DCIT CENTRAL CIRCLE 6(2), Mumbai V. M/S ALOK INDUSTRIES LTD, Mumbai

ITA 902/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8604 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RA J IV HARIT; MICHAEL JERALD
• Assessee Lawyers: NIMESH K CHOTHANI
• Keywords: Opportunity of being heard; Earning of tax free income; Commercial expediency; Rule 8D
• Section: 115JB; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO S . 900 TO 906 /MUM/2019 : A.Y S : 2006 - 07 TO 2011 - 12 DCIT, CENTRAL CIRCLE 6(2), MUMBAI. (APPELLANT) VS. M/S. ALOK INDUSTRIES LIMITED TOWER B, 2 ND FLOOR, PENINSULA BUSINESS PARK, G.K. MARG, LOWER PAREL, MUMBAI 400 013. PAN : AAACA0210C (RESPONDENT) APPELLANT BY : SHRI RAJIV HARIT (CIT - DR) & SHRI MICHAEL JERALD (SR.DR) RESPONDENT BY : SHRI NIMESH K. CHOTHANI DATE OF HEARING : 0 5 /02/2020 DATE OF PRONOUNCEMENT : 1 6 /0 7 /2020 O R D E R PER SHAMIM YAHYA , ACCOUNTANT MEMBER THESE ARE APPEALS BY THE REVENUE DIRECTED AGAINST RESPECTIVE ORDERS OF CIT(A) FOR THE RESPECTIVE ASSESSMENT YEARS. THE ISSUE S ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER . T HESE ARE BEING CONSOLIDATED AND DISPOSED OF BY THIS COMMON ORDER. 2 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. 2. ONE COMMON ISSUE RAISED IN THESE APPEALS RELATES TO THE DIRECTION OF LEARNED CIT (A) TO DELETE THE ADDITION ON ACCOUNT OF SUBSIDY RECEIVED ON THE T ECHNOLOGY U PGRADATION F UND (TUF) . THE R EVENUE S GROUND F URTHER STATES THAT THE ITAT ORDER IN THIS REGARD HAS NOT BEEN ACCEPTED BY THE DEPARTMEN T AND THE APPEAL HAS BEEN FILED BEFORE THE HONBLE BOMBAY HIGH COURT. 3. BRIEF FACTS ON THIS ISSUE ARE THAT CONSEQUENT UPON THE DISALLOWANCE OF THE AFORESAID SUM BY THE A SSESSING O FFICER , T HE LEARNED CIT(A) HAD DELETED THE DISALLOWANCE BY REFERRING TO ITA T DECISION IN ASSESSEE'S OWN CASE. AGAINST THIS ORDER , R EVENUE HAS FILED APPEAL BEFORE US. 4. UPON HEARING BOTH THE COUN SE L AND PERUS ING THE RECORDS , W E FIND THAT ITAT IN ASSESSEE'S OWN CASE HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE. NO CONTRARY DECISI ON HAS BEEN PRODUCE D BEFORE US. MERELY ON THE GROUND THAT THE SAID DECISION OF ITAT HAS BEEN APPEAL ED BEFORE THE HONBLE HIGH COURT, THE SAME DOES NOT WARRANT THAT W E DE PART FROM THE SAME. ACCORDINGLY, RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENT IN ASSESSEE S OWN CASE FROM THE ITAT , W E UPHOLD THE ORDER OF LEARNED CIT (A) . THE ITAT ORDER IN ASSESSEES CASE FOR ASSESSMENT YEAR 2012 - 13 AND 2013 - 14 IN ITA NOS. 1017/MUM/2017 AND 7243/MUM/2017 DATED 26.07.2019 AND 21.05.2018 RESPECTIVELY ARE GERMANE AND HA VE NOT BEEN REVERSED BY THE HON'BLE BOMBAY HIGH COURT. 5. AN OTHER COMMON ISSUE RAISED IN THESE APPEALS IS THAT LEARNED CIT (A) ERRED IN DIRECTING THE A SSESSING O FFICER TO EXCLUDE THE INTEREST SUBSIDY WHILE CALCULATING 3 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. THE INCOME UNDER S ECTION 115 JB OF THE ACT . 6. THIS ISSUE RELATE S TO THE TREATMENT OF SUBSIDY RECEIVED UNDER TUF FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER S ECTION 115JB OF THE ACT . THE A SSESSING O FFICER HAVING NOTED THAT THE AFORESAID SUM WAS DULY CREDITED IN THE P ROFIT AND L OSS A CCOUNT OF THE ASSESSEE , HAS INCLUDED THE SAME IN THE COMPUTATION OF BOOK PROFIT. THE LEARNED CIT(A) BY REFERRING TO ITAT ORDER IN ASSESSEE'S OWN CASE HAS DIRECTED THAT THE SAID SUM SHOULD BE EXCLUDED WHILE COMPUTING THE INCOME UNDER S ECTION 115JB OF THE AC T . AGAINST THIS ORDER , R EVENUE HAS FILED APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUN SE L AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT DECISION S IN ASSESSEE'S OWN CAS E, AS REFERRED ABOVE. 8. PER CONTRA , LEARNED D EPARTMENTAL R EPRESENTATIVE SUBMITTED THAT THIS ISSUE HAS ALREADY BEEN DEALT WITH BY HONBLE JURISDICTIONAL HIGH COURT IN SEVERAL DECISIONS. HE SUBMITTED THAT IN THOSE DECISIONS THE HONBLE J URISDICTIONAL HIGH COURT HELD THAT SUCH INCOME HAVE TO BE TAKEN INTO ACCOUNT FOR COMPUTATION OF BOOK PROFIT. IN THIS REGARD , LEARNED D EPARTMENTAL R EPRESENTATIVE REFERRED TO THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS VEEKAYLAL INVESTMEN T CO. (P.) LTD., 249 ITR 597 (BOM.) 9. THE L EARNED D EPARTMENTAL R EPRESENTATIVE FURTHER SUBMITTED THAT ITAT, 4 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. HYDERABAD SPECIAL B ENCH IN RAIN COMMODITIES LTD. VS DCIT, 131 TTJ 514 (HYDERABAD) (SB) HAS DULY TAKEN NOTE OF THESE DECISIONS AND HAS HELD THAT IN VIEW OF THESE DECISIONS SUCH EXEMPT CAPITAL GAIN HAVE TO BE COMPUTED AND TAKEN INTO ACCOUNT FOR THE PURPOSE OF APPLICATION OF BOOK PROFIT. 10. THE LEARNED D EPARTMENTAL R EPRESENTATIVE FURTHER SUBMITTED THAT THE ITAT DECISION IN ASSESSEE'S OWN CASE HAS A MISTAKE APPARENT FROM RECORD IS IN AS MUCH AS IT HAS NOT CONSIDERED THE HONBLE J URISDICTIONAL HIGH COURT ORDER AS WELL AS THE SPECIAL BENCH DECISION. 11. IN REJOINDER, TH E LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASES REFERRED BY LEARNED DEPARTMENTAL REPRESENTATIVE HAVE BEEN DULY CONSIDERED AND DISTINGUISHED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS . METAL & CHROMIUM PLATER (P.) LTD., 415 ITR 123 (MADRAS). HE ALSO SUBMITTED THAT ITAT DECISION IN ASSESSEES OWN CASE SHOULD BE ASSUMED TO HAVE CONSIDERED THIS DECISION. 12 . U PON CAREFUL CONSIDERATION , WE FIND OURSELVES IN AGREEMENT WITH THE SUBMISSION OF THE LE ARNED D EPARTMENTAL R EPRESENTATIVE THAT THE ITAT ORDER S RELIED U PON BY THE LEARNED COUNSEL OF THE ASSESSEE DO NOT CONSIDER AFORESAID H ON BLE J URISDICTIONAL HIGH COURT DECISION . I T IS WITHOUT ANY DOUBT THAT THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IS EXACTLY ON THE SAME SUBJECT AS IS BEING DISCUSSED HEREUNDER. FURTHERMORE, THE PROPOSITION THAT BOOK PROFIT IS NOT TO BE TINKERED WITH IS DULY SUPPORTED BY HON'BLE JURISDICTIONAL HIGH COURT DECISION 5 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. IN FURTHER FOLLOW ING DECISIONS: - 1. PR . CIT VS. BHAGWAN INDUSTRIES LTD IN ITA NO. 436 OF 2015 VIDE ORDER DATED 18.07. 2017 . 2. CIT VS . AKSHAY TEXTILE TRADING & AGENCIES PVT LTD 304 ITR 401 (BOM) . 3. CIT VS. ADBHUT TRADING CO . PVT . LTD . (2011) 338 ITR 94 (BOM) FURTHERMORE, WE NOTE THAT H ON BLE SUPREME COURT IN THE CASE OF ACIT VS SAURASHTRA KUTCH STOCK EXCHANGE LTD. , 305 ITR 227 (SC ) HAS EXPOUNDED THAT NON - CONSIDERATION OF JURISDICTIONAL HIGH COURT DECISION CAN RENDER A DECISION OF THE T RIBUNAL SUFFERING FROM MISTAKE APPARENT FROM RECORD. 1 3 . FURTHERMORE, WE NOTE THAT HONOURABLE SUPREME COURT IN THE CASE OF KAPURCHAND SHRIMAL V CIT, 131 ITR 451 (SC) HAD EXPOUNDED THAT IT IS THE DUTY OF THE APPELLATE AUTHORITY TO CORRECT THE ERRORS IN THE ORDERS OF THE AUTHORIT IES BELOW AND REMIT THE MATTER, WITH OR WITHOUT DIRECTIONS FOR THEIR CONSIDERATION, UNLESS PROHIBITED BY LAW. 1 4 . CONSIDERING THIS PRESENT ISSUE ON THE CONSPECTUS OF AFORESAID DISCUSSION AND CASE LAWS , IN OUR CONSIDERED OPINION , T HIS ISSUE NEEDS TO BE REM ITTED TO THE FILE OF LEARNED CIT(A). THE LEARNED CIT(A) IS DIRECTED TO CONSIDER THIS ISSUE DE NOVO AFTER TAKING INTO ACCOUNT THE AFORESAID HONBLE J URISDICTIONAL HIGH COURT DECISIONS . N EEDLESS TO ADD , THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 6 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. 1 5 . ANOTHER COMMON ISSUE RAISED IN THESE APPEALS FOR ASSESSMENT YEAR S 200 8 - 0 9 TO 20 11 - 12 IS THAT LEARNED CIT(A) ERRED IN DIRECTING TO DELETE DISALLOWANCE UNDER S ECTION 14 A OF THE ACT READ WITH RULE 8D (2)(II) BY RELYING ON HDFC B ANK DECISION OF THE HONBLE BOMBAY HIGH COURT REPORTED IN 366 ITR 505, WITHOUT APPRECIATING THAT THE SAME HAS BEEN SUPERSEDED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD . VS CIT, 4 02 ITR 640 (SC) . 1 6 . BRIEF FACTS ON THIS ISSUE ARE THAT WHILE DISCUSSING THE AFORESAID DISALLOWANCE , THE A SSESSING O FFICER HAS NOTED THAT ASSESSEE HAS DULY SUBMITTED THAT IT HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE THOSE INVESTMENT WHICH EARNED EX EMPT INCOME . THE ASSESSEE FURTHER CONTENDED BEFORE THE A SSESSING O FFICER THAT THESE WERE STRATEG IC INVESTMENTS. THE A SSESSING O FFICER REJECTED THE CONTENTION OF SUFFICIENT INTEREST FREE FUNDS BY HOLDING THAT ASSESSEE HAS NOT SUBMITTED CASH FLOW STATEMENT. HOWEVER, HE DID NOT DISPUTE, THAT INTEREST FREE FUNDS AVAILABLE WERE MORE THAN THE INVESTMENTS MADE. UPON ASSESSEE'S APPEAL IN THIS REGARD , LEARNED CIT(A) ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE BY AGREEING WITH THE CONTENTION THAT HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF HDFC B ANK IS APPLICABLE IN AS MUCH AS SUFFICIENT INTEREST FREE FUNDS ARE AVAILABLE. 17. AGAINST THIS ORDER , R EVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUN SE L AND PERUSED THE RECORDS. WE FIND THAT IT H AS NOT BEEN DENIED BY THE A SSESSING O FFICER THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS. HOWEVER , THE A SSESSING O FFICER HAS HELD THAT ASSESSEE HAS NOT SUBMITTED THE CASH FLOW STATEMENT. FURTHERMORE, THE R EVENUE NOW CONTENDS THAT THE SAID DECISION OF 7 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. H ONBLE J URISDICTIONAL HIGH COURT HAS BEEN SUPERSEDED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD . WE FIND THAT LEARNED CIT (A) IS CORRECT IN HOLDING THAT IF ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, NO DISALLOWANCE UNDER S ECTION 14 A OF THE ACT ON ACCOUNT OF INTEREST FOR FUNDS UTILISED FOR EARNING THE EXEMPT INCOME NEEDS TO BE DONE. THE REFERENCE BY THE R EVENUE TO THE AFORESAID HONBLE SUPREME COURT DECISION, CLAIMING THAT THE SAID DECISION HAS SUPERSEDED THE DECISION OF HONBLE BOMBAY HIGH COURT IS TOTALLY MISPLACED. WE HAVE GONE THROUGH THE ENTIRE DECISION. NOWHERE IT WAS POINTED OUT BY THE R EVENUE AS TO WHICH PORTION OF THIS DECISION SUPERSEDES THE DECISION OF HONBLE BOMBAY HIGH COURT . A CCORDINGLY, RESPECTFULLY FOLLOW ING THE AFORESAID DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT , WE UPHOLD THE ORDER OF THE LEARNED CIT (A) . FURTHERMORE , ITAT ON SIMILAR REASONING HAS ALSO UPHELD THE SIMILAR ORDER OF LEARNED CIT(A) IN EARLIER YEARS , IN ASSESSEES OWN CASE . 18. ANOTHE R ISSUE RAISED FOR ASSESSMENT YEAR S 20 10 - 11 AND 20 11 - 12 IS WITH RE SPECT TO DISALLOWANCE UNDER S ECTION 36(1)(III) OF THE ACT. T HE R EVENUE CONTENDS THAT ASSESSEE DID NOT HAVE ADEQUATE INTEREST FREE FUNDS, AND THAT ASSESSEE COULD NOT ESTABLISH COMMERCIAL EXP EDIENCY. 19. THE DISALLOWANCE IN THIS REGARD HAS BEEN DONE ON THE SAME REASONING AS IN THE CASE OF DISALLOWANCE UNDER S ECTION 14 A OF THE ACT . THE A SSESSING O FFICER HAS DISREGARDED THE ASSESSEE S SUBMISSION THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO MAKE THESE INVESTMENTS/ADVANCES ON THE GROUND THAT ASSESSEE HAS NOT 8 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. SUBMITTED THE CASH FLOW STATEMENT. IT IS NOT DEN IED THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS. THE LEARNED CIT(A) HAS NOTED THIS ASPECT AND HE HAS DECIDED THIS ISSUE SOLELY ON THE BASIS OF THE FACT THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO GIVE THOSE ADVANCES AND HE HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK ( SUPRA ) . THE LEARNED CIT(A) HAS NOT ALLOWED T HIS ISSUE IN FAVOUR OF ASSESSEE ON THE GROUND OF COMMERCIAL EXPEDIENCY. IN THIS VIEW OF THE MATTER , IN OUR CONSIDERED OPINION , THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) IN THIS REGARD. ACCORDINGLY, WE UPHOLD THE S AME . 20. A NOTHER ISSUE RAISED IN ASSESSMENT YEAR 2011 - 12 RE LATES TO DISALLOWANCE WITH RESPECT TO EMPLOYEES CONTRIBUTION TO THE P ROVIDENT F UND UNDER S ECTION 36(1)(VA) OF THE ACT AMOUNTING TO RS. 23,85,474 / - . 21. UPON HEARING BOTH THE COUN SE L AND PERUS ING THE RECORDS , W E FIND OURSELVES IN AGREEMENT WITH THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS GHATGE PATIL TRANSPORTS LTD., 368 IT R 749 (BOM) AND HONBLE SUPREME COURT REFERRED IN ITAT ORDER IN ASSESSEES OWN CASE AS ABOVE FOR THE PROPOSITION THAT THE SAID CONTRIBUTIONS MADE BEFORE THE DUE DATES OF RETURN OR GRACE PERIOD IS ALLOWABLE. HENCE, WE UPHOLD THE ORDER OF LD. CIT(A) IN THIS REGARD. 22. BEFORE PARTING, WE NOTE THAT THIS APPEAL WAS HEARD ON 06.02.2020. THE PRONOUNCEMENT IS DELAYED DUE TO LOCKDOWN IN VIEW OF COVID - 19 PANDEMIC. THE 9 ITA NOS. 900 TO 906/MUM/2019 M/S. ALOK INDUSTRIES LTD. PRONOUNCEMENT IS AS PER RULE 34(5) OF APPELLATE TRIBUNAL RULES AND HON'BLE BOMBAY HIGH COURT DECISION VIDE ORDER DATED 15.04.2020 EXTENDING THE TIME BOUND PERIODS SPECIFIED BY HON'BLE HIGH COURT BY REMOVING THE PERIOD UNDER LOCKDOWN. THIS ASPECT IS ALSO D EALT WITH IN DETAIL IN ITAT MUMBAI ORDER IN CASE OF DCIT VS JSW STEEL VIDE ORDER DATED 15.05.2020. 23. IN THE RESULT, THE APPEALS OF REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 6 T H JU LY , 2020 AS PER RULE 34(4) BY PLACING THE PRONOUNCEMENT LIST ON NOTICE BOARD. SD/ - SD/ - (PAWAN SINGH) JUDICIAL MEMBER (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATE : 1 6 T H JU LY , 2020 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI