Appeal details
Counselvise Citation
83021714 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 3 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-09-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
11-09-2013
Assessment Year
2002-2003
Appeal Filed On
01-06-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NOS. 830 & 831/MDS/2010 (ASSESSMENT YEARS : 2002-03 & 2007-08) M/S BHARAT OVERSEAS BANK LTD. (SINCE TAKEN OVER BY INDIAN OVERSEAS BANK, CHENNAI), ACCOUNTS DEPARTMENT, 762, ANNA SALAI, CHENNAI - 600 002. PAN : AAACB 1374 M (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), CHENNAI - 600 034. (RESPONDENT) I.T.A. NOS. 1183 & 1184/MDS/2010 (ASSESSMENT YEARS : 2002-03 & 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), CHENNAI - 600 034. (APPELLANT) V. M/S BHARAT OVERSEAS BANK LTD. (SINCE TAKEN OVER BY INDIAN OVERSEAS BANK, CHENNAI), ACCOUNTS DEPARTMENT, 762, ANNA SALAI, CHENNAI-600 002. (RESPONDENT) ASSESSEE BY : SH. C. NARESH, CA REVENUE BY : SH. SHAJI P. JACOB, ADDL.CIT DATE OF HEARING : 11.09.2013 DATE OF PRONOUNCEMENT : 26.09.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AND REVEN UE RESPECTIVELY, DIRECTED AGAINST ORDERS DATED 7.4.201 0 OF COMMISSIONER I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 2 OF INCOME TAX (APPEALS)-III, CHENNAI, FOR THE IMPUG NED ASSESSMENT YEARS. 2. APPEALS FOR ASSESSMENT YEAR 2002-03 ARE TAKEN UP FIRST. 3. ASSESSEE IN ITS APPEAL ASSAILS THE VALIDITY OF R EASSESSMENT PROCEEDINGS, WHICH WAS UPHELD BY THE CIT(APPEALS). 4. FACTS APROPOS ARE THAT ASSESSEE HAD FILED ITS RE TURN FOR THE IMPUGNED ASSESSMENT YEAR ON 31.10.2002 DECLARING IN COME OF ` 40,65,11,720/-. ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') ON 18.2.2 005. THEREAFTER NOTICE UNDER SECTION 148 WAS ISSUED ON 24.3.2009 AN D REASSESSMENT WAS COMPLETED ON 17.12.2009. REASON FOR REOPENING WAS STATED AS UNDER:- THE INCOME OF THE ASSESSEE EARNED IN THAILAND IS RE QUIRED TO BE TAXED IN INDIA WITH THE ALLOWANCE OF TAX CRED IT ON THE ACTUAL TAX PAID BY THE ASSESSEE IN THAILAND SUBJECT TO THE PROVISIONS OF DTAA. ARTICLE 23(2) OF THE DTAA WITH THAILAND READ AS U NDER. THE AMOUNT OF THAI TAX PAYABLE, UNDER THE LAWS O F THAILAND AND IN ACCORDANCE WITH THE PROVISIONS OF T HIS CONVENTION, WHETHER DIRECTLY OR BY DEDUCTION, BY A RESIDENT OF INDIA, IN RESPECT OF PROFITS OR INCOME ARISING IN THAILAND, W HICH HAS BEEN SUBJECTED TO TAX BOTH IN INDIA AND IN THAILAND, SHA LL BE ALLOWED AS A CREDIT AGAINST THE INDIAN TAX PAYABLE IN RESPECT OF SUCH PROFITS OR INCOME PROVIDED THAT SUCH CREDIT SHALL NOT EXCEE D THE INDIAN I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 3 TAX (AS COMPUTED BEFORE ALLOWING ANY SUCH CREDIT) W HICH IS APPROPRIATE TO THE PROFITS OR INCOME ARISING IN THA ILAND. ACCORDING TO ARTICLE 23(3) OF THE DTAA, FOR THE PU RPOSES OF THE CREDIT REFERRED TO IN PARAGRAPH (2), THE TERM THAT TAX PAYABLE SHALL BE DEEMED TO INCLUDE ANY AMOUNT WHICH WOULD H AVE BEEN PAYABLE AS THAI TAX FOR ANY YEAR.. IT IS CLEAR FROM THE ABOVE, WHERE THE PROFITS OR INCOME HAS BEEN SUBJECTED TO TAX BOTH IN INDIA AND IN THAI LAND, THERE SHALL BE ALLOWED AS A CREDIT IN THE FORM OF DITR R ELIEF AGAINST THE INDIAN TAX PAYABLE IN RESPECT OF SUCH PROFIT OR INCOME EARNED IN THAILAND. IT IS SIMPLY MADE CLEAR VIDE ARTICLE 23(3) OF DTAA THAT THE QUANTUM OF CREDIT TO BE ALLOWED IS THAT A NY AMOUNT WHICH WOULD HAVE BEEN PAYABLE AS THAI TAX FOR ANY YEAR. THE ABOVE STAND IS ALSO STRENGTHENED BY THE GAZET TE NOTIFICATION EXTRAORDINARY PART II SECTION 3 SUB-SE CTION (II) DATED 28.8.2008. THIS CLARIFICATORY NOTIFICATION I MPLIES THAT SUCH INCOME OF RESIDENT SHALL NOT BE EXEMPT FROM TAX IN INDIA AND THE TAX, IF ANY, PAID IN THE OTHER COUNTRY MAY BE GIVEN CREDIT IN ACCORDANCE WITH DTAA. THE ASSESSEE HAD FILED TO DISCLOSE ALL THE DETAIL S RELEVANT TO THE THAILAND INCOME LIKE, HEAD OFFICE EXPENSES, TRAVEL EXPENSES, ETC WHILE CLAIMING RELIEF UNDER EXCLUSION METHOD WHEREAS THE RELIEF UNDER CREDIT METHOD NEEDS TO BE COMPUTED WITH REFERENCE TO PROVISIONS OF SECTION 23(2) OF DT AA WITH THAILAND. AS THE ASSESSEE HAD FAILED TO DISCLOSE T HESE DETAILS IN FULL, I AM OF THE OPINION THAT THE INCOME HAS ESCAP ED ASSESSMENT WITHIN THE MEANING OF SECTION 147 AND THE AMOUNT OF ESCAPED INCOME IS ALSO LIKELY TO EXCEED ` 1 LAKH. I THEREFORE REQUEST THE COMMISSIONER TO KINDLY AC CORD APPROVAL FOR ISSUE OF NOTICE U/S 148. 5. REASSESSMENT WAS COMPLETED ON 17.12.2009 WHEREBY THE INCOME OF THE ASSESSEE FROM BANGKOK BRANCH WAS INCL UDED IN ITS INCOME CHARGEABLE TO TAX IN INDIA. I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 4 6. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS), WH EREIN IT ASSAILED THE REOPENING AS WELL AS THE MERITS OF THE ADDITION. AS PER ASSESSEE, IN VIEW OF THE DECISION OF HON'BLE APEX C OURT IN THE CASE OF CIT V. PV.AL. KULANDAGAN CHETTIAR (267 ITR 654), IN COME OF ITS BANGKOK BRANCH COULD NOT BE INCLUDED IN ITS TOTAL I NCOME FOR THE PURPOSE OF TAXATION IN INDIA. FURTHER, AS PER ASSE SSEE, IN THE ORIGINAL ASSESSMENT, TAXABILITY OF THE INCOME FROM BANGKOK B RANCH WAS CONSIDERED BY THE ASSESSING OFFICER IN DETAIL. THE REFORE, AS PER THE ASSESSEE, REOPENING WAS BASED ON A CHANGE OF OPINIO N. THOUGH CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE ON M ERITS, HE DID NOT SPECIFICALLY ADJUDICATE ON ITS GROUND REGARDING VAL IDITY OF THE REOPENING. 7. NOW BEFORE US, LEARNED A.R. SUBMITTED THAT THE R EASSESSMENT NOTICE WAS ISSUED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ACCORDING TO HIM, IN THE ORIGINAL ASSESSMENT COMPLETED ON 18.2.2005, ASSESSING OFFICER HAD IN DE TAIL CONSIDERED THE CLAIM OF THE ASSESSEE THAT BANGKOK INCOME WAS N OT TAXABLE IN INDIA. 8. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 5 9. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. WE FIND THAT IN THE ORIGINAL ASSESSMENT COMPLETED U NDER SECTION 143(3) ON 18.2.2005, ASSESSING OFFICER HAD DEALT WI TH THE ISSUE REGARDING CLAIM OF THE ASSESSEE WITH REGARD TO ITS BANGKOK INCOME. RELEVANT PARA IN THE ASSESSMENT ORDER APPEARING ON PAGE 5 IS REPRODUCED HEREUNDER:- DIT RELIEF UNDER DOUBLE TAXATION AGREEMENT THE ASSESSEE HAS CLAIMED A SUM OF ` 4,50,23,152/- BEING 35.70% TAX ON ITS BANGKOK INCOME OF ` 12,61,15,270/-. AS HELD BY THE SUPREME COURT OF INDIA, IN THE CASE OF PVAL. KULANDAGAN CHETTIAR, THE INCOME FROM BANGKOK AMOUNTING TO ` 12,61,15,270/- IS NOT TAXABLE IN INDIA AND HENCE REDUCED FROM THE TOTAL INCOME. THE ABOVE SUPREME COURT JUDGMENT WAS REFERRED TO TH E SR. STANDING COUNSEL FOR PROPER INTERPRETATION AND AS A DVISED BY HER NECESSARY REWORKING HAS BEEN DONE IN EARLIER YEARS ALSO. THUS, ASSESSING OFFICER, DURING THE COURSE OF ORIGI NAL ASSESSMENT, WAS VERY WELL AWARE OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF PVAL. KULANDAGAN CHETTIAR (SUPRA). WHEN WE LOOK AT THE REASON GIVEN FOR REOPENING REPRODUCED AT PARA 4 ABOVE, WE FIND THAT THE REOPENING HAS BEEN RESORTED TO FOR THE SAME ISSUE. THERE IS NO NEW MATERIAL OR TANGIBLE EVIDENCE IN THE HANDS OF THE R EVENUE. IT WAS ONLY BASED ON A CHANGE OF OPINION THAT REOPENING WA S RESORTED TO. THAT A REOPENING CANNOT BE DONE BASED ON A CHANGE O F OPINION HAS BEEN LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF CIT V. KELVINATOR I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 6 INDIA LTD. (320 ITR 561). REVENUE HAS NO CASE THAT ASSESSEE HAD FAILED TO DISCLOSE TRULY AND FULLY ANY PARTICULARS NECESSARY FOR ITS ASSESSMENT. IN OTHER WORDS, PROVISO TO SECTION 147 IS SQUARELY APPLICABLE. REOPENING DONE BASED ON CHANGE OF OPIN ION AFTER FOUR YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEAR COULD NOT BE HELD AS VALID. THE REOPENING AND RESULTANT REASSES SMENT ARE QUASHED. 10. APPEAL OF THE ASSESSEE IS ALLOWED. 11. SINCE ASSESSEES APPEAL HAS BEEN ALLOWED, CROSS APPEAL OF THE REVENUE FOR THE IMPUGNED ASSESSMENT YEAR HAS BECOME INFRUCTUOUS AND IS DISMISSED. 12. NOW WE TAKE UP CROSS APPEALS OF THE ASSESSEE AN D REVENUE FOR ASSESSMENT YEAR 2007-08. 13. APPEAL OF THE ASSESSEE IS TAKEN UP FIRST FOR DI SPOSAL. 14. IN ITS GROUND NO.1, ASSESSEE IS AGGRIEVED THAT CIT(APPEALS) REMITTED THE ISSUE REGARDING ALLOWANCE OF RURAL BAD DEBTS OF ` 17,89,732/- BACK TO THE FILE OF THE ASSESSING OFFIC ER. AS PER I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 7 ASSESSEE, CLAIM HAD TO BE ALLOWED SINCE THERE WAS N O CREDIT BALANCE IN THE PROVISION COMPUTED UNDER SECTION 36(1)(VII) OF THE ACT. 15. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE T HIS TRIBUNAL IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08. THI S TRIBUNAL IN ITS ORDER DATED 19 TH MARCH, 2013 IN I.T.A. NO. 818/MDS/2010, HELD AT PARA 14 & 15, AS UNDER:- 14. IN THE THIRD GROUND OF APPEAL, THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE GROUND THAT THE CIT(A) HA S ERRED IN RESTRICTING THE CLAIM IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIIA) TO THE EXTENT OF PROVISION MADE IN THE BOOKS INSTEAD OF ALLOWING THE SAME BASED ON THE ELIGIBLE AMOUNT A S PER THE PROVISIONS OF THE SAID SECTION. THE A.R. FAIRLY CO NCEDED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ITA NO.1191/MDS/2012. THE RELEVANT EXTRACT OF THE O RDER OF THE TRIBUNAL IN THE SAID APPEAL IS REPRODUCED HEREI N BELOW:- 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THE ORIGINAL CLAIM, WHICH WAS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE ACT, WAS AS FOLLOWS:- 7.5% OF GROSS TOTAL INCOME : ` 5,74,07,362 10% OF RURAL ADVANCES ( ` 27,26,50,990/-) : ` 2,72,65,099 ` 8,46,72,461 THEREAFTER, ASSESSEE HAD MOVED IN APPEAL AGAINST SO ME OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON OTHER IS SUES AND PURSUANT TO THE RELIEF GRANTED IN SUCH APPEAL, THE GROSS TOTAL INCOME WHICH EARLIER STOOD AT ` 76,54,31,493/- CAME DOWN TO ` 35,38,65,546/-. AS A RESULT OF THE REDUCTION IN GR OSS TOTAL INCOME, DEDUCTION UNDER SECTION 36(1)(VIIA) WAS ALSO SCALED DOWN FROM ` 5,74,07,362/- TO ` 2,65,39,916/-. THIS SUM WHEN AGGREGATED WITH 10% OF RURAL ADVANCES COMING TO ` 2,72,65,099/-, RESULTED IN THE SUM OF ` 5,38,05,015/- BEING EVENTUALLY ALLOWED AS DEDUCTIO N UNDER I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 8 SECTION 36(1)(VIIA) OF THE ACT. IN THE BOOKS OF TH E ASSESSEE, ACTUAL PROVISION FOR BAD AND DOUBTFUL DEBTS WAS ONLY ` 4,01,44,027/-. ASSESSEE HAD ALSO MADE A PROVISION OF ` 2.23 CRORES ON ITS STANDARD ASSETS. IF THE PROVISION FOR BAD AND DOUB TFUL DEBTS ALONE WAS CONSIDERED, THEN THE TOTAL ALLOWANCE UNDER SECT ION 36(1)(VIIA) WAS IN EXCESS OF SUCH PROVISION. HOWEVER, IF THE P ROVISION FOR STANDARD ASSETS WAS ALSO CONSIDERED AS PROVISION FO R BAD AND DOUBTFUL DEBTS, THEN THE TOTAL PROVISION COULD GO U P TO ` 6,24,44,027/-. THEN OF COURSE, ASSESSEES CLAIM AS FINALLY ALLOWED WAS WELL WITHIN THE LIMITS SPECIFIED UNDER SECTION 36(1)(VIIA) OF THE ACT. AT THIS JUNCTURE, A LOOK AT SECTION 36(1)(VII A) IS NECESSARY AND THIS IS REPRODUCED HEREUNDER, FOR BREVITY:- 36(1)(VIIA) A SCHEDULED BANK [NOT BEING A BANK INC ORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-S CHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULT URAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RU RAL DEVELOPMENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. IT IS CLEAR FROM THE ABOVE THAT IT IS NOT A STANDAR D ALLOWANCE WHICH IS GIVEN, BUT, THE ALLOWANCE IS SUBJECT TO THE ACTUAL PROVISION MADE BY THE ASSESSEE, WHICH IN NO CASE SHALL EXCEED 7.5% OF THE GROSS TOTAL INCOME. THEREFORE, THE ARGUMENT OF THE ASSESSEE TH AT WHATEVER THE PROVISION IT HAD ACTUALLY MADE IN ITS BOOKS, A PROVISION OF 7.5% OF THE GROSS TOTAL INCOME HAD TO BE ALLOWED, IS NOT IN ACCORDANCE WITH LAW. NOW CONSIDERING THE SECOND ASPECT, WHETH ER PROVISION FOR STANDARD ASSETS COULD BE CONSIDERED AS PROVISIO N FOR BAD AND DOUBTFUL DEBTS, ADMITTEDLY A PROVISION ON STANDARD ASSETS IS NOT AGAINST ANY DEBTS WHICH HAD BECOME DOUBTFUL. STAND ARD ASSETS ARE ALWAYS CONSIDERED RECOVERABLE, IN THE SENSE, BA NK HAS NO DOUBT OF RECOVERABILITY. WHEN THE BANK ITSELF HAS TREATED SUCH ASSETS AS GOOD AND RECOVERABLE, ANY PROVISION MADE ON SUCH ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEBTS. THE DEBT ITSELF BEING GOOD, A PROVISION MAD E ON GOOD DEBT CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOU BTFUL DEBTS. MAY BE, THE RBI HAS MADE A REGULATION FOR 10% PROVI SION FOR STANDARD ASSETS ALSO A PRUDENTIAL NORM. THIS CAN H OWEVER BE CONSIDERED AS A MEASURE PRESCRIBED IN ABUNDANT CAUT ION, TO DEAL WITH A SITUATION WHERE BANKS ARE NOT TO SUFFER SHOC K OF SUDDEN I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 9 DELINQUENCY THAT COULD HAPPEN IN FUTURE. THERE IS ALWAYS A POSSIBILITY THAT AN ASSET, WHICH IS FULLY RECOVERAB LE, MAY NOT BE SO AT FUTURE DATE. NEVERTHELESS, POSSIBILITY OF HAPPE NING OF SUCH A CONTINGENCY CANNOT BE A SUFFICIENT REASON TO CONSID ER A PROVISION MADE ON STANDARD ASSETS ALSO AS A PROVI SION FOR BAD AND DOUBTFUL DEBTS. THEREFORE, CLAIM OF THE ASSESS EE THAT PROVISION FOR STANDARD ASSETS ALSO HAS TO BE CONSIDERED FOR A PPLYING THE CONDITION SET OUT UNDER SECTION 36(1)(VIIA) IS NOT IN ACCORDANCE WITH LAW. IF THE PROVISION FOR STANDARD ASSETS IS NOT C ONSIDERED AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THE ACTUAL PR OVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE IN ITS BOOK S ` 4,01,44,027/- FALL MUCH BELOW THE SUM OF ` 5,38,05,015/- ALLOWED BY THE ASSESSING OFFICER. IN ANY CASE, A LOOK INTO THE ORIGINAL ASSESSMENT ORDER CLEARLY SHOW THAT BUT FOR THE DEDU CTION ALLOWED TO THE ASSESSEE AS CLAIMED BY IT IN ITS RETURN, THERE WAS NO DISCUSSION AS TO HOW SECTION 36(1)(VIIA) WAS APPLIED AND WHETH ER THE LIMITS WERE CORRECTED WORKED OUT. ADMITTEDLY, NO QUESTION WAS ASKED TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS ALSO WITH REGARD TO THE CLAIM MADE BY IT UNDER SECTION 3 6(1)(VIIA), INSOFAR AS IT CONCERNS THE QUANTUM OF SUCH CLAIM. THIS OBVIOUSLY SHOW THAT THERE WAS NO APPLICATION OF MIND BY THE A SSESSING OFFICER AT THE TIME OF ASSESSMENT. ASSESSING OFFIC ER HAD NOT COME TO ANY CONCLUSION AT ALL HAVING NOT CONSIDERED THE CLAIM IN THE LIGHT OF THE CONDITIONS SET OUT IN SECTION 36(1)(VIIA) OF THE ACT. WE CANNOT SAY THAT HE HAD TAKEN A VIEW WHICH WAS IN AC CORDANCE WITH LAW. IT IS NOT A CASE WHERE THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES POSSIBLE IN LAW. OF COURSE, A CRYPT IC ORDER OF THE ASSESSING OFFICER BY ITSELF MAY NOT SHOW THAT THERE WAS NO THOUGHT GIVEN BY HIM ON A CLAIM OF THE ASSESSEE. HOWEVER, HERE THERE WAS NO ENQUIRY MADE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS. THEREFORE, THE ORDER WHICH WAS SILENT ON THE CLAIM MADE BY THE ASSESSEE, AND ALLOWING SUCH CLAIM, WITHOUT ANY DISC USSION, WILL DEFINITELY RENDER IT ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE. AS HELD BY HON'BLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (243 ITR 83), PREJUDICI AL TO THE INTERESTS OF THE REVENUE IS A TERM OF WIDE IMPORT AND NOT CO NFINED TO LOSS OF TAX. AN ORDER WITHOUT APPLICATION OF MIND IS DEFIN ITELY PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE ARE IN AGREEMENT WITH LD. CIT THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEOUS INSOFA R AS IT WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. NO INTERF ERENCE IS REQUIRED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 10 15. THE TRIBUNAL HAS UPHELD THE ORDER OF CIT U/S.2 63 IN ASSESSEES OWN CASE FOR THE SAME ASSESSMENT YEAR ON THE ISSUE IN HAND. SINCE, THE MATTER HAS BEEN REMITTED BACK TO A SSESSING OFFICER, THIS GROUND OF APPEAL OF THE ASSESSEE IS D ISMISSED. FOR THE IMPUGNED ASSESSMENT YEAR ALSO, THE ISSUE RE GARDING ALLOWANCE OF RURAL BAD DEBTS HAS ONLY BEEN REMITTED BACK BY THE CIT(APPEALS) TO THE ASSESSING OFFICER. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(APPEALS). 16. GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 17. VIDE ITS GROUND NO.2, GRIEVANCE RAISED BY THE A SSESSEE IS THAT DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, FOR THE IMPUGNED ASSESSMENT YEAR, WAS CONFIRMED BY THE LD. CIT(APPEA LS). AS PER ASSESSEE, THE A.O. HAD MADE THE DISALLOWANCE RELYIN G ON RULE 8D OF INCOME-TAX RULES, 1962, WHEREAS, THE SAID RULE WAS NOT APPLICABLE FOR IMPUGNED ASSESSMENT YEAR. 18. LEARNED A.R. SUBMITTED THAT INCOME WAS EARNED O N SECURITIES HELD AS STOCK-IN-TRADE. ACCORDING TO HIM, WHEN SEC URITIES WERE HELD AS STOCK-IN-TRADE, INCOME EARNED THEREON WERE ONLY INCIDENTAL. RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CCI LTD. V. JCIT (250 CTR 291), LEARNED A.R. SUB MITTED THAT WHERE I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 11 EARNINGS OF INCOME WERE ONLY INCIDENTAL, SECTION 14 A COULD NOT BE APPLIED. RELIANCE WAS ALSO PLACED ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MSA SECURITIE S V. ACIT IN I.T.A. NO. 1523/MDS/2012 DATED 17 TH OCTOBER, 2012. 19. PER CONTRA, LEARNED D.R. SUBMITTED THAT IN ASSE SSEE'S OWN CASE FOR ASSESSMENT YEAR 2006-07, THIS TRIBUNAL HAS REMI TTED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSI DERATION AFRESH. 20. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COUR T IN THE CASE OF GORDREJ& BOYCE MFG. CO. LTD. V. DY. CIT (328 ITR 8 1), THERE CAN BE NO DISPUTE THAT RULE 8D COULD NOT BE APPLIED FOR IM PUGNED ASSESSMENT YEAR. HOWEVER, HON'BLE BOMBAY HIGH COUR T ALSO HELD THAT EVEN AFTER THE APPLICATION OF RULE 8D, DISALLO WANCE UNDER SECTION 14A COULD BE MADE. NO DOUBT, HERE ASSESSEES SUBMI SSION IS THAT SECURITIES WERE HELD BY IT AS STOCK-IN-TRADE AND EA RNING OF INCOME WAS INCIDENTAL THEREON. BUT, AT THE SAME TIME, WE ALSO FIND THAT CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN C ASE FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 96/MDS/2010 D ATED 3.1.2011 HAD REMITTED THE SAID ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF TH E OPINION THAT FOR THE I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 12 IMPUGNED ASSESSMENT YEAR ALSO, THE MATTER CAN BE LO OKED INTO BY THE ASSESSING OFFICER ONCE AGAIN. WE SET ASIDE THE ORD ERS OF AUTHORITIES BELOW AND REMIT THE ISSUE REGARDING DISALLOWANCE UN DER SECTION 14A BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRE SH, IN ACCORDANCE WITH LAW. 21. GROUND NO.2 OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 22. VIDE ITS GROUND NO.3, GRIEVANCE OF THE ASSESSEE IS THAT DEPRECIATION ON UPS, WHICH WAS CLAIMED BY IT AT 80% CONSIDERING UPS TO BE AN ENERGY SAVING DEVICE, WAS DISALLOWED B Y THE A.O. AND CONFIRMED BY THE CIT(APPEALS). 23. LEARNED A.R. SUBMITTED THAT THE ISSUE STOOD DEC IDED IN FAVOUR OF ASSESSEE BY THIS TRIBUNAL, ON ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 818/MDS/2010 DATED 19 TH MARCH, 2013. 24. LEARNED D.R. FAIRLY AGREED THAT THE MATTER AS O N DATE STOOD IN FAVOUR OF ASSESSEE. 25. WE HAVE PERUSED THE ORDERS AND HEARD THE SUBMI SSIONS. THIS TRIBUNAL, ON ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007-08, HELD AT PARAS 27 & 28 IN ITS ORDER DATED 19 TH MARCH, 2013, AS UNDER:- I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 13 27. THE NEXT GROUND OF APPEAL RELATES TO CLAIM FOR DEPRECIATION ON UPS AT 80%. THE AR SUBMITTED THAT T HE CIT(A) HAS FAILED TO APPRECIATE THAT UPS IS AN ENERGY SAVI NG DEVICE, THEREFORE, DEPRECIATION @ 80% SHOULD HAVE BEEN ALLO WED. HOWEVER, HE ALSO RELIED ON THE JUDGEMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF ORIENT CERAMICS & INDUSTR IES LTD., REPORTED AS 56 DTR (DEL) 397, WHEREIN THE HONBLE H IGH COURT HAS ALLOWED DEPRECIATION @ 60% ON UPS TREATING IT A S PART OF COMPUTER HARDWARE. ON THE OTHER HAND, LEARNED DR R ELIED ON THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CAS E OF NESTLE INDIA VS. DCIT., REPORTED AS 111 TTJ 498 WHEREIN TH E TRIBUNAL HAS HELD UPS AT PAR WITH PLANT AND MACHINERY AND RE JECTED THE CONTENTION OF ASSESSEE TO TREAT IT AS PART OF COMPU TER. 28. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE AR THAT THE UPS IS AN ENERGY SAVING DEVICE, THEREFORE, DEPRECIA TION @ 80% SHOULD BE GRANTED. HOWEVER, WE ARE IN CONSONANCE WI TH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ORIENT CERAMICS & INDUSTRIES LTD. (SUPRA), WHEREIN THE HON BLE COURT HAS GRANTED DEPRECIATION @ 60% BY TREATING UPS AS PART OF COMPUTER HARDWARE. ACCORDINGLY, WE ALLOW DEPRECIATION @ 60% ON UPS AND PARTLY ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. FOLLOWING THE ORDER OF CO-ORDINATE BENCH OF THIS TR IBUNAL, WE HOLD THAT ASSESSEE WAS ENTITLED FOR HIGHER DEPRECIATION AVAIL ABLE TO ENERGY SAVING DEVICE. 26. GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 27. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2007- 08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 14 28. COMING TO THE APPEAL OF THE REVENUE, IT HAS RAI SED ALTOGETHER FIVE GROUNDS, OF WHICH, GROUND NOS.1 AND 5 ARE GENE RAL NEEDING NO ADJUDICATION. 29. VIDE ITS GROUND NO.2, GRIEVANCE RAISED BY THE R EVENUE IS THAT CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE ON B AD DEBT RELATING TO NON-RURAL ADVANCES. 30. LEARNED A.R. SUBMITTED THAT THE ISSUE STOOD DEC IDED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSE SSEE'S OWN CASE FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 215/MDS/2 010 DATED 30.10.2012. 31. LEARNED D.R. FAIRLY ADMITTED THAT DECISION OF H ON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. C IT (343 ITR 270) WENT IN FAVOUR OF ASSESSEE. 32. IN VIEW OF THE ADMITTED POSITION, GROUND NO.2 O F THE REVENUE STANDS DISMISSED. 33. VIDE ITS GROUND NO.3, GRIEVANCE OF THE REVENUE IS THAT CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO ALLO W DOUBLE INCOME TAXATION RELIEF (DITR). I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 15 34. LEARNED A.R. SUBMITTED THAT THIS ISSUE STOOD CO VERED AGAINST THE ASSESSEE BY THE DECISION OF TRIBUNAL ON ITS APP EAL FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 215/MDS/2010 DATED 30.10 .2012. 35. WE FIND THAT THE ISSUE REGARDING DOUBLE TAXATIO N RELIEF RAISED BY THE REVENUE HAD COME UP BEFORE THIS TRIBUNAL IN ASS ESSEES APPEAL FOR ASSESSMENT YEAR 2006-07, IN I.T.A. NO. 215/MDS/ 2010. IT WAS HELD BY THIS TRIBUNAL IN THE SAID ORDER AS UNDER:- 10. WE HAVE HEAR D BOTH THE S IDES , PERUSED T HE RECORDS AND GONE THROUGH THE ORDE R S OF THE AUTHORITIES BELOW. IN THIS CASE THE ASSESSEE IS A BANKING COMPANY AND ALSO HAVING A BRA NCH OFFICE AT BANGKOK. THE ASSESS I NG OFFICE R I N THE ORIGINAL A S SESSMENT ORDER GAVE T AX CREDIT TO THE ASSESSE E O N T HE T AX P A I D AT BA N GKOK AT ` 1,08,25 , 780 /- ACCO R D IN G TO T H E A S SESSEE HE I S EN TI TLED F O R THE TA X RA T E PAYABLE IN INDIA AN D CL A IME D AT ` 1 , 86 ,7 4 , 47 0/ -. THE MATTER WENT TO TH E CIT ( A ) . T H E L EAR N ED CIT ( APPEALS ) ALLO W ED T H E CLAIM OF THE ASSESSEE . THE RE VE NUE CAR RI E D T HE MATTER BEFORE THE TRIBUNAL . THE TRIBUNAL VIDE ORD E R DATED 3 0 - 11-2004 D IR ECTED THE ASSESS I NG OFFICER TO ENQU I RE W HE THER THE R E IS A DTAA BET W EEN INDIA AND BANGKOK. THE ASSESSI N G OF FI CE R I N ACCORDAN C E WI T H TH E DIRECTIONS GIVEN BY T HE ITAT ENQUIRED ALL TH E P R OV I S I ONS OF TH E DTAA BETWEEN INDIA AND THAILAND AND AS PER ART I C L E 23(3) BY FO LLOWING THE TA X C RE D I T METHOD W H ATEV E R TAX WA S PAID BY THE ASSE S SEE I N THAILAND W AS GIVEN CREDI T TO TH E A S SESSE E . AGGR I EVED , THE ASSES S EE CARR I ED T H E MA TT E R BEFORE T H E L EA RNE D CIT( APPEALS ) . T H E L EARNED C I T ( APPEALS ) HYPER TEC HN I CA L L Y HEL D THAT T HE O NLY JOB OF THE ASSESS I NG OFFICE R WAS TO SEE W H E TH E R THERE IS A DTAA BETWEEN I NDIA AND THAILAND . W E ARE U N A B LE T O UNDERS T AND THE ABOVE CONCLUSION MADE BY THE LEARNED C IT ( APPEALS) THA T THE JOB OF THE ASSESSING OFFICER IS JU S T TO SEE WHE TH ER THERE IS A DTAA BETWEEN INDIA AND THAILAND. IF THE R E IS A DTAA , THE ASSESSING OF F ICER HAS TO ALLOW THE RELIEF C LAIMED BY THE A S SESSEE. THAT B EING SO , IN OUR OPIN I O N, THE TRI B UNAL N EE D NO T R EF E R IT TO TH E I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 16 ASS E SSING OFF I CER AS WELL J UST TO SEE AND PA S S AN O R D ER . T H E T R IBUNAL CL E ARLY DI RECTED TH E ASSESS I NG OFF I CER TO E N QU I R E INT O T H E EX I STENCE OF A DTAA BETWEEN INDIA AND BANGKOK . ' ENQU I RY ' M E ANS TO INVEST I GA T E AND APPLY THE SAME. IN OUR OPINION, T H E ASSE SSI NG OF FI CER H AS RIGHTLY IN VESTIGATED AND APPL I ED THE SAME AND DECIDED THE ISSUE. W E THE R EFORE HO L D THAT THE FIND I NG GIVEN BY THE LEARNED CIT(APPEALS ) IS NOT CORRECT. ACCORDINGLY, WE REV E RSE THE ORDER PASSED BY THE LEARNED CIT(APPEALS) ON THIS C O UNT AN D UP H OL D THE O RDER O F THE ASSESSING OFF I CE R. 36. GROUND NO.3 OF THE REVENUE IS ALLOWED. 37. VIDE ITS GROUND NO.4, GRIEVANCE RAISED BY THE R EVENUE IS THAT CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO ALLO W LOSS ON REVALUATION OF INVESTMENTS OF ` 34,98,10,600/-. 38. LEARNED A.R. SUBMITTED THAT THE ISSUE STOOD DEC IDED IN FAVOUR OF ASSESSEE BY THIS TRIBUNAL ON ASSESSEES APPEAL F OR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 215/MDS/2010 DATED 30.10 .2012. RELIANCE WAS ALSO PLACED ON THE DECISION OF CO-ORDINATE BENC H OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 IN I.T.A. NO. 861/MDS/2010. LEARNED D.R. FAIRLY AGREED WITH THIS . 39. IN VIEW OF THE ADMITTED POSITION THAT LOSS ON R EVALUATION OF INVESTMENTS HAS BEEN ALLOWED BY VIRTUE OF THE DECIS ION OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2006-07 IN I.T.A. NO. 830 & 831/MDS/10 I.T.A. NO. 1183 & 1184/MDS/10 17 I.T.A. NO. 215/MDS/2010 DATED 30.10.2012, WE DO NOT FIND ANY MERIT IN THIS GROUND RAISED BY THE REVENUE. 40. GROUND NO.4 OF THE REVENUE STANDS DISMISSED. 41. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. 42. TO SUMMARIZE THE RESULT, ASSESSEES APPEAL FOR 2002-03 IS ALLOWED, WHEREAS, ITS APPEAL FOR 2007-08 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, AND, REVENUES APPEAL FOR ASS ESSMENT YEAR 2002-03 IS DISMISSED AS INFRUCTUOUS, WHEREAS, ITS A PPEAL FOR ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 26 TH OF SEPTEMBER, 2013, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH SEPTEMBER, 2013. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-III, CHE NNAI/ CIT, CHENNAI-I, CHENNAI/D.R./GUARD FILE
