2016 (1) TMI 1220 - HC - Income Tax

Court upholds Tribunal's decision on disallowance under Section 14A, criticizes Revenue for lack of justification.

The Commissioner of Income Tax-6, Mumbai Versus M/s Goodlas Nerolac Paints Ltd.

The court dismissed the appeal, upholding the Tribunal's decision to recompute the disallowance under Section 14A and delete disallowances related to the ... Recompute the disallowance u/s 14A on a reasonable basis - Held that:- Tribunal has followed the decision of this Court in Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ). The above decision according to the Revenue was subject to challenge by the Revenue before the Supreme Court and the same according to the Revenue has been dismissed on 28th October, 2013. Therefore, question (a) as raised does not survive. Thus, this question is not entertained. Disallowance of expenses and depreciation incurred by the assessee on Kavesar Unit - ITAT deleted addition - Held that:- The Revenue has already accepted the earlier order of the Tribunal in case of the same respondent assessee for Assessment Year 2002-03 which has been merely followed by the impugned order. There is no justification shown warranting filing of an appeal from the impugned order, when it has merely followed the earlier orders in Assessee's own case for the Assessment Year 2002-03. Mrs. Bharucha states that the Department has accepted the decision of the Tribunal rendered in the case of Respondent Assessee for the Assessment Year 2002-03, which has been followed by the impugned order. Although no affidavit has been filed indicating the reasons as to why the Revenue has preferred the present appeal on the above two issues when the earlier order of the Tribunal for the Assessment Year 2002-03 has been accepted by the Revenue. The statement is made by Mrs. Bharucha is on the basis of instructions given by one Mr. Rajesh Kumar Yadav in his letter dated 15th January, 2016. The same is taken on record and marked 'X' for identification. Accordingly, questions (b) and (c) also do not raise any substantial question of law and are not entertained. Issues Involved:1. Recompute disallowance under Section 14A.2. Deletion of disallowance incurred on Kavesar Unit.3. Deletion of disallowance of depreciation on assets of Kavesar Unit.Issue-wise Detailed Analysis:1. Recompute Disallowance under Section 14A:The Tribunal directed the Assessing Officer to recompute the disallowance under Section 14A on a reasonable basis, relying on the judgment of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010). The Revenue challenged this, citing that the judgment had not been accepted and was under challenge before the Supreme Court. However, the court noted that the Supreme Court had dismissed the Revenue's challenge to the Godrej & Boyce decision, thus concluding the issue against the Revenue. Consequently, question (a) did not raise any substantial question of law and was not entertained.2. Deletion of Disallowance Incurred on Kavesar Unit:The Tribunal deleted the disallowance of Rs. 1,19,498/- incurred by the assessee on the Kavesar Unit, following its decision for the Assessment Year 2002-03. The Revenue's appeal memo did not indicate any challenge to the earlier order of the Tribunal for the Assessment Year 2002-03, nor did it provide any justification for the appeal. The court emphasized that whenever the Tribunal follows its own order and the Revenue has accepted the earlier decision, the appeal memo must set out reasons for preferring an appeal. Since no such reasons were provided, question (b) did not raise any substantial question of law and was not entertained.3. Deletion of Disallowance of Depreciation on Assets of Kavesar Unit:The Tribunal deleted the disallowance of Rs. 1,27,678/- being depreciation on assets of Kavesar, noting that the assessee had discontinued its pigment operation at Kavesar from 01.04.1999 and the assets were never put to use. Again, the Tribunal followed its decision for the Assessment Year 2002-03, which the Revenue had accepted. No justification was provided for the appeal, and thus, question (c) did not raise any substantial question of law and was not entertained.Court's Observations on Revenue's Conduct:The court expressed displeasure with the manner in which the Revenue prosecuted the appeal, highlighting the lack of necessary information provided to the counsel and the failure to follow directions in earlier orders. The court reiterated the need for certainty and uniform application of law, emphasizing that the Revenue should not act arbitrarily. The court directed the Chief Commissioner of Income Tax to ensure compliance with its directions and warned of potential costs on the Assessing Officer and Commissioner for non-compliance.Conclusion:The appeal was dismissed, with the court directing the Registry to serve a copy of the order to the Principal Chief Commissioner of Income Tax and the Central Board of Direct Taxes.