M/s Shamaraju & Company India Pvt Ltd , BAngalore V. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

MA 53/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2782 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 14-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 14A; 115JB; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Assessment Years: 2012-13to 2014-15 M/s. Shyamaraju and Company (India) Private Limited, Divyashree Chambers, ‘A’ Wing, No.11, Shaugnessy Road, Bengaluru – 560 025. PAN : AAACS 6562 L Vs. DCIT, Circle – 6(1)(1), Bengaluru. APPELLANT RESPONDENT Assessee by :Shri.Narendra Sharma, Advocate Revenue by:Shri. Sankar K.Ganesan,CIT(DR)(ITAT), Bengaluru. Date of hearing:16.09.2022 Date of Pronouncement:19.09.2022 O R D E R Per N. V. Vasudevan, Vice President :. V. Vasudevan These are Miscellaneous Applications (MAs) filed by the assessee under section 254(2) of the Income Tax Act, 1961 (hereinafter called ‘the Act’), praying for rectification of errors apparent on the face of the Order of the Tribunal. 2. One of the common issues in the aforesaid 3 appeals filed by the Revenue for Assessment Years 2012-13 to 2014-15 was as to whether the disallowance of expenses under section 14A of the Act, which was computed by the AO under the normal provisions of the Act can be straight away added under clause (f) of MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Page 2 of 6 explanation 1 to section 115JB of the Act. On the above issue, the Tribunal held as follows: “20. We shall now take up the appeals filed by the revenue for AY 2012-13 to 2014-15. The only issue urged in this appeal relates to the decision of Ld CIT(A) in holding that the disallowance computed u/s 14A of the Act cannot be straight away added for computing book profit under clause (f) of Explanation 1 to sec.115JB of the Act. We notice that the Ld CIT(A) has followed the decision rendered by Delhi Special Bench of Tribunal in the case of Vireet Investments Pvt Ltd (supra). However, we notice that the Ld CIT(A) has deleted the addition made to book profit u/s 115JB of the Act. The special bench has only said that the disallowance computed u/s 14A of the Act cannot be adopted straight away for the purpose of clause (f) of Explanation 1 to sec.115JB of the Act, meaning thereby, the amount to be added under clause (f) of Explanation 1 to sec.115JB of the Act has to be computed independently having regard to the books of account. Accordingly, we modify the order passed by Ld CIT(A) on this issue in AY 2012-13 to 2014-15 and restore this issue to the file of AO with the direction to compute the addition to be made clause (f) of Explanation 1 to sec.115JB of the Act independently on the basis of books of accounts.” 3. In these MAs, the assessee has submitted that the Hon’ble Karnataka High Court in three decisions has taken the view that disallowance under section 14A of the Act made under the normal provisions of the Act, cannot be made while computing book profits under section 115JB of the Act under clause (f) of explanation 1 viz., CIT Vs. Gokaldas Images Pvt. Ltd., 429 ITR 526, Sobha Developers Vs. DCIT 434 ITR 266, Karnataka State Industrial and Infrastructure Development Corporation Ltd., Vs. DCIT (2021) 128 taxmann.com 412 (Karnataka). It has further been submitted in the MA that in the aforesaid decisions of the jurisdictional Karnataka High Court was not cited before the Tribunal when the appeals were heard by oversight. It has further been submitted that non-application of the decision of the Hon’ble jurisdictional Karnataka High Court will constitute an MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Page 3 of 6 error apparent on record and has to be rectified under section 254(2) of the Act. In this regard, the assessee has placed reliance on the decision of the Hon’ble Supreme Court in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd., 305 ITR 227. The assessee has therefore prayed that the directions of the Tribunal restoring the issue to the file of AO with the direction to compute the addition to be made clause (f) of Explanation 1 to sec.115JB of the Act independently on the basis of books of accounts, should be modified by holding that the disallowance under section 14A of the Act should not be added to the profits as per the Profit and Loss A/c for determining book profits under section 115JB of the Act by relying on clause f of explanation 1 to section 115JB of the Act. 4. Learned Counsel for the assessee reiterated submissions made in the MP. He further pointed out that in the decision rendered by Hon’ble Supreme Court in the case of Saurashtra Kutch Stock Exchange Ltd., (supra), identical factual situation prevailed whereby a decision of the jurisdictional Gujarat High Court was not cited at the time of the appeal. Subsequently, a MA under section 254(2) of the Act was filed pointing out a decision of the Hon’ble jurisdictional High Court and praying for rectification and on the question whether such a petition is maintainable, the Hon’ble Supreme Court held that non-consideration of a decision of jurisdictional High Court can be said to be a mistake apparent from record which can be rectified under section 254(2) of the Act. Our attention was drawn to the observations of the Hon’ble Supreme Court, whereby it observed that the core issue was whether non- consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a 'mistake apparent li-om the record'? Both, the Tribunal and the High Court were right in holding that such a mistake can he said to be a 'mistake apparent MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Page 4 of 6 from the record' which can be rectified under section 254(2). The Hon’ble Court also observed that it is also well - settled that a judicial decision acts retrospectively. If a subsequent decision alters the earlier one, it (the later decision) does not make a new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect, clarifying the legal position which was earlier not correctly understood. The Hon’ble Supreme Court further noted the facts by observing that in the instant case, according to the assessee, the Tribunal had decided the matter on 27-10-2000. Hiralal Bhagwati's case (supra) was decided few months prior to that decision by the Hon’ble Gujarat High Court, but it was not brought to the attention of the Tribunal. In the circumstances, the Tribunal had not committed any error of law or of jurisdiction in exercising power under sub-section (2) of section 254 and in rectifying 'mistake apparent from the record'. 5. We have considered the submissions of the learned Counsel for the assessee. The submissions of the learned Counsel for the assessee proceeds on the basic assumption that the three decisions of the Hon’ble Karnataka High Court referred to by the assessee in the MA, took the view that no addition can be made to the profits as per the Profit and Loss A/c of any expenditure incurred in earning exempt income (in this case under section 14A of the Act) by invoking clause f to explanation 1 to section 115JB of the Act. The proposition laid down by the Hon’ble Karnataka High Court in the three decisions was that the disallowance computed under the normal provisions of the Act on expenditure that has to be disallowed under section 14A of the Act cannot straight away be added to the profit as per the Profit and Loss A/c by MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Page 5 of 6 invoking clause (f) of explanation 1 to section 115JB of the Act. The decision of the Hon’ble High Court has to be read as laying down of proposition that independently the disallowance under section 14A of the Act made under the normal provisions of the Act, disallowance u/s.14A of the Act has to be worked out independently on the basis of books of accounts of the assessee and only such sums can be added under clause f to explanation 1 of section 115JB of the Act. This being the legal decision emanating from the judgments of the Hon’ble Karnataka High Court on which the learned Counsel for the assessee placed reliance, the prayer sought by the learned Counsel for the assessee in the MA which is to the effect that no addition should be made of the expenses incurred while earning tax free income to the profit as per Proft and Loss A/c by invoking clause f to explanation 1 of section 115JB of the Act, cannot be accepted. Giving such an interpretation as canvassed by the learned Counsel for the assessee will have the effect of nullifying the provisions of clause (f) to Explanation-1 to Sec.115JB of the Act, which was never the intention of the three judgments. In any event, we are of the view that as to whether or not, the decision of Hon’ble Karnataka High Court can be said to have laid down a proposition that no addition to the profit as per profit and loss account of expenses incurred to earn exempt income can be made by invoking clause (f) of explanation-1 to Sec.115JB of the Act, is itself a debatable issue. In the circumstances, such debatable issues cannot be subject matter of proceedings u/s.254(2) of the Act. In other words, the issue canvassed on the interpretation of the three judgments of the Hon’ble Karnataka High Court, is not free from debate and therefore the present petition under section 254(2) of the Act cannot be entertained. Accordingly, these MAs are dismissed. MP Nos.52 to 54/Bang/2022 (in ITA Nos.2142 to 2144/Bang/2018) Page 6 of 6 6. In the result, MAs of the assessee are dismissed. Pronounced in the open court on the date mentioned on the caption page. Sd/- (LAXMI PRASAD SAHU) Sd/- (N.V. VASUDEVAN) Accountant MemberVice President Bangalore, Dated: 19.09.2022. /NS/* Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR 6. Guard file By order Assistant Registrar, ITAT, Bangalore.