Income Tax Appellate Tribunal - Ahmedabad
Torrent Pvt.Ltd.,, Ahmedabad vs The Acit, Circle-8,, Ahmedabad on 11 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' B " BENCH - AHMEDABAD
Before Shri S. S. Godara, JM & Shri Manish Borad, AM.
M.A. No.68/Ahd/2015 in
ITA No. 1370/Ahd/2009
&
C.O. No.107/Ahd/2009
Asst. Year: 2006-07
ACIT, Cir.No.8, Ahmedabad. Vs. Torrent Pvt. Ltd., Torrent
House, Off Ashram Road,
Nr. Dinesh Hall,
Ahmedabad.
Appellant Respondent
PAN
Appellant by Shri S. N. Soparkar with Parin Shah,
AR
Respondent by Shri Prasoon Kabra, Sr.DR
Date of hearing: 18/11/2016
Date of pronouncement: 11/01/2017
ORDER
PER Manish Borad, Accountant Member.
This assessee's Miscellaneous Application filed u/s 254(2) of the Income Tax Act, 1961 (in short the Act) raises following grounds:-
1. The present Misc. Application arises from the aforesaid order of the Hon'ble Tribunal in Cross-objections filed by the assessee in departmental appeal ITA No. 1370/A/2009 which have been disposed-of by the Hon'ble Tribunal vide the above referred order.
M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 2 In ITA No. 1370/Ahd/2009 Asst. Year 2006-07
2. In ground No. 2 of the Cross-objections of the assessee for A.Y. 2006-07, the assessee had challenged the disallowance u/s. 14A of Rs. 6,79,897 confirmed by Ld. CIT(A) [kindly refer para 6 of the order].
3. The A.O. had made the disallowance u/s. 14A in the assessment order for A.Y. 2006-07 at the rate of 5% of the expenditure of Rs.1,35,97,939 [kindly refer para 7 of ITAT's order]. While deciding the issue, the Hon'ble Tribunal recorded its finding in para Nos. 9 and 10 as under:-
"9. We find that the A.O. made disallowance u/s. 14A at the rate of 5% of the dividend income earned during the year by the assessee. The rate of 5% is an adhoc estimate without any basis. On appeal, the CIT(A) confirmed the action of the A.O."
"10. We find that in similar circumstances, the Hon'ble Madras High court in the case of M/s Simpson and Co. Ltd. v. DCIT, Tax case [appeal] No. 2621/2006 order dated 15-10-2012 confirmed the disallowance made at the rate of 2% of dividend inome earned during the year as fair and reasonable. We, therefore, following the same, are of the considered opinion that it shall meet ends of justice to restrict the disallowance u/s. 14A at the rate of 2% of the dividend income earned during the year by the assessee. We, therefore, set aside the order of the lower authorities on this issue and direct the A.O. to disallow 2% of the dividend income earned by the assessee during the year under consideration u/s. 14A, as expenditure incurred for earning of dividend income. Thus, this Ground of Appeal of the assessee is partly allowed."
4. From the above, your Honours will appreciate that while concluding the issue under consideration, the Hon'ble Tribunal has restricted the disallowance u/s. 14A at the rate of 2% of dividend income. For dividend income earned by the assessee for the above A.Y., kindly refer para 3.2.1 on page 3 of the Assessment Order where the A.O. has recorded the finding that assessee has earned exempt income of Rs. 19,26,81,869 as dividend. If the disallowance u/s. 14A is restricted at the rate of 2% of dividend income i.e. Rs. 19,26,81,869, the disallowance will come to Rs. 38,53,637, as against the original disallowance made by the A.O. at Rs. 6,79,897, which amounts to an enhancement of income, instead of getting relief by the assessee.
M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 3 In ITA No. 1370/Ahd/2009 Asst. Year 2006-07
5. On verification, we also find that at the time of arguing the above appeal, the Ld. Counsel of the assessee Mr. Soparkar had relied upon two decisions:- [1] 237 ITR 164 Kerala in the case of Catholic Syrian Bank; and [2] 137 ITD 301 Ahmedabad in the case of ACIT v Torrent Pharmaceuticals Ltd. on the issue of disallowance of expenses of Rs. 6,79,897 made by the A.O. u/s. 14A. While deciding the above referred issue, both the above referred decisions have not been considered by the Hon'ble Bench.
6. These being mistakes apparent on record, the assessee requests your Honours to rectify, in the interest of justice, the above referred order, to avoid enhancement of income directed by the Hon'ble Tribunal as referred to above in para 10 of its order and therefore, to decide on merits, the issue of disallowance u/s. 14A, this order is required to be recalled.
7. It is therefore, prayed that the impugned order of the Hon'ble Tribunal may kindly be recalled u/s. 254[2] of the I. T, Act on this issue and oblige.
2. Ld. counsel for the assessee summarizing the issue in this Miscellaneous Application submitted that for Asst. Year 2005-06 ld. Assessing Officer made disallowance u/s 14A of the Act of a lump sum amount of Rs.5,00,000/- which was sustained at Rs.50,000/- by ld. CIT(A) and for Asst. Year 2006-07 ld. Assessing Officer made disallowance u/s 14A of the Act at Rs. 6,79,897/- by applying 5% on certain expenditure totaling to Rs. 1,35,97,939/- and the said disallowance was confirmed by ld. CIT(A).
3. The issue relating to disallowance u/s 14A of the Act for Asst. Years 2005-06 and 2006-07 came up before the Tribunal. In ITA No.3906/Ahd/2008 for Asst. Year 2005-06 and in ITA No.1370/Ahd/2009 for Asst. Year 2006-07 this Bench decided the M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 4 In ITA No. 1370/Ahd/2009 Asst. Year 2006-07 issue for Asst. Year 2005-06 confirming the disallowance sustained by ld. CIT(A) at Rs.50,000/-. However, for Asst. Year 2006-07, the Bench relying on the decision of Hon. Madras High Court in the case of M/s Simpson and Co. Ltd. vs. DCIT, Tax Case (Appeal) No.2621 of 2006 order dated 15.10.2012 partly allowed the assessee's ground restricting the disallowance u/s 14A @ 2% of the dividend income. This has resulted in an increase of the corresponding sec.14A disallowance from Rs.6,79,897/- to that @ 2% of the exempt income f Rs.1,92,681,869/- coming to Rs.38,53,637/-.
4. Ld. counsel for the assessee submitted that the Tribunal made an apparent error while adjudicating the issue of disallowance u/s 14A of the Act for Asst. Year 2006-07 for the very reason that the tribunal sustained the disallowance u/s 14A of the Act by applying 2% of the dividend income of Rs.19,26,81,869/- due to which the disallowance amount is calculated at Rs.38,53,637/- which is much more than the disallowance of Rs.6,79,897/- made by ld. Assessing Officer and confirmed by ld. CIT(A). Ld. counsel further submitted that it seems that the tribunal had an intention to apply the rate of 2% as against 5% on the expenditure amount of Rs.1,35,97,939/- as adopted by ld. Assessing Officer but due to apparent error the figure of dividend has been mentioned in the order. Ld. counsel then requested that suitable rectification may be made in the above order so that disallowance u/s 14A does not exceed the amount made by ld. Assessing Officer. Ld. AR further emphasized that the tribunal's order in fact intended to partly allow assessee's corresponding M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 5 In ITA No. 1370/Ahd/2009 Asst. Year 2006-07 ground pleaded in its cross objection in view of the findings contained in para 10 page 4.
5. Ld. DR strongly supports our order dated 8/5/2015 disallowing 2% of assessee's exempt income following Hon'ble Madras high court judgment referred herein above.
6. We have heard rival contention and perused the record. This Miscellaneous Application arises out of the Tribunal's order for Asst. Year 2006-07 wherein disallowance u/s 14A of the Act sustained by the Tribunal seems to be higher than the disallowance made by ld. Assessing Officer in the assessment order u/s 143(3) of the Act. We observe that the tribunal's order dated 8.5.2015 adjudicated the issue relating to disallowance u/s 14A of the Act for Asst. Year 2005-06 and 2006-07 together.
7. As far as Asst. Year 2006-07 is concerned, dividend income earned by the assessee is Rs.19,26,81,869/-. Ld. Assessing Officer while framing the assessment order u/s 143(3) of the Act on 28.11.2008 calculated disallowance u/s 14A by applying 5% of three expenses namely - employees remuneration at Rs.50,87,617/-, general administrative expenses at Rs. 27,39,843/- and interest payment of Rs.57,70,479/-; totally to Rs.1,35,97,939/- ld. Assessing Officer applied 5% of this amount of Rs.1,35,97,939/- and calculated the disallowance u/s 14A of the Act at Rs. 6,79,897/-. Ld. CIT(A) confirmed the disallowance made by Assessing Officer. The tribunal's order dated 8/5/2015 partly accepted assessee's contention in para 10 of its order by observing that ends of justice could be met in M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 6 In ITA No. 1370/Ahd/2009 Asst. Year 2006-07 restricting the impugned disallowance to that @ 2% of the exempt income. This results in enhancement of the impugned sec.14A disallowance as indicated hereinabove. We are of the opinion that in these peculiar facts an apparent error has cropped up in Tribunal's order dated 8.5.2015 giving rise to mutually contradictory situation between substantive reasoning and consequential computation. We thus recall our findings in order dated 8/5/2015 to the limited extent of issuing direction to the AO to compute sec.14A disallowance @ 2% of the exempt income (supra) and deem it appropriate to uphold the original disallowance amount of Rs. 6,79,897 in question. The assessee's corresponding ground no.2 in its C.O. No.107/Ahd/2009 shall be deemed to have been dismissed henceforth.
9. In the result, assessee's M.A. is allowed in above stated terms.
Order pronounced in the open Court on 11th January, 2017 Sd/- sd/-
(S. S. Godara) (Manish Borad)
Judicial Member Accountant Member
Dated 11/01/2017
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
M.A. No.68/Ahd/2015 in C.O. No.107/Ahd/2009 7
In ITA No. 1370/Ahd/2009
Asst. Year 2006-07
1. Date of dictation: 10/01/2017
2. Date on which the typed draft is placed before the Dictating Member: 10/01/2017 other Member:
3. Date on which approved draft comes to the Sr. P. S./P.S.:
4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________
5. Date on which the fair order comes back to the Sr. P.S./P.S.:
6. Date on which the file goes to the Bench Clerk: 11/1/17
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: