DCIT, C-6(1), Mohali V. M/s Jupiter Aqua Line Pvt. Ltd., Mohali

MA 32/CHANDI/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4689 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Question of law; Tax effect
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ %! , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER / MA NO.32/CHD/2019 IN ./ ITA NO.16/CHD/2018 / ASSESSMENT YEAR :2013-14 THE D.C.I.T., CIRCLE 6(1), MOHALI. M/S JUPITER AQUA LINE PVT. LTD., D-192, INDL. AREA, PHASE-VIII-B, MOHALI. ./ PAN: AAACJ3530F /APPELLANT /RESPONDENT !' /ASSESSEE BY : SMT.MEENAKSHI VOHRA, SR.DR ' / REVENUE BY : SHRI PARIKSHIT AGGARWAL, CA # $! % /DATE OF HEARING : 08.03.2019 &'()! % /DATE OF PRONOUNCEMENT:14.03.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : VIDE THIS MISCELLANEOUS APPLICATION THE REVENUE HAS SOUGHT RECALLING OF THE ORDER PASSED IN ITA NO.16/C HD/2018 DATED 17.7.2018 RELATING TO ASSESSMENT YEAR 2013-14 , WHEREIN THE APPEAL OF THE REVENUE WAS DISMISSED ON ACCOUNT OF LOW TAX EFFECT INVOLVED AS PRESCRIBED BY THE CBD T CIRCULAR NO. 3/2018 DATED 11.07.2018. IT HAS BEEN CONTENDED THAT THE DISMISSAL ON ACCOUN T OF LOW TAX EFFECT WAS INCORRECT SINCE THE MATTER INVOL VED IN THE 2 APPEAL FELL IN THE EXCEPTIONAL CASES/CIRCUMSTANCES TO WHICH THE WITHDRAWAL OF APPEAL BY THE DEPARTMENT ON ACCOU NT OF LOW TAX EFFECT WOULD NOT APPLY, AS PRESCRIBED IN TH E SAID CBDT CIRCULAR. IT HAS BEEN POINTED OUT THAT THE ISS UE INVOLVED IN THE APPEAL RELATED TO DISALLOWANCE OF E XPENSES MADE U/S 14A OF THE ACT. IT HAS BEEN CONTENDED THA T THE CBDT IN ITS CIRCULAR NO.5/2014 HAS CLARIFIED THAT THE DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT WOULD B E ATTRACTED EVEN IF NO EXEMPT INCOME IS EARNED. THE R EVENUE HAS, THEREFORE, CONTENDED THAT THE APPEAL HAD BEEN ALLOWED IN VIOLATION OF CBDT CIRCULAR, AND HENCE FELL WITH IN THE EXCEPTION CARVED OUT BY THE CBDT FOR DISMISSING APP EALS ON ACCOUNT OF LOW TAX EFFECT INVOLVED AND, THEREFORE, THE DISMISSAL BY THE I.T.A.T. ON ACCOUNT OF LOW TAX EFF ECT WAS A MISTAKE FOR WHICH PURPOSE THE ORDER NEEDED TO BE RE CALLED AND THEREAFTER DECIDED ON MERIT. 2. THE LD. COUNSEL FOR ASSESSEE, ON THE OTHER HAND, CONTENDED THAT THE IMPUGNED APPEAL WAS ALLOWED BY THE CIT(A) FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS LAKHANI MARKETING 272 ITR 265 (P&H) AND THEREFORE DID NOT VIOLATE ANY CBDT CIRCULAR. H E THEREFORE CONTENDED THAT THE ISSUE WAS NOT COVERED UNDER ANY OF THE EXCEPTIONS PROVIDED IN THE CBDT CIRCULAR NO. 3/2018 DATED 11.07.2018 AND HAD BEEN RIGHTLY DISMI SSED ON ACCOUNT OF LOW TAX EFFECT INVOLVED. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O CAREFULLY GONE THROUGH THE MISCELLANEOUS APPLICATIO N FILED 3 BEFORE US. THE DEPARTMENT IN THE PRESENT MISCELLAN EOUS APPLICATION HAS CONTENDED THAT THE ISSUE INVOLVED I N THE APPEAL BEFORE THE ITAT WAS COVERED IN THE EXCEPTION CARVED OUT IN THE CBDT CIRCULAR FOR WITHDRAWING APPEALS IN VOLVING LOW TAX EFFECT, AND THEREFORE THE DISMISSAL OF THE APPEAL ON ACCOUNT OF LOW TAX EFFECT INVOLVED WAS A MISTAKE. T HE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS S TATED THAT SINCE THE CIT(A) HAD ALLOWED THE APPEAL ON THI S ISSUE, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT, IT WAS NOT COVERED IN ANY OF THE EXCEPTIONS IN THE CBDT CIRCULAR AND THE ITAT HAD THEREFORE RIGHTLY DI SMISSED THE APPEALS ON ACCOUNT OF THE LOW TAX EFFECT INVOLV ED. 4. THE I.T.A.T. DEALT WITH AN IDENTICAL ISSUE IN AN APPEAL FILED BY THE REVENUE IN ITA NOS.1125 TO 1130/CHD/20 18 DATED 28.1.2019 IN THE CASE OF ITO VS. M/S KAPSONS GLOBAL (P) LTD (IN WHICH BOTH OF US WERE MEMBER). IN THAT CASE ALSO THE TAX EFFECT INVOLVED WAS BELOW THAT PRESCRIBED B Y CBDT FOR FILING APPEALS BEFORE US VIDE CIRCULAR NO. 3/20 18 DATED 11.07.2018,BUT THE REVENUE CONTENDED THAT THE ISSUE INVOLVED WAS COVERED IN THE EXCEPTION CARVED OUT IN THE SAID CIRCULAR INVOLVING AN ISSUE DECIDED IN VIOLATION OF CBDT CIRCULAR ON THE SAME. ON NOTING THAT THE CIT(A) HAD DECIDED THE ISSUE FOLLOWING THE DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT, IT WAS HELD BY THE ITAT THAT THERE WAS NO VIOLATION OF CBDT CIRCULAR BY THE CIT(A) ,BEING BOU ND BY THE ORDER OF AN AUTHORITY HIGHER IN HIERARCHY TO THE CB DT, AND THEREFORE NOT COVERED IN ANY OF THE EXCEPTIONS CARV ED OUT IN 4 THE LOW TAX EFFECT CIRCULAR ISSUED BY CBDT. THE REL EVANT PORTION OF THE ORDER IS AS UNDER: 2. AT THE OUTSET, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE APPEAL EFFECT INVOLVED IN ALL THE IMPUGNED APPEALS WAS BELOW THE LIMIT OF RS.20 LACS, WHICH WAS MANDATED BY THE CBDT FOR FILING APPEALS BEFORE THE I.T.A.T, VIDE IT LATEST CIRCULAR NO. 3/2018 DATED 11.07.2018,REVISING THE LIMIT. 3. THE LD. DR, THOUGH CONCEDED THAT THE TAX EFFECT INVOLVED IN THE ABOVE APPEALS WAS BELOW RS.20 LACS, BUT STATED THAT A REPORT FROM THE ASSESSING OFFICER (IN SHORT A.O) HAD BEEN CALLED FOR REGARDING WHETHER THE APPEALS FELL UNDER ANY OF THE EXCLUSIONARY CLAUSES MENTIONED IN THE SAID CBDT CIRCULAR. THE LD. DR CONTENDED THAT THE A.O. HAD SUBMITTED HIS REPORT, VIDE LETTER DATED 15.1.2019, STATING THAT THE APPEALS FELL WITHIN THE EXCEPTION LAID DOWN IN PARA 10 OF THE AFOREMENTIONED CBDT CIRCULAR. COPY OF THE REPORT WAS FILED BEFORE US AND IS REPRODUCED HEREUNDER: TO THE ADDI. COMMISSIONER OF INCOME TAX (DR) ITAT, CHANDIGARH MADAM, SUB:- APPEAL FILED BY THE DEPARTMENT IN THE CASES OF M/S KAPSONS GLOBAL (P) LTD., M/S KAPSONS REALTECH(P) LTD., KAPSONS RETAIL PVT. LTD., AND KAPSONS WARDROBE (P)., MOHALI IN ITA NOS. 1125, 1126 AND 11 29,1130/ CHD/ 2018 FOR THE A.Y. 201S-16-REGARDING KINDLY REFER TO YOUR OFFICE LETTER DATED 15.01.2019 ON THE SUBJECT CITED ABOVE 2. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSME NT RECORD IN THE CASE OF KAPSONS RETAIL PVT. LTD., AND KAPSONS WARDROBE (P)., MOHALI HAS ALREADY BEEN TRANSFERRED TO DCIT CIRCLE 6(1), MOHALI AND COPY OF YOUR OFFICE LE TTER HAS BEEN FORWARDED TO THEIR OFFICE. 3. WITH REGARD TO THE REASONS FOR .FILLING OF APPEA L BEFORE THE HON'BLE ITAT IN THE CASE OF M/S KAPSONS REALTECH (P) LTD FOR THE AS SESSMENT YEAR 2015-16, THE SAME HAS BEEN FILED DUE TO THE REASON THAT THE LD. CIT ( APPEAL) ERRED IN LAW IN ALLOWING RELIEF TO THE ASSESSEE ON ACCOUNT OF LATE PAYMENT OF ESI A ND EMPLOYEE'S CONTRIBUTIONS MADE TO PROVIDENT FUND U/S 36(L)(VA) OF THE INCOMETAXACT ,1961INCONTRAVENTION TO THE CBDT'S CIRCULAR NO. 22/2015 DATED 17.12.2015, WHERE IN IT HAS CLEARLY BEEN STATED THAT THE .CIRCULAR DOES NOT APPLY TO CLAIM OF DEDUCTION RELATING TO EMPLOYEES CONTRIBUTION TO WELFARE FUNDS WHICH ARE GOVERNED BY SECTION 36(L)(VA) OF IT ACT. THE MONETARY LIMITS FOR FILING OF APPEALS DOES NOT APPL Y IN THIS CASE AS THE AS THE PRESENT CASE FALLS IN ONE OF THE EXCEPTIONS LAID DOWN IN PARA 10 OF THE BOARD'S CIRCULAR NO 03/2018 DATED 11.07.2018 ISSUED VIDE F.NO. 279/MISC.142/200 7-ITJ (PT) FOR FILING OF FURTHER APPEALS BEFORE THE HON'BLE ITAT. YOURS FAITHFULLY, SD/- (CHANDRESH KUMAR) INCOME TAX OFFICER, WARD 6(3), MOHALI. 5 COPY SUBMITTED TO :- 1. THE PR. COMMISSIONER OF INCOME TAX-2 CHANDIGARH FOR INFORMATION 2. THE ADD I. CIT,RANGE-VI, MOHALI FOR INFORMATION 3. THE BY. COMMISSIONER OF INCOME TAX/CIRCLE 6(1), MOH ALI YOURS FAITHFULLY, SD/- (CHANDRESH KUMAR) INCOME TAX OFFICER, WARD 6(3), MOHALI. 4. AT THIS JUNCTURE, THE LD. DR WAS ASKED AT BAR TO SPECIFY THE SPECIFIC CLAUSE OF PARA 10 IN WHICH THE PRESENT CASES FELL, SINCE THERE WAS NO SUCH MENTION IN THE AOS REPORT. TO THIS THE LD. DR RESPONDED BY STATING THAT IT WAS TELEPHONICALLY COMMUNICATED TO HER BY THE A.O. THAT THE PRESENT CASES FELL WITHIN THE EXCLUSIONARY CLAUSE 10(B) OF THE CIRCULAR. THE RELEVANT CLAUSE 10(B) OF THE CIRCULAR IS REPRODUCED HEREUNDER: 10. ADVERSE JUDGEMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: . . . (B) WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES , OR 7. THE CLAUSE 10(B) OF THE CIRCULAR, WE FIND, EXCLUDES THOSE JUDGMENTS WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAVE BEEN HEL D TO BE ILLEGAL OR ULTRA VIRUS. ON PERUSING THE REPOR T OF THE A.O., WE FIND THAT THE A.O. HAS MENTIONED THAT THE CIT(A) HAD ALLOWED RELIEF TO THE ASSESSEES IN THE PRESENT CASES IN CONTRAVENTION OF CBDT CIRCULAR NO.22/2015 DATED 17.12.20156 ON THE ISSUE OF ALLOWABILITY OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION OF ESI AND PF AS PER THE PROVISIONS OF SECTION 36(1)(VA) OF THE ACT WHEREIN IT HAS BEEN CLEARLY STATED THAT THE CIRCULAR DOES NOT APPLY TO THE CLAIM OF DEDUCTION RELATING TO EMPLOYEES CONTRIBUTION TO WELFARE FUNDS WHICH ARE GOVERNED BY SECTION 36(1)(VA) OF THE ACT. 8. WE HAVE PERUSED THE ORDER OF THE CIT(A) ALSO WHO HAS ALLOWED THE ASSESSEES APPEAL ON THIS ISSUE FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MARK AUTO INDUSTRIES LTD., 358 ITR 43 (P&H). 6 9. IN VIEW OF THE ABOVE FACTS, IT IS EVIDENT THAT THE ORDER OF THE CIT(A), WHILE ALLOWING THE ASSESSEES GROUND RAISED BEFORE IT, HAS NOWHERE HELD ANY CBDT CIRCULAR TO BE ULTRA VIRES OR ILLEGAL . IN FACT, IT HAS FOLLOWED THE DECISION OF THE HON'BL E JURISDICTIONAL HIGH COURT IN THIS REGARD, BY WHICH IT IS BOUND BY RULE OF JUDICIAL PRECEDENCE. THE LD. DR WAS ASKED TO CLARIFY HOW THE ISSUE WAS COVERED BY CLAUSE 10(B) OF THE CBDT CIRCULAR, TO WHICH THE LD. DR SIMPLY RELIED UPON THE REPORT OF THE A.O. IN THIS REGARD. 10. CONSIDERING THE ABOVE, WE FIND NO MERIT IN THE CONTENTION OF THE LD. DR THAT THE ORDER PASSED BY THE CIT(A) HAD HELD ANY CBDT CIRCULAR TO BE ILLEGAL OR ULTRA VIRES. SINCE NO OTHER EXCLUSIONARY CLAUSE HAS BEEN POINTED OUT TO US IN WHICH THE PRESENT CASES FELL, IT IS CLEAR, THEREFORE, THAT THE PRESEN T CASES ARE COVERED BY THE CBDT CIRCULAR NO.3/2018 AND THE PRESENT APPEALS ARE TO BE TREATED AS WITHDRAWN. 11. IT MAY BE NOTED THAT CBDT VIDE CIRCULAR NO. 3/2018 DATED 11.07.2018 HAS REVISED THE MONETARY LIMIT UPTO RS.20 LACS FOR FILING APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL AND FURTHER VIDE PARA 13 OF THE SAID CIRCULAR IT HAS BEEN CLARIFIED THAT SAID CIRCULAR IS APPLICABLE RETROSPECTIVELY T O THE PENDING APPEALS ALSO. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PRINCIPAL CIT OF INCOME TAX VS. SURINDER KUMAR SINGHAL ITA NO 406-2016 (O&M) VIDE ORDER DATED 30.1.2017 WHILE FURTHER RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DHANALEKSHMI BANK LTD. (2015) 373 ITR 526 (SC), HAS DISMISSED THE APPEAL OF THE REVENUE WITHOUT GOING INTO THE MERITS DUE TO LOW TAX EFFECT LEAVING THE QUESTION OF LAW OPEN. IN VIEW OF THE CBDT CIRCULAR NO. 03/2018 (SUPRA) AND IN THE LIGHT OF TH E ABOVE REFERRED TO DECISION OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT (SUPRA), THE PRESENT APPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. 5. FOLLOWING THE SAME WE HOLD THAT THE ISSUE IS N OT COVERED IN ANY OF THE EXCEPTIONS PROVIDED IN THE CB DT CIRCULAR GIVING GUIDELINES FOR WITHDRAWAL OF APPEA LS INVOLVING LOW TAX EFFECT. THERE IS THEREFORE NO MIS TAKE IN THE ORDER OF THE ITAT AND THE MISCELLANEOUS APPLICATION FILED ARE LIABLE TO BE DISMISSED. 7 6. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ' # $ %! (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER &' /ACCOUNTANT MEMBER )' /DATED: 14 TH MARCH, 2019 * ! * '*!+,-,! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # .! / CIT 4. # .! ( )/ THE CIT(A) 5. ,/0 !1 , % 1 , 23405 / DR, ITAT, CHANDIGARH 6. 046$ / GUARD FILE '* # / BY ORDER, / ASSISTANT REGISTRAR