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TMI Blog2024 (8) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... venience, the same are disposed of by this common order. First we will take up Assessee's appeal in ITA No.166/Ahd/2022 relating to Asst. Year 2017-18. 3. The brief facts of the case is that the assessee is a Public Sector Undertaking engaged in purchase, sale and distribution of electricity. For the Assessment Year 2017-18, the assessee filed its Return of Income on 18-10-2017 declaring total income of Rs.90,92,02,810/- after setting off Brought Forward Losses of Rs.75,45,22,135/-. The assessee shown book profit u/s. 115JB of Rs.165,54,21,963/-. The return was taken up for scrutiny assessment and various disallowances made by the Assessing Officer namely: (i) Disallowance u/s. 14A of Rs. 154,61,81,000/- (ii) Interest capitalization of CWIP of Rs.6,97,664/- (iii) Interest income on IT Refund of Rs.10,49,47,929/- (iv) Interest income treated as "other sources" of Rs.13,36,99,000/- (v) Dividend Income exempt u/s. 10(34/35) of Rs.12,07,96,095/- (vi) Adjustment in Book Profit under 115JB including the disallowance u/s. 14A. 4. Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A). Regarding the first issue of disallowance u/s. 14A, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty proceedings under section 270A of the IT Act. 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the charging of interest under section 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 4.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of this appeal. 5.1 At the outset, Ld. Counsel Shri Manish J. Shah appearing for the assessee submitted that the disallowance made u/s.14A of the Act is squarely covered by assessee's own case vide ITA Nos. 281 & 282/Ahd/2018 dated 31.07.2023 relating to Asst. Years 2013-14 & 2014-15, wherein similar disallowance u/s. 14A was remanded back to the file of Assessing Officer for fresh adjudication by the Co-ordinate Bench of this Tribunal by following earlier Asst. Year 2008-09 by observing as follows: ".....10. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, there is no ambiguity that the Learned CIT (A) has decided the issue on hand after relying on the order of his predecessor for the Assessment Year 2008-09 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish necessary evidence to prove that no borrowed fund has been utilized for the work-in-progress of Rs.58,13,869/- shown during the year under consideration and accordingly as per the proviso to Section 36(1)(iii) of the I.T. Act the interest expenditure attributable to the capital work-in- progress is not allowable as deduction for computing the total income. [iii] On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in deleting the addition made by the Assessing Officer in computing the Book Profit u/s 115JB of the I.T. Act on account of disallowance u/s 14A read with Rule 8D without appreciating the fact that the amount disallowable under section 14A of the I.T. Act is covered under Clause (f) of Explanation 1 to Section 115JB(2) of the I.T. Act and accordingly the disallowance made u/s 14A of the I.T. Act is required to be added in computing the Book Profit u/s 115JB of the I.T. Act. [iv] It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and that of the Assessing Officer may be restored to the above extent. [v] The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that the Co-ordinate Bench followed the above Jurisdictional High Court judgement and dismissed the Ground raised by the Revenue in its appeal for the Asst. Years 2013-14 & 2014-15 in ITA Nos. 281 & 323/Ahd/2018 dated 31.07.2023. Therefore the present ground raised by the Revenue is liable to be dismissed. 10. Per contra Ld. CIT-DR Shri Akhilendra Pratap Yadaw appearing for the Revenue drawn our attention to the order passed by the Coordinate Bench of this Tribunal in assessee's own case for the subsequent Asst. Year 2018-19 in ITA No.178/Ahd/2023 dated 15.03.2024 wherein Revenue Ground was allowed by observing as follows: "...13. The interest income from staff loans and advances of Rs. 26.74 lakhs under consideration, though disallowed by the Ld. AO, the same was subsequently allowed by the Ld. CIT(A) on the basis of the order passed by the Coordinate Bench in assessee's own case. In this respect, the assessee further relied upon the judgment passed in the matter of DCIT vs. Gujarat Urja Vikas Nigam Ltd. in ITA No. 569/Ahd/2019. wherein similar ground was allowed in favour of the assessee, a copy whereof was also submitted before us. ................. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rja Vikas Nigam Ltd vs. DCIT have held that interest income on staff loans is required to be treated as 'business income' instead of 'income from other sources' which is confirmed by this Court in the aforesaid Tax Appeal. 9. In case of Gujarat Energy Transmission Corporation Ltd (supra) in ITA No. 633/2013, the Coordinate Bench of the Tribunal, after considering the decision of this Court, has held that the interest on staff loans and advances are part of the 'business income' only. In such circumstances, the decision of the Co-ordinate Bench of the Tribunal as well as this Court were binding upon the Tribunal resulting into the mistake apparent on record. 10. The Tribunal therefore ought to have considered such aspect while deciding the Misc. Application under section 254(2) of the Act. ... ... ... ... ... ... ... ... ... 12. From the above observation of the Tribunal it is clear that though the Tribunal has referred to the decision of the Coordinate Bench as well as the binding decision of this Court which is a Jurisdictional High Court and has relied upon the decision of the Hon'ble Orissa High Court on the ground that as per the view of the Tribunal, the interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this court. The apex court of the country in no uncertain terms held that the law declared by a High Court is binding on all subordinate courts and Tribunals within the territory to which it exercises the jurisdiction. In Bhopal Sugar Industries Ltd. v. ITO[1960] 40 ITR 618 (SC), the Income-tax Officer (subordinate authority) refused to carry out clear and unambiguous directions of the Income-tax Appellate Tribunal (superior authority). Deprecating it, their Lordships of the Supreme Court observed (page 622): "Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice.... A direct question arose before the Supreme Court in East India Commercial Co. Ltd. vs Collector of Customs, AIR 1962 SC 1893. In that case, proceedings were initiated by the Collector of Customs against the petitioner-company on allegations that it had violated conditions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of the Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be conducive to their smooth working; otherwise, there would be confusion in the administration of law and respect for law would irretrievably suffer. We, therefore, hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and that they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such a proceeding." The above view has been reiterated by the Supreme Court in a number of subsequent decisions (see M. Padmanabha Setty v,K.P. Papiah Setty, AIR 1966 SC 1824; Kausalya Devi Bogra v. Land Acquisition Officer, AIR 1984 SC 892 and Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the instant appeal itself is one, when, alone or in company, I have dissented from a decision of the majority of this House. But the judicial system only works if someone is allowed to have the last word and if that last word, once spoken, is loyally accepted." We are very clear and we have no doubt in our minds that when a point is concluded by a decision of this court, all subordinate courts and inferior Tribunal within the territory of this State and subject to the supervisory jurisdiction of this court are bound by it and must scrupulously follow the said decision in letter and spirit. Since the second respondent has not decided the matter in accordance with law laid down by this court in the case of Bharat Textile Works [1978] 114 ITR 28 , the order passed by him requires to be quashed and set aside." 15. IN view of the above conspectus of law, the decision of the jurisdictional High Court is binding up on the Tribunal. In such circumstances, not following the binding decision is mistake apparent on record. The impugned orders are accordingly quashed and set aside. The matter is remanded back to the Tribunal to pass fresh orders in Misc. Application preferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e funds were sufficient to meet the investments and therefore, interest was deductible. Similar view has been taken by the Division Bench of this Court in the case of CIT v. Gujarat State Fertilizers & Chemicals Ltd. [2013] 358 ITR 323/36 taxmann.com 230/217 Taxman 229 (Guj.). Applying the ratio/law laid down by the Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra) as well as Division Bench of this Court in the case of Gujarat State Fertilizers & Chemicals Ltd. (supra) to the facts of the case on hand and when it has been found that the assessee was having interest-free funds far in excess of investments and therefore, it can be said that the investments are made out of interest-free funds and therefore, the AO was not justified in making additions and/or making disallowance under section 36(1)(iii) of the IT Act. Under the circumstances, no error and/or illegality has been committed by the learned ITAT in deleting the disallowance made by the AO under section 36(1)(iii) of the IT Act. No question of law much less substantial question of law arise with respect to deletion of the disallowance made by the AO under section 36(1)(iii) of the IT Act. " 13. Per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of sub - sections (2) and (3) of Section 14A cannot be made applicable to clause (f) of Explanation to Section 115JB of the Act, 1961. 21. Apart from the above, we have a binding precedent before us - one from Hon'ble jurisdictional High Court and other from the Hon'ble Bombay High Court. The question considered by the Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra) is as under: " Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that adjustment made on account of disallowance u/s.14A of the Act in computation of book profit u/s. 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profit? 22. The Hon'ble Gujarat High Court has replied this question as under: 7. So far as issue Nos.(iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the decision of this court in the case of Commissioner of Income tax-I vs. Gujarat State Fertilizers & Chemicals Ltd. (supra), we are of the opinion that issue Nos.(iii) and (iv) required to be answered in favour of the assessee and against the revenue. In that view of the matter, we answer questions (iii) and (iv) referred to us in favour of the assessee and against the revenue. The appeal ofrevenue is dismissed. 23. Similarly, Hon'ble Bombay High Court has formulated following question in the case of Bengal Finance & Investments P. Ltd. (supra) and replied as under: (b) Whether on the facts and in the circumstances of the case, and in law, the ITAT is justified in deleting the addition of Rs.78,84,387/- under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. Vs. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?" ...... 4. So far as qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sst. Year 2020-21 and the assessee appeal is partly allowed. 19. ITA No. 293/Ahd/2024 filed by the Revenue for the Asst. Year 2020-21. Ground No. 1 is whether Ld. CIT(A) is justified in restricting the disallowance u/s. 14A only to the extent of exempt income earned by the assessee. This issue is already set aside to the file of Ld. A.O. to calculate the disallowance u/s. 14A as applicable to the present Asst. Year. Thus the Ground No. 1 raised by the Revenue is partly allowed. 20. Ground No. 2 of the Revenue is relating to Interest Income and Misc. Income to be treated as "Income from Other Sources". This ground is already dealt by us in Para 9 to 11.2 of this order in ITA No. 223/Ahd/2022 wherein it is held Interest income and Misc. Income earned by the assessee are directly related to the business of the assessee and assessable as "business income" only. Thus Ground N. 2 raised by the Revenue is hereby rejected. 21. Ground No. 3 is adjustment made on account of disallowance u/s. 14A to be added in the computation of book profit u/s. 115JB of the Act. This issue is directly covered against the Revenue by Hon'ble High Court of Gujarat in assessee's own case in Tax Appeal No. 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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