9911796707
TMI Blog2018 (12) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... wing grounds without prejudice to each other: - "1. In the facts and circumstances of the case and in law, it should be held that the Order u/s. 263 of the Income Tax Act, 1961 (the Act) dated 271h December, 2017 passed by the Pr. Commissioner of Income Tax-2, Mumbai directing the AO to determine expenses incurred in relation to exempt income and add such expenses in computing the books profits u/s. I ISJB of the Act is bad in law in view of the following reasoning's: - (a) Keeping in view the directions contained at Page Nos. 11 and 12 vide Para No. 11 of the said Order i. e "to determine the expenses incurred in relation to exempt income and add such expenses while computing the book profit under Section 1 15. JB of the Act read with clause (t) of Explanation 1 to the said Section of the Act" which tantamounts to passing of the fresh order of assessment, resulting in exceeding his jurisdiction. (b) The AO has determined expenses incurred in relation to exempt income by invoking Section 14A read with Rule SD. The Pr. C. I. T. has not established that expenses so determined are incorrect. (c) Pursuant to the specific inquiry made by the AO in the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to the computation as contemplated u/ s. 14A read with Rule 8D. 3. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted." 3. Brief facts relating to this issue are that the assessee has claimed exempt income of Rs. 3403. 90 crores on an investment of Rs. 38378. 03 crores. The assessee company suo moto disallowed a sum of Rs. 873. 24 crores as expenditure relatable to exempt income. The AO during the course of assessment proceedings framed under section 143(3) read with section 144C (3) of the Act and recomputed the disallowance under Rule 8D(2)(ii) & (iii) read with section 14A of the Act after going into the details amounting to Rs. 302. 46 crores apart from the disallowance made by assessee suo moto. The AO recomputed the disallowance as under: - Accordingly, the following the calculation u/s made for the purpose of disallowance under section 14A. Description Amount as per Rule 8D(2)( Rs. in crores) Addition (Rs. in crores) (i) The amount of expenditure directly relating to income which does not form p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04. 12. 2017, for revising the assessment dated 30. 03. 2016 passed by the AO due to the following reasons: - "In this case during the assessment under section 143(3) read with section 144C an addition of Rs. 3, 02, 46, 000/- was made under section 14A, calculated on the basis of methodology prescribed in Rule 8D. However, the same was not included in computing the book profit under the provisions of section 115Jb of the Act by the Assessing Officer in the assessment order dated 30. 03. 2016. the failure to add the aforesaid amount to book profit has rendered the assessment order dated 30. 03. 2016 erroneous in so far it is prejudicial to the interest of revenue. " 6. The assessee subsequently replied that this aspect has been considered by the AO in the original assessment order and he specifically referred to the observations of the CIT(A) which are already reproduced in this order. The assessee also contended that the AO has taken one of the possible view on this aspect because Hon'ble Delhi High Court in the case of CIT . v. Goetze (India) Ltd. (2014) 361 ITR 505 (Delhi) held that computing the book profit under section 115 JB of the Act, the necessary disallowances under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in clause (38) thereof or section 11 or section 12 apply / is/are required to be added to the book profit. Further, as per section 14A(1), for the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. The incomes which do not form part of the total income are enumerated in Chapter III in section 10 to 136. From the aforesaid provisions of law, it is absolutely clear that the expenses related to exempt income are required to be added in computation of book profit under section 115JB. 10. In the instant case, the Assessing Officer determined the expenses relatable to exempt income invoking the provisions of section 14A read with Rule 8D for computation of total income under the normal provisions of the Act. However, no such exercise was undertaken by the Assessing Officer to correctly determine the expenses incurred for earning the exempt income which was required to be disallowed and added to the Book profit in accordance with clause (f) of explanation 1 to the said section of the Act. The assessment order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue and also considered the decisions of Hon'ble Delhi High Court in the case of Goetze (India) Ltd. (supra) and Bhushan Steels And Strips Ltd. (supra) and held as under: - "6. 20 Thus, it cannot be said that Hon'ble Delhi High Court has not considered this issue and merely allowed the revenue's appeal on concession. The substantial question of law framed by Hon'ble Delhi High Court clearly shows that the specific issue was whether disallowance u/s 14A was required to be made while computing book profit u/s 115JA/ 115JB. The Hon'ble Delhi High Court has not only recorded assessee's plea of merely not contesting the issue in view of specific provisions but has recorded that the counsel fairly conceded. The expression "fairly" implies that Hon'ble High Court was also of the view that the provisions of section 14A were applicable with full force to the corresponding provisions u/s 115J. 6. 21 Ld. Principal CIT(DR) has, in this regard, referred to the decision of Hon'ble Supreme Court in the case of K. Y. Pilliah & Sons (supra), wherein in para 10, it has been observed as under: 10. The form of the second question needs some explanation. The Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties are agreed on certain provision of law. We, therefore, reject the assessee's contention that the decision of Ho'nble jurisdictional High Court in Goetze (India) Ltd's. case (supra) does not constitute a binding precedent more particularly in respect of subordinate courts including Tribunal functioning within its jurisdiction. However. Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:- "ITA 593/2015 PR. CIT . . . . . . . . . . Appellant Through: Mr. N. P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate. versus BHUSHAN STEEL LTD Respondent Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate. ORDER 29. 09. 2015 ** ** &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt II & III of Schedule VI to Company's Act, 1956. Explanation (I) to section II5JB(2) defines the expression "book profit" and means the net profit as shown in the P&L A/c for the relevant previous year prepared under sub-section (2) as increased by the amounts specified in clause (a) to (h) of the Explanation I. Clause (f) of the Explanation 1 refers to the amount or amounts or expenditure retable to any income to which section 10 (other than provisions contained in clause 38 thereof or section 11 or section 12 apply. For applying the provisions of clause (f) of Explanation to section 1I5JB(2), there should be nexus between the amount of expenditure relatable to the income exempt u/s 10 of the Act. The dividend income is exempt u/s 10(33) for assessment year 2001-02. Since the expenditure incurred has not been identified and no nexus has been established with the dividend income, the expenditure could not be disallowed under clause (f) of the Explanation. As per the decision of Hon 'ble Supreme Court in the case of Apollo Tyres Ltd. , the Assessing Officer is not entitled to tinker with the book profits as determined as per provisions of Company's Act unless the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a court of the same rank; (v) if it is a precedent sub silentio or not fully argued; (vi) when it is rendered per incuriam, i. e. , in ignorance of a statutory provision or binding precedent - however, the rule of per incuriam is of limited application, and if the provision of the Act was noticed and considered, then the judgment cannot be ignored as being per incuriam merely on the ground that it has erroneously reached the conclusion; and (vii) when it is an erroneous decision, i. e, a decision conflicting with the fundamental principles of law. Ld. Principal CIT(DR) further relied on the decision of Hon'ble Bombay High Court in the case of CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 wherein hon;ble court while summarizing the general principles with regard to precedents, inter-alia, observed as under:- (iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. Ld. Principal CIT(DR) has also relied on following decisions :- - CIT v. Pamwi Tissues Ltd. [2009] 313 ITR 137 (Bom. ) - Indian Oil Corpn. Ltd. v. State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be followed and not the later decision given in the case of Bhushan Steel. Further, the Hon'ble Supreme Court in the case of Mamaleshwar Prasad v. Kanhaiya Lal (Dead) AIR 1975 SC 907 observed as follows :- "Certainity of the law, consistency of rulings and comity of Courts all flowering from the same principle converge to the conclusion that a decision once rendered must later bind like cases. We do not intend to detract from the rule that, in exceptional instances where by obvious inadvertence or over sight a judgement fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have the sway of binding precedents. It should be a glaring case, an obtrusive omission. " Although the above observations are not 'ratio' but then as held in the case of (1) Kharawala v. ITO 147 ITR pages 67, 85 :- The observation of the Supreme Court on the true interpretation of sub-section (1) cannot, therefore, be regarded as mere passing observations. At the highest, they may be treated as an obiter dictum, that is to say the expression of opinion on a point which it was not necessary for the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on following decisions :- 1. Indo Swiss Time Ltd. v. Umrao AIR 1981 Punj. & Har. 213 2. Amar Singh Yadav v. Shanti Devi AIR 1987 Pat 191 3. T. P. Naik v. Union of India AIR 1998 MP 83 Third proposition advanced by Ld. Senior Counsel is that a lower authority/Court cannot declare a judgment of a higher Court as per incurium. In this regard he has relied on following decisions:- 1. Cassel & Co. Ltd. v. Broome [1972] 1 All ER 801 (HL)uoted in ITO v. Modern International ITA No. 1253/Kol/2011. 2. CIT v. B. R. Constructions [1993] 202 ITR 222/[1994] 73 Taxman 473 (AP) (FB). Thus, we are pitted against two decisions of Hon'ble jurisdictional high court taking divergent views and, under such circumstances we have to decide which decision to follow. We find from the decisions relied upon by Ld. Senior Counsel more particularly in the case of Bhika Ram (supra) that later pronouncement by a bench of co-equal strength should be followed even if earlier decision was not considered. We are not convinced with the submission of ld. Senior Counsel that Tribunal can decide which decision state the law more elaborately and accurately. We are of the view that decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh notice was served on the assessee. The ITO determined the tax due from the assessee for the assessment year at Rs. 1, 25, 512, 10, and on that basis, the penalty payable by the assessee was fixed at Rs. 12, 734. 10. It may be pointed out that on February 2, 1961. a provisional assessment was made by the ITO under section 23B of the 1922 Act. Immediately thereafter , the assessee deposited Rs. 92, 294. 55. In determining the penalty due from the assessee, the ITO took into consideration not the amount demanded under section 156 of the Act but the amount assessed under section 143 of the Act. In the back drop of these facts the controversy before Hon'ble Supreme Court was whether the penalty was to be levied on the tax assessed under section 143 or as demanded under section 156 being tax assessed minus the amount paid under the provisional assessment order. Hon'ble Supreme Court before resorting to the interpretation of term in addition to the amount of the tax, if any, payable by him as appearing in section 271(l)(a)(i) observed as under:- "On the other hand, it two reasonable constructions of a taxing provision are possible, that construction which favours the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
