ACIT, Jaipur V. STATE BANK OF BIKANER & JAIPUR, Jaipur

ITA 700/JPR/2003

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99422 (ITAT-JAIPUR)
• Duration Of Justice: 12 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2001-2002
• Appeal Filed On: 08-10-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NOS. 700 & 701/JP/2003 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2001-02 & 2002-03 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. STATE BANK OF BIKANER & JAIPUR, TILAK MARG, C- SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AADCS 4750 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI SUNIL MATHUR (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09/10/2015. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/10/2015. VKNS'K@ ORDER PER T.R. MEENA, A.M. IN BOTH THE APPEALS, THIS BENCH HAS DECIDED ITA NO . 700 & 701/JP/2003 FOR A.Y. 2001-02 AND 2002-03 VIDE ORDER DATED 12/09/2014. THE ASSESSEE FOUND APPARENT MISTAKE IN THE ORDER OF THE ITAT, THEREFORE, IT FILED MISC. APPLICATION BEARING MA NO. 33&34/JP/201 4 FOR A.Y. 2001-02 AND 2002-03. THIS BENCH VIDE ORDER DATED 19/2/2015 HAS ALLOWED BOTH THE MISC. APPLICATIONS OF THE ASSESSEE. THE FINDING OF THE BEN CH IS AS UNDER:- 2 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ 4. WE HAVE HEARD BOTH THE PARTIES AND IT IS A FACT THAT THE ASSESSEES APPEALS IN ITA NO. 578/JP/2003 FOR A.Y. 2001-02 AND 577/JP/2003 FOR A.Y. 2001-02 AND 2002-03, THE A SSESSEES APPEAL DECIDED BY THIS BENCH WITHOUT CONSIDERING THE REVENUES APPEAL IN THESE YEARS ON THIS ISSUE. AS CLAIMED BY THE APPELLANT, THE ISSUE IS PENDING BEFORE THE HONBLE RAJASTHAN H IGH COURT AGAINST THE DECISION GIVEN BY THIS BENCH IN CASE OF ASSESSEES APPEAL FOR A.Y. 2001-02 AND 2002-03. THEREFORE, IT I S APPARENT MISTAKE ON OUR ORDER DATED 12/09/2014 IN ITA NO. 70 0/JP/2003 FOR A.Y. 2001-02 AND 701/JP/2003 FOR A.Y. 2002-03, ACCORDINGLY WE RECALL OUR ORDER TO THE EXTENT OF FINDING GIVEN O N SECTION 14A IN BOTH THE ASSESSMENT YEARS. THE ASSESSEES M.A S ON SECTION 14A OF THE ACT ARE ALLOWED. THEREAFTER, THE CASE WRITTEN SUBMISSIONS REFIXED AND HEARD. 2. THE LD AR OF THE ASSESSEE HAS ARGUED THAT ON THIS ISSUE I.E. 14A DISALLOWANCE HAVE BEEN MADE BY THE ASSESSING OFFICER FROM A.Y. 2001-02 AND 2002-03. THE LD CIT(A) HAS ALLOWED THE APPEAL PART LY. BOTH THE PARTIES HAVE CHALLENGED THE ISSUE BEFORE THE HONBLE ITAT. TH E ASSESSEE SUO MOTO HAS MADE CERTAIN DISALLOWANCE U/S 14A IN COMPUTATION OF INCOME. HOWEVER, WHICH WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND ADDITIONS WERE MADE U/S 14A IN BOTH THE YEARS BY THE ASSESSING OFFICER. THE HONBLE ITAT IN BOTH THE YEARS HAS DECIDED THE ASSESSEES APPEAL BUT REV ENUES APPEAL HAS NOT 3 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ BEEN DECIDED IN ASSESSEES APPEAL IN ITA NO. 578/JP /2003 AND 577/JP/2003 VIDE ORDER DATED 30/10/2009 WHERE THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER AND PARTLY CONFIRMED BY THE LD CIT(A) WAS RED UCED BY THE ITAT AS UNDER:- ASSESSMENT YEAR DISALLOWANCE BY A.O. DISALLOWANCE CONFIRMED BY CIT(A) DISALLOWANCE CONFIRMED BY ITAT IN ASSESSEES APPEAL. 2001-02 11,87,68,152/- 7,76,47,631/- 2,83,00,000/- 2002-03 15,81,27,285/- 12,47,28,784/- 6,83,00,000/- THUS THE ISSUE OF DISALLOWANCE U/S 14A FOR A.Y. 2001- 02 AND 2002-03 WAS ALREADY DECIDED BY THE BENCH IN ASSESSEES APPEAL A GAINST THIS THE ASSESSEE HAD FILED APPEAL BEFORE THE HON'BLE RAJASTHAN HIGH COURT, WHICH HAS BEEN ADMITTED, BUT THE HONBLE ITAT VIDE ORDER DATED 12/ 09/2014 IN REVENUES APPEAL HAD SET ASIDE THE ISSUE TO THE ASSESSING OFF ICER WHICH WOULD LEAD TO ANOMALY INASMUCH AS THE LD ASSESSING OFFICER WOULD N OT BE IN A POSITION TO GIVE EFFECT TO THE DIRECTION OF THE ITAT. THEREFORE, HE PRAYED THE HONBLE BENCH TO DECIDE THE REVENUES APPEAL BY CONSIDERING THE ASSESSEES APPEAL ON THIS ISSUE, WHICH WAS DEICED BY THE THEN HONBLE BENCH VIDE ORDER DATED 30/10/2009. HE FURTHER ARGUED THAT WHEN ISSUE IS ALR EADY ADMITTED BY THE HON'BLE RAJASTHAN HIGH COURT, THERE IS NO POINT TO SET ASIDE THIS ISSUE IN 4 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ REVENUES APPEAL TO THE ASSESSING OFFICER. THEREFORE , HE PRAYED TO DISMISS THE REVENUES APPEALS. 3. AT THE OUTSET, THE LD SR. DR ARGUED THAT EVEN IS SUE IS SET ASIDE TO THE ASSESSING OFFICER ON 14A DISALLOWANCES, THE ASSESSEE CAN EVEN FILE THE APPEAL BEFORE THE HON'BLE RAJASTHAN HIGH COURT ON T HE BASIS OF ORDER PASSED BY THE HONBLE ITAT IN CASE OF REVENUES APPE AL ORDER AND APPELLANT CAN MAKE REQUEST TO THE HON'BLE RAJASTHAN HIGH COUR T TO CONSIDER THIS APPEAL ALONGWITH ORIGINAL APPEAL FILED BEFORE THE HO NBLE COURT. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE HONBLE ITAT, WHICH WAS PASSED VIDE ORDER DATED 12/09/2010 ON THIS ISSUE FOR A.Y. 2001- 02 AND 2002-03. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COORDINATE BEN CH HAS ALREADY DECIDED THIS ISSUE IN ASSESSEES APPEAL IN ITA NO. 577 & 57 8/JP/2003 FOR A.Y. 2001- 02 AND 2002-03. THE COORDINATE BENCH FINDINGS IN AS SESSEES APPEAL ON THIS ISSUE ARE AS UNDER:- 9. CONSIDERING THE ABOVE SUBMISSION AND IN VIEW OF THE DECISION OF SPECIAL BENCH IN CASE OF ITO VS. DAGA CAPITAL MANAG EMENT PRIVATE LIMITED 119 TTJ 289 (MUM), WE ARE BOUND TO FO LLOW THE SAID DECISION AND THEREFORE WE DO NOT FIND ANY SUBST ANCE IN THE VARIOUS CONTENTION RAISED BY LD. AR IN THIS REGARD. THE 5 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ DISALLOWANCE U/S 14A IS THEREFORE REQUIRED TO BE COM PUTED AS PER RULE 8D. 10. IN THE PRESENT CASE RULE 8D(2)(I) IS NOT APPLIC ABLE AS THERE IS NO DIRECT EXPENDITURE IN RELATION TO THE INCOME WHICH D OES NOT FORM PART OF TOTAL INCOME. AS PER RULE 8D(2)(II), T HE EXPENDITURE BY WAY OF INTEREST IS TO BE PROPORTIONATELY DISALLOWE D IN THE RATIO OF THE AVERAGE VALUE OF THE INVESTMENT INCOME , WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME TO THE AVERAGE OF THE TOTAL ASSETS. WE NOTE THAT THE INVES TMENT MADE BY THE ASSESSEE HAS YIELDED TWO INCOMES. SOME OF THE INVESTMENTS HAS YIELDED BOTH THE TAXABLE INCOME AS WELL AS TAX FREE INCOME. SUCH INVESTMENT FOR THE YEAR IS OF RS. 90.23 CRORES AS COMING IN THE ORDER OF THE CIT(A). THE INVESTMENT WHICH HAS YIELDED ONLY TAX FREE INCOME IS RS. 54.95 CRORES DU RING THE YEAR. SINCE THE RULE PROVIDES FOR CONSIDERING ONLY THAT I NVESTMENT, INCOME, WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, THEREFORE, THE VALUE OF THE INVESTMENT WHIC H YIELDS BOTH THE TAXABLE INCOME AS WELL AS THE EXEMPT INCOME CANNOT BE CONSIDERED FOR COMPUTING THE DISALLOWANCE UNDER R ULE 8D. WE NOTE THAT THE INVESTMENT IN SHARES AND MUTUAL FU NDS ARE HELD BY THE ASSESSEE AS BUSINESS ASSETS FROM WHICH D IVIDEND IS EXEMPT BUT THE PROFIT ON SALE THEREOF IS TAXABLE. TH EREFORE, THESE INVESTMENTS CANNOT BE CONSIDERED FOR THE PURP OSE OF CALCULATION OF DISALLOWANCE UNDER RULE 8D. THE LD AR HAS PROVIDED THE CALCULATION OF DISALLOWANCE IN TERMS OF RULE 8D 6 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ WHICH WE HAVE PRODUCED HEREIN ABOVE. THE A.O. IS THERE FORE DIRECTED TO VERIFY THE SAID CALCULATION AND RESTRIC T THE DISALLOWANCE U/S 14A ACCORDINGLY. IN THE RESULT THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 26. THIS ISSUE IS IDENTICAL TO GROUND NO. 1 OF A.Y. 2001-02 WHERE WE HAVE GIVEN OUR DETAILED FINDINGS. THE LD AR HAS GI VEN FOLLOWING CALCULATION FOR DISALLOWANCE OF EXPENDITURE U/S 14A AS PER RULE 8D. TOTAL INTEREST EXPENDITURE 867.18 VALUE OF INVESTMENT, INCOME FROM WHICH DO NOT FORM PART OF TOTAL INCOME 158.92 AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DO NOT FORM PART OF TOTAL INCOME. (54.95+158.92)/2 106.94 TOTAL ASSETS AS PER BALANCE SHEET 15552.24 AVERAGE VALUE OF TOTAL ASSETS AS PER BALANCE SHEET (13865.39+15552.24)/2 14708.82 PROPORTIONATE DISALLOWANCE OUT OF INTEREST (867.18*106.94/14708.82) 6.30 % OF AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DO NOT FORM PART OF TOTAL INCOME 0.53 TOTAL DISALLOWANCE AS PER RULE 8D 6.83 THE A.O, IS THEREFORE, DIRECTED TO VERIFY THIS WORKIN G AND ALLOW THE RESULTANT RELIEF TO THE ASSESSEE AS PER OUR DEC ISION GIVEN IN A.Y. 2001-02. THIS GROUND IS THUS PARTLY ALLOWED. 7 ITA NO. 700 & 701/JP/2003 ACIT VS SBBJ THE COORDINATE BENCH HAD DECIDED THIS ISSUE IN ASSES SEES APPEALS AND THE REVENUES APPEAL ON THIS GROUND IS BECOME INFRUCTUO US. THEREFORE, WE DISMISS THE REVENUES APPEAL IN BOTH THE YEARS ON T HIS GROUND I.E. DISALLOWANCE U/S 14A OF THE ACT. 6. IN THE RESULT, BOTH THE REVENUES APPEALS ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2015. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 TH OCTOBER, 2015 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE SBBJ, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.700 & 701/JP/2003) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR