Ita/483/2015 Of Commissioner Of Income Tax Ii Ludhiana v. M/S Aarti Steels Ltd

I N THE HI GH COURT OF PUNJAB AND HARYANA ATCHANDI GARH --I TA 483 2015 ( O&M) -Dat e of deci si on: 28. 11. 2016 The Pr . Commi ssi oner of I ncome Tax- 2, Ludhi ana . . . Appel l ant Ver sus M/ s Aar t i St eel s Lt d. . . . Respondent CORAM: HON’ BLE MR. JUSTI CE S. J. VAZI FDAR, CHI EF JUSTI CEHON’ BLE MR. JUSTI CE DEEPAK SI BAL Pr esent : -Mr . Zor a Si ngh Kl ar , Advocat e, f or t he appel l ant . Mr . Al ok Mi t t al , Advocat e, f or t he r espondent . * * * * S. J. VAZI FDAR, C. J. ( ORAL) Thi s i s an appeal agai nst t he or der of t he I ncome TaxAppel l at e Tr i bunal conf i r mi ng t he or der of t he CI T ( Appeal s) i nr espect of t he assessment year 2007- 2008. 2.The appeal i s admi t t ed on t he f ol l owi ng subst ant i alquest i ons of l aw: - “ ( i ) Whet her on t he f act s and i n t heci r cumst ances of t he case and i n l awt he Hon’ bl e I TAT i s cor r ect i nuphol di ng t he or der of CI T ( Appeal s) -2, Ludhi ana i n del et i ng di sal l owanceu/ s 14A of t he I . T. Act ? ( i i ) Whet her on t he f act s and i n t heci r cumst ances of t he case and i n l aw ( a) The Hon’ bl e I TAT i s cor r ect i ngr ant i ng r el i ef t o t he assessee on t hebasi s ofi t s own or der i n t he case ofM/ s Nahar Capi t al & Fi nanci alSer vi ces, Ludhi ana vi de i n I TANo. 1353/ CHD/ 2012 and I TANo. 1120/ Chd/ 2011 wi t hout appr eci at i ngt hat i n t he case of M/ s Nahar Capi t al & Fi nanci al Ser vi ces, Ludhi ana, t he AOhad made an addi t i on under cl ause ( f )of expl anat i on 1 bel ow sect i on 115JBwher eas i n t he case of assessee t heassessi ng of f i cer has not di st ur bedbook pr of i t s. ( b) I n vi ew of t he above Hon’ bl e I TAThas er r ed i n not appr eci at i ng t he f actt hat t he deci si on i n t he case ofM/ s Nahar Capi t al and Fi nanci alSer vi ces, Ludhi ana i s not appl i cabl ei n t hi s case. ( i i i ) Whet her on t he f act s and i n t heci r cumst ances of t he case and i n l awt he l d. I TAT i s cor r ect i n uphol di ngt he or der of t he l d. CI T ( Appeal )wi t hout appr eci at i ng t he i mpl i cat i onof sub sect i on ( 1A) , ( 2A) , ( 3A) ( 4) and( 5) of Sect i on 115JAA r . w. Sect i on115JB of t he I . T. Act , 1961?” 3.Nei t her t he CI T ( Appeal s) , nor t he Tr i bunal haveadopt ed t he cor r ect appr oach t o t he mat t er . They have notadver t ed t o t he mai n i ssue t hat ar i ses. 4.The assessee f i l ed i t s r et ur nof i ncome f or t heassessment year 2007- 2008 showi ng an i ncome of about` 28. 87 cr or es under Sect i on 115JB of t he I ncome Tax Act , 1961( i n shor t t he Act ) . The Assessi ng Of f i cer not ed t hat t heassessee had ear ned i ncome f r om di vi dend of about ` 82, 165/ - andhad shown an i nvest ment i n shar es and mut ual f unds of about` 17. 07 cr or es. Ul t i mat el y, t he Assessi ng Of f i cer comput ed t hedi sal l owance under Sect i on 14Aof t he Actat about` 1. 03 cr or es. For t he pur pose of t hi s appeal , we ar e notconcer ned wi t h whet her t he di sal l owance was r i ght l y comput ed ornot .The Assessi ng Of f i cerul t i mat el y assessedt he r egul ari ncome at`1. 03 cr or es. However , t he book pr of i t of`28. 87 cr or es was assessed f or t ax pur poses underSect i on 115JB.The r espondent / assessee chal l enged t he samebef or e t he CI T ( Appeal s) . I t i s i mpor t ant t o not e t hat t heAmodh Sharma2016.12.01 14:59assessee had i t sel f chal l enged t he comput at i on of di sal l owanceI attest to the accuracy andauthenticity of this documentchandigarh under Sect i on 14A on var i ous gr ounds. The CI T ( Appeal s) , i nt eral i a, hel d as under : - “ 3.Gr ounds No. 1 t o 3: - These gr oundsar e agai nst di sal l owance ofRs. 1, 03, 46, 099/ - u/ s 14A r ead wi t hr ul e 8D. under Sect i on 14A on var i ous gr ounds. The CI T ( Appeal s) , i nt eral i a, hel d as under : - “ 3.Gr ounds No. 1 t o 3: - These gr oundsar e agai nst di sal l owance ofRs. 1, 03, 46, 099/ - u/ s 14A r ead wi t hr ul e 8D. 3. 3 I have car ef ul l y consi der ed t heappel l ant ’ s submi ssi ons. The f act swhi ch need t o be not ed ar e t hat t heappel l ant f i l ed i t s r et ur n of i ncome on29. 10. 2007 decl ar i ng l oss ofRs. 9, 75, 28, 257/ - and book pr of i t s u/ s115JB at Rs. 28, 87, 00, 981/ - . Theassessment u/ s 143( 3) was made on ani ncome of Rs. 1, 03, 46, 099/ - and si ncet he t ax payabl e u/ s 115JB exceeded t het ax on r egul ar i ncome hence bookpr of i t s of Rs. 28, 87, 00, 981/ - wer eassessed t o t ax. The i ssue whi ch needst o be consi der ed i s whet her pr ovi si onsof sect i on 14A ar e appl i cabl e f ordet er mi ni ng book pr of i t s under sect i on115JB of t he Act . Thi s i ssue i ssquar el y cover ed by t he deci si on of t heHon’ bl e I TAT, Chandi gar h i n t he case ofM/ s Nahar Capi t al and Fi nanci alSer vi ces, Ludhi ana f or A/ Y 2008- 09. I nt hi s or der dat ed 27. 07. 2012 i n I TA No.1120/ CHD/ 2011,t he Hon’ bl e I TAT hel d asunder : - “ The i ssue ar i si ng i n t he pr esentappeal i s i dent i cal t o t he i ssue bef or et he Chandi gar h Bench of t he Tr i bunal i nDCI T Vs. I nd- Swi f t Lt d. ( Supr a) andf ol l owi ng t he same we di r ect t heAssessi ng Of f i cer t o adopt t he bookpr of i t s as per t he Pr of i t & l ossAccount and t o not make addi t i on onaccount of di sal l owance wor ked outunder sect i on 14A of t he Act , as suchdi sal l owance i s comput ed under t henor mal pr ovi si on of t he Act , whi ch ar enot appl i cabl e f or det er mi ni ng bookpr of i t s under sect i on 115JB of t heAct . ” Thi s vi ew has been agai n f ol l owed byt he Hon’ bl e I TAT i n or der dat ed16. 04. 2013 i n t he case of M/ s Nahar Capi t al and Fi nanci al Ser vi ces,Ludhi ana f or AY 2009- 10 i n I TA No.1353/ Chd/ 2012. Respect f ul l y f ol l owi ngt he deci si ons of t he Hon’ bl e I TAT, t hedi sal l owance made u/ s 14A r ead wi t hRul e 8D f or comput i ng book pr of i t u/ s115JB of t he I ncome Tax Act i s del et ed.Thi s gr ound of appeal i s accor di ngl yal l owed. ” 5.As we ment i oned ear l i er , f or t ax pur poses, t he i ncomeunder Sect i on 115JB was t aken i nt o consi der at i on wi t hout maki ngany di sal l owance i n r espect t her eof under Sect i on 14A.Admi t t edl y, f or t he pur pose ofSect i on 115JB, t he book pr of i t sassessed by t he assessee wer e accept ed and t he assessee wasbr ought t o t ax accor di ngl y. The CI T ( Appeal s) , t her ef or e,wr ongl y obser ved t hat t he i ssue whi ch r equi r ed consi der at i on i swhet her t he pr ovi si ons of Sect i on 14A ar e appl i cabl e f ordet er mi ni ng t he book pr of i t s underSect i on 115JB. I n vi ew ofwhat we have j ust sai d t hi s i ssue does not ar i se. The l ast butone sent ence i n par agr aph 3. 3 quot ed above woul d causedi f f i cul t i es i n f ut ur e. The CI T ( Appeal s) obser ved t hat t hedi sal l owance under Sect i on 14A r ead wi t h Rul e 8D f or comput i ngbookpr of i t under Sect i on 115JB was del et ed. Whi l e i t i spossi bl e t o r est r i ct t hi s obser vat i on f or t he pur pose ofSect i on 115JB al one, i t i s al so possi bl e t hat i n f ut ur e t hesame conf usi on may ar i se on account of t he assessee cont endi ngt hat t he di sal l owance under Sect i on 14A was set asi de. 6.Mor e i mpor t ant , i t was necessar y f or t heCI T ( Appeal s) t o comput e t he di sal l owance under Sect i on 14A f ort he pur pose of f ut ur e assessment year s.UnderSect i on 115JAA of t he Act , i t was necessar y t o comput e t hecor r ect di sal l owance under Sect i on 14A, ast he assessee i sent i t l ed t o t he cr edi t st i pul at ed t her ei n. I t was necessar y,t her ef or e, f or t he CI T ( Appeal s) t o comput e t he di sal l owance,i f any, under Sect i on 14A. 7.The Tr i bunal f el l i nt o t he same er r or . Par agr aph 6 oft he or der of t he Tr i bunal i mpugned i n t hi s appeal r eads asunder : - 8.The Tr i bunal has gone a st ep f ur t her i n obser vi ngt hat t he i ssue of di sal l owance under Sect i on 14A was academi c.I t i s not .As we ment i oned ear l i er , i ti s necessar y t hat t he di sal l owance under Sect i on 14A i s al so comput ed f or i t may havean ef f ect i n t he f ut ur e year s on account of t he benef i taccor ded t o an assessee under Sect i on 115JAA. 9.I n t hese ci r cumst ances, t he i mpugned or der andj udgement i s set asi de. The mat t er i s r emanded t o t he Tr i bunalf or det er mi ni ng al l t he i ssues r ai sed by t he assesseeespeci al l y t he i ssue of di sal l owance under Sect i on 14A.Needl ess t o cl ar i f y t hat al l t he cont ent i ons of t he par t i esi ncl udi ng as t o t he appl i cabi l i t y of Rul e 8D ar e kept open.10.Mr . Mi t t al wi t hout pr ej udi ce t o hi s ot her cont ent i onssubmi t t ed t hat t he mat t er ought t o be r emanded t o t heCI T ( Appeal s) as even t he CI T ( Appeal s) had not det er mi ned t her el evant i ssues r ai sed by t he assessee. I t woul d be open t o t he assessee t o r ai se t hi scont ent i on bef or e t he Tr i bunal . I t woul d be f or t he Tr i bunal t odeci de whet her t o r emand t he mat t er t o t he CI T ( Appeal s) or t odeci de i t i t sel f as t he Tr i bunal i s al so a f act f i ndi ngaut hor i t y. 11.The ot her appeal s, namel y,I TAs- 65, 66, 442- 2015, 149,157, 294, 128, 82, 225, 340, 259, 260, 261, 272, 275, 301, 302 &327- 2016 whi ch wer e t agged wi t h t hi s appeal r ai se di f f er ent i ssuesal so i ncl udi ng as t o whet her Rul e 8D i s r et r ospect i ve or not .Thoseappeal s whi ch wer e t agged ear l i er , ar e, t her ef or e,segr egat ed andnot deci ded by t hi s or der . ( S. J. VAZI FDAR)CHI EF JUSTI CE 28. 11. 2016AmodhWhet her speaki ng/ r easonedYes/ NoWhet her r epor t abl eYes/ No ( DEEPAK SI BAL)JUDGE