITION IN LAW WHICH PARLIAMENT INTENDED TO HOLD THE FIELD AT ALL MATERIAL TIMES. IT WAS THEREFORE HELD THAT THE AMENDMENT MUST APPLY IN RES PECT OF THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2007- 08. 8. THE SAME POSITION HOLDS GOOD IN THE CASE OF DITR ALLOWED TO THE ASSESSEE UNDER SECTION 90 OF THE ACT. THERE IS NO DISPUTE IN THE PRESENT CASE THAT THE AMOUNT OF ` 12,23,598/- REPRESENTS DIT RELIEF TO 7 ITA NO: 5511/MUM/2010 WHICH THE ASSESSEE IS ENTITLED. JUST AS IN THE CAS E OF MAT CREDIT, IN THE CASE OF THE DITR ALSO THERE WERE REPRESENTATION S TO THE GOVERNMENT THAT DITR SHOULD BE DEDUCTED FROM THE AS SESSED TAX BEFORE CHARGING INTEREST UNDER SECTION 234B OF THE ACT. THIS IS CLEAR FROM THE MEMORANDUM EXPLAINING THE PROVISIONS IN TH E FINANCE BILL, 2006 [281 ITR (STATUTES) 178]. AT PAGE 191 192, THE MEMORANDUM RECOGNIZES THE POSITION THAT PRIOR TO 01.04.2007 TH E MAT CREDIT AND THE DITR UNDER SECTION 90 ARE NOT TAKEN INTO ACCOUNT WH ILE CHARGING INTEREST UNDER SECTIONS 234A TO 234C. IT THEN REFE RS TO REPRESENTATIONS HAVING BEEN RECEIVED THAT THE MAT CREDIT IS NO WAY DIFFERENT FROM TAX PAID IN ADVANCE AND THAT CREDIT SHOULD BE GIVEN TO THE SAME AGAINST THE TAX LIABILITY WHILE CALCULATING THE INTEREST PA YABLE UNDER THESE SECTIONS. THE MEMORANDUM FURTHER RECOGNIZES THAT ON SIMILAR GROUNDS, CREDIT FOR TAXES PAID IN A COUNTRY OUTSIDE INDIA HAS ALSO BEEN REQUESTED SO THAT INTEREST IS NOT CHARGED ON AN AMO UNT EQUIVALENT TO TAXES PAID OUTSIDE INDIA . THE MEMORANDUM THEREAFTER STATES THAT IT WAS THEREFORE PROPOSED TO PROVIDE FOR REDUCING FROM THE ASSESSED TAX BOTH THE MAT CREDIT AS WELL AS THE DITR UNDER SECTI ON 90 BEFORE CHARGING INTEREST UNDER THE SECTIONS 234A TO 234C. THUS IT APPEARS TO US THAT THE RATIO OF THE DECISION OF THE HONBLE BO MBAY HIGH COURT (SUPRA) EQUALLY APPLIES TO A CASE OF DITR ALLOWED T O THE ASSESSEE UNDER SECTION 90 OF THE ACT. THE HONBLE HIGH COUR T HAS HELD THAT THE AMENDMENT MADE BY THE EXPLANATION SUBSTITUTED WITH EFFECT FROM 01.04.2007, IN SO FAR AS IT ALLOWS THE MAT CREDIT T O BE REDUCED FROM THE 8 ITA NO: 5511/MUM/2010 ASSESSED TAX BEFORE CHARGING INTEREST, IS CLARIFICA TORY AND HENCE RETROSPECTIVE IN NATURE AND WOULD APPLY TO ASSESSME NT YEARS EARLIER TO THE ASSESSMENT YEAR 2007-08. THE SAME RATIO, IN OU R HUMBLE OPINION, SHOULD APPLY TO A CASE WHERE DITR UNDER SECTION 90 IS ALSO CONCERNED. THE AMENDMENT PERMITTING THE DITR TO BE REDUCED FROM THE ASSESSED TAX BEFORE CHARGING INTEREST WAS ALSO MADE TO REMOVE AN AMBIGUITY AND IS EXPRESSIVE OF A POSITION IN LAW WH ICH PARLIAMENT INTENDED TO HOLD THE FIELD AT ALL MATERIAL TIMES. WE ARE THUS OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REC TIFYING THE ASSESSMENT TO CHARGE FURTHER INTEREST OF ` 3,79,315/- UNDER SECTION 234B OF THE ACT, BY WITHDRAWING THE DEDUCTION OF THE DITR OF ` 12,23,598/- ALLOWED FROM THE ASSESSED TAX BEFORE CHARGING INTEREST UNDE R SECTION 234B. THE RECTIFICATION ORDER PASSED UNDER SECTION 154 OF THE ACT IS ACCORDINGLY QUASHED. 9. AT THE TIME OF THE HEARING THE LEARNED COUNSEL F OR THE ASSESSEE FAIRLY POINTED OUT THAT THE CORRECT AMOUNT OF DITR IS NOT ` 12,23,598/- BUT IS SOMETHING LESS, BEING THE DIFFERENCE BETWEEN THE FIGURE OF ` 3,60,610/- AND ` 3,54,446/- (PAGE 2 OF THE PAPER BOOK AND THE STATEMENT OF PROFESSIONAL INCOME RECEIVED IN UK FIL ED BEFORE US). THERE IS A DIFFERENCE OF ` 6,000/- AND ODD. HE STATES THAT THE ASSESSING OFFICER MAY REDUCE THE CORRECT AMOUNT OF DITR FROM THE ASSESSED TAX BEFORE CHARGING INTEREST UNDER SECTION 234B BY TAKING THE FIGURE OF ` 3,54,446/- IN THE PLACE OF ` 3,60,610/-. THE ASSESSING 9 ITA NO: 5511/MUM/2010 OFFICER MAY LOOK INTO THE FACTUAL POSITION WHILE GI VING EFFECT TO OUR ORDER AND GIVE THE CORRECT AMOUNT OF CREDIT FOR DITR. 10. IN THE RESULT, THE APPEAL IS ALLOWED WITH NO OR DER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER 2011. SD/- SD/- (P M JAGTAP) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 14 TH SEPTEMBER 2011 SALDANHA COPY TO: 1. MR HOMI C H BHABHA 49, CUFFE PARADE, COLABA MUMBAI 400 005 2. DCIT 12(2), MUMBAI 3. CIT-XII, MUMBAI 4. CIT(A)-23, MUMBAI 5. DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI