9911796707
TMI Blog2021 (5) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... puted the disallowance under section 14A at Rs. 1,55,774 on a reasonable basis. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in upholding the action of the Assessing Officer in invoking the provisions of Rule SD without recording nonsatisfaction with the correctness of the disallowance of Rs. 1,55,774 made by the appellant on a reasonable basis. 4. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in holding that the appellant cannot challenge the non-recording of satisfaction before making the disallowance as per Rule 8D on the ground that the appellant had itself made a suo-moto disallowance. 5. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in not appreciating the fact that no expenditure is required to be incurred by the appellant in respect of longterm legacy investments in group companies. 6. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in not appreciating the fact that disallowance under section 14A can be only if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. The relevant finding has been given in para no. 4.8 to 4.18 which is hereby reproduced as under.:- " 4.8. Ld. counsel submitted that Section 14A contemplates disallowance of both direct and indirect expenditure having proximate connection with the exempt income. He submitted that in terms of sub-section (1) of Section 14A of the act, any expenditure incurred in relation to exempt income is not an allowable deduction Thus, the pre-requisite condition for applying the provisions of section 14A of the Act is that some expenditure must be incurred "in relation to" the earning of exempt income. The said expression "in relation to" has been judiciously explained to mean some real and dominant relationship. 4.9. In this regard ld. counsel has relied on the decision of Hon‟ble Supreme Court in the case of CIT Vs. Walford Share & Stock Brokers 326 ITR 1, wherein it has been held by the Apex Court that there must be proximate relationship of expenditure with the exempt income for the purpose of making disallowance u/s 14A of the Act. This decision was followed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reading additional words into the statute which is not permissible and would be against the cardinal rule of "literal interpretation‟. In this regard ld. counsel has relied on following decisions: - Jugal Kishore Saraf v. Raw Cotton Co. Ltd. AIR 1955 SC 376, wherein it has been observed as under: " The cardinal rule of construction of statutes is to read the statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning, the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation. In the present case, the literal construction leads to no apparent absurdity and therefore, there can be no compelling reason for departing from that golden rule of construction. " 4.15. He also relied on various other Supreme Court decisions as mentioned in the Broad Proposition advanced by the ld. counsel. Ld. counsel also referred to the Jurisdictional High Court in the case of Great Eastern Exports v. CIT 332 ITR 14, wherein also it has been held that if the language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of the matter has answered the aforesaid question of law in favour of the Assessee and against the Revenue. In effect the Full Bench, has not agreed with the view taken by the Division Bench in Orient (Goa) Private Limited (supra). 13. As noted earlier, since, the ITAT in its impugned judgment and order dated 17th May, 2013, has solely relied upon Orient (Goa) (P.) Limited (supra) in order not to follow its own view, in respect of this very Appellant - Assessee, in respect of Assessment Year 2009-2010, we feel that the substantial questions of law Nos.(i) and (ii) now framed in Tax Appeal No. 17 of 2013, are required to be answered in favour of the Appellant - Assessee and against the Respondent - Revenue, now that the Full Bench of this Court has disagreed in view of the Division Bench in Orient (Goa) (P.) Limited (supra) and decided the substantial question of law in favour of Assessee and against the Revenue. We do so accordingly. 14. Therefore, the substantial questions of law Nos.(i) and (ii) framed in Tax Appeal No. 17 of 2013 are hereby answered in favour of the Appellant - Assessee and against the Respondent-Revenue. To that extent, the view taken by the ITAT in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of interpretation are quite well settled. In New Shorrock Spinning and Mfg. Co. Ltd. v. Raval, [1959] 37 ITR 41 (Bom.), it is held that one safe and infallible principle, which is of guidance in these matters, is to read the words through and see if the rule is clearly stated. If the language employed gives the rule in words of sufficient clarity and precision, nothing more requires to be done. Indeed, in such a case the task of interpretation can hardly be said to arise : Absoluta sententia expositore non indiget. The language used by the Legislature best declares its intention and must be accepted as decisive of it. 19. Besides, when it comes to interpretation of the IT Act, it is well established that no tax can be imposed on the subject without words in the Act clearly showing an intention to lay a burden on him. The subject cannot be taxed unless he comes within the letter of the law and the argument that he falls within the spirit of the law cannot be availed of by the department. [See CIT v. Motors & General Stores [1967] 66 ITR 692 (SC)]. 20. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : "(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains" 25. However, when the matter came up before the Select Committee of the Parliament, it was decided to omit the word "cess" from the aforesaid clause from the Income-tax Bill, 1961. The effect of the omission of the word "cess" is that only any rate or tax levied on the profits or gains of any business or profession are to be deducted in computing the income chargeable under the head "profits and gains of business or profession". Since the deletion of expression "cess" from the Income-tax Bill, 1961, was deliberate, there is no question of reintroducing this expression in Section 40(a)(ii) of IT Act and that too, under the guise of interpretation of taxing statute. 26. In fact, in the aforesaid precise regard, reference can usefully be made to the Circular No. F. No. 91/58/66-ITJ(19), dated 18th May, 1967 issued by the CBDT which reads as follows :- "Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 - Clarification regarding.- "Recently a case ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. 29. In Kanga and Palkhivala's "The Law and Practice of Income Tax" (Tenth Edition), several decisions have been analyzed in the context of provisions of Section 40(a)(ii) of the IT Act, 1961. There is reference to the decision of Privy Council in CIT v. Gurupada Dutta [1946] 14 ITR 100 (PC), where a union rate was imposed under a Village Self Government Act upon the assessee as the owner or occupier of business premises, and the quantum of the rate was fixed after consideration of the 'circumstances' of the assessee, including his business income. The Privy Council held that the rate was not 'assessed on the basis of profits' and was allowable as a business expense. Following this decision, the Supreme Court held in Jaipuria Samla Amalgamated Collieries Ltd. v. CIT 1971 [82 ITR 580] that the expression 'profits or gains of any business or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in a manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income tax and fringe benefit tax, therefore, such "cess" is to be construed as "tax". According to us, there is no scope for such implications, when construing a taxing statute. Even, though, "cess" may be collected as a part of income tax, that does not render such "cess", either rate or tax, which cannot be deducted in terms of the provisions in Section 40(a)(ii) of the IT Act. The mode of collection, is really not determinative in such matters. 34. Ms. Linhares, has relied upon Unicorn Industries v. Union of India [2019] 112 taxmann.com 127 (SC) in support of her contention that "cess" is nothing but "tax" and therefore, there is no question of deduction of amounts paid towards "cess" when it comes to computation of income chargeable under the head profits or gains of any business or profession. 35. The issue involved in Unicorn Industries (supra) was not in the context of provisions in Section 40(a)(ii) of the IT Act. Rather, the issue involved was whether the 'education cess, higher education cess and National Calamity Contingent Duty (NCCD)' on it could be construed as "duty of excise" which was exempted in terms of Notification dated 9th September, 2003 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the present case. The record bears out that such deduction was clearly claimed by the Appellant - Assessee, both before the Commissioner (Appeals) as well as the ITAT. 39. In CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336/208 Taxman 498/23 taxmann.com 23 (Bom), one of the questions of law which came to be framed was whether on the facts and circumstances of the case, the ITAT, in law, was right in holding that the claim of deduction not made in the original returns and not supported by revised return, was admissible. The Revenue had relied upon Goetze (supra) and urged that the ITAT had no power to allow the claim for deduction. However, the Division Bench, whilst proceeding on the assumption that the Assessing Officer in terms of law laid down in Goetze (supra) had no power, proceeded to hold that the Appellate Authority under the IT Act had sufficient powers to permit such a deduction. In taking this view, the Division Bench relied upon the Full Bench decision of this Court in Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351/66 Taxman 27 (Bom.) to hold that the Appellate Authorities under the IT Act have very wide powers ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
