IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `SMC' NEW DELHI
BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER
I.T.A. Nos. 6804 & 6805/Del/2018
Assessment Years: 2000-01 & 2001-02
VIRGO MARKETING PVT. LTD. vs. ITO, WARD 26(4),
C/O RRA TAXINDIA, BULANDSHAHR
D-28, SOUTH EXTENSION,
PART-I, NEW DELHI 49
(PAN: AWWPM3839K)
(ASSESSEE) (RESPONDENT)
Assessee by:Sh. P.C. Yadav, Adv.
Revenue by: Sh. Amrit Lal, Sr. DR.
ORDER
These appeals are filed by the assessee against the respective
Orders passed by the Ld. CIT(A)-9, New Delhi relating to Assessment
Years 2000-01 & 2001-02 on the following grounds.
GROUNDS RAISED IN ITA NO. 6804/DE/2018 (AY 2000-01)
That on facts and circumstances of the case, the order passed by the LD.
CIT (Appeal) is bad both in the eyes of law and on facts.
That the LD. CIT (Appeal) has erred in law and on facts in confirming the
addition of Rs. 18,43,898/- made u/s 14A,despite the fact that rule 8D
was not applicable for the year under consideration.
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the
addition of Rs. 18,43,898/- made u/s 14A, despite the fact that no
borrowed funds were used in making the investment.
2
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the
addition of Rs. 18,43,898/- made u/s 14A, despite the fact that the
investment has been made much prior to the borrowing of funds.
That the impugned appellate order is arbitrary, illegal, bad in law and in
violation of rudimentary principles of contemporary jurisprudence.
That the Appellant craves leave to add/alter any/all grounds of appeal
before or at the time of hearing of the appeal.
GROUNDS RAISED IN ITA NO. 6805/DE/2018 (AY 2001-02)
That on facts and circumstances of the case, the order passed by the Ld .
CIT (Appeal) is bad both in the eyes of law and on facts.
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the
addition made uls 14A,despite the fact that rule 8D was not applicable for
the year under consideration.
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the
addition of Rs. 15,85,000/- out of addition of Rs. 16,86,393/- made u/s
14A, despite the fact that no borrowed funds were used in making the
investment.
That the Ld. CIT (Appeal) has erred in law and on facts in confirming the
addition of Rs. 15,85,000/- out of addition of Rs. 16,86,393/- made u/s
14A, despite the fact that the investment has been made much prior to
the borrowing of funds.
3
That the impugned appellate order is arbitrary, illegal, bad in law and in
violation of rudimentary principles of contemporary jurisprudence.
That the Appellant craves leave to add/alter any/all grounds of appeal
before or at the time of hearing of the appeal.
2. Since the grounds of appeal raised in both these appeals are similar
and identical, hence, we have heard both the appeals together and are
being disposed of by this common order for the sake of convenience, by
dealing with ITA No. 6804/Del/2018 (AY 2000-01) and the result thereof
will apply mutatis mutandis to other appeal being ITA No. 6805/Del/2018
(AY 2001-02).
3. At the time of hearing, Ld. Counsel for the assessee stated that the
legal issue in dispute in both the appeals is that "whether Rule 8D is
applicable in the case of the assessee or not for the assessment years
2000-01 & 2001-02"? He further stated that the issue in dispute is
squarely covered in favour of the assessee in view of the decision dated
31.01.2018 of the Hon'ble Supreme Court of India in the case of
Commissioner of Income Tax vs. Essar Teleholdings Ltd. reported in
(2018) 101 CCH 0021 (SC). He further stated that the AO has made the
addition u/s. 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules,
1962 for the assessment years in dispute. But Rule 8D was prospective
in operation and could not have been applied to any assessment year
prior to assessment year 2008-09. He further stated that the assessee's
case is for assessment year 2000-01 and 2001-02. Therefore, Rule 8D is
4
not applicable in the case of the assessee. In support of his contention, he
filed the copy of decision dated 31.01.2018 of the Hon'ble Supreme Court
of India in the case of Commissioner of Income Tax vs. Essar Teleholdings
Ltd. reported in (2018) 101 CCH 0021 (SC) and requested to follow the
same and delete the addition in dispute in both the assessment years by
allowing the appeals of the assessee.
4. Ld. Sr. DR relied upon the orders of the revenue authorities.
5. I have heard both the parties and perused the orders of the revenue
authorities alongwith the decision dated 31.01.2018 of the Hon'ble
Supreme Court of India in the case of Commissioner of Income Tax vs.
Essar Teleholdings Ltd. reported in (2018) 101 CCH 0021 (SC). I have
also gone through the impugned order passed by the Ld. First Appellate
Authority who himself in para no. 5.6 at page no. 10 (which is attached
with APB Pg. 13) has mentioned that no doubt, the AO erred in making a
disallowance under rule 8D, since the same was not applicable during the
year under consideration, he did not make any reference to the accounts
of the assessee, which is specific mandate of section 14A. But in para no.
5.7 of the impugned order, Ld. CIT(A) has held that "However,
provision of Section 14A as available during the relevant AY 2000-02 was
very much applicable even without advent of Rule 8D which is,
apportionment of expenditure in respect of exempt income was to be
done and disallowed...."
5
5.1 It is an admitted fact that the issue involved in this appeal is
relating to addition made under section 14A of the Act read with Rule 8D
which is squarely covered in favour of the assessee in view of the
decision dated 31.01.2018 of the Hon'ble Supreme Court of India in the
case of Commissioner of Income Tax vs. Essar Teleholdings Ltd. reported
in (2018) 101 CCH 0021 (SC) wherein it was observed in the Heads Notes
as under:-
"Income-Expenditure incurred in relation to income not
includible in total income-Applicability of rule-
Retrospective vis-a-vis prospective effect-AO held that
assessee company was in receipt of both taxable and
non-taxable dividend income-Accordingly dividend on
investment exempt u/s 10(23G) was considered by AO
for purpose of disallowance u/» 14A and Rule 8D-AO
held that, sub-section (2) and sub-section (3) of section
14A inserted with effect from 01.04.2007 would apply to
all pending assessments and Rule 8D was
retrospectively applicable-CIT(A) partly allowed appeal
of assessee-Tribunal allowed assessee's appeal holding
that Rule 8D was only prospective and in year under
consideration Rule 8D was not applicable-High Court
affirmed tribunal's order and dismissed appeal of
revenue- Whether Rule 8D of Income Tax Rules is
prospective in operation as held by High Court or it is
6
retrospective in operation .and should also be applicable
in assessment year in question as claimed by revenue-
Held, machinery provision of taxing statute had to give
effect to its manifest purposes-But applicability of
machinery provision whether it was prospective or
retrospective depended on content and nature of
Statutory Scheme-Methodology for determining amount
of expenditure in addition to income not includable in
total income was for first time prescribed by Rule 8D as
was envisaged in Section 14A sub-section (2) and sub-
section (3)- Memorandum of explanation explaining
provisions of Finance Act, 2006 had clearly mentioned
that Section 14 sub-section (2) and sub-section (3)
should be effective with effect from assessment year
2006-07 alone which was indicator that provision was
intended to operate prospectively-Methodology as
provided under Rule 8D was neither well-known nor
well-settled mode of computation-New mode of
computation was brought in place by Rule 8D-No AO
even in his imagination could have applied methodology
which was brought in place by Rule 8D, thus
retrospective operation of Rule 8D could not be
accepted-Rule 8D was prospective in operation and
could not have been applied to any assessment year
7
prior to Assessment Year 2008-09-Revenue's appeal
dismissed."
5.2 Keeping in view of the aforesaid discussions and respectfully
following the aforesaid precedent, the addition in dispute for the
assessment year 2000-01 is deleted and accordingly the appeal of the
assessee is allowed.
5.3 Following the consistent view as taken in assessment year 2000-01
in para nos. 5.1 & 5.2 as aforesaid, the addition in dispute in the
assessment year 2001-02 is deleted and appeal for this assessment year
is also allowed.
6. In the result, both the appeals filed by the assessee stand allowed.
Order pronounced on 05/11/2019.
Sd/-
[H.S. SIDHU]
JUDICIAL MEMBER
Date 05/11/2019
"SRB"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar, ITAT, Delhi Benches
|
