Income Tax Appellate Tribunal - Delhi
Vedanta Ltd , Gurgaon vs Acit, Circle- 26(2), New Delhi on 21 January, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : FRIDAY : NEW DELHI
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
Stay Application No.2/Del/2020
(ITA No.12/Del/2020)
Assessment Year: 2014-15
Vedanta Ltd., Vs. ACIT, Circle-
Core-6, 3rd Floor, Scope Complex, 26(2),
7, Lodhi Road, New Delhi.
South Delhi,
New Delhi.
PAN: AACCS7101B
(Appellant) (Respondent)
Assessee by : Shri Ajay Vohra, Sr. Advocate,
Shri Rohit Garg, Advocate &
Shri Vasudevan G, Advocates
Revenue by : Shri Pradeep Singh Gautam, Sr.DR
Date of Hearing : 17.01.2020
Date of Pronouncement: 21.01.2020
ORDER
PER SUCHITRA KAMBLE, JM:
This Stay Application is filed by the assessee for staying the outstanding demand of Rs.567,72,38,226/-, for assessment year 2014-15.
2. The ld. AR submitted that M/s. Vedanta Limited i.e. the applicant is engaged in the business of exploration, mining and processing of iron ore with domestic mining operations carried in the States of Goa and Karnataka. The Ld. AR submitted that the SA No.2/Del/2020 applicant filed its return of income for A.Y. 2014-15 declaring a loss of Rs. 1706,34,08,865/- under the normal provisions of the Income Tax Act, 1961 and a book loss of Rs. 2623,16,31,044/- under the provisions of Section 115JB. The assessment proceedings against the Applicant were initiated vide notice dated 08.09.2015 issued under Section 143(2) of the Act. During the said proceedings, a reference was made by the Assessing Officer ('AO') to the Transfer Pricing Officer ('TPO') under Section 92CA of the Act. The TPO, thereafter, passed an order dated 31.10.2017 ('TP Order'), wherein, an upward Transfer Pricing ('TP') adjustments to the tune of Rs. 28,06,17,338/- were made to the income of the Applicant. The AO subsequently after making various other addition(s)/disallowance(s) passed a Draft Assessment Order dated 28.12.2018 under Section 143(3) read with Section 144C of the Act ('Draft Order'), wherein, the following was proposed:
a. Income of the Applicant under the normal provisions of the Act was proposed to be assessed at Rs. 830,71,80,036/-; and b. The Book Profit of the Applicant under Section 115JB of the Act were proposed to be determined at Rs. 1676,32,07,099/-.
Aggrieved by the Draft Order, the Applicant filed detailed objections before the Dispute Resolution Panel ('DRP') - 2, New Delhi on 30.01.2019. Pertinently, in the Draft Order, certain additions/disallowances were proposed to be made. Certain additional evidences were filed by the Applicant before the DRP, both, in respect of TP as well as other additions/disallowances made in the Draft Order. The Ld. AR submitted that the DRP had sought remand report by the AO/TPO in respect of the 2 SA No.2/Del/2020 said evidences, in response to which the Applicant had also filed detailed Rejoinder(s). Thereafter, the DRP passed its directions vide order dated 25.09.2019 passed under Section 144C(5) of the Act (DRP Directions'), confirming the addition(s)/disallowance(s) made during the assessment proceedings. Subsequently, the AO after giving effect to the DRP Directions, passed Final Assessment Order dated 28.11.2019 under Section 143(3) read with Section 144C(13) of the Act making the assessment as under:
a. Income of the Applicant has been assessed at 460,29,01,662/- under the normal provisions of the Act.
b. The Book Profit of the Applicant under Section 115JB of the Act have been determined at 1676,32,07,099/-.
The Ld. AR submitted that the tax assessed under the MAT provisions is higher than the tax determined under the normal provisions of the Act, the AO has raised a total tax demand of Rs. 507,79,95,787/- (including interest under Sections 234B and 234C of the Act) under the MAT provisions of the Act. The Ld. AR submitted that the addition(s)/disallowance(s) made by the AO/DRP are without judicious appreciation of the facts and the law and that the Applicant has strong prima facie case in its favour. The Ld. AR further submitted that the Impugned Order is illegal and invalid inasmuch as the same is barred by limitation. In view of the provisions of Section 144C(13) of the Act, the final assessment order is required to be passed by the Assessing Officer within one month of the directions having been passed by the DRP. It may kindly be noted that the DRP issued its directions on 25.09.2019 under Section 144C(5) of the 3 SA No.2/Del/2020 Act, whereas, the Impugned Order was passed on 28.11.2019. The Ld. AR further submitted that on merit some issues in this matter are covered by assessment year 2011-12 and 2012-13. The ld. AR further submitted that the assessee has already paid Rs.57,92,42,439/- towards tax and now the total outstanding is Rs.507,79,95,787/-. The ld. AR further submitted that the assessee is having prima facie good case on merit, therefore, the stay of the outstanding demand may be allowed and the oral hearing may be granted in the appeal.
4. In respect of merits, the Ld. AR submitted that the disallowances made under Section 14A of the Act and the addition made on account of out of Books receivables cumulatively work out at Rs. 1953 crores (approx.) and are also, common under both MAT provisions as well as normal provisions of the Act. The Ld. AR pointed out that if both the said addition/disallowance are deleted no demand whatsoever would survive against the Applicant under normal as well as MAT provisions. The Ld. AR submitted that even if only the aforesaid disallowance under Section 14A of the Act is deleted, it would result in an assessed loss of the Applicant under the normal provisions of the Act. The Ld. AR submitted that in respect of disallowance under Section 14A of the Act is a recurring issue and has already been decided in favour of the Applicant for the earlier Assessment Year by the Tribunal, Goa in A.Y. 2009-10, but since the revenue filed an appeal against the said order before the Hon'ble Bombay High Court, in which question of law have been admitted, the DRP, therefore, merely to keep the issue alive upheld the disallowance made by the Assessing Officer. The 4 SA No.2/Del/2020 Ld. AR further submitted that one of the primary condition which needs to be satisfied to invoke Section 14A(2) of the Act is that the Assessing Officer should be satisfied that the claim of the assessee in respect of expenditure incurred for earning exempt income is incorrect. Therefore, the Ld. AR submitted that a disallowance under Section 14A(2) made by the Assessing Officer without recording his satisfaction regarding the claim of the assessee being incorrect is bad in law. The Ld. AR relied upon the decisions of the Hon'ble Apex Court in case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT 394 ITR 449 (SC) and Maxopp Investments Ltd. vs. CIT 402 ITR 640 (SC) as well as decision of the Hon'ble Delhi High Court in case of H.T. Media Ltd. vs. PCIT 399 ITR 576 (Del.). The Ld. AR further submitted that an addition on account of expenses incurred in respect of exempt income under Section 14A, the action of the DRP and the Assessing Officer in making an upward adjustment to the Book Profits of the Applicant under Section 115JB of the Act qua disallowance under Section 14A of the Act is in blatant disregard of the ruling of the Special Bench of the Tribunal in case of ACIT vs. Vireet Investment (P.) Ltd. 82 taxmann.com 415 (Del. Tri.) (SB), wherein the Tribunal unequivocally held that computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to computation as contemplated under Section 14A read with Rule 8D.
5. The Ld. AR further submitted that in respect of disallowance of Rs. 857 crores u/s 14A of the Income Tax Act, 1961 and addition to book profits u/s 14A of the Act, such an issue is covered in assessee's own case for the assessment year 2011-12 and 5 SA No.2/Del/2020 followed in subsequent years in favour of the assessee. In respect of additions on account of out of books receivables, the Ld. AR submitted that the Assessing Officer never rejected the books of accounts maintained by the Applicant under Section 145 of the Act. The Ld. AR submitted that when the books of account were not rejected, the adjustment cannot be made to the book profit, more so when the adjustment made does not fall under any of the specified adjustment under Explanation to Section 115JB of the Act. As regards to adjustment on account of reversal of provision for tax, the Ld. AR submitted that the amalgamating entities in their computation of income for the respective assessment years, had duly added back the amount of provision for tax created in those years. Therefore, the amount of provision for tax had already been added as part of Book Profit. This amounts to double taxation in assessee's case. As regards to addition on account of debenture redemption reserve, the Ld. AR submitted that the evidence placed before the Revenue reflects that the said reserve is calculated on scientific basis. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in case of National Rayon Corporation Ltd. vs. CIT 227 ITR 764 and Hon'ble Bombay High Court decision in case of CIT vs. Raymond Ltd. 209 Taxman 65. As regards to addition on account of provision for Bad and Doubtful debts, the Ld. AR submitted that the provisions are made against the moneys that are to be received by the assessee in due course of business and the said provision reflect an estimate of amounts that end up as bad debts as the same are never received by the assessee. The said amounts are not against the liabilities as they are not made against any payable/liability of the assessee. Thus, it does not fall within the ambit of the Clause (c) of the Explanation 1 6 SA No.2/Del/2020 of Section 115JB of the Act. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in case of CIT vs. HCL Comnet Systems and Services Ltd. 305 ITR
409.
6. The ld. DR vehemently opposed the stay application and early hearing.
7. We have heard both the parties and perused the relevant material available on record. Prima facie, the Ld. AR made out a case for granting stay and early hearing.
Therefore, we are granting Stay for six months or till the disposal of the appeal whichever is earlier. The registry is directed to list the appeal being ITA No. 12/Del/2020 for hearing on 30.01.2020 before "I-2" Bench. We would also like to make it clear that on the fixed date of hearing of the appeal, the assessee will not seek any adjournment. If any unreasonable adjournment is sought by the assessee, the Bench will be at liberty to withdraw the stay granted to the assessee. Dasti of the order be given to both the parties.
8. In the result, the Stay Application filed by the assessee is allowed. Order pronounced in the open court on this 21st day of January, 2020.
Sd/- Sd/- (R.K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21 January, 2020 dk Copy forwarded to : 1. Appellant 7 SA No.2/Del/2020 2. Respondent 3. CIT 4. CIT(A) 5. DR Dy. Registrar, ITAT, New Delhi Date 1. Draft dictated on 17.01.2020 2. Draft placed before the author 17.01.2020 3. Draft placed before the other Member 21.01.2020 4. Approved Draft comes to the Sr.PS/PS 21.01.2020 5. Order uploaded on 21.01.2020 6. File sent to the Bench Clerk 21.01.2020 7. Date on which file goes to the Head Clerk. 8. Date on which file goes to the AR 9. Date of dispatch of Order. 8