Subject: subsidiary’s which were made to acquire controlling interest to serve business interest of assessee.
Refferred Section:
Section 28 of the I.T. Act.
Section 14A of the Income-tax Act,
Section 33 of the Income-tax Act
Section 14A
Referred Cases / Judgments
ACIT vs. Jubilant Enpro P Ltd.
Godhra Electricity Co. Ltd. Vs C1T
CIT vs. Excel Industries P Ltd.
CIT vs. BSES Rajdhani Powers Ltd.
National Thermal Power company Ltd vs. CIT
B.R Bamsi vs. CIT
Maxxop investments Ltd vs CIT
Income-tax v. Hazarimal Nagji
Kanpur Industrial Works v. Commissioner of Income-tax
Venkata Rao v. Satyanarayanamurthy
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: `D', NEW DELHI
BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER
AND SMT. BEENA A PILLAI, JUDICIAL MEMBER
ITA No. 3485/Del/2014
AY: 2010-11
ACIT, Circle 1 vs. M/s Jubilant Enpro P Ltd.
Noida 201 301 Plot No.1-A
Sector 16 A
Noida 201 301
PAN: AAACE0653L
Cross Objection No. 194/Del/2017
(In ITA No. 3485/Del/2014)
AY: 2010-11
M/s Jubilant Enpro P Ltd. vs. ACIT, Circle 1
Plot No.1-A Noida
Sector 16 A
Noida 201 301
PAN: AAACE0653L
(Appellant) (Respondent)
Department by : Sh. Amit Jain, Sr.D.R.
Assessee by : Sh. Gaurav Jain, Adv. &
Sh. Aditya Vohra, Adv.
Date of Hearing : 04th July, 2018
Date of Pronouncement: 16th August, 2018
ORDER
PER BEENA A PILLAI, JUDICIAL MEMBER
Present appeal has been filed by Revenue against the order of
Ld.CIT(A), Noida dated 18.03.2014 for A.Y. 2010-11 and Assessee
has filed Cross Objections, on the following grounds.
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
Grounds in Revenue's appeal:
"1.The CIT (Appeals) has erred in law and on facts by deleting the
addition of Rs.5,79,60,145/- made on account of duty credit scrips
received but not utilized, by following the order of CIT(A)VII, Delhi
who had himself relied on the decision of Hon'ble apex court in
Godhra Electricity Co. Ltd. Vs C1T[1997] 225 ITR 746, a case
wherein the issue dealt with is not even distantly similar to the one
involved in this case.
2. The CIT (Appeals) has erred in law and on facts by deleting the
addition of Rs.5,79,60,145/- made on account of duty credit scrips
received but not utilized by not appreciating that such duty credit
scrips fetch free foreign exchange to the assessee and such scrips
are cash assistance received by the assessee and are therefore
taxable in terms of the provisions of clause (iii b) of section 28 of
the I.T. Act., 1961.
3. That the CIT (A) has erred in law and on facts by ignoring the
findings recorded by the Assessing Officer that the depreciation on
computer peripherals is allowable @ 15% and not at 60% as
claimed by the assessee.
4. That the appellant craves to leave, add, alter and amend any of
the grounds of appeal on or before hearing.
5. That the order of CIT (Appeals) being erroneous in law and on
facts deserves to be set aside/cancelled and the order of the AO to
be restored."
Grounds in Cross Objection:
C.O. 194/Del/2017 (In ITA 3485/Del/2014)
"1. That on the facts and circumstances of the case and in law,
suo motu disallowance of Rs.23.85 crores made by the
Respondent under section 14A of the Income-tax Act, 1961 ("the
Act") deserves to be deleted since substantial investments held by
the Respondent, as at the end of the relevant year, were in group
concerns/ subsidiary companies, which were made to acquire
controlling interest or to serve business interests of the
2
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
Respondent, income from which is outside the purview of
disallowance under the said section.
2. Without prejudice, that on the facts and circumstances of the
case and in law, suo motu disallowance made by the Respondent
under section 14A of the Act ought to have been restricted to Rs.
3.17 crores, being the amount of exempt dividend income earned
by the Respondent during the relevant previous year.
The Respondent craves leave to add, amend, alter or vary from
the above grounds at or before the time of hearing."
2. At the outset Ld.AR submit that identical issue has been
decided by Coordinate Bench of this Tribunal in assessee's own
case for A.Y. 2006-07 in ITA 4032/Del/2011 vide order dt.
24.03.2017, wherein it has been held as under.
"88. We have perused submissions advanced by both sides in the
light of records and judicial decision placed before us.
89. On perusal of the same, it is observed that assessee had not
undertaken any import of goods during years under consideration
which is an admitted position. In our considered view, income
does not accrue until imports are made and raw materials are
consumed by assessee. Ld.DR has not brought any material
contrary on record so as to deviate from findings of Ld.CIT(A).
Respectfully, following the decision of Hon'ble Supreme Court in
the case of CIT vs. Excel Industries P Ltd. (supra), we are inclined
to dismiss this ground raised by revenue.
Accordingly the appeal filed by revenue stands dismissed.
2.1. It is observed from the submissions advanced by both the
sides that this factual difference between the year under
consideration vis-a-vis assessment year 2006-07. Has not
brought any material contrary to the record so as to deviate from
the aforesaid findings of coordinate bench of this tribunal in
assessee's own case for assessment year 2006-07.
3
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
Respectfully, following the same we dismiss ground no.1 raised
by Revenue.
3. Ground No.2 raised by Revenue relates to depreciation at 60%
of computer peripherals. At the outset both the parties submit
that the issue stands covered by decision of Hon'ble Delhi High
Court in the case of CIT vs. BSES Rajdhani Powers Ltd. reported
in 258 ITR 47 (Del.) wherein it has been held as under:
"4. We are in agreement with the view of the Tribunal that
computer accessories and peripherals such as, printers, scanners
and server etc. form an integral part of the computer system. In
fact, the computer accessories and peripherals cannot be used
without the computer. Consequently, as they are the part of the
computer system, they are entitled to depreciation at the higher
rate of 60%."
Respectfully following the same, we dismiss this ground
raised by Revenue.
In the result, appeal filed by Revenue stands dismissed.
4. Cross Objection filed by assessee is regarding restricting suo
moto disallowance made by assessee under section 14 A at Rs.
3.17 crores, being amount of exempt income earned by assessee
during year under consideration.
4.1. Ld.AR, relying upon decision of Hon'ble Supreme Court in
case of National Thermal Power company Ltd vs. CIT reported in
(1998) 229 ITR 383, submitted that both assessee as well as
revenue can raise a question before this tribunal for the 1st time,
so long as the relevant facts are on record. Referring to the
assessment order, and the discussion made regarding suo moto
4
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
disallowance made by assessee under section 14A, Ld.AR
submitted that the cross objection is maintainable even though
the order of Ld.CIT (A) are on different grounds.
4.2. In respect of the merits of the addition was concerned Ld.AR
submitted that by virtue of decision of Hon'ble Delhi High Court in
the case of Joint Investments Pvt.Ltd., reported in (2015) 59
Taxmann.com 295, submitted that disallowance if any, that could
be made under section 14 A could not exceed exempt income
earned by the assessee. Another ground raised in the cross
objection is regarding exclusion of the investments made by
assessee in the group concerns/subsidiary's which were made to
acquire controlling interest to serve business interest of assessee.
It has been submitted that such investments would fall outside
the purview of section 14 A.
4.3. On the contrary Ld. DR submitted that assessee cannot race
this argument at this stage as it neither originates from the order
of the authorities below. It was further submitted by Ld. DR that
assessee had made suo moto disallowance of Rs.23,85,68,748/-,
which was accepted by assessing officer at the time of
assessment proceedings. Ld. DR objected to the present cross
objection of the assessee by submitting that the grounds raised
in the cross objection to not arise out of the order of Ld. CIT (A).
We have considered rival contentions raised by both the sides in
the light of various decisions of Hon'ble Supreme Court and
Hon'ble High Courts.
4.4. It is observed that during the year assessee earned exempt
income of Rs.3,17,92,844/- against which, a sum of
5
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
Rs.23,85,68,748/-, was offered to tax as disallowance under
section 14 A read with Rule 8D. Ld.AO passed assessment order,
by making additions in the hands of assessee on other issues,
against which assessee had filed appeal before Ld.CIT(A). Ld.CIT
(A) granted relief to assessee on certain issues against which
revenue preferred appeal before this Tribunal.
4.5. A cross objection has been filed by Assessee in the appeal
filed by revenue. The issue raised in the cross objection is
regarding restricting disallowance under section 14 A to the
extent of exempt income and to exclude the investments made by
tenets group concerns/subsidiary companies which were made to
acquire controlling interest or to serve the business interest of
assessee.
4.6. It is also observed that revenue filed appeal on 06/06/14.
assessee has stated to have received intimation of appeal filed by
revenue on 11/09/17. It is thereafter that present cross objection
has been filed by assessee on 26/09/17. Ld.Counsel thus
submitted that there is no delay in filing present cross objection,
as it is filed within 30 days of receipt of intimation of appeal
being filed by revenue.
4.7. On perusal of decision of Hon'ble Bombay High Court in case
of B.R Bamsi vs. CIT, reported in 83 ITR 223, it is observed that
Hon'ble court relying upon views taken by various High Courts
observed as under:
"The only question is whether the Tribunal was entitled in law to
refuse to allow the assessee to urge that ground in the appeal
before it. Now a Division Bench of this High Court in Commissioner
6
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
of Income-tax v. Hazarimal Nagji & Co. [1962] 46 ITR 1168 (Bom.),
after considering the relevant sections of the Income-tax Act and
the relevant Rules made thereunder, held that the powers of the
Appellate Tribunal are similar to the powers of an appellate court
under the Civil Procedure Code. It has further held that the
respondent in an appeal is undoubtedly entitled to support the
decree which is in his favour on any grounds which are available
to him, even though the decision of the lower court in his favour
may not have been based on those grounds. It has further held
that if the appellant in his challenge to the decree of the lower
court is entitled to take a new ground not agitated in the court
below by leave of the court, there appears to be no reason why a
respondent in support of the decree in his favour passed by the
lower court should not be entitled to agitate a new ground and
subject to the same limitation. A Division Bench of the Allahabad
High Court has taken a similar view in Kanpur Industrial
Works v. Commissioner of Income-tax [1966] 59 ITR 407 (All.). That
judgment has considered the position of an appeal under section
33 of the Income-tax Act along with the relevant Rules and that of
an appeal under the Code of Civil Procedure and the provisions of
Order XLI, rule 22. The judgment holds that when the department
files an appeal for an increase in the assessed income, the subject-
matter of the appeal is the increase claimed by the department and
the assessee can urge any ground of defence even though it might
have been rejected by the Appellate Assistant Commissioner for
showing that there should be no increase. It has further held that
that the assessee is not liable to be assessed at all is a ground for
showing that there should be no further assessment and the
7
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
department's appeal can therefore be resisted on that ground and
that there is no incongruity in maintaining the assessment order
passed against the assessee and yet refusing to increase it on the
ground that he was not liable to be assessed at all. The judgment
points out however that if the Tribunal accepts the ground of
defence that the assessee was not liable to be assessed, it can
only refuse to increase the assessed income as only such an order
would be within the scope of the appeal filed by the department
and any other order such as annulling the assessment would be
outside the scope of the appeal. That judgment holds that the
position of an appeal under section 33 of the Income-tax Act and
an appeal under the Code of Civil Procedure is identical. A Full
Bench of the Madras High Court has in Venkata
Rao v. Satyanarayanamurthy ILR 1944 Mad. 147; AIR 1943 Mad.
698 [FB], held that it was open to a respondent in appeal who had
not filed cross-objection with regard to the portion of the decree
which had gone against him to urge in opposition to the appeal of
the plaintiff a contention which if accepted by the trial court would
have necessitated the total dismissal of the suit, but the decree in
so far as it was against him would stand."
Ratio laid on by Hon'ble Bombay High Court in case of B.R Bamsi
vs. CIT (supra), supports the argument advanced by Ld.AR. We
are therefore inclined to consider the plea of assessee by setting
aside the issue back to Ld.AO for re-computation of disallowance
under section 14A having regards to the decision of Hon'ble
Supreme Court in the case of Maxxop investments Ltd vs CIT
reported in (2018) 91 taxman.com 154. In case the disallowance
so computed exceeds the exempt income, Ld.AO is also directed
8
ITA 3485/Del/2014 ACIT vs. Jubilant Enpro P Ltd. (A.Y. 2010-11)
and C.O.194/Del/17
to restrict the disallowance to Rs.3.17 crores, being the amount
of exempt income earned by assessee during year under
consideration.
Accordingly, grounds raised by assessee in cross objection
stands allowed for statistical purposes.
In the result appeal filed by Revenue stands dismissed and
Cross Objection by assessee stands allowed for statistical
purposes.
Order pronounced in the open court on 16/08/2018.
Sd/- Sd/-
(N.K.BILLAIYA) (BEENA A PILLAI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dt. 16th August, 2018
· Manga
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
- TRUE COPY -
By Order,
ASSISTANT REGISTRAR
ITAT Delhi Benches
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