Ambani Meena Ramaniklal, Ahmedabad V. The Dy.CIT.,Cent.Circle-1(3), Ahmedabad

ITA 660/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1217 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.660/AHD/2012 / ASSTT. YEAR: 2004-2005 AMBANI MEENA RAMANIKLAL VIMAL HOUSE, NAVRANGPURA SCHOOL ROAD POST-NAVJIVAN, NAVRANGPURA AHMEDABAD 380 009. PAN : AADPA 5921 B VS DCIT, CENT.CIR.1(3) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI ASEEM THAKKAR REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 21/06/2016 / DATE OF PRONOUNCEMENT: 04/07/2016 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST T HE ORDER OF THE LD.CIT(A)- 6, AHMEDABAD DATED 24.01.2012 PASSED FOR THE ASSTT. YEAR 2004-05. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,96,438/- WHICH WAS DISALLOWED BY THE AO UNDER SECTION 14A R.W.S RULE 8D OF THE INCOME TAX R ULES. 3. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET CONTENDED THAT THIS IS THE SECOND ROUND OF LITIGATION. IN THE FIRST ROUND OF LITIGATION TRIBUNAL HAS SET ASIDE THE ORDER OF THE REVENUE AUTHORITIES IN ITA NO.768/AHD/ 2009. THE TRIBUNAL HAS DIRECTED THE AO TO RECOMPUTE THE EXPENSES DISALLOWA BLE FOR EARNING OF DIVIDEND INCOME AS PER THE DIRECTIONS OF THE TRIBUNAL IN THE CASE OF ITO VS. DAGA CAPITAL MANAGEMENT P.LTD. 119 TTJ (MUM)(SB)289. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER. HE POINTED OUT THAT THE ORDER OF THE SPECIAL OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT HAS BEEN OVERRULED BY THE HONBLE BOMBAY HIGH ITA NO.660/AHD/2012 2 COURT, THEREFORE, DISALLOWANCE AS PER THAT JUDGMENT CANNOT BE MADE IN THE SECOND ROUND OF LITIGATION. 4. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE LD.CIT(A). 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THR OUGH THE RECORD CAREFULLY. THE FINDING OF THE TRIBUNAL IN THE FIRST ROUND OF L ITIGATION READS AS UNDER: 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED IHE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. BOTH THE PARTIES, AT THE TIME OF HEARING, AGREED THAT TH IS ISSUE HAS TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATING THE SAME AFRESH IN ACCORDANCE WITH THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. DAGA CAPITAL MANAGEMENT (P) LTD. WE FIN D THAT WHILE DECIDING THE ISSUE MUMBAI SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF INCOME TAX OFFICER VS. DAGA CAPITAL MANAGEM ENT (P) LTD. (2008) 119 TTJ (MUMBAI)(SB) 289 : (2008) 26 SO T 603 : (2008) , OBSERVED ASUNDER:- THE LINE OF DISTINCTION SOUGHT TO BE DRAWN ON BEHA LF OF THE ASSESSEE BETWEEN THE MAIN AND INCIDENTAL INCOM E IS, UNFORTUNATELY, MISSING IN S. 14A. SUB-S. (1) SPELLS OUT IN UNAMBIGUOUS TERMS THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME 'WHICH DOES NOT FORM PART OF THE TOTAL INCOME IS TO BE DISALLOWED UNDER S.L4A . THE REFERENCE IS TO THE 'INCOME WHICH DOES NOT FORM PAR T OF THE TOTAL INCOME' WITHOUT MAKING ANY FURTHER DISTINCTIO N BETWEEN THE MAIN OR INCIDENTAL EXEMPT INCOME. THE S TATUS OF INCOME IS NOT ENHANCED OR LOWERED IF IT IS EARNE D FROM THE MAIN BUSINESS ACTIVITY OR INCIDENTALLY. THERE MAY BE A DIFFERENCE IN CLASSIFICATION OF SUCH INCOME UNDER ONE HEAD OR THE OTHER. BUT NO SPECIAL TREATMENT IS ENVISAGED FOR THE MAIN OR INCIDENTAL INCOME UNDER THE ACT. THERE IS N O PROVISION IN THE ACT, WHICH EXEMPTS A PARTICULAR IN COME FROM TAXATION SIMPLY ON THE GROUND THAT IT IS AN IN CIDENTAL INCOME. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF INCOME AND NOT IT BEING MAJOR OR SUBSIDIARY. MOREOVER DIVI DEND IS EXEMPT IRRESPECTIVE OF WHETHER IT IS EARNED BY THE ASSESSEE ITA NO.660/AHD/2012 3 FROM THE SHARES HELD AS OR AS STOCK-IN-TRADE. THE I NSTRUCTION OF SUB-S. (1) IS UNEXCEPTIONAL IN THE SENSE THAT IF THERE IS ANY EXEMPT INCOME, THE DISALLOWANCE OF THE EXPENDITURE UNDER S.14A IN RELATION TO SUCH INCOME HAS TO AUTOMATICAL LY FOLLOW. THERE IS ABSOLUTELY NO INDICATION MUCH LESS THE REF ERENCE IN THE LANGUAGE OF SECTION THAT COULD EVEN REMOTELY SU GGEST THAT THE DISALLOWANCE IS NOT CONTEMPLATED IN RESPECT OF INCIDENTAL INCOME, WHICH IS OTHERWISE EXEMPT FROM TAX IN THE S AME MANNER AS IS THE MAIN INCOME. IT IS SIMPLE AND PLAI N THAT THE DISALLOWABLE EXPENDITURE IS TO BE WORKED OUT WHICH HAS RELATION WITH THE EXEMPT INCOME AND NOT OTHERWISE. THEREFORE, THE ASSESSEE'S VERSION THAT IF THE EXEMP T INCOME IS INCIDENTAL TO THE MAIN BUSINESS WHOSE INCOME IS TAX ABLE, THEN THE PROVISIONS OF S. 14A WILL BE DEFEATED IS N OT ACCEPTABLE. FURTHER CONTENTION ON BEHALF OF THE ASS ESSEE THAT THE INTERPRETATION SOUGHT TO BE GIVEN BY THE DEPART MENTAL REPRESENTATIVE TO S. 14A, IF ACCEPTED WOULD BE V ERY HARSH AND UNEQUITABLE AS IT WILL RESULT IN DISAL LOWANCE OF EXPENDITURE WHICH IS INDIRECTLY RELATED TO THE EXEM PT INCOME AGAIN CANNOT BE APPRECIATED FOR THE SIMPLE REASON T HAT THE DUTY OF THE TRIBUNAL IS TO INTERPRET THE PROVISION AS IT EXISTS IN THE ACT. THE TRIBUNAL CANNOT USURP THE LEGISLATI VE POWER TO TONE DOWN THE RIGOR OF ANY PROVISION. IT IS SETT LED LEGAL POSITION THAT EQUITY OR HARDSHIP IS HARDLY ANY RELEVANT GROUND FOR THE INTERPRETATION OF TAX LAW. THE TRIB UNAL IS RESTRICTED IN INTERPRETING THE PROVISION AS IT EXIS TS, WHETHER IT IS HARD OR SOFT. AS PER LANGUAGE OF S. 14A, THE DISALLOWANCE IS CONTEMPLATED IN RESPECT OF E XPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. WHEN THE L ANGUAGE OF SECTION IS CLEAR AND DOES NOT ADMIT OF ANY DOUBT WHATSOEVER, THE TRIBUNAL IS BOUND TO INTERPRET IT L ITERALLY. IT IS TRITE LAW THAT SO LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO IN INTERPRETIVE PROCE SS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMI SSIBLE. TAXING STATUTE HAS TO BE STRICTLY CONSTRUED AND NOT HING CAN BE READ IN IT. THERE IS HARDLY ANYTHING TO INFER, T HAT THE LEGISLATURE INTENDED TO IMMUNE, THE EXPENDITURE IN RELATION INCIDENTAL EXEMPT INCOME FROM THE OPERATION OF S.14 A. THERE IS NO EXCEPTION FOR NOT CONSIDERING ANY INCOM E ITA NO.660/AHD/2012 4 WHICH IS EXEMPT FROM TAX, BE IT THE MAIN OR INCIDEN TAL PROVISIONS OF S.14A ARE APPLICABLE WITH RESPECT OF THE DIVIDEND INCOME EARNED BY THE ASSESSEE ENGAGED IN T HE BUSINESS OF DEALING WITH SHARES AND SECURITIES, ON THE SHARES AS STOCK-IN-TRADE WHEN EARNING OF SUCH DIVID END INCOME IS INCIDENTAL TO THE TRADING IN SHARES. SUB- SS. (2) AND (3) OF S.14A ARE RETROSPECTIVE IN NATURE AND TH E RESULTANT R. 8D WOULD ALSO FALL ON THE SAME LINE, T HEN THE DISALLOWANCE UNDER S. 14A IS REQUIRED TO BE COMPUTE D WITH REFERENCE TO THE MANDATE OF THESE PROVISIONS. THERE FORE, THE IMPUGNED ORDERS IN ALL THE CASES ARE SET ASIDE THE MATTER IS REMITTED TO THE FILE OF THE AOS FOR COMPU TING, .THE DISALLOWANCE IN TERMS OF S.14A R/W R. 8D.' 6. THE AO HAS TO GIVE EFFECT TO THIS DIRECTION. IT IS SETTLED POSITION THAT EXECUTING COURT CANNOT TRAVEL BEYOND THE DECREE. BE CAUSE OF SUBSEQUENT DEVELOPMENT IN THE POSITION OF LAW, THE DECREE CANN OT BE TERMED AS ERRONEOUS. THE AO WAS BOUND BY THE DIRECTIONS OF THE HIGHER APPELL ATE AUTHORITY. HE CANNOT SIT IN THE JUDGMENT OF THE TRIBUNAL WHILE GIVING EFFECT TO IT. EVEN IF THERE IS SOME ERROR IN THE ORDER OF THE TRIBUNAL, BECAUSE OF SUBSEQUENT DE CISION OF THE HONBLE BOMBAY HIGH COURT, THAT WOULD NOT AUTOMATICALLY AFFECT EXE CUTABILITY OF THE ORDER IN THE CASE OF THE ASSESSEE, WHERE SPECIFIC FINDING HAS BE EN RECORD. THEREFORE, THE LD.REVENUE AUTHORITIES HAVE RIGHTLY GIVEN EFFECT TO THE ORDER OF THE TRIBUNAL. REMEDY OF THE ASSESSEE LIES, IF ANY, AGAINST THE OR IGINAL ORDER AND NOT IN THE ORDER GIVING EFFECT. TRIBUNAL CANNOT REVIEW ITS EARLIER ORDER IN THE GARB OF FINDING OUT WHETHER EFFECT HAS BEEN PROPERLY GIVEN OR NOT. IN THIS VIEW OF THE MATTER, THIS APPEAL IS DEVOID OF ANY MERIT, HENCE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 4 TH JULY, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 04/07/2016