TaxTMI 
TaxTMI 
2017 (9) TMI 1287
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....r sale of shares were wrongly assumed to be Rs. 10 crores whereas the full value of sale consideration was later worked out to be Rs. 25 lakhs." Ground No. 2: The CIT(A) has erred on facts and circumstances of the case in not accepting the alternate plea made by the assessee with regard to computation of disallowance u/s 14A read with Rule 8D that "Investment in Shares" ought to be excluded from the value of total investment while computing the "Average investment" as contemplated in Rule 8D of IT Rules. Ground No.3: The appellant prays that he may be allowed to add, amend, alter or forego any of the above grounds of appeal as the circumstances may warrant." 4. Brief facts of sole Ground No. 1 in Revenue's appeal are that the appellant Company is engaged in the business of real estate project development. During the assessment proceeding, the AO observed that the appellant had earned dividend income of Rs. 1,95,118/-. The AO asked the appellant as to why the disallowance u/s 14A read with Rule 8D may not be made in its case. The reply of the appellant that it had Suo Motto disallowed an amount of Rs. 50,231/- in the computation of income on ac....
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....the proceeding, in which the order of appeal against was passed before the Commissioner of appeal. In the case of the appellant, it is evident that the issue relating to the revision of capital gains was never raised and no such difference of opinion existed between AO and the appellant. Moreover, in case of the said M/s Shivalik Land Development Limited, its shares are not listed and therefore the market value of their shares cannot be determined only on the basis of a revised sale agreement. The explanation given by the appellant regarding the inability to file such claim during the assessment proceedings is not satisfactory. Moreover, there is no explanation, whatsoever, as to how in respect of sale of some shares, the two contracting parties could substitute the full value of consideration from Rs. 10 Crores to Rs. 25 Lakhs, without any basis. Under the circumstances, the request of the appellant to admit additional ground of appeal against its own admitted position at the time of filing of return and later during the assessment proceeding cannot be allowed to be accepted." 9. We have considered the rival arguments made by both the sides, perused the orders of the A.O and th....
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.... the Act read with Rule 8D(1) of the Income Tax Rules' 1962 disallowance made otherwise too is untenable as held by learned Commissioner of Income Tax (Appeals). The Assessing Officer did not give credence to the assessee's working of voluntary disallowance, however rejecting the claim of the assessee without providing any cogent reason and has not recorded satisfaction that he is not satisfied with the correctness of the claim of the assessee as required by the section 14A(2) of the Act. The Assessing Officer however stating general reasons for disallowance u/s 14A of the Act. 12. The learned CIT(A), therefore reversed the order of the Assessing Officer as held at page 8-9 of CIT(A) order, as under: "7.4 I find that in the original return of income filed on 29.09.2009, the appellant had disallowed expenditure attributable to earning of tax-exempt dividend income by making its own working. This claim was based on the entries made in the books of accounts. In order to justify his lack of satisfaction, the AO ought to have identified instances suggesting serious defects in the working of the appellant, however, the AO did not do the same and applied the provisions of Rule....
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....r that having regard to the accounts of the assessee, as placed before him it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable". ii) 360 ITR 68 (Del) CIT vs. M/s Hero Management Service Ltd. iii) 347 ITR 272 (Del) Maxopp Investment Ltd. vs. CIT iv) 358 ITR 310 (Del) dated 2.7.2012 CIT vs. Consolidated Photo & Finvest Ltd v) 370 ITR 338 (Del) CIT vs. Taikisha Engineering India Ltd. (pages 15-23 of JPB) "20. However, in the present case we need not refer to sub Rule (2) to Rule 8D of the Rules as conditions mentioned in sub Section (2) to Section 14A of the Act readwith sub Rule (1) to Rule 8D of the Rules were not satisfied and the Assessing Officer erred in invoking sub Rule (2), without elucidating and explaining why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory. We do not find any such satisfaction recorded in the present case by the Assessing Officer, bef....
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....ved after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO-an aspect which is completely unnoticed by the CIT(A) and the Tribunal. The third, and in the opinion of this Court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs. 48,90,000, the disallowance ultimately directed works out to nearly 110 per cent of that sum, i.e., Rs. 52,56,197. By no stretch of imagination can s. 14A or r. 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in s. 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." Bombay High Court i) 328 ITR 81 (Bom) M/s Godrej and Boycee Mgf. Co. Ltd. vs. DCIT Punjab & Haryana High Court i) 380 ITR 652(P&H) CIT vs. Abhishek Industrial Ltd. ii) 393 ITR 223(P&H) Punjab Tractor Ltd. vs. CIT iii) ....
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....s Insurance Advisors Ltd.(pagel03-110 of JPB) "So the disallowance made by the AO without recording his satisfaction on any cogent ground by disputing the computation of disallowance made by the assessee rather subjectively written that, " the submission of the assessee cannot be accepted in view of the provisions contained u/s 14A read with Rule 8D" is not sustainable in the eyes of law. In the given circumstances, the case law relied upon by the Id. DR is not applicable to the facts and circumstances of the case. So, finding no illegality or perversity in the finding returned by Id. CIT(A), the instant appeal filed by the Revenue is hereby dismissed." 14. The ld. DR relied upon the decision of the Hon'ble Delhi High Court in the case of the assessee dated 21.11.2016 in ITA No. 470/2016. In this regard and in view of the judgment of Hon'ble Supreme Court in the case of Godrej & Boyce [supra], the decision of Hon'ble Delhi High Court is no more a good case. 15. Accordingly, the disallowance made by the assessee is appropriate, considering the process of the investment and the steps involved in an investment activity. It is emphasized that in order to just....
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....108 (Del) ACB India Ltd. vs. ACIT (pages 46-48 of JPB) "The Assessing Officer, instead of adopting the average value of investment of which income is not part of the total income, i.e., the value of tax exempt investment, chose to factor in the total investment itself. Even though the Commissioner of Income-tax (Appeals) noticed the exact value of the investment which yielded taxable income he did not correct the error but chose to apply his own equity. Given the record that had to be done so to substitute the figure of Rs. 38,61,09,287 with the figure of Rs. 3,53,26.800 and, thereafter, arrive at the exact disallowance of .05 per cent." 388 ITR 81 (P&H) CIT vs. Max India Ltd. (pages 37-45 of JPB) 381 ITR 107 (P&H) Bright Enterprises (P) Ltd. vs. CIT 393 ITR 223 (P&H) Punjab Tractors Ltd. vs. CIT "Accordingly, disallowance made by Assessing Officer is not in accordance with law as it is evident from the tabulated chart placed at para 3.4 above, that investment taken for disallowance under Rule 8D(2)(iii), read with section 14A of the Act, by Assessing Officer, does not give rise to any income which does not form part of the total income.....
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....D of the Act. Similar view has also been expressed by the judgment of Jurisdictional High Court in the case of CIT v. Holcim India (P) Ltd. reported in 217 CTR 282. Further, in the case of EIH Associated Hotels Limited vs. DCIT (2013-TIOL-796- ITAT-MAD) (pages 60-77 of the JPB), wherein Chennai ITAT has held that even if dividend is earned from the investment made in subsidiary, still for calculating average investments for Section 14A those investments need to be excluded. The motive of the assessee towards theinvestment in subsidiary was not for earning dividend or capital gain, but to promote business of subsidiary. The Tribunal has supported above analogy and held as under: "the investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. The assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore, the investments mad....
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....e, the disallowance made by the AO is not justified, accordingly the same is deleted." 22. Accordingly, disallowance made by Assessing Officer is also not in accordance with law on the facts that investments are made only for the purpose of strategic or controlling interest, as it is evident from the tabulated chart placed at para 3.4 above. In light of the aforesaid, it is respectfully prayed that that order of the learned Commissioner of Income Tax (Appeals) be upheld. 23. Lastly it was submitted that disallowance made by the Assessing Officer cannot exceed the exempt income of Rs. 1,95,118/- earned by the assessee (page 2 of Paper Book). Reliance is placed on the following judicial pronouncements: i) 372 ITR 694 (Del) Joint Investments Pvt. Ltd. vs. CIT (pages 30-32 of JPB) ii) I.T. A. No. 245 /AHD/2013 dated 27.03.2015 Chudgar Ranchodlal Jethalal vs. DCIT iii) ITA NO.5592/MUM/2012 dated 01.01.2015 M/s Daga Global Chemicals Pvt. Ltd. vs. Asst. CIT iv) ITA No.986/Del/2012 dated 18.03.2015 HT Media Ltd. vs. ACIT v) 148 ITD 336 (Del) Sahara India Financial Corpn.Ltd. vs. DCIT vi) ITA No. 548/Chd/2011 dated 30.09.2011 ACIT ....
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....s agreement by the purchaser, the purchaser shall cause the mortgage under this agreement by the purchaser, the purchaser shall cause the mortgage of said land admeasuring 11.30 acre situated at village Kherki Dhaula, Tehsil Sohna Distt Gurgaon in favour of seller simultaneous to the execution of this agreement by the parties. The mortgage for this purpose shall be only equitable mortgage by depositing the original title deeds of the said land with the seller and the seller shall enforce the mortgage only on default of the purchaser with respect to the payment of entire sale consideration under the share purchase agreement including interest thereon. The said mortgage shall be redeemed as soon as the entire sale consideration is received by the seller in terms of clause 3.3 of this agreement on the sale consideration alongwith interest thereon is paid by the purchaser in terms of clause 3.5. Non encashment of the said cheque or non payment of balance sale consideration alongwith interest thereon as envisaged in clause 3.5 shall be deemed as default on part of the purchaser for the purpose of exercising redemption of the mortgage. 27. Thereafter several disputes arose between the....
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.... (A) has also not admitted the additional ground as held at page 20 of order as under: "7.9 I find that the appellant itself had disclosed sale consideration of Rs. 25 lakhs (however disclosed sale consideration is Rs. 10 Crores) in the return of income. The disclosure made by the learned AO also was accepted by the Id. AO and hence there is no dispute in the matter. The provisions of section 251 relating to powers of commissioner of appeals as provided in explanation below sub-section (2) provided that in disposing of an appeal, the commissioner of appeal may consider and decide any matter arising out of the proceeding, in which the order of the appeal against which passed before the learned commissioner of appeal. In the case of the appellant it is evident that the issue relating to the revision of capital gain was never raised and no such difference of opinion existed between AO and the appellant. Moreover in the case of the said M/s Shivalik Land Development Limited, its shares are not listed and therefore the market value of their shares cannot be determined only on the basis of a revised sale agreement. The explanation given by the appellant regarding inability to fi....
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....w: i) 160 ITR 920 (SC) CIT vs. Mahalaxmi SugarMills Co. Ltd. Delhi High Court (i) 81 ITR 303 (Del) CIT vs. Bharat General Reinsurance Co. Ltd It is true that the assessee itself had included that dividend income in its return for the year in question but there is no estoppel in the Income-tax Act and the assessee having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resiled from the position which it had wrongly taken while tiling the return. Quit apart from it, it is incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessee wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year. We are therefore of the view that the income from dividend was not assessable during the assessment year 1958-59, but it was assessable in the assessment year 1953-54. It cannot, therefore, be taxed in the assessment year 1958-59. ii) 130 ITR 264 (Del) Archna L....
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.... ii) 269 ITR 1 (Bom) Nirmala L. Mehta vs. A. Balasubramaniam, CIT iii) 310 ITR 310 (Bom) Balmukund Acharya vs. DCIT "31. Having said so, we must observe that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconceptions or on not being properly instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected (see S.R. Kosti v CIT (Guj) (2005) 276 ITR 165, C.P.A. Yoosuf v. I.T.O. (1970) 77 ITR 237, CIT v. Bharat General Reinsurance Co. Ltd, (1971) 81 ITR 303, CIT vs. Archana R. Dhanwate (1982) 136 ITR 355 (Bom). 32. If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. (See Dy. Commissioner of Sales Tax vs. Sreeni Printers (1987) 67 SCC 279. 33. This Court in the case of Nirmala L. Mehta v. A. Balasubramaniam, C.I.T. (2004) 269 ITR 1 has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India i....
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....is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Incometax Act, 1961. There shall be no order as to costs." [emphasis supplied] 23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254." v) 349 ITR 404 (Bom) Sanchit Software& Solutions (P) Ltd. Vs. CIT (pages 111-117 of JPB ) "7. Therefore, in view of the above it is clear that the Commissioner of Income-tax in the order dated 7.04.2011 committed a fundamental error in proceeding on the basis that no deduction on account of dividend income and income form capital gains under Section 10 of the ....