Case Law Details
In assessment proceedings, the AO raised a query about dis allowance of expenditure attributable to exempted dividend income u/s 14A. After considering the assessee’s reply, no dis allowance was made u/s 14A, though interest expenditure was disallowed on the ground that it was not for business purposes. This was confirmed by the CIT (A). On appeal by the assessee, the Tribunal remanded the matter to the AO by observing that the AO should reconsider the matter in the light of Daga Capital Management 199 TTJ 289 (SB) (Mum). On appeal by the assessee, HELD:
As the AO had not made any dis allowance u/s 14A, the Tribunal could not have not touched the question of s. 14A and made observations prejudicial to the assessee while remanding the matter. It had no jurisdiction to issue directions to the AO decide afresh on the touchstone of s. 14A and Daga Capital Management Pvt. Ltd. Accordingly, the order of the Tribunal to the extent it directed consideration of applicability of s. 14A was quashed & set aside.
FULL TEXT OF THE JUDGEMENT:
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.1460 OF 2009
Top star Mercantile Pvt. Ltd.
(Formerly, Urvi Chemicals & Allied Industries Ltd) Appellant.
V/s.
The Asstt. Commissioner of Income Tax ..Respondent.
Mr. J.D. Mistri with A.K. Jasani for appellant.
Mr. P.S. Sahadevan for respondent.
CORAM : V.C.DAGA AND J.P.DEVADHAR, JJ.
DATED : 26TH AUGUST, 2009.
P.C. :-
1. Heard learned counsel for the appellant and the learned counsel appearing for the Revenue. The appeal is admitted on the following substantial question of law :-
“ Whether the Tribunal’s observations that the A.O. may consider the applicability of the provision of section 14A of the Act go beyond its jurisdiction ? “
2. Mr. Sahadevan, advocate appearing for Revenue waives service.
3. Both the parties agreed that the appeal be disposed of finally at the stage of admission. That is how this appeal is heard finally.
SUBMISSIONS
4. Mr. Mistry, learned counsel for appearing for the appellant submits that the assessing officer during the course of assessment proceedings had made a query in respect of dis allowance of expenditure attributable to the exempted dividend income in view of section 14A of the Income Tax Act, 1961 (‘Act’ for short). The said query was answered and appropriate submissions were made. The assessing officer did not persue the matter further. He further submits that in the assessment order, no finding was recorded by the assessing officer with respect to the dis allowance of part of the expenditure on the touchstone of section 14A of the Act. The interest expenditure to the extent of Rs.1,50,89,771/- was disallowed holding it to be not allowable as business expenditure having not expended wholly and exclusively for earning any business income.
5. Mr. Mistri further submits that being aggrieved by this part of the order, an appeal was carried to CIT(A) wherein the CIT(A) confirmed the order of the assessing officer.
6. Being not satisfied by the order of CIT(A), the appeal was further carried to the Tribunal. The Tribunal accepted the contentions canvassed by the appellant, however, matter is restored back to the assessing officer observing in para 11 that the assessing officer need to reconsider the issues including that of the dis allowance of expenditure on the touchstone of section 14A of the Act applying the ratio of its own judgment in the case of Daga Capital Management Pvt. Ltd. in 199 TTJ 289 (SB) (Mum). Being aggrieved by the later part of the order of the Tribunal referable to section 14A of the Act, appellant has invoked the appellate jurisdiction of this Court under section 260A of the Act.
7. Mr. Mistri submits that so far as the applicability of section 14A of the Act is concerned, it was not pressed into service against the assessee appellant by the assessing officer, except to the extent of making query on that count. The same was replied. After reply from the assessee, he was apparently satisfied. He did not record any adverse findings against the assessee. In his submission, had there been an adverse finding on this issue, the assessee would have challenged the same raising specific ground in that behalf. Mr. Mistri submits that in absence of any adverse finding by the A.O., it has got to be presumed that the submissions made by the assessee were accepted by the assessing officer with regard to the non applicability of section 14A of the Act. He, thus, submits that the very same issue which was considered in favor of the assessee ought to have been challenged by the Revenue. It was never challenged by the Revenue at any stage. The Tribunal as such could not have not touched this question and made observations prejudicial to the appellant while remanding the matter. No directions to decide afresh on the touchstone of applicability of section 14A of the Act and the ratio of the judgment of the Tribunal in the case of Daga Capital Management Pvt. Ltd. could have been issued by the Tribunal.
6. In reply, Mr. Sahadevan tried to support the order of the Tribunal but could not take his submissions to the logical end. He practically conceded that the finding of the Tribunal to the extent it directs consideration of applicability of section 14A of the Act and the ratio of Daga Capital Management Pvt. Ltd. could not have been recorded by the Tribunal and expressed no objection for deletion or to set aside the order of the assessing officer to the extent it is objected to by Mr. Mistry.
CONSIDERATION
7. Having considered rival submissions, contention raised by Mr. Mistry deserves acceptance. Revenue has practically conceded to the submission made by the assessee. In view of the above, we quash and set aside the order of the Tribunal to the extent it directs consideration of applicability of section 14A of the Act. Rest of the order shall remain untouched.
8. In the result, appeal is partly allowed and disposed of accordingly with no order as to costs.
(J.P.DEVADHAR, J.) (V.C.DAGA, J.)
