ACIT 3(2)(1), MUMBAI vs. LIFE INSURANCE CORPORATION OF INDIA, MUMBAI

Learned counsel for the assessee, however, is not content even with the dismissal of revenue’s appeal.

Learned counsel invites our attention to, and urges us to first take a call on, the petition filed by the respondent-assessee under rule 27 of the Income Tax Appellate Tribunal Rules, 1963, wherein the respondent-assessee has raised a grievance against reopening of the assessment, and submits that once we hold that the reassessment proceedings are vitiated in law- as is the undisputed legal position according to him, adjudication on merits will be Assessment year: 2009-10 Page 3 of 7 rendered infructuous. That’s a little unusual an approach and, rather than taking it at face value and proceeding to adjudicate on the petition under rule 27 straightaway, we must first understand the bigger picture.

What emerged as true motivation for this approach is indeed interesting, and we must spend a few minutes dealing with the same. The relevant facts, from this perspective, are as follows. The assessee before us is a public sector undertaking engaged mainly in the business of providing life insurance. While its scrutiny assessment under section 143(3) was completed on 30th December, 2011, the finalized assessment was reopened on 19th February 2015, on two counts- first, missing out on disallowance under section 14A in respect of expenses attributable to tax-exempt income; and, second, the inadmissibility of excessive foreign tax credit granted to the assessee. Its reassessment was thus finalized on 29th February, 2016 at an assessed income of Rs 16,520.91 crores- including disallowance under section 14A amounting to Rs 854.96 crores, and withdrawing inadmissible foreign tax credit of Rs 7.57 crores. So far as the first point regarding disallowance of Rs 854.96 crores is concerned, the assessee moved an appeal before the CIT(A) and succeeded in the said appeal. However, so far as withdrawal of excessive foreign tax credit of Rs 7.57 crores is concerned, the assessee accepted that position by not raising any grievance against the same in appeal. The assessee, in a very subtle manner though, fairly accepts the fact that its foreign tax credit claim, to the extent of Rs 7.57 crores, was incorrect- and perhaps rightly so because, to this extent, the foreign tax credit claim, for taxes paid abroad in Mauritius, Fiji and the United Kingdom in respect of its branches in those jurisdictions, was clearly in excess of the related Indian income tax liability itself. The correct legal position is that the foreign tax credit, in respect of taxes paid abroad, can never exceed the Indian tax liability in respect of related income taxed abroad as also in India- as also elaborated upon in the case of Bank of India Vs ACIT [(2021) 125 taxmann.com 155 (Mum)] authored by one of us (i.e. the Vice President). It’s really gracious on the part of the assessee to accept, though in a rather subtle manner though, incorrectness of its claim and let the matter rest at that. However, today when learned counsel pleads for our quashing the reassessment itself, what he really seeks is that the entire reassessment is quashed, and thus even the withdrawal of excess foreign tax credit to the extent of Rs 7.57 crores, against which the assessee consciously did not offer any resistance by not challenging it in appeal on merits, must stand nullified. When we realized this fallout of the petition under rule 27, and we put it to the assessee, learned counsel candidly accepted this position and submitted that if the reassessment itself is quashed, all consequences must follow. He submits that whatever rights a taxpayer has under the law have to be protected and respected; the notions of propriety or fairness cannot come in the way of implementing these rights. The assessee has a right to challenge the reassessment proceedings at this stage under rule 27, and if that be so, we are bound to adjudicate on the same- whether or not it gives some additional benefit to the assessee. Quite clearly thus, whatever stand of the Assessing Officer, i.e. with respect to the inadmissibility of foreign tax credits Assessment year: 2009-10 Page 4 of 7 aggregating to Rs 7.57 crores, is accepted even by the assessee, and is not challenged in appeal before the CIT(A), is sought to be nullified in this circuitous manner.

Irrespective of the intended fruits of this labour, in our humble understanding of the law, the path so adopted will not yield anything more to the assessee than what the assessee would have got anyway by dismissal simpliciter of the revenue’s appeal. Let us see the rationale of this proposition. It is interesting to note that rule 27 of the ITAT Rules 1963 provides that “(t)he respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him”. What can thus be supported is the order impugned in appeal, and, in effect, the conclusions arrived at in the impugned order. In other words, even though the respondent may support on any of the grounds decided against the respondent by the CIT(A), he can never seek more than what the CIT(A) has given him. It is for this reason that the respondent can only “support the order”. That is materially distinct a situation vis-à-vis a situation in which the respondent is in appeal or is in cross objection, against the order of the CIT(A), before the Tribunal. It is for the reason when an assessee is in appeal or cross-objections before the Tribunal, he can not only support the conclusions arrived at in impugned order but can also assail the conclusions arrived at in the impugned order, and he can not only challenge, what is decided in the impugned order, but he can also raise a new ground of appeal even wholly unconnected with the findings in the impugned order. When we bear in mind this significant and qualitative difference in scope of an appeal and a cross-objection vis-à-vis the scope of a petition under rule 27, it becomes quite clear that the relief sought by way of a petition under rule 27 can never go beyond what the impugned order has given to the respondent. Therefore, even if we are to uphold the plea of the assessee against reopening of the assessment, it has to essentially come with a rider that the relief eventually to be given to the assessee will not exceed the relief available to the assessee in the impugned order passed by the CIT(A). When the grievance against the withdrawal of foreign tax credit to the tune of Rs 7.57 crore was not even challenged in appeal before the CIT(A), the assessee will not be eligible for any relief on that aspect- directly or indirectly. The assessee thus gets no additional advantage by the petition under rule 27.

On a similar note, Hon’ble jurisdictional High Court in the case of CIT Vs Jamnadas Virji Shares and Brokers Pvt Ltd [(2013) 258 ITR 458 (Bom)], were dealing with a situation in which the Tribunal was dealing with an appeal filed by the Assessing Officer against an order passed by the CIT(A), and no cross-appeal or cross-objection, against the said order, filed by the assessee was pending for adjudication by the Tribunal. The assessee, however, filed a petition under rule 27, and in effect, sought relief going beyond the relief given by the CIT(A). On these facts, the question arose whether, in such a situation and within the limited scope of rule 27, the Tribunal could grant relief beyond the relief granted by the CIT(A). Their Lordships decided this question in negative and in favour of the revenue authorities, and reversing the relief granted by the Tribunal, observed as follows: Assessment year: 2009-10 Page 6 of 7 10. Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 provides as follows:- "27. Respondent may support order on grounds decided against him.:- The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." 11. Under Rule 27 the Respondent is permitted to support the order appealed against, though he may not have appealed against the order, on any of the grounds decided against him. In B.R. Bamasi v. CIT [1972] 83 ITR 223 (Bom.), a Division Bench of this Court noted an earlier judgment in CIT v. Hazarimal Nagji & Co. [1962] 46 ITR 1168 (Bom.) which had held that the Respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the Lower Court in his favour may not have raised those grounds. In this regard the Division Bench had held that the powers of the Appellate Tribunal are similar to those of an Appellate Court under Order XLI Rule 22 of the Code of Civil Procedure, 1908. 12. Now, in the present case, the Commissioner of Income Tax (Appeals) allowed the appeal of the Assessee in part and deleted the disallowance made by the Assessing Officer to the extent of Rs. 13.73 lacs. However, the Commissioner of Income Tax (Appeals) confirmed the disallowance in regard to the balance representing an amount of Rs. 14.96 lacs. The Assessee's appeal against the order of the Commissioner of Income Tax (Appeals), was withdrawn, perhaps because it was barred by limitation. Once the appeal was withdrawn, it was only open to the Assessee to support the order of the Commissioner of Income Tax (Appeals) on any of the grounds decided against him. Hence, while the Assessee would support the order, that would mean that the Assessee would be entitled to urge that the deletion of the disallowance to the extent of Rs. 13.73 lacs by the CIT(A) was correct and proper. The Assessee, however, would not be entitled to avail of the benefit of the provisions of Rule 27 in regard to that part of the order of the CIT(A) which, upon consideration of the evidence, confirmed the disallowance of Rs.14.96 lacs made by the Assessing Officer. 13. For these reasons, we are of the view that the Tribunal erred in setting aside the order of the CIT(A) in its entirety and by restoring the proceedings to the Assessing Officer in regard to the disallowance to the extent of Rs.28.69 lacs. The order of the Tribunal would have to be confirmed only to the extent to which it restores the proceedings to the Assessing Officer as regards the amount of Rs. 13.73 lacs. We, accordingly, answer the question of law in the negative, in favour of the Revenue and against the Assessee.

Quite clearly, therefore, in a situation in which the respondent to an appeal has not filed a cross-appeal or a cross-objection, but has simply moved the petition under rule 27, one of the limitations of invoking rule 27 is that the appellant cannot be worse off vis-à-vis the position he was in when he presented the present appeal. In the present case, however, if entire reassessment proceedings are to be quashed- as is sought by way of a petition under rule 27, the Assessing Officer will be in a worse position vis-à-vis the position if he was not to come in appeal, in the sense that even admitted liability in respect of the incorrect foreign tax credits of Rs 7.57 crores will stand nullified. What the respondent-assessee can at best Assessment year: 2009-10 Page 7 of 7 seek is the position as on at the outcome of the first appellate order, and that is what he gets anyway when the appeal of the Assessing Officer is dismissed. The relief being sought by this petition rule 27 is thus much more than what is permissible in law. Be that as it may, the appeal of the Assessing Officer having been dismissed on merits, and, thus, the net position as at the time of the outcome of the first appeal having been allowed to be sustained, the present petition under rule 27 becomes wholly academic and infructuous, and it does not therefore call for any adjudication on merits. We, therefore, dismiss the petition as infructuous.

In the result and with the observations as above, the appeal is dismissed. Pronounced in the open court today on the 4th day of October, 2021.