L AND T EMPLOYEES WELFARE FOUNDATION vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX-15 (1) AND 2 ORS.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURI ICTION WRIT PETITION NO. 423 OF 2011 L & T Employees Welfare Foundation, Mumbai

..Petitioner versus The Assistant Commissioner of Income tax 15(1), Mumbai & Ors. ..Respondent ­­­­­­­­ Mr.   Percy   Pardiwalla,   Sr.   Counsel   alongwith   Mr. Atul K. Jasani for the Petitioner. Mr. Arvind Pinto alongwith Mr. D.K.Kamwal for the Respondent. ............. CORAM :  S.J.VAZIFDAR & M.S. SANKLECHA, JJ.

DATE :   19 July, 2012. (JUDGMENT PER M.S.SANKLECHA, J) 1 Rule.   By   consent,   returnable   forthwith. Respondent   waives   service.     At   the   instance   and request of the Advocates for both the parties, the Petition is taken up for final disposal. SNC 1/8 WP 423-11.doc CNR No : HCBM020040942011 Uploaded on - 21/08/2020 This   petition   under   Article   226   of   the Constitution of India was originally filed by the Petitioner   against  the   order   dated   14.01.2011  of the Assistant Commissioner of Income Tax (Assessing Officer)   and   the   order   dated   10.02.2011   of   the Commissioner   of   Income   Tax,   rejecting   the Petitioner's application for stay of demand pending the disposal of its appeal before the Commissioner of   Income   Tax   (Appeals)   from   the   order   of assessment dated 30.11.2010 passed for assessment year 2008­2009. However, while the petition was pending, the Commissioner of Income Tax (Appeals) by   an   order   dated   08.03.2011   dismissed   the Petitioner's appeal on merits.  Consequently, after obtaining   leave   from   this   court,   the   Petitioner amended the petition and also sought to challenge the   order   of   the   Commissioner   of   Income   Tax (Appeals) dated 08.03.2011 on merits. 3 The   Petitioner   is   a   private   trust, registered under the Indian Trust Act, 1882 formed SNC 2/8 WP 423-11.doc Uploaded on - 21/08/2020 for the benefit and welfare of  the  employees  of Larson & Tubro Ltd.  On 23.09.2008, the Petitioner filed   its   return   of   Income   for   Assessment   year 2008­2009   declaring   a   total   Income   of   Rs.40.29 lacs. This was after exclusion of Rs.11.18 crores from  its  total  income  under Section 10  (34) and (35) of the Income Tax Act, 1961 (the said Act). The   total   expenditure   incurred   during   the assessment   year   2008­2009   by   the   Petitioner   was Rs.43.14 lacs. 4 By   an   order   dated   30.11.2010,   the Assessing Officer by application of Section 14A of the said Act read with Rule 8D of the Income Tax Rules (Rules 1961) disallowed an amount of Rs.1.98 crores as being the expenditure incurred in earning income   which   does   not   form   part   of   the   total income.   As   a   consequence   to   the   above,   the disallowed expenditure of Rs.1.98 crores was added to   the   Petitioner's   income,   resulting   in   a   tax demand of Rs.86.97 lacs. SNC 3/8 WP 423-11.doc Uploaded on - 21/08/2020 Being aggrieved by the order of assessment the   Petitioner   filed   an   appeal   before   the Commissioner   of   Income   Tax(Appeals).     In   the meantime, the Petitioner also sought a stay of the demand under Section 220(6) of the said Act from the   Assessing   Officer.   By   an   order   dated 14.01.2011,   the   Assessing   Officer   directed   the Petitioner  to  pay  50%  of  the  demand of  Rs.86.97 lacs i.e. Rs.43.48 lacs on or before 15.02.2011 and ordered that subject to the above payment     the balance amount of tax demand would be stayed till the disposal of the appeal. 6 In view of the above, on 07.02.2011, the Petitioner filed an application to the Commissioner of Income Tax to stay the demand of Rs.86.97 lacs till its appeal was disposed of by the Commissioner of   Income   Tax   (Appeals).     By   an   order   dated 10.02.2011,   the   Commissioner   of   Income   Tax   held that the order passed by the Assessing Officer on the stay application was reasonable and therefore SNC 4/8 WP 423-11.doc Uploaded on - 21/08/2020 refused to exercise his juri iction.

It was against the aforesaid orders dated 14.01.2011 and 10.02.2011 the Petitioner had filed this petition. However, during the pendency of the petition,   by   an   order   dated   08.03.2011,   the Commissioner of Income Tax (Appeals) dismissed the Petitioner's appeal on merits. The aforesaid order of the Commissioner of Income Tax (Appeals) is also challenged in the present petition by an amendment pursuant   to   the   order   of   this   court   dated 22.03.2011. 8 Mr.   Percy   Pardiwalla,   Senior   Counsel   for the Petitioner states that Petitioners have filed an appeal before the Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax (Appeals) dated 08.03.2011 and the same is pending disposal.  However, it is his submission that this court should exercise its writ juri iction, as the entire demand has been made on the Petitioner by SNC 5/8 WP 423-11.doc Uploaded on - 21/08/2020 adding to income a disallowance of an expenditure which had admittedly not been incurred. It is his submission   that   Section   14A   of   the   Act   cannot disallow   expenditure   in   excess   of   the   total expenditure   incurred   by   the   assessee   for   the assessment   year.     The   Counsel   submits   that   such blind application of Section 14A read with Rule 8D leads to a manifestly unjust and arbitrary result. Consequently, the entire proceedings are arbitrary and   without   juri iction.   Therefore,   he   submits that   this   court   should   exercise   its   writ juri iction and quash the orders dated 08.03.2011 and 30.11.2010 of the Commissioner of Income Tax (Appeals) and the Assessing Officer respectively. 9 Mr.   Arvind   Pinto,   Counsel   for   the Respondent   supports   the   orders   of   the   Assessing Officer   and   the   Commissioner   of   Income   Tax (Appeals).  Mr. Pinto submits that being creatures of the statue, the officers are bound to apply Rule 8D of the said Rules for the purposes of arriving SNC 6/8 WP 423-11.doc Uploaded on - 21/08/2020 at expenditure to be disallowed under Section 14A of   the   said   Act.     Therefore,   no   fault   could   be found with the order passed by the Authorities.  In any event, he submits that the Petitioners have an alternate remedy of filing an appeal to the Income Tax   Appellate   Tribunal   from   the   order   dated 08.03.2011   and   the   same   has   been   exercised. Therefore, this court should not interfere in its writ   juri iction   with   the   orders   passed   by   the Authorities under the said Act.  However, Mr. Pinto very   fairly   stated   that   the   department   will   not commence   any   recovery   proceedings   against   the Petitioner in respect of the present demand till the   disposal   of   its   appeal   by   the   Income   Tax Appellate Tribunal. 10 In view of the statement made by Mr. Pinto on behalf of the department, we feel it would be appropriate for the Petitioner to pursue its remedy of appeal before the Income Tax Appellate Tribunal. In   the   circumstances,   we   need   not   exercise   our SNC 7/8 WP 423-11.doc Uploaded on - 21/08/2020 extraordinary   writ   juri iction   in   the   present case. 11 The petition is disposed of by recording and accepting the statement made by Counsel for the Respondent.  No order as to costs. (M.S.SANKLECHA, J.) (S.J.VAZIFDAR, J.) SNC 8/8 WP 423-11.doc Uploaded on - 21/08/2020 Powered by TCPDF (www.tcpdf.org)