ITO, W-2(5), Chandigarh V. M/s Bassi Steels Ltd., Derabassi

MA 53/CHANDI/2019

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6238 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 8 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-09-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; 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, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER M.A.No. 53/Chd/2019 (Arising out of आयकर अपील सं./ITA No. 587/CHD/2018 Ǔनधा[रण वष[ / Assessment Year : 2004-05 The ITO, Ward-2(5), Chandigarh बनाम M/s Bassi Steels Ltd., Village – Gholu Majra, Derabassi èथायीलेखासं./PAN NO: AABCB2610D अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनधा[ǐरतीकȧओरसे/Assessee by : None राजèवकȧओरसे/ Revenue by : Smt. Amanpreet Kaur, Sr. DR स ु नवाईकȧतारȣख/Date of Hearing : 22.09.2023 उदघोषणाकȧतारȣख/Date of Pronouncement : 25.09.2023 आदेश/Order Per A.D. Jain, Vice President: This is Departmental Application in ITA No. 587/Chd/2018, which was dismissed for tax effect vide order dated 4.10.2018. 2. The Department contends that the Tribunal has dismissed the appeal only on the basis of tax effect which is below the prescribed monetary limit i.e. Rs. 20 lacs as per CBDT Circular No. 3/2018 dated 11.7.2018; that this case was based on the issue of accepted Revenue MA. No.53/Chd/2019 in ITA 587/Chd/2018 - M/s Bassi Steels Ltd, Derabassi 2 audit objection and falls under the exceptions prescribed in the CBDT Circular No. 03/2018 dated 11.7.2018 or amended exception as per letter 20.08.2018 of the CBDT: and that this being so, the Assessee falls under exemption u/s 10(c) of the said circular as per which, irrespective of the low tax effect, the matter needs to be contested on merits. 3. We find that the matter was fixed for hearing on 22.09.2023 and the date was duly intimated to the Assessee. However, none appeared on behalf of the Assessee. Thus, finding that the matter can be proceeded with in the absence of the Assessee, we have heard the ld. DR and we are proceeding to pass this order. We find that CBDT circulars are not binding on the Tribunal. Reliance, in this regard, can 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. 4.1 Firstly, the issue of binding force of the CBDT Circulars on Courts and Tribunal, has been considered by the Hon'ble jurisdictional High Court in “Principal Commissioner of Income Tax-I MA. No.53/Chd/2019 in ITA 587/Chd/2018 - M/s Bassi Steels Ltd, Derabassi 3 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 can also be 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.53/Chd/2019 in ITA 587/Chd/2018 - M/s Bassi Steels 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(c) of the CBDT Circular No. 3/2018 dated 11.07.2018. 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.53/Chd/2019 in ITA 587/Chd/2018 - M/s Bassi Steels Ltd, Derabassi 5 9. In the result, the Application filed by the Department is dismissed. Order pronounced in the Open Court on 25.09.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President Dated : 25 .09.2023 “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