ACIT, C-2(1), Chandigarh V. M/s Mount Shivalik Breweries Ltd. (Now Molson Coors India Pvt. Ltd.), Derabassi

MA 113/CHANDI/2019

AI Insights

The case revolves around the Department's application to revive an appeal against M/s Mount Shivalik Breweries Ltd., which was initially dismissed due to the low tax effect as per CBDT Circular No. 3/2018. The Department sought to contest the applicability of CBDT Circular No. 05/2014 concerning disallowance under Section 14A of the Income Tax Act, 1961, despite the tax effect being below the monetary limits set by the circular. The Assessee argued that the Tribunal's earlier decision should stand, citing that CBDT circulars are not binding on the Tribunal and referencing several judicial precedents supporting this view. The Tribunal, after considering the arguments and relevant judicial precedents, dismissed the Department's application, reaffirming that the circulars do not override the express provisions of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128357 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 4 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 22-05-2019
• Other Referred Cases: Principal Commissioner of Income Tax-I vs. Vardhman Chemtech Private Limited, Principal Commissioner of Income Tax vs. IL & FS Energy Development Company Ltd., Principal Commissioner of Income Tax vs. Rattan India Infrastructure Ltd., Redington (India) Ltd. Vs. Additional Commissioner of Income Tax, ACIT, C- 4(1), Chandigarh vs. M/s Diamond Plastic Products
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Earning of tax free income; Tax effect; Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलȣय अͬधकरण, चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER M.A.No. 113/Chd/2019 (Arising out of आयकर अपील सं./ITA No. 944/CHD/2018 Ǔनधा[रण वष[ / Assessment Year : 2013-14 The ACIT, Circle 2(1), Chandigarh बनाम M/s Mount Shivalik Breweries Ltd., Now Molson Coors India Pvt. Ltd., Mohan Gram, P.O. Bhankar, Derabassi èथायीलेखासं./PAN NO: AAACM9806D अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Tej Mohan Singh, Advocate राजèव कȧ ओर से/ Revenue by : Shri Dharamvir, JCIT, Sr. DR स ु नवाई कȧ तारȣख/Date of Hearing : 22.09.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 03.10.2023 आदेश/Order Per Vikram Singh Yadav, AM: This is Departmental Application in ITA No. 944/Chd/2018, which was dismissed for tax effect vide order dated 1.11.2018. MA. No. 113/Chd/2019 in ITA 944/Chd/2018 - M/s Mount Shivalik Breweries Ltd, Derabassi. 2 2. The Department contends that the Tribunal has dismissed the appeal only due to low tax as per CBDT Circular No. 3/2018 dated 11.7.2018 without going into merits of the issue; and that the Department desires to contest the applicability of CBDT Circular No. 05/2014 on the basis of disallowance u/s 14A of the Income Tax Act, 1961 even when the tax effect is below the monetary limits as per aforesaid CBDT circular. A request has been made to revive the appeal and the matter needs to be contested on merits. 3. The ld. Counsel for the Assessee, on the other hand, has placed strong reliance on the Tribunal order dated 01.11.2018 (supra). It has been contended that firstly; CBDT circulars are not binding on the Tribunal. Reliance, in this regard, has been placed on “Principal Commissioner of Income Tax-I vs. Vardhman Chemtech Private Limited”, 423 ITR 241 (P&H), “Principal Commissioner of Income Tax vs. IL & FS Energy Development Company Ltd.”, 399 ITR 483(Del.), and “Principal Commissioner of Income Tax vs. Rattan India Infrastructure Ltd.”, (2019) 104 CCH 0053 ISCC, order dated 4.1.2019 passed by the Hon'ble Supreme Court. 4. We have heard the parties and have perused the material on record. 4.1 Firstly, the issue of binding force of the CBDT Circulars on Courts and Tribunal, has been considered by the Hon'ble MA. No. 113/Chd/2019 in ITA 944/Chd/2018 - M/s Mount Shivalik Breweries Ltd, Derabassi. 3 jurisdictional High Court in “Principal Commissioner of Income Tax-I vs. Vardhman Chemtech Private Limited” (supra) and it has been held that clarifications / circulars issued by the Central / State Government represent merely their understanding of statutory provisions; and that it is for the Court to declare as to what a particular provision of a statute says, and not for the executive to do so. 4.2 Then, in “Vardhman Chemtech Private Limited” (supra), again, it was held by the Hon'ble jurisdictional High Court that the Tribunal was right in dismissing the Department’s appeal, holding that unless and until there is receipt of exempt income for the concerned assessment year, Section 14A of the Act is not attracted. A reference was made to “Redington (India) Ltd. Vs. Additional Commissioner of Income Tax”, 392 ITR 633 (Mad.), wherein it was held that no disallowance u/s 14A read with Rule 8D of the Income Tax Rules, 1962 can be made in respect of an assessment year in which no exempt income is earned. 4.3 Reference was also made to “Principal Commissioner of Income Tax vs. IL&FS Energy Development Company Limited”, (2017) 399 ITR 482 (Del.) (supra), wherein it was held that the CBDT Circular dated 11.2.2014 cannot override the express provisions of section 14A read with Rule 8D of the Rules. MA. No. 113/Chd/2019 in ITA 944/Chd/2018 - M/s Mount Shivalik Breweries Ltd, Derabassi. 4 5. It may be pointed out that the aforementioned CBDT Circular No. 3/2018 dated 11.7.2018 is the very Circular on which the Department seeks to place reliance in the present application. 6. Further, the Department contends that the issue falls under exception 10(b) of the CBDT Circular No. 03/2018. In this regard, the ld. Counsel for the Assessee has sought to place reliance on “ACIT, C- 4(1), Chandigarh vs. M/s Diamond Plastic Products” and five other M.A.s, and all these six M.As. have been decided by the Chandigarh Bench of the Tribunal vide order dated 9.8.2019. Here, it is seen that in “M/s Diamond Plastic Products” (supra), it has been noted that the Department had been subsequently asked as to whether the CBDT Circular No. 5/2014 relating to disallowance of expenditure for earing exempt income u/s 14A of the Act has been held to be invalid or illegal / ultra vires by any Court; and that the Department had stated that the said Circular was still in force and had not been held to be illegal or ultra vires. 7. The aforesaid situation continues as such till date. The said CBDT Circular No. 5/2014 continues to be in force and it has not been held to be either illegal or ultra vires the law. 8. Therefore, considering all the above facts, we find that there is no force in the application filed by the Department and the same is liable to be rejected and dismissed. It is ordered so, accordingly. MA. No. 113/Chd/2019 in ITA 944/Chd/2018 - M/s Mount Shivalik Breweries Ltd, Derabassi. 5 9. In the result, the Application filed by the Department is dismissed. Order pronounced in the Open Court on 3.10.2023 Sd/- Sd/- ( A.D. JAIN ) (VIKRAM SINGH YADAV) Vice President Accountant Member Dated : 3.10.2023 “आर.के.” आदेशकȧĤǓतͧलͪपअĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकरआय ु Èत/ CIT 4. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयआͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar