PRINCIPAL COMMISSIONER OF INCOME TAX 4 vs. VIMPSAN INVESTMENT PVT LTD

C/SCA/10194/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 10194 of 2018 With R/SPECIAL CIVIL APPLICATION NO. 10197 of 2018

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE

====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== PRINCIPAL COMMISSIONER OF INCOME TAX 4 Versus VIMPSAN INVESTMENT PVT LTD ====================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE

Date : 09/07/2018

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 6

C/SCA/10194/2018 JUDGMENT [1.0] As common question of law and facts arise in both these petitions and as such arise out of the impugned common order passed by the learned Income Tax Appellate Tribunal, “A” Bench, Ahmedabad, both these petitions are heard, decided and disposed of together by this common order. [2.0] Special Civil Application No.10194/2018 has been preferred by the petitioner – revenue for an appropriate writ, order or direction to quash and set aside the impugned order dated 23/01/2018 passed by the learned Income Tax Appellate Tribunal “A” Bench, Ahmedabad (hereinafter referred to as “the learned Tribunal”) in MA No.40/Ahd/2012 in CO No.355/Ahd/2004 for the Assessment Year 2001-02 by which the learned Tribunal has recalled its earlier order passed in CO 355/AHD/2004 for the Assessment Year 2001-02 and has restored CO No.355/Ahd/2004 to the file of the learned Tribunal for fresh decision. [2.1] Special Civil Application No.10197/2018 has been preferred by the revenue for an appropriate writ, order or direction to quash and set aside the impugned common order dated 23/01/2018 passed by the learned Tribunal in MA No.28/Ahd/2013 in ITA No.3475/Ahd/2004 for the Assessment Year 2001-02 by which the learned Tribunal has recalled its earlier order passed in ITA No.3475/Ahd/2004 and has restored the matter to the file of the learned Tribunal for fresh decision. [3.0] The learned Assessing Officer made additions with Page 2 of 6

C/SCA/10194/2018 JUDGMENT respect to deep discount bond, material storage, handling charges, disallowance of claim of interest expenditure and lastly in respect of expenditure incurred in relation to exempt income under Section 14A of the Income Tax Act. The assessee claimed dividend income of Rs.84,41,780/- as exempt under Section 10(33) of the Income Tax Act. The learned Assessing Officer under order dated 08/03/2004 made disallowance of expenditure of Rs.3,73,12,575 under Section 14A of the Income Tax Act. Being aggrieved with the assessment order, the assessee preferred Appeal before the learned CIT(A). Learned CIT(A) observed that the disallowance was made by the learned Assessing Officer at 15% of Rs.24,85,91,626/-, which also included stock in trade of Rs.5,44,89,529/-, and therefore, the question of invoking Section 14A of the stock in trade does not arise. For the remaining amount Rs.19,41,02,097/-, learned CIT(A) observed that the assessee had reserve of Rs.1,47,50,979/- at his disposal, which was required to be excluded. Learned CIT(A) borrowed the funds used for investment for the purpose of disallowance under Section 14A of the Income Tax Act, which was to be calculated on balance amount, being Rs.17,93,51,118/-. Learned CIT(A) further held that the proportionate interest rate of 6.57% on Rs.17,93,51,118/- was to be considered for disallowance under Section 14A of the Income Tax Act, and therefore, the learned CIT(A) reduced the disallowance of Rs.1,17,91,794/-. Being aggrieved by the order passed by the learned CIT(A),

revenue

preferred

Appeal,

being

ITA No.3475/Ahd/2004. The assessee preferred Cross Objection, being CO No.355/Ahd/2004 before the learned Tribunal. Page 3 of 6

C/SCA/10194/2018 JUDGMENT Learned Tribunal partly allowed the Appeal of the revenue by directing that the stock in trade was required to be considered for arriving at an amount of interest expenditure to be disallowed for the purpose of Section 14A of the Income Tax Act. Learned Tribunal directed the Assessing Officer to compute the interest to be disallowed under Section 14A of the Income Tax Act at the rate of 6.57% on Rs.23,38,40,647/-. The learned Tribunal therefore dismissed CO No.355/Ahd/2004 filed by the assessee. Subsequently, the respondent – assessee filed MA No.40/Ahd/2012 in CO 355/Ahd/2004 as well as MA No.28/Ahd/2013 in ITA No.3475/Ahd/2004 contending that there is mistake apparent on the record passed in CO 355/Ahd/2004 as well as ITA No.3475/Ahd/2004. By the impugned common order, the learned Tribunal has recalled its earlier order dated 31/01/2012 and has directed re- adjudication of issue of disallowance under Section 14A of the Income Tax Act. Being aggrieved by the impugned order passed by the learned Tribunal, revenue has preferred the present Special Civil Applications under Article 226 of the Constitution of India. [4.0] Mrs Mauna Bhatt, learned Advocate appearing on behalf of the revenue has vehemently submitted that the learned Tribunal has materially erred in allowing the Miscellaneous Applications and recalling its earlier order. It is submitted that the learned Tribunal has committed an error in exercise of the powers under Sub Section (2) of Section 254 of the Income Tax Act in recalling its earlier order. It is submitted that earlier when the learned Tribunal passed an order in Appeal as well as Cross Objection, the same was after Page 4 of 6

C/SCA/10194/2018 JUDGMENT considering all the material facts. It is submitted that therefore the impugned order passed by the learned Tribunal recalling its earlier order can be said to be reviewing its own order. Making the above submission, it is requested to admit the present petitions. [5.0] Having heard Mrs Mauna Bhatt, learned Advocate appearing on behalf of the petitioner – revenue and considering the impugned common order passed by the learned Tribunal by which the learned Tribunal has recalled its earlier order and has directed re-adjudication of the issue of disallowance under Section 14A of the Income Tax Act, the same is not required to be interfered with by this Court in exercise of powers under Article 226 of the Constitution of India. The objection taken by the petitioner can be said to be too technical. Even in a case where the assessee would have preferred the Appeals before this Court against the orders passed by the learned Tribunal in Cross Objection on the issue of disallowance under Section 14A of the Income Tax Act, this Court could have considered the decision of this Court in the case of PCIT Vs Nirma Credit & Capital (P) Ltd. reported din (2017) 85 taxmann.com 72 (Gujarat), which has been relied upon by the assessee. In the Appeal /Appeals, rectification applications were preferred and the same are allowed and the earlier order passed by the learned Tribunal is recalled and the learned Tribunal has directed re-adjudication of the issue of disallowance under Section 14 of the Income Tax Act, and the same cannot be said to be erroneous and /or the same does not call for any interference of this Court in Page 5 of 6

C/SCA/10194/2018 JUDGMENT exercise of powers under Article 226 of the Constitution of India. The issue would be at large and ample opportunity will be given to the revenue to put forward their case. [6.0] In view of the above and for the reasons stated hereinabove, both these petitions fail and the same deserve to be dismissed and are accordingly dismissed. (M.R. SHAH, J.) (A.Y. KOGJE, J.) siji Page 6 of 6