ITO, Baddi V. Hycron Electronics, Baddi

ITA 951/CHANDI/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9481 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 26-06-2019
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ % & ' , ' BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.951/CHD/2019 / ASSESSMENT YEARS : 2014-15 THE INCOME TAX OFFICER, WARD BADDI (HP). M/S HYCRON ELECTRONICS, VILL. BATED, BAROTIWALA, DISTT. SOLAN. ./PAN NO: AADDFH1249K /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI ASHOK MISHRA, ACCOUNTS MANAGER ! / REVENUE BY : SHRI AKARSHAN SINGH, SR. DR ' # $ /DATE OF HEARING : 04.09.2019 %&'( $ /DATE OF PRONOUNCEMENT: 30.09.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE ABOVE APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA [(IN SHORT REFERRED TO AS CIT(A)] DATED 28.3.2019 RELATING TO ASSESSMENT YEAR 2014-15, PASS ED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS ACT. ITA NO.951/CHD/2019 A.Y. 2014- 15 2 2. THE APPEAL OF THE REVENUE WAS ORIGINALLY FIXED FOR HEARING ON ACCOUNT OF TAX EFFECT INVOLVED IN THE SA ME BEING BELOW THE LIMIT PRESCRIBED BY THE RECENT CIRCULAR NO.17/2019 DATED 8.8.2019 FOR FILING THE APPEALS B EFORE THE I.T.A.T. THE TAX EFFECT INVOLVED IN THE PRESENT A PPEAL AS STATED IN THE PRESCRIBED FORM OF FILING APPEAL TO THE I.T.A.T. IN FORM NO.36 AND THE GROUNDS OF APPEAL SEPARATELY ANNEXED THERETO, FIND MENTION OF RS.5,69,930/-. 3. DURING THE COURSE OF HEARING BEFORE US THE LD. D R STATED THAT THOUGH ADMITTEDLY THE MANDATORY LIMIT F IXED FOR FILING THE APPEALS OF THE REVENUE TO THE I.T.A.T. H AVE BEEN ENHANCED FROM RS.20 LACS TO RS.50 LACS VIDE THE AFO RESAID CIRCULAR ISSUED BY THE CBDT AND THE TAX EFFECT INVO LVED IN THE PRESENT APPEAL FALLS WITHIN THAT LIMIT, YET THE ISSUE INVOLVED IN THE PRESENT APPEAL IS COVERED IN THE EX CEPTION TO THE APPLICABILITY OF THE CIRCULAR, AS MENTIONED IN THE EARLIER CBDT CIRCULAR NO.3/2018. IT WAS POINTED OUT BY THE LD. DR THAT THE CURRENT CBDT CIRCULAR, I.E CBDT CIRCULAR NO.17/2019 , ONLY MODIFIED THE EARLIER CBDT CIRCULA R NO.3/2018 TO THE EXTENT OF INCREASING THE LIMITS FOR FILING APPEALS FROM RS.20 LACS TO RS.50 LACS AND FURTHER C LARIFYING ITA NO.951/CHD/2019 A.Y. 2014- 15 3 THAT WHERE CONSOLIDATED ORDER IS PASSED FOR SEVERAL YEARS, THE TAX EFFECT HAS TO BE SEEN FOR EACH YEAR. THE LD . DR STATED THAT REST OF THE CONDITIONS/CLAUSES IN THE E ARLIER CBDT CIRCULAR WOULD REMAIN. HE, THEREAFTER POINTED OUT THAT THE EXCEPTIONS TO THE APPLICATION OF THIS CIRCULAR FIND MENTION AT PARA 10 THEREOF WHICH READS AS UNDER; 10. ADVERSE JUDGMEN TS RELATING TO THE FOLLOWING ISSUE S SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PAR A 3 ABOVE OR THERE I S NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE IS UND ER CH AL LENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION , INSTRUCTION OR CIRCULAR HAS B EE N HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION M THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/ BANK ACCOUNTS 4. IT WAS STATED THAT THE PRESENT CASE WAS COVERED BY CLAUSE (B) OF THE SAME HAVING BEEN PASSED BY THE LD .CIT(A) IN VIOLATION OF CBDT CIRCULAR NO.5/2014. IT WAS STA TED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL RELATED TO DISALLOWANCE MADE OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME AS PER THE PROVISIONS OF SECTION 14A OF THE ACT. IT WAS CONTENDED THAT AS PER CBDT CIRCULAR NO.5/2014, THE DISALLOWANCE HAD TO BE MADE EVEN IF NO EXEMPT INCOM E WAS EARNED. THE LD. DR STATED THAT IN THE FACTS OF THE PRESENT ITA NO.951/CHD/2019 A.Y. 2014- 15 4 CASE THE LD.CIT(A) HAD DELETED THE DISALLOWANCE CO NSIDERING THE FACT THAT NO EXEMPT INCOME HAD BEEN EARNED AND RELYING ON THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF BCL INDUSTRIES & INFRASTRUCTURES LTD. FOR ASSESSMEN T YEAR 2010-11 IN ITA NO.1002/CHD/2013.ON MERITS THE LD. D R ARGUED THAT THE DISALLOWANCE WAS LIABLE TO BE UPHEL D IN VIEW OF THE CBDT CIRCULAR NO.5/2014 DATED 11.2.2014 WHIC H EXPLICITLY STATED THAT THE EXPENSES RELATABLE TO TH E EARNING OF EXEMPT INCOME HAVE TO BE CONSIDERED FOR DISALLOW ANCE IRRESPECTIVE OF THE FACT WHETHER ANY SUCH INCOME HA D BEEN EARNED DURING THE YEAR OR NOT. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND HAVE ALSO GONE THROUGH THE ORDER OF THE LD.CIT(A). 6. THE ISSUE IN APPEAL BEFORE US RELATES TO DISALLO WANCE OF EXPENSES U/S 14A OF THE ACT AND THE AMOUNT INVOLVED IS RS.10,22,046/- WITH THE TAX IMPACT BEING RS.5,69,93 0/- ON THE SAME. UNDISPUTEDLY THE TAX INVOLVED IN THE PRES ENT APPEAL IS WITHIN THE LIMITS WHICH HAS BEEN PRESCRIBED BY T HE CBDT CIRCULAR FOR WITHDRAWING APPEALS BEFORE THE I.T.A.T . BUT THE LD. DR HAS CONTENDED THAT THE ISSUE IN APPEAL FALLS WITHIN THE EXCEPTION CARVED OUT BY THE CBDT FOR THE APPLICABI LITY OF THE SAME. THE CASE OF THE REVENUE BEFORE US IS THAT THE CBDT CIRCULAR NO.5/2014 STATES THAT THE DISALLOWANCE U/S ITA NO.951/CHD/2019 A.Y. 2014- 15 5 14A OF THE ACT HAS TO BE MADE EVEN IF NO EXEMPT INC OME HAS BEEN EARNED AND THE LD.CIT(A) BY NOT FOLLOWING THIS CIRCULAR HAS PASSED AN ORDER AGAINST THE INSTRUCTIONS GIVEN BY THE CBDT VIDE THE AFORESAID CIRCULAR. 7. WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF T HE LD.DR. AS PER THE EXCLUSIONARY CLAUSE REFERRED TO BY THE LD.DR, IF AN ORDER IS PASSED HOLDING ANY CBDT CIRCU LAR TO BE ILLEGAL, ONLY IN THAT CASE THE APPEALS CANNOT B E WITHDRAWN ON ACCOUNT OF TAX EFFECT BEING LOW. WE HA VE GONE THROUGH THE ORDER OF THE CIT(A). WE NOTE THAT THE L D.CIT(A) HAS HELD THAT NO DISALLOWANCE WAS LIABLE TO BE MADE U/S 14A OF THE ACT FOLLOWING THE DECISION OF THE ITAT CHAND IGARH BENCH IN THE CASE OF BCL INDUSTRIES & INFRASTRUCTUR ES LTD. (SUPRA). WE ALSO AWARE THAT THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. M/S LAKHANI MARKETING INC.(2014) 272 CTR 265 HAS HELD THAT NO DISALLOWANC E U/S 14A IS WARRANTED WHEN NO EXEMPT INCOME IS EARNED. MOREOVER EVEN THE HONBLE GUJARAT,DELHI AND ALLAHAB AD HIGH COURTS HAVE HELD SO IN THE FOLLOWING DECISIONS: 1) PCIT VS IL &FS ENERGY DEVELOPMENT COMPANY (2017) 297 ITR 452(DEL). 2) CIT VS HOLCIM INDIA (P) LTD.(2014) 90 CCH 81(DEL ). 3) CIT VS CORRTECH ENERGY (P) LTD.(2014) 223 TAXMANN 130(GUJ). ITA NO.951/CHD/2019 A.Y. 2014- 15 6 4) CIT VS SHIVAM MOTORS (P) LTD.ITA NO. 88 OF 2014 DATED 05.05.2014(ALL). 8. THE HONBLE DELHI HIGH COURT IN THE CASE OF IL&F S (SUPRA) CONSIDERED THE CBDT CIRCULAR NO. 05/14 AND HELD THAT THE SAME COULD NOT OVERRIDE THE PROVISIONS OF SECTION 14A. IN VIEW OF THE SAME, IT CANNOT BE SAID THAT TH E LD.CIT(A) HAS HELD THE CBDT CIRCULAR NO.5/2014 TO B E ILLEGAL. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE OTHER HIGH COURTS BEING BINDING ON THE CIT( A), HE WAS BOUND TO FOLLOW THE SAID DECISIONS AS AGAINST T HE CBDT CIRCULAR WHICH IS AN INTERNAL GUIDELINE AND NOT TH E LAW AS LAID DOWN BY THE COURTS. THE IMPUGNED CASE, THEREFO RE, WE HOLD DOES NOT FALL IN THE EXCEPTION TO APPLICATION TO CBDT CIRCULAR REGARDING WITHDRAWAL OF APPEALS ON ACCOUNT OF LOW TAX EFFECT INVOLVED BY THE DEPARTMENT. THE TAX EFFE CT INVOLVED IN THE IMPUGNED CASE BEING WITHIN THE PRES CRIBED LIMITS BY THE CIRCULAR IS, THEREFORE, LIABLE TO BE WITHDRAWN AND THUS IS TREATED AS DISMISSED. 9. EVEN ON MERITS WE FIND THAT THERE IS NO STRENGTH IN THE REVENUES APPEAL SINCE THE ISSUE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION OF V ARIOUS HIGH COURTS INCLUDING THAT OF THE HON'BLE JURISDICTIONAL HIGH COURT AS POINTED OUT ABOVE BY US. IN VIEW OF THE AB OVE, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.951/CHD/2019 A.Y. 2014- 15 7 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % & ' (DIVA SINGH) (ANNAPURNA GUPTA) ! ' /JUDICIAL MEMBER () ' /ACCOUNTANT MEMBER # /DATED: 30 TH SEPTEMBER, 2019 * * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35# / GUARD FILE &) ' / BY ORDER, / ASSISTANT REGISTRAR