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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee and the revenue against the order of ld. CIT(A)-39, New Delhi dated 25.04.2017.
2. In , following grounds have been raised by the assessee: “1. That on the facts and circumstances of the case and in law, the CIT(A) erred in sustaining & 4697/Del/2017
2. HT Media Ltd. disallowance of Rs.26,70,000/- made by the Assessing Officer towards administrative expenses under clause (iii) of Rule 8D of the Income Tax Rules without appreciating that making a disallowance as per Rule 8D results in arbitrary, unreasonable and unjustified disallowance.
2. That the CIT(A) erred in not appreciating the fact that the Appellant had added an amount of Rs.100,000/- in the return of income on account of disallowance u/s 14A of the Act for administrative expenses which ought to have been accepted by the Assessing Officer, being reasonable and justified considering fact on the case.
3. That the CIT(A) erred in not appreciating the fact that the Assessing Officer has not discussed and recorded satisfaction to the effect that disallowance of Rs.100,000/- made by the Appellant in the return of income u/s 14A of the Act was not appropriate in the facts and circumstances of the case.”
In following grounds have been raised by the revenue:
1. Whether on the facts and circumstances of the case, the order of Commissioner of Income Tax (Appeal) is erroneous and bad in law as application of Rule 8D for counting quantum of disallowance u/s 14A of the I.T. Act, 1961 is mandatory.
Whether on the facts and circumstances of the case, the ld. CIT (A) was correct in deleting the disallowance of Rs.3,98,08,092/- u/s 14A r.w. Rule 8D by restricting it to Rs.26,70,000/- out of total of disallowance made by the AO of Rs.4,24,78,092/-.”
& 4697/Del/2017 3 HT Media Ltd. 4. Facts relevant for the adjudication of the case are that, a. Dividend received and claimed Rs.5,80,00,000/- as exempt u/s 14A b. Amount disallowed on estimate Rs.1,00,000/- basis by the assessee c. The average value of Rs.2,89,70,00,000/- investment of the assessee d. Amount disallowed by the AO Rs.4,24,78,000/- e. Disallowance determined by the Rs.26,70,000/- ld. CIT (A)
Aggrieved with the curtailment of the disallowance, the revenue and aggrieved with the confirmation of a part disallowance, the assessee filed appeals before this Tribunal.
6. At the outset, the Counsels fairly brought to the notice of the Bench, the order of the Hon’ble Jurisdictional High Court clarifying the exclusion of income derived from strategic investments for the purpose of computation of disallowance. The order of the Hon’ble High Court is as under:
IN THE HIGH COURT OF DELHI AT NEW DELHI ITA 281/2019 & CM APPL. 14304/2019 THE PR. COMMISSIONER OF INCOME TAX -4 …… Appellant Through : Mr. Ruchir Bhatia, Sr. Standing Counsel. versus H.T. MEDIA LTD. ……..Respondent Through : Mr. V.P. Gupta and Mr. Arunav Kumar, Advs.
CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON’BLE MR. JUSTICE PRATEEK JALAN O R D E R 29.03.2019 & 4697/Del/2017 4 HT Media Ltd. “The question urged by the Revenue in its appeal is with respect to the correctness of the remand made by the ITAT in its impugned order; the remand was on two aspects i.e. the calculation of average investments (confined to the income generating part thereof) and the exclusion of tax exempt income derived from strategic investments.
The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct view in the light of the decision of the Supreme Court in Maxopp Investment Ltd. Vs. Commissioner of Income Tax, (2018) 402 ITR 640. Accordingly, the observations of the ITAT on this aspect are set aside. However, its observations with respect to the calculation of disallowance under Section 14A being confined to investments that derived tax exempt income are valid in the light of the Division Bench ruling in ACB India Ltd. v. ACIT, (2015) 374 ITR 108 (Del).
In view of the above clarification, the ITAT’s order, to the extent that it makes observations with respect to exclusion of income derived from strategic investments, is hereby set aside.”
Following the order of the Hon’ble High Court, the revised disallowance is comprehensively determined as under:
“CIT(A) vide para 5.1d of the order upheld the disallowance to the extent of Rs. 26,70,000/-, which was determined as under following the judgment of Hon’ble Delhi High Court in The case of ACB India Ltd. v. ACIT, 374 ITR 108 (Del.).
ITA Nos. 4583 & 4697/Del/2017 5 HT Media Ltd. Particulars Investment as Investment Average on 31.03.2011 as on Investment (crores) 31.03.2012 (crores) (crores) Investments on 117.75 102.75 110.25 which dividend income was received during the year. Less: Investment in 56.85 56.85 56.85 subsidiary company. Remaining 60.90 45.90 53.40 investment Disallowance at Rs. 26,70,000 0.5% In view of judgment of Hon’ble Supreme court in the case of Maxopp Investment Ltd. (2018) 402 ITR 640 (SC), investment in subsidiary company is also to be considered for the purpose of disallowance. Accordingly, the order of CIT(A) is to be reversed to the extent he had excluded average investment of Rs. 56.85 crores in the subsidiary company. Accordingly, disallowance following the judgment of Hon’ble Delhi High Court in the case of ACB India Ltd. v. ACIT, 374 ITR 108 (Del.) and taking into consideration the aforesaid judgment of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. disallowance as per Rule 8D would work out as under:- Particulars Investment Investment Average as on as on Investment 31.03.2011 31.03.2012 (crores) (crores) (crores) Investments on which 117.75 102.75 110.25 dividend income was received during the year. Disallowance at 0.5% - Rs. 55,12,500 & 4697/Del/2017 6 HT Media Ltd.
8. With regard to the ground No. 3 of the assessee regarding the satisfaction, we find that the AO has duly considered this issue as can be deciphered at para 3.2 of the assessment order.
The assessee has filed application under Rule 11 of the Income Tax(Appellate Tribunal) Rules, 1963 for admission of additional grounds of appeal. The additional grounds read as under: “On the facts and circumstances of the case & in law, the ld. AO, while computing the income of the Appellant under the head ‘Profits and Gains from Business and Profession’, ought to have allowed the deduction in respect of ‘Education Cess’ and ‘Secondary and Higher Education Cess’ of Rs.1,93,84,058/- as determined by him vide order of assessment.”
The ld. AR relied on the judgment of Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383. Admission of the additional ground has been opposed in principle by the ld. DR. The relevant portion of the said judgment is as under: “5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to & 4697/Del/2017 7 HT Media Ltd. file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
In the case of Jute Corporation of India Ltd. v. C.I.T. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised
by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.
7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income- tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. Karamchand Premchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd. . Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.
The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a & 4697/Del/2017 8 HT Media Ltd. question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits.”
Respectfully, following the above judgment of the Hon’ble Apex Court, the additional grounds taken up by the assessee are hereby admitted.
With regard to the issue of ‘Education Cess’ taken up by the ld. AR, we find that this issue has been adjudicated in the following cases: Chambal Fertilisers and Chemicals Ltd. Vs JCIT in dated 31.07.2018 (Raj. HC) ITC Vs ACIT in ITA No. 685/Kol/2014 dated 27.11.2018 Peerless General Finance & Investment Co. Ltd. Vs DCIT in ITA No.937 & 938/Kol/2018 dated 24.03.2019 DCIT Vs M/s. Agrawal Coal Corporation Pvt. Ltd ITA Nos. 801 to 803/Indore/2018. Atlas Copco India Ltd. Vs ACIT in ITA No. 736/Pune/2011 Tata Autocomp Hendrickson Vs DCIT in ITA No. 2486/Pune/2017 Symantec Software India Pvt. Ltd. Vs DCIT in ITA No. 1824/Pune/2018 Sicpa India Pvt. Ltd. Vs ACIT in ITA No. 704/Kol/2015 Philips India Ltd. Vs ACIT in ITA No. 2612/Kol/2019 DCIT Vs The Peerless General Finance & Investment & Co. Ltd. in ITA No. 1469/Kol/2019. ACIT Vs ITC Infotech in ITA No. 220/Kol/2017 Reckitt Benckiser India Pvt. Ltd. Vs DCIT (2020) 117 taxmann.com 519 (Kol.) Crystal Crop. Protection Pvt. Ltd. Vs JCIT in ITA No. 1539/Del/2016 Midland Credit Management India Vs ACIT in ITA No. 3892/Del/2017 Voltas Ltd. Vs ACIT in ITA No. 6612/Mum/2018 Sesa Goa Ltd. Vs JCIT (2020) 117 taxmann.com 96 (Bom.) & 4697/Del/2017 9 HT Media Ltd.
Hence, keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66- ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon’ble High Court of Bombay and Hon’ble High Court of Rajasthan, we hereby direct the revenue to consider the claim of deduction of the ‘Education Cess’ as per the provisions of Section 37 of the Income Tax Act.
In the result, the appeal of the assessee is partly allowed and the appeal of the revenue is allowed for statistical purposes. Order Pronounced in the Open Court on 22/02/2021.