Apollo International Ltd., New Delhi V. DCIT, New Delhi

ITA 6118/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3803 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MITHUN SETHI
• Assessee Lawyers: MANU KR GIRI
• Keywords: Earning of tax free income; Question of law; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A NO.6118/DEL/2016 ASSESSMENT YEAR: 2012-13 APOLLO INTERNATIONAL LTD., 303, DLF COURT YARD, SAKET, NEW DELHI. VS. DCIT, CIRCLE-3(1), NEW DELHI. TAN/PAN: AAACA 6447N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANU KR. GIRI, ADV. RESPONDENT BY: SHRI MITHUN SETHI, SR.D.R. DATE OF HEARING: 14 08 2019 DATE OF PRONOUNCEMENT: 14 08 2019 O R D E R PER AMIT SHUKLA, JM THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 19.09.2016 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI F OR THE QUANTUM OF ASSESSMENT PASSED U/S. 143(3) FOR THE ASSESSMENT YEAR 2012-13. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING AN AMOUNT OF RS.26,16,000/- UNDER SECTION 14A OF THE ACT READ WI TH RULE 8D OF THE INCOME TAX RULES AND IN DOING SO HAS GROSSLY ERRED IN:- HOLDING THAT THE APPELLANT IS UNDER AN OBLIGATION TO COMPUTE DISALLOWANCE AS PER PROVISIONS OF RULE 8D. I.T.A. NO.6118/DEL/2016 2 MAKING ADDITION U/S 14A OF THE ACT WITHOUT REWARDI NG HIS DISQUALIFICATION HAVING REGARD TO THE TAX AUDIT REP ORT AND ACCOUNTS OF THE APPELLANT THAT EXPENDITURE OF RS.8, 17,000 HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. 2. AT THE OUTSET, LD. COUNSEL SUBMITTED THAT SIMILA R DISALLOWANCE HAS COME UP FOR CONSIDERATION BEFORE T HE TRIBUNAL FOR THE ASSESSMENT YEAR 2011-12 IN THE CAS E OF ASSESSEE WHEREIN THE TRIBUNAL HAS RESTRICTED THE DI SALLOWANCE U/S.14A READ WITH RULE 8D OF THE INCOME TAX RULES T O AVERAGE VALUE OF INVESTMENT WHICH YIELD EXEMPT INCO ME DURING THE YEAR. 3. ON THE OTHER HAND, LD. DR HAS STRONGLY RELIED UP ON THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(A). 4. THE ASSESSEE-COMPANY HAD SHOWN DIVIDEND INCOME O F RS.87.64 LAC WHICH WAS CLAIMED EXEMPT U/S.10(34) OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE THOUGH OFFERED DISALLOWANCE OF 0.5% OF THE EXPENDITURE; HO WEVER, STATED THAT INVESTMENT IN SHARE CAPITAL OF SUBSIDIA RY COMPANIES WHICH HAVE NOT YIELDED EXEMPT INCOME SHOU LD NOT BE TAKEN INTO CONSIDERATION. HOWEVER, LD. ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AND MADE DISALLO WANCE OF RS.26,16,000/- WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). WE FIND THAT THIS PRECISE ISSUE HAS COME UP FOR CON SIDERATION BEFORE THE TRIBUNAL WHEREIN THE TRIBUNAL HAS DECIDE D THIS ISSUE AFTER FOLLOWING THE JUDGMENT OF SPECIAL BENCH IN THE CASE OF VIREET INVESTMENT PVT. LTD. AND ANR., (2017) 165 I.T.A. NO.6118/DEL/2016 3 ITD 0027 (DELHI) (SB) AND PARTLY ALLOWED THE APPEAL AFTER OBSERVING AND HOLDING AS UNDER: 4.3 BEFORE US, THE LEARNED COUNSEL HAS PRAYED FOR F OLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF VI REET INVESTMENT PVT. LTD. (SUPRA), WHEREIN THE TRIBUNAL HELD AS UNDER: '11.14 NOW THE POSITION OF LAW AS STANDS IS THAT TH E DECISION OF HON'BLE JURISDICTION HIGH COURT IS DIRECTLY ON THE POINT IN DISPUTE WHEREAS THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RA JENDRA PRASAD MOODY (SUPRA) HAS BEEN RENDERED IN THE CONTEXT OF SECTION 57(III) , THE APPLICABILITY OF WHICH HAS BEEN RULED OUT BY HON'BL E DELHI HIGH COURT IN THE CASE OF CHEMINVEST (SUPRA). 11.15 UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA, THE COURTS FUNCTION UNDER THE SUPERVISORY JURISDICTION OF HON'BLE HIGH COURT. THE DECISIONS RENDERED BY HON'BLE HIGH COURT ARE BINDING ON ALL S UBORDINATE COURTS WORKING WITHIN ITS JURISDICTION. IN THIS REGARD WE MAY REFER TO THE FOLLOWING DECISIONS: (I) CIT V. THANA ELECTRICITY SUPPLY LTD . (1994) 206 ITR 727 (BOM.), WHEREIN ON THE ISSUE OF 'WHOSE DECISION-IS BINDING ON WHOM', THE. ITA NO.9/DEL/2015 HON'BLE BOMBAY COURT CONSIDERED I N DETAIL THE HIERARCHY OF THE COURTS AND HAS OBSERVED AS UNDER: 'IT IS ALSO WELL-SETTLED THAT THOUGH THERE IS NO SP ECIFIC PROVISION MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINA TE COURTS, IT IS IMPLICIT IN THE POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THAT THE TRIBUNALS SUBJECT TO ITS SUPERVISION WOULD CONF ORM TO THE LAW LAID DOWN BY IT. IT IS IN THAT VIEW OF THE MATTER THAT T HE SUPREME COURT IN EAST INDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUSTOMS , AIR 1962 SC 1893 (AT PAGE1905) DECLARED: 'WE, THEREFORE', HOLD THAT THE LAW DECLARED BY THE HIGHEST COURT IN THE STATE IS BINDING ON AUTHORITIES OR TRIBUNALS UNDER ITS SU PERINTENDENCE, AND THEY CANNOT IGNORE IT. ....' THIS POSITION HAS BEEN SUMMED UP BY THE SUPREME COU RT IN MAHADEOLAL KANODIA V. ADMINISTRATOR GENERAL OF WEST BENGAL , AIR 1960 SC 936 (AT PAGE 941) AS FOLLOWS: 'JUDICIAL DECORUM NO LESS THAN LEGAL PROPRIETY FORM S THE BASIS OF JUDICIAL PROCEDURE. IF ONE THING IS MORE NECESSARY IN LAW TH AN ANY OTHER THING, IT IS THE QUALITY OF CERTAINTY. THAT QUALITY WOULD TOTALL Y DISAPPEAR IF JUDGES OF CO- ORDINATE JURISDICTION IN A HIGH COURT START OVE RRULING ONE ANOTHER'S DECISIONS. IF ONE DIVISION BENCH OF A HIGH COURT IS UNABLE TO DISTINGUISH A PREVIOUS DECISION OF ANOTHER DIVISION BENCH, AND HO LDING THE VIEW THAT THE I.T.A. NO.6118/DEL/2016 4 EARLIER DECISION IS WRONG, ITSELF GIVES EFFECT TO T HAT VIEW, THE RESULT WOULD BE UTTER CONFUSION. THE POSITION WOULD BE EQUALLY B AD WHERE A JUDGE SITTING SINGLY IN THE HIGH COURT IS OF OPINION THAT THE PREVIOUS DECISION OF ANOTHER SINGLE JUDGE ON A QUESTION OF LAW IS WRONG AND GIVES EFFECT TO THAT VIEW INSTEAD OF REFERRING THE MATTER TO A LARGER BE NCH.' THE ABOVE DECISION WAS FOLLOWED BY THE SUPREME COUR T IN BARADAKANTA MISHRA V. BHIMSEN DIXIT , AIR 1972 SC 2466, WHEREIN THE LEGAL POSITION WAS REITERATED IN THE FOLLOWING WORDS (AT PAGE 2469 ) : 'IT WOULD BE ANOMALOUS TO SUGGEST THAT A TRIBUNAL O VER WHICH THE HIGH COURT HAS SUPERINTENDENCE CAN IGNORE THE LAW DECLAR ED BY THAT COURT AND START PROCEEDINGS IN DIRECT VIOLATION OF IT. IF A T RIBUNAL CAN DO SO, ALL THE SUBORDINATE COURTS CAN EQUALLY DO SO, FOR THERE IS NO SPECIFIC PROVISION, JUST LIKE IN THE CASE OF SUPREME COURT, MAKING THE LAW DECLARED BY THE HIGH COURT BINDING ON SUBORDINATE COURTS. IT IS IMP LICIT IN THE POWER OF SUPERVISION CONFERRED ON A SUPERIOR TRIBUNAL THAT A LL THE TRIBUNALS SUBJECT TO ITS SUPERVISION SHOULD CONFORM TO THE LAW LAID D OWN BY IT. SUCH OBEDIENCE WOULD ALSO BE CONDUCIVE TO THEIR SMOOTH W ORKING; OTHERWISE THERE WOULD BE CONFUSION IN THE ADMINISTRATION OF L AW AND RESPECT FOR LAW WOULD IRRETRIEVABLY SUFFER,' ITA NO.9/DEL/2015 (II) CIT V. SVNIL KUMAR (1995) 212 ITR 238 (RAJ.), IT WAS OBSERVED AS UNDER: 'THE POINT WHICH HAS BEEN RAISED COULD HAVE BEEN CO NSIDERED TO BE DEBATABLE BECAUSE OTHER HIGH COURTS HAVE TAKEN A DI FFERENT VIEW. BUT SINCE THE VIEW TAKEN BY THIS COURT IS BINDING ON TH E TRIBUNAL AND OTHER AUTHORITIES UNDER THE ACT IN THIS STATE, IT COULD N OT BE CONSIDERED TO BE A DEBATABLE POINT IN VIEW OF THE DECISION OF THIS COU RT IN THE CASE OF CIT V. M.I, SANGHI [1988] 170 ITR 670.' (III) INDIAN TUBE COMPANY LTD. V. CIT & OTHERS (1993) 203 ITR 54 (COL.) , IT WAS OBSERVED AS UNDER: 'IN THE IMPUGNED ORDER, RESPONDENT NO.1 HAS REJECTE D THE PETITIONER'S CONTENTION BY STATING THAT, ALTHOUGH THE CALCUTTA H IGH COURT HAD HELD THAT AN ASSESSEE WAS ENTITLED TO INTEREST ON SUCH REFUND CALCULATED UP TO THE DATE OF THE ORDER PASSED CONSEQUENT UPON AN APPEAL OR REVISION OF THE ORIGINAL ASSESSMENT, THIS VIEW HAD NOT BEEN ACCEPTE D BY THE BOMBAY HIGH COURT, THE ALLAHABAD HIGH COURT AND THE KERALA HIGH COURT. RESPONDENT NO.1, ACCORDINGLY, CHOSE TO ACCEPT THE VIEW OF THE BOMBAY, ALLAHABAD AND KERALA HIGH COURTS IN PREFERENCE TO THE VIEW OF THE CALCUTTA HIGH COURT. IN MY VIEW, THE ORDER OF RESPONDENT NO. 1 CANNOT BE SUSTAINED ON THE SIMPLE GROUND THAT RESPONDENT NO. 1 IS AN AUTHORITY OPERATING WITHIN THE STATE OF WEST BENGAL AND IS BOUND BY THE DECISIONS OF THE NIGH COURT OF THIS STATE ( SEE CIT V. INDIAN PRESS EXCHANGE LTD . [1989] 176 ITR 331 (COL) ; EAST INDIA COMMERCIAL CO. LTD. V. COLLECTOR OF CUST OMS AIR 1962 SC 1993, PARAGRAPH 29). IN THAT VIEW OF THE MATTER, THE IMPUGNED ORDER MUST BE SET ASIDE AND THE COMMISSIONER IS DIRECTED TO CONSIDER THE MATTER AFR ESH IN KEEPING WITH THE DECISIONS OF THIS COURT AFTER GIVING THE PETITIONER S AN OPPORTUNITY OF BEING I.T.A. NO.6118/DEL/2016 5 HEARD. AT LEAST 48 HOURS CLEAR NOTICE MUST BE GIVEN TO THE PETITIONERS. THE COMMISSIONER WILL COMMUNICATE THE FINAL ORDER TO TH E PETITIONER WITHIN EIGHT WEEKS FROM THE DATE OF HEARING. (IV) CIT V. J.K. JAIN [1998] 230 ITR 839 (P&H), OBSERVING AS UNDER: 'WE HAVE CAREFULLY EXAMINED THE RECORDS AND HAVE HE ARD LD. COUNSEL REPRESENTING THE PARTIES. WE ARE IN RESPECTFUL AGRE EMENT WITH THE VIEW EXPRESSED BY THE ALLAHABAD HIGH COURT IN OMEGA SPOR TS AND RADIO WORKS' CASE [1982] 134 ITR 28, AS ALSO THE DECISION OF THIS COURT IN MOHAN LAL KANSAL'S CASE [1978] 114 ITR 583. FOLLOWI NG THE DECISION IN THE TWO CASES REFERRED TO ABOVE, WE HOLD THAT IT WA S NOT A CASE OF DIVERGENCE OF OPINION INASMUCH AS THE OPINION EXPRE SSED BY THIS COURT WAS BINDING UPON THE TRIBUNAL.' 11.16 THEREFORE, IN OUR CONSIDERED OPINION, NO CONT RARY VIEW CAN BE TAKEN UNDER THESE CIRCUMSTANCES. WE, ACCORDINGLY, HOLD TH AT ONLY THOSE ITA NO.9/DEL/2015 INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME DUR ING THE YEAR.' 4.3 RESPECTFULLY, FOLLOWING THE ABOVE DECISION, WE DIRECT THE ASSESSING OFFICER TO ACCORDINGLY RESTRICT THE DISALLOWANCE UN DER SECTION 14A READ WITH RULE 8D(2)(III) OF THE RULES TO AVERAGE VALUE OF IN VESTMENT WHICH YIELD EXEMPT INCOME DURING THE YEAR. THE GROUND NO. 4 OF THE APPEAL IS PARTLY ALLOWED. 5. THUS, RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE ASSESSING OFFICER TO ACCORDINGLY RESTRICT THE DISAL LOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(III) IN LINE WITH THE DIRECTION OF THE TRIBUNAL TO AVERAGE VALUE OF INVES TMENT WHICH HAS YIELDED EXEMPT INCOME DURING THE YEAR. THUS, TH E GROUND RAISED BY THE ASSESSE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2019. SD/- SD/- [T.S. KAPOOR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 14 TH AUGUST, 2019 PKK: