ASSISTANT COMMISSIONER OF INCOME TAX 2(3)(1), MUMBAI V. TATA INDUSTRIES LIMITED, MUMBAI

ITA 68/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1297 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 04-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 115JB; 201; 13; 12; 10; 2; 11

Judgement Text

ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI E BENCH, MUMBAI [CORAM : PRAMOD KUMAR VP, AND RAVISH SOOD JM] ITA NO S. 2 9 9 AND 278 //MUM/18 ASSESSMENT YEAR S: 2013 - 14 AND 20 14 - 15 TATA INDUSTRIES LTD ... . .. . ...... APPELLANT BOMBAY HOUSE , 24, HOMI MODY STREET, FORT, MUMBAI 400 001 [PAN: AAACT4058L] V S DEPUTY COMMISSIONER OF I N COME TAX CIRCLE (3)(1 ) , MUMBAI . ......RESPONDENT ITA NO S . 67 AND 68/MUM/2018 ASSESSMENT YEAR S: 2013 - 14 AND 20 14 - 15 DEPUTY COMMISSIONER OF I N COME TAX CIRCLE (3) (1 ) , MUMBAI ... . .. ..... .. APPELLANT V S TATA INDUSTRIES LIMITED . ......RESPONDENT BOMBAY HOUSE , 24, HOMI MODY STREET, FORT, MUMBAI 400 001 [PAN: AAACT4058L] APPEARANCES BY R MANJUNATH SWAMY, AMIT PRATAP SINGH, A ND INDE R SOLANKI F OR THE REVENUE AARTI VISSANJI FOR THE ASSESSEE DATES OF HEARING OF THE APP EAL : FEBRUARY 24 TH , 2020 DATE OF PRONO UNCING TH IS ORDER : MAY 27 TH , 2020 O R D E R PER PRAMOD KUMAR V P: 1. THESE TWO SETS OF CROSS APP EAL S PERTAIN T O THE SAM E ASSESSEE, INVOLVE SOME COMMON ISSUES AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, BOT H THE SET OF CROSS APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. WE WILL FIRST TAKE UP THE C ROSS APPEALS FOR THE ASSESSMENT YEA R 2013 - 14. ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 2 OF 9 3. T HESE C ROSS APPEALS CHALLENGE CORRECTNESS OF THE LEARNED CIT(A ) S ORDER DATE D 23 RD OCTOBER 2017, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2013 - 14. 4. GRIEVANCES RAISED BY THE PARTIES ARE AS FOLLO WS: GRIE VANC ES OF THE ASSESSEE: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE HELD THAT: 1.1 (A) NO DISALL OWANCE CAN BE MADE UNDER RULE 8D(2)(I), AS THE LD. AO HAS NOT ESTABLISHMENT THAT RS. 2, 86,45,152/ - INCUR RED BY PROJECT AND INVESTMENT DEPARTMENT REPRESENTS DIRECT EXPENDITURE. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATE (B) IN VIEW OF THE DISALL OWANCE MADE OF RS. 2,86 ,45,152/ - BEING THE EXPENDITURE INCURRED BY PROJECT AND INVESTMENT DEPARTMENT UN DER RULE 8D(2)(I) OF THE RULES, NO FURTHER DISALLOWANCE CAN BE MADE UNDER RULE 8D(2)(III) OF THE RULES. (C) THE AGGREGATE AMOUNT OF DISALLOWANCE MADE OF EXPENDITURE U/S. 14A OF THE ACT READ WITH RULE 8D CANNOT EXCEED T HE EXPENDITURE INCURRED BY THE P ROJEC T AND INVESTMENT DEPARTMENT OF RS. 2,86,45,152/ - . 1.2 THE EXPENDITURE INCURRED BY THE PROJECT AND INVESTMENT DEPARTMENT OF RS. 2,86,4 5,152/ - CANNOT BE CONSIDERED IN COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, AS THE AO HAS NOT ESTABLISHED THAT SUCH EXPEN DITURE REPRESENTS DIRECT EXPENDIT ASSESSING OFFIC ER S GRIEVANCES: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O TO EXCLUDE ST RATEGIC INVESTMENTS FROM THE TOTAL INVESTMENT FOR COMPUTING DISAL LOWANCE U/S. 14A R.W.R 8D(2)(III), WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME BY INCURRING ESTABLISHMENT AND ADMINISTRATIVE EXPENDITURE ON STRATEGIC INVESTMENT. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT AS PER CLAUSES (F) OF EXPLANATION 1 OF SECTION 115JB(2) THE BOOK PROFIT MEANS THE NET PROFITS AS SHOWN IN THE PROFIT AND LOSS ACCOUNT F OR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB - S ECTION (2), AS INCREASED BY THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 3 OF 9 WHICH (SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF ) OR SECTION 11 OR SECTION 12 APPLY AND ALL THE RELEVANT EXPENDITURE HAS TO BE ADDED B ACK TO INCOME FOR MAT COMPUTATION. 5. TO ADJUDICATE ON THESE APPEA LS, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NO TE OF. THE ASSESSEE BEFORE US IS A RESI DENT COMPANY . THE RE TURN OF INCOM E, FILED BY THE ASSESSEE, WAS SELECTED FOR SCRUTINY ASSESSMENT UN DER THE CASS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WH ILE TH E ASSESSEE COMPANY HAD A TAX - EXEMPT DIVIDEND INCOM E OF RS 62,07,41,055 , THE ASSESSEE HAD OFFERED DISAL LOWANCE UNDER SECTION 14A FOR ONLY RS 6,18, 69,000. WHEN AS SESSING OFFICER SOUGHT JUSTIFICATION FOR THIS QUANTUM OF DISALLOWANCE, IT WAS , INTER ALIA, EXPLAINED BY THE ASSESSEE THAT THERE IS NO INTEREST COST DURING THE YEAR, THAT THE RELAT ED EXPENDITURE OF DISALLOWANCE UNDER SECTION 14A WAS ONLY OUT OF PROJECT AND INVESTMENT DEPARTMENT FORMING PART OF THE HEAD OFFICE, THAT ENTIRE EXPENDITURE INCURRED UNDER THAT HEAD IS RS 2,86, 45,152 , AND THAT OUT OF THIS EXPENSE OF RS 2,86,45,152, CERTAIN EXPENSES , DETAILS OF WHICH WERE SET OUT , ARE SUCH THA T THESE CANNOT BE SAID TO RELATABLE TO EARNING OF T AX EXEMPT INCOME . IT WAS EXPLAINED THAT THE BA LANCE AMOUNT , DISALLO WABLE UNDER SECTION 14A , WORKED OUT TO RS 6,18,69,000. THE ASSESSING OFFICER REJECT ED THE SAID EXPLA NATION AN D OBSERVED THAT I HAVE CONSIDERED T HE SUBM ISSIONS OF THE ASSESSEE COM PANY. I DO NOT AGREE W ITH THE S AME , AS, IN MY O PINION, THE EXPEN DITURE INC URRED FOR PROJECT AND INVESTMENT DEPARTMENT CONS TITUTES DIRECT EXPENDITURE INCURRED IN RELATION TO INVESTMENTS HELD IN SHARES, HE NCE IT IS TO BE DIS ALLOWED UNDER RULE 8D(2 )(I ) BEING IN ADDITION TO DISALLOWANCE MADE UNDER RULE 8D(2)(III) HE THEN PROCEEDED TO COMPUTE THE DISALLOWANCE UNDER SECTION 14A READ WI TH RULE 8D, WHICH WAS 0.5% OF THE AVERAGE INVESTMENTS HELD BY THE ASSE SSEE [I.E. UNDER RULE 8D (2) (III)] AMOUNTING TO RS 11,06,68,000 PLUS RS 2,86,45,152 BEING ON ACCOUNT OF DIRECT EXPENSES INCURRED T O EARN THE DIVIDEND INCOME [UNDER RULE 8D (2)(I)] . OUT OF THE T O TA L AMOUNT OF RS 13,93,13 ,152, THE ASSESSING OFFICER REDUCED THE SUO MOTU DISALLOWANCE O FFER ED OF RS 6,18,69,000 , AND ADDED , INTER ALIA , THE REMAINING RS 7,74,44,152 TO THE INCOME R ET URNED BY THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) UPHELD , IN PRINCIPLE , THE REJECTION OF SUO MOTU DISAL LOWANCE OFFERED BY THE ASSESSEE BUT GAVE SOME PAR TIAL RELIEF ON THE COMP UTATION PART, BUT, FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE, IT IS NOT REALLY NECES SARY TO DEAL WITH JUSTIFICATION FOR THE PARTIAL RELIE F GRANTED BY THE C IT(A). SUFFICE TO NOT E THAT THE LEARNED C IT(A) UPHELD , IN PRINCIPLE, THE REJECTION OF SUO MOTU DISALLOWANCE OFFERED B Y THE ASSESSEE. THE ASSESSEE IS AGGRIEVED OF THE ACTION OF THE CIT (A) BEING UPH E LD IN PRINCIPLE WHILE THE ASSESSING OFFICER IS AGGRIEVED OF THE R ELIEF GRANTED BY THE CIT (A). BOT H THE PARTIES ARE IN AP PEAL BEFORE US. 6. WE HAVE HEARD THE RIVA L CONTENTIONS, PERU SED THE MATERIAL ON RECORD AND DUL Y CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THE ASSESSEE HAS GIVEN A REASONABLE EXPLANATION ABOUT THE QUANTIFICATION OF HIS SUO MOTU DISALLOWANCE, AND THE ASSESSING OFFICER HAS NO T POINTED OUT ANY SPE CIFIC ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 4 OF 9 DEFECTS IN THE SAME. WHAT WAS P OINTED OUT BY THE ASSESSEE THAT AT BEST ENTIRE EXP ENSES OF P ROJECT AND INVESTMENT D EPARTMENT COULD B E TREATED AS EXPENDIT URE I NCURRED BY THE ASSESSEE IN RELATION TO I NCOME WHICH D OES NOT FORM PART O F THE T OTAL INCOME . IT IS SO FOR THE REASON THAT THE PR OJECT AND INVESTMENT DEPARTMENT IS ONLY D EPARTMENT WHICH DEALS WITH IDENTIFYING THE OPPORTUNITIES AND GROWTH IN DIVERSE BUSINESS OPPORTUNITIES , AND THUS IDENTIFYING IN VESTMENT OPPORTUNITIES IS ONE OF ITS FU NCTIONS , AND THAT NO OTHER DEPA RTMENT OF TH IS COMPA NY DEALS WITH THE MATTERS RELATING TO INVESTMENTS IN SHARES. THE ASSESSING OFFICER HAS RE JECTED THIS EXPLANATION ON THE GROUND THAT AS, IN MY O PINION, THE EXPEN DITURE INC URRED FOR PROJECT AND INVESTMENT DEPARTMENT CONS TITUTES DIRECT EXPENDITURE INCURRED IN RELATION TO INVESTMENTS HELD IN SHARES, HE NCE IT IS TO BE DISALLOWED UNDER RULE 8D(2 )(I ) BEING IN ADDITION TO DISALLOWANCE MADE UNDER RULE 8D(2)(III) . T HATS WHERE HE FELL IN ERROR. AN ASSESS ING OFFICER CANNOT REJECT THE SUO MOTU D ISALLOWANCE OFFERED BY THE ASSESSEE ON THE GRO UND THAT SUCH A DISALLOWANCE UNDER RU LE 8D WILL BE MORE ; T HATS P UTTING CART BE F ORE THE HOR SE. QUITE TO THE CONTRARY, AN ASSESSING OFFICER CAN RESORT TO RULE 8D ONLY WHEN , AS PER THE PRESCRIPTION OF SECTION 14A(2) THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE COR RECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT . THAT SATISFACT ION, AS REQUIRED , UNDER SECTION 14A(2), FOR IN VOKING RULE 8D, CANNOT BE ON THE BA SIS OF M ECHANISM OF RULE 8D ITSELF ; IT HAS TO BE I NDEPENDENT OF RULE 8D. RULE 8D(1) ALSO P ROVIDES THAT WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED INTE R ALIA , WITH (A) THE CORRECTNESS OF THE CL AIM OF EXP ENDITURE MADE BY THE ASSESSEE , IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SUB - RULE (2) . TH AT EXER CISE IS CLEARLY NOT CARRIED OUT. T HE ASSESSING OFFICE R HAS NOTED THE EXPLANATION OF THE ASSESSEE AND PROCEEDED TO DISRE GARD ED THE SAME ON THE BASIS OF WOR KING OF RULE 8D(2)(I) AND 8D( 2)(III). THERE IS NO OTHER , AND IN FACT NO, REA SON FOR REJECTION OF THE C OMPUTATION OF DISALLOWANCE BY THE ASSESSEE. AS A MATTER OF FACT, ON THE FACT OF THIS CASE, THERE IS NOT EVEN A WH ISPER OF THE REASON , BARRI NG REFERENCE TO RULE 8D(2)(I) , FOR RE JECTING THE SUO MOTU DISALLOWANCE OFFERED BY THE ASS ESSEE. ON THESE FACTS, AND FOR THE DETA ILED REASONS SET OU T ABOVE, THE ASSESSING OFFICER WAS IN ERROR IN INVOKING RULE 8D(2) . WE, THERE FORE, DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO DELETE THE IMP UGNED ADDITIONAL DISALLOWANCE UNDER SECTIO N 14A READ WITH RUL E 8D , AND TO THEREBY ACCEPT THE SUO MOTU DISALLO WANCE OF RS 6,18,69,000 OFFERED BY THE ASSESSEE . ONCE WE HOLD SO, ALL OTHER ISSUES RA ISED IN THESE APPEALS BECOME WHOLLY ACADEMIC AND I NFRUCTUOUS , AND THERE IS NO NEED TO ADJ UDICATE ON THE SAME. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2013 - 14 I S ALLOWED IN THE TERMS INDICATED ABOVE, AND THE APPEAL OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2013 - 14 IS D ISMISSED A S INFRUCTO US. ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 5 OF 9 9. CO M ING TO THE C ROSS APPEAL S FOR THE ASSESSMENT YEAR 2014 - 15 , WHICH ARE DIRECTED AG AINST THE CIT( A) S ORDER DATED 23 RD OCTO BER 2017, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2014 - 15, THE GRIEVANCES RAISED BY THE PARTIES ARE AS FOLLOWS: GRIEVANCES OF THE ASSESSEE: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE HELD THAT: 1.1 (A) NO DISALLOWANCE CAN BE MADE UNDER RULE 8D(2)(I ), AS THE LD. AO HAS NOT ESTABLISHMENT THAT RS5,61,47,265/ - INCURRED BY PROJECT AND INVESTMENT DEPARTMENT REPRESENTS DIRECT EXPENDITURE. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATE (B) IN VIEW OF THE DISALLOWANCE MADE OF RS5,61,47,265/ - BEING TH E EXPENDITURE INCURRED BY PROJECT AND INVESTMENT DEPARTME NT UNDER RULE 8D(2)(I) OF THE RULES, NO FURTHER DISALLOWANCE CAN BE MADE UNDER RULE 8D(2)(III) OF THE RULES. (C) THE AGGREGATE AMOUNT OF DISALLOWANCE MADE OF EXPENDITURE U/S. 14A OF THE ACT READ WIT H RULE 8D CANNOT EXCEED THE EXPENDITURE INCURRED BY THE PROJECT AND INVESTMENT DEPARTMENT OF RS5,61,47,265/ - . 1.2 THE EXPENDITURE INCURRED BY THE PROJECT AND INVESTMENT DEPARTMENT OF RS5,61,47,265/ - CANNOT BE CONSIDERED IN COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, AS THE AO HAS NOT ESTABLISHED THAT SUCH EXP ENDITURE REPRESENTS DIRECT EXPENDITURE. GRIEVANCES OF THE ASSESSING OFFICER: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O TO EXCLUDE STRATEG IC INVESTMENTS FROM THE TOTAL INVESTMENT FOR COMP UT ING DISALLOWANCE U/S. 14A R.W.R 8D(2)(III), WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME BY INCURRING ESTABLISHMENT AND ADMINISTRATIVE EXPENDITURE ON STRATEGIC INVESTME NT. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT AS PER CLAUSES (F) OF EXPLANATION 1 OF SECTION 115JB(2) THE BOOK PROFIT MEANS THE NET PROFITS AS SHOWN IN THE PROFIT AND ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 6 OF 9 LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB - SECTION (2), AS INCREASED BY THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH (SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF ) OR SECTION 11 OR SECTION 12 APPLY AND ALL THE RELEVANT EXPENDITURE HAS TO BE A DDED BACK TO INCOME FOR MAT COMPUTATION. 10. LEARNED REPRESENTATIVES FAIR LY AGREE THAT WHATEVER WE DECIDE FOR THE ASSESSMENT YEA R 201 3 - 14 WILL A L SO APPLY MUTAT IS MUTANDIS TO THIS ASSESSMENT YEAR AS WE LL, AS ALL THE MATERIAL FACTS , INCLUDING THE REA SONS O F RESORTING TO DI SALLOWANCE UNDER RULE 8D (2) ARE THE SAME AS IN THE ASSESSMENT YEAR. THE REJECTION OF SUO MOTU DISALLOWANCE OFFERED BY THE ASSESSEE, FOR THIS YEAR ALSO, WAS BASED ON SECTION 14A READ WITH R ULE 8D, RATHER THAN WITH THE FACTS OF THIS CASE OR O N ANALYSIS OF THE DISALLOWANCE OFFERED BY THE ASSESSEE. IN VIEW OF THIS POSITION , AND FOR THE DETAILED R EASONS SET OUT EA RLIER IN THIS ORDER WH ICH ARE EQUAL LY APPLICABLE HERE , THE ASSESSING OFFICER WAS IN ERROR IN INVOKIN G RULE 8D(2). WE, THEREFORE, DEEM I T FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONAL DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D, AND TO THEREBY ACCEPT THE SUO MOTU DISALLOWANCE OF RS 5,61,47,265 OFFERED BY THE ASSES SEE. ONCE WE HOLD SO, ALL OT HER ISS UES RAISED IN THESE APPEALS BECOME WHOLLY ACADEMIC AND INFRUCTUOUS, AND THERE IS NO NEED TO ADJUDICATE ON THE SAME. 11 . HOWEVER, BEFORE WE PART WITH THE MATTER, WE MUST DEAL WITH ONE PROCEDURAL ISSUE AS WELL. WHILE HEARING OF THESE APPEALS WAS CON CLUDED ON 24 TH FEBRU ARY 2020, THIS ORDER THEREON IS BEING PRONOUNCED TODAY ON TH DAY OF MAY, 2020, MUCH AFTER THE EXPIRY OF 90 DAYS FROM THE DATE OF CONCLUSION OF HEARING. WE ARE ALSO ALIVE TO THE FACT THAT RULE 34(5) OF THE INCOME TAX APPELLATE TRI BU NAL RULES 1963, WHICH DEALS WITH PRONOUNCEMENT OF ORDERS, PROVIDES AS FOLLOWS: (5) THE PRONOUNCEMENT MAY BE IN ANY OF THE FOLLOWING MANNERS : (A) THE BENCH MAY PRONOUNCE THE ORDER IMMEDIATELY UPON THE CONCLUSION OF THE HEARING. ( B) IN CASE WHERE THE ORDER IS NOT PRONOUNCED IMMEDIATELY ON THE CONCLUSION OF THE HEARING, THE BENCH SHALL GIVE A DATE FOR PRONOUNCEMENT. (C) IN A CASE WHERE NO DATE OF PRONOUNCEMENT IS GIVEN BY THE BENCH, EVERY ENDEAVOUR SHALL BE MADE BY THE BENCH TO PRONOUNCE THE ORDER WITHIN 60 DAYS FROM THE DATE ON WHICH THE HEARING OF THE CASE WAS CONCLUDED BUT, WHERE IT IS NOT PRACTICABLE SO TO DO ON THE GROUND OF EXCEPTIONAL AND EXTRAORDINARY CIRCUMSTANCES OF THE CASE, THE BENCH SHALL FIX A FUTURE DA Y F OR PRONOUNCEMENT OF THE ORDER, AND SUCH DATE SHALL NOT ORDINARILY (EMPHASIS SUPPLIED BY US NOW) BE A DAY BEYOND A FURTHER PERIOD OF 30 DAYS AND DUE NOTICE OF THE DAY SO FIXED SHALL BE GIVEN ON THE NOTICE BOARD. ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 7 OF 9 12 . QUITE CLEARLY, ORDINARILY TH E ORDER ON AN APPEAL SHOULD BE PRONOUNCED BY THE BENCH WITHIN NO MORE THAN 90 DAYS FROM THE DATE OF CONCLUDING THE HEARING. IT IS, HOWEVER, IMPORTANT TO NOTE THAT THE EXPRESSION ORDINARILY HAS BEEN USED IN THE SAID RULE ITSELF. THIS RULE WAS INSERTED AS A RESULT OF DIRECTIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIVSAGAR VEG RESTAURANT VS ACIT [(2009) 317 ITR 433 (BOM)] WHEREIN THEIR LORDSHIPS HAD, INTER ALIA, DIRECTED THAT WE, THEREFORE, DIRECT THE PRESIDENT OF THE APPELLATE TRIBUNAL T O FRAME AND LAY DOWN THE GUIDELINES IN THE SIMILAR LINES AS ARE LAID DOWN BY THE APEX COURT IN THE CASE OF ANIL RAI (SUPRA) AND TO ISSUE APPROPRIATE ADMINISTRATIVE DIRECTIONS TO ALL THE BENCHES OF THE TRIBUNAL IN THAT BEHALF. WE HOPE AND TRUST THAT SUITA BL E GUIDELINES SHALL BE FRAMED AND ISSUED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL WITHIN SHORTEST REASONABLE TIME AND FOLLOWED STRICTLY BY ALL THE BENCHES OF THE TRIBUNAL. IN THE MEANWHILE (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW), ALL THE REVISION AL AND APPELLATE AUTHORITIES UNDER THE INCOME - TAX ACT ARE DIRECTED TO DECIDE MATTERS HEARD BY THEM WITHIN A PERIOD OF THREE MONTHS FROM THE DATE CASE IS CLOSED FOR JUDGMENT. IN THE RULED SO FRAMED, AS A RESULT OF THESE DIRECTIONS, THE EXPRESSION ORDINA RI LY HAS BEEN INSERTED IN THE REQUIREMENT TO PRONOUNCE THE ORDER WITHIN A PERIOD OF 90 DAYS. THE QUESTION THEN ARISES WHETHER THE PASSING OF THIS ORDER, BEYOND NINETY DAYS, WAS NECESSITATED BY ANY EXTRAORDINARY CIRCUMSTANCES. 13 . LET US IN TH IS LIGHT REVERT TO THE PREVAILING SITUATION IN THE COUNTRY. ON 24TH MARCH, 2020, HONBLE PRIME MINISTER OF INDIA TOOK THE BOLD STEP OF IMPOSING A NATIONWIDE LOCKDOWN, FOR 21 DAYS, TO PREVENT THE SPREAD OF COVID 19 EPIDEMIC, AND THIS LOCKDOWN WAS EXTENDED F RO M TIME TO TIME. AS A MATTER OF FACT, EVEN BEFORE THIS FORMAL NATIONWIDE LOCKDOWN, THE FUNCTIONING OF THE INCOME TAX APPELLATE TRIBUNAL AT MUMBAI WAS SEVERELY RESTRICTED ON ACCOUNT OF LOCKDOWN BY THE MAHARASHTRA GOVERNMENT, AND ON ACCOUNT OF STRICT ENFORC EM ENT OF HEALTH ADVISORIES WITH A VIEW OF CHECKING SPREAD OF COVID 19. THE EPIDEMIC SITUATION IN MUMBAI BEING GRAVE, THERE WAS NOT MUCH OF A RELAXATION IN SUBSEQUENT LOCKDOWNS ALSO. IN ANY CASE, THERE WAS UNPRECEDENTED DISRUPTION OF JUDICIAL WOK ALL OVER T HE COUNTRY. AS A MATTER OF FACT, IT HAS BEEN SUCH AN UNPRECEDENTED SITUATION, CAUSING DISRUPTION IN THE FUNCTIONING OF JUDICIAL MACHINERY, THAT HONBLE SUPREME COURT OF INDIA, IN AN UNPRECEDENTED ORDER IN THE HISTORY OF INDIA AND VIDE ORDER DATED 6.5.2020 R EAD WITH ORDER DATED 23.3.2020, EXTENDED THE LIMITATION TO EXCLUDE NOT ONLY THIS LOCKDOWN PERIOD BUT ALSO A FEW MORE DAYS PRIOR TO, AND AFTER, THE LOCKDOWN BY OBSERVING THAT IN CASE THE LIMITATION HAS EXPIRED AFTER 15.03.2020 THEN THE PERIOD FROM 15.03. 20 20 TILL THE DATE ON WHICH THE LOCKDOWN IS LIFTED IN THE JURISDICTIONAL AREA WHERE THE DISPUTE LIES OR WHERE THE CAUSE OF ACTION ARISES SHALL BE EXTENDED FOR A PERIOD OF 15 DAYS AFTER THE LIFTING OF LOCKDOWN. HONBLE BOMBAY HIGH COURT, IN AN ORDER DATED 15 TH APRIL 2020, HAS, BESIDES EXTENDING THE VALIDITY OF ALL INTERIM ORDERS, HAS ALSO OBSERVED THAT, IT IS ALSO CLARIFIED THAT WHILE CALCULATING TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 202 0 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY, AND ALSO OBSERVED THAT ARRANGEMENT CONTINUED BY AN ORDER DATED 26TH MARCH 2020 TILL 30TH APRIL 2020 SHALL CONTINUE FURTHER TILL 15TH JUNE 2020. IT HAS BEEN AN UNPRECEDENTE D SITUATION ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 8 OF 9 NOT ONLY IN INDIA BUT ALL OVER THE WORLD. GOVERNMENT OF INDIA HAS, VIDE NOTIFICATION DATED 19TH FEBRUARY 2020, TAKEN THE STAND THAT, THE CORONAVIRUS SHOULD BE CONSIDERED A CASE OF NATURAL CALAMITY AND FMC (I.E. FORCE MAJEURE CLAUSE) MAYBE INVO KE D, WHEREVER CONSIDERED APPROPRIATE, FOLLOWING THE DUE PROCEDURE. THE TERM FORCE MAJEURE HAS BEEN DEFINED IN BLACKS LAW DICTIONARY, AS AN EVENT OR EFFECT THAT CAN BE NEITHER ANTICIPATED NOR CONTROLLED WHEN SUCH IS THE POSITION, AND IT IS OFFICIALLY S O NOTIFIED BY THE GOVERNMENT OF INDIA AND THE COVID - 19 EPIDEMIC HAS BEEN NOTIFIED AS A DISASTER UNDER THE NATIONAL DISASTER MANAGEMENT ACT, 2005, AND ALSO IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE PERIOD DURING WHICH LOCKDOWN WAS IN FORCE CAN BE ANYTHIN G BUT AN ORDINARY PERIOD. 1 4 . IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING PRONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENT IR E COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING AT LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE. WE MUST FACTOR GROUND REALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER. LAW I S NOT BROODING OMNIPOTENCE IN THE SKY. IT IS A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED. THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY IN CONSONA NC E WITH THE LETTER AND SPIRIT OF RULE 34(5) BUT IS ALSO A PRAGMATIC APPROACH AT A TIME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPRECEDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM. UNDOUBTEDLY, I N THE CASE OF OTTERS CLUB VS DIT [(2017) 392 ITR 244 (BOM)], HONBLE BOMBAY HIGH COURT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HONBLE BOMBAY HIGH COURT ITSELF HAS, VIDE JUDGMENT D AT ED 15TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY . THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT ALSO INDICATE THAT THIS PERIOD OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE. IN OUR C ON SIDERED VIEW, EVEN WITHOUT THE WORDS ORDINARILY, IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING WHICH LOCKOUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIMITS SET OUT IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1 963. VIEWED THUS, THE EXCEPTION, TO 90 - DAY TIME - LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34(5)(C), WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE. OF COURSE, THERE IS NO, AND THERE C AN NOT BE ANY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BECAUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCLUDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, I N OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE. ITA NOS. 67 AND 68 , 299 AND 278 /MUM/2018 ASSESSMENT YEARS: 2013 - 14 AND 2014 - 15 P AGE 9 OF 9 1 5 . IN THE RESULT, THE APPEAL OF THE AS SESSEE FOR THE ASSESSMENT YEAR 2014 - 15 IS ALSO ALLOWED IN THE TE RMS INDICATED ABOVE, AND THE APPEAL OF THE ASSESSING OF FICER FOR THE ASSESSMENT YEAR 201 4 - 15 IS ALSO DISMISSED AS INFRUCTOUS. TO SUM UP BOT H THE APP EALS FILED BY THE ASSESSEE ARE ALLOWED IN THE TERMS INDICATED ABOVE, AND BOTH THE APPEALS FILED BY THE ASSESS ING O FF ICER ARE DISMISSED AS INFUCTUOUS. ORD ER PRONOU NC ED UNDER RULE 34 (4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1 96 2, BY PLACING THE DETAILS ON THE NOTICE BOARD. SD/ - SD/ - RAVISH SO OD PRAMOD KUMAR (J UDICIAL MEMBER) ( VICE PRESIDENT ) MU MBAI , DATED THE 27 TH DAY O F MAY 2020 COPIES TO : (1) T HE APPELLAN T (2) THE RESPONDENT (3) CIT (4) CIT (A) (5) DR (6) GUARD FILE BY ORDER ASSISTA NT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHE S, MUM BAI