Ita-382-2019 (O&M v. Rajender Prasad Moody (1978),Tis Itr 519 2

ITA-382-2019 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA.AT CHANDIGARH ITA-382-2019 (O&M)Date of Decision : 6.2.2020 The Pr. Commissioner ofIncome Tax-2, Chandigarh ..- APpellant 3 +%4% M/s. TDS Management Consultant Pvt. Ld. _...... Respondent CORAM : HON'BLE MR.JIUSTICEKE AJAY TEW* HON'BLE MR.JUSTICE AVNEESH JHINGAN| ;;; Present °Ms. Urvashi Dhugga, Sr. Standing counselfor the appellant. ;;; AJAY TEWARI, J. (Oral) l.This appeal has been by the Revenue under Section 260-A ofthe Income Tax Act, 1961 (for short 'the Act') against the order dated27.3.2019 relating to assessment year 2014-2015 of the Income TaxAppellate Tribunal Division Bench Chandigarh, in M.A. No. 50/Chd/2019in ITA No. 656/Chd/2018 (Annxure A-4) claiming following questions of law :- (1)Whether on the facts and in the circumstances of thecase, the order of the Hon'ble ITAT in dismissing theMiscellaneous application without going through the meritsof the case is not perverse and the legal issue raised byrevenue before it should be reinstated and decided onmerits 2 (11)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application of the Revenue without discussingthe merits ignoring the legislative intent expressed in CBDT's ITA-382-2019 (O&M) Circular No. 5/2014 dated 11.02.2014, which explicitly statesthat expenses relatable to earning of exempt income have tobe considered for disallowances irrespective of the factwhether any such income has been earned during the F.Y. ornot as confirmed by Apex Court in Maxopp Investment Ltd.Vs. CIT, 91 Taxman.com 154 (SC) ? (111)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application of the Revenue, withoutappreciating the fact that applicability ofsection 14A or RuleSD does not depend on earning ofincome as held by SupremeCourt in the case of CIT vs. Rajender Prasad Moody (1978),TIS ITR 519 2 (iv)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application and not deciding the merits,without appreciating the fact that there is no such restrictionto disallow the interest to extent exempt income stipulatedeither in section 14A of the Income Tax Act or Rule 8D of theIncome Tax Rule ? (v)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application and not deciding the merits,ignoring the principal of apportionment regardless of exemptincome laid down by Hon'ble Supreme Court decision in CITvs. Walfor Share and stock Brokers P Ltd : 326 ITR 1 (SC)and upheld by the Hon'ble Supreme Court in 91Taxmann.com 154 (SC) 2 (v1)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application of the Revenue and not decidingthe merits, whereas the disallowances wa restricted by Ld.CIT (A) to the extent except income earned ignoring the factthat Hon'ble Supreme Court ofIndia in Civil Appeal No. 1423of 2015 filed by Avon Cycles Ltd. Decided with Maxopp ITA-382-2019 (O&M) Investment Ltd. And many other cases decided the issue infavour ofdepartment ? (v1)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in dismissing theMiscellaneous application of the Revenue and not decidingthe merits, whereas the disallowances wa restricted by Ld.CIT (A) to the extent except income earned ignoring the factthat Hon'ble Supreme Court ofIndia in Civil Appeal No. 1423of 2015 filed by Avon Cycles Ltd. Decided with Maxopp ITA-382-2019 (O&M) Investment Ltd. And many other cases decided the issue infavour ofdepartment ? (vil)Whether on the facts and in the circumstances of thecase and in law, Hon'ble ITAT has erred in dismissing theMiscellaneous application and not deciding the merits of thecase because order of Ld. CIT Appeal is perverse in holdingthat it is now ‘res integra’ that disallowances u/s 14A cannotexceed exempt income, when Supreme Court has upheld theprinciples of apportionment and department is in SLP on thesame issue in the cases of Moderate Leasing and CapitalServices Pvt. Ltd in ITA No. 102 of 2018, A.Y. 2009-10 andMatrix Cellular Services (P) Ltd. in ITA No. 454 of20174 andNilgiri Infrastructure Development Ltd. in ITA No. 135 of2016 and Instant Holding Ltd. in ITA No. 2168 of2011 ?(vill) Whether on the facts and in the circumstances of thcase and in law, Hon'ble ITAT has erred in dismissing theMiscellaneous application and not deciding the merits of thecase ignoring the legality of CBDT Circular No. 5 of 2014which is in consonance with legislative intent behind Section14A and the charging sections 4 and 5 ofthe Income Tax Act,1961, which lay down that total income under the Act wouldinclude income from all sources whether “received”, deemedto be received”, “accrued” or “deemed to accrue” ? 2.Brief facts of the case are that originally the appeal of theRevenue was dismissed by the Tribunal on account of low tax effect inview of the CBDT Circular No. 03 of 2018 dated 11.7.2018. Thereafter,the application for rectification was filed which was dismissed videimpugned order holding that this was outside the scope of rectification,Today, learned counsel has argued that the case was wrongly dismissed onaccount of low tax effect whereas it was covered by exceptions in Circular,However, when we go through the circular, the only item which could bepossibly related is para No. 10 of the circular which is quoted herein below “10. Adverse judgments relating to the following issuesshould be contested on merits notwithstanding that the taxeffect entailed is less than the monetary limits specified inpara 3 above or there is no tax effect : (a) Where the Constitutional validity of the provisions of anAct or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circularhas been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has beenaccepted by the Department, or (d) Where the addition relates to undisclosed foreignassets/band account. 3.The only point to which this argument can be relatable isClause 10 (b). We asked the learned counsel where any Notification,Order, Instruction or Circular has been held to be illegal or ultra vires. Her argument is that though no Order, Notification, Instructions or Circular hasbeen held to be legal or ultra vires but effect of the said Circular has notbeen correctly understood. In our considered view, that is beyond theexception clause count down by the circular. | 4Accordingly, no substantial question of law proposed arises.Consequently, the appeal stands dismissed. 45Since the main case has been dismissed, the pendingapplication, if any, also stands disposed of. (AJAY TEWARIT) JUDGE 6.2.2020anuradha (AVNEESH JHINGAN)JUDGE