C I T vs. M/S PUNJAB STATE WAREHOUSING CORP.

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ITA/567/2008HC Punjab & HaryanaPHHC01080572200821 November 2008Bench: MR. JUSTICE L.N. MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that since the Income Tax Appellate Tribunal (ITAT) had remanded the matter back to the Assessing Officer (AO) for fresh adjudication in accordance with law, no substantial question of law arose from the ITAT's order at that stage. The ITAT's earlier decision, which was followed, took the view that Section 14A of the Income Tax Act, 1961, could not be invoked for assessment years prior to 2001. The High Court did not delve into the merits of the applicability of Section 14A or the method of apportionment of expenses. The operative direction was that the appeal was dismissed. No issue was expressly left undecided, as the dismissal was based on the procedural stage of the proceedings.

What were the facts?

The revenue, Commissioner of Income Tax-I, Chandigarh, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The ITAT's order was for assessment year 2002-03. The assessee is M/s Punjab State Warehousing Corporation. The dispute concerns the applicability of Section 14A of the Act, which disallows expenses attributable to exempt income. The CIT(A) had directed the Assessing Officer (AO) to apportion expenses based on gross turnover. The ITAT, however, had allowed the revenue's appeal and remanded the matter to the AO for fresh adjudication, following its earlier order that Section 14A could not be invoked for assessment years prior to 2001. The High Court noted that since the matter was remanded, no substantial question of law arose at that stage.

What were the issues?

1. Whether in the facts and circumstances of the case, the Hon'ble Tribunal was right in questioning the applicability of Section 14A of the Income Tax Act, 1961. 2. Whether the Hon'ble Tribunal was right in upholding the decision of the Ld. CIT(A) by directing the AO to calculate the income from procurement/other activities on the basis of turnover/receipts, when as per the amended provisions of Section 14A of the Income Tax Act, 1961, the AO was supposed to determine the amount of expenditure incurred in relation to such income which does not form part of the total income in accordance with the method to be laid down by the CBDT. Contentions of the Revenue: The revenue contended that the ITAT was incorrect in questioning the applicability of Section 14A and in upholding the CIT(A)'s direction to apportion expenses based on turnover, especially considering the amended provisions of Section 14A which require determination of expenditure in accordance with CBDT guidelines. Contentions of the Assessee: The judgment does not record specific contentions made by the assessee before the High Court.

Which sections of the Income-tax Act were involved?

Section 260A,Section 14A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.567 of 2008 Date of decision: 21.11.2008 The Commissioner of Income Tax-I, Chandigarh. -----Appellant. Vs. M/s Punjab State Warehousing Corporation. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N. MITTAL Present:- Ms. Urvashi Dhugga,Standing Counsel for the revenue. ----- ORDER:

The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Chandigarh, Bench ‘B’ passed in I.T.A. No.734/Chandi/2007 dated 26.2.2008 for the assessment year 2002- 03, proposing to raise following substantial question of law:- “Whether in the fact and circumstances of the case the Hon’ble Tribunal was right in questioning the applicability of section 14A of the Income Tax Act, 1961. Further whether the Hon’ble Tribunal is right in upholding the decision of Ld. CIT(A) by directing the AO to calculate the income from procurement/ other activities on the basis of turnover/receipts when as per the amended provisions of 14A of the Income Tax Act, 1961, the AO was supposed to determine the amount of expenditure incurred in relation to such income which does not form a part of the total income

ITA. No.567 of 2008 in accordance with the method to be laid down by the CBDT.”

The assessee claimed deduction of expenses which were disallowed under Section 14-A of the Act to the extent attributable to exempted income. The CIT (Appeal) accepted the claim of the assessee holding that the expenses should be apportioned in the ratio of gross turnover. The Tribunal allowed the appeal of the revenue and remanded the matter to the Assessing Officer for fresh adjudication in accordance with law. The Tribunal followed its earlier order dated 24.12.2007 in respect of previous years, taking a view that Section 14A of the Act could not be invoked for assessment years prior to 2001.

Since the matter has been remanded back to the Assessing Officer, at this stage, we are unable to hold that any substantial question of law arises from the order of the Tribunal.

The appeal is dismissed. ( ADARSH KUMAR GOEL ) JUDGE November 21, 2008 ( L. N. MITTAL ) ashwani JUDGE 2

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