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Income Tax Appellate Tribunal, “F ” BENCH MUMBAI
Before: SHRI PRAMOD KUMAR & SHRI AMARJIT SINGH
आदेश / O R D E R PER AMARJIT SINGH, J.M.
The assessee has filed the present appeal against the order dated 20-07-2018 passed by the CIT(Appeals)-51, Mumbai relevant to the assessment year 2015-16. The assessee has raised the following grounds:
1(a) On the facts and in the circumstances of the case ad in law, the Ld. CIT(A) erred in directing ld. AO to recalculate the disallowance u/s 14A r.w. Rule 8D(2)(iii) on average investments of Rs.39,59,06,791/- (being average of investments of Rs.44,94,13,741/- as on 31.03.2014 and investments of Rs.34,23,99,841 as on 31.03.2015) by considering the following investments: (a) which are capable of generating the taxable income. (b) investments wherein there is no movement made during the year. A.Y.2015-16 (c) on which the appellant has not received any exempt income. which wrong and contrary to the facts of the case, the provisions of the Act and Rules made there under.”
2. The brief facts of the case are that the assessee filed its return of income on 30- 11-2015 declaring total income of Rs.62,80,82,820/-. The case was selected for scrutiny. Notices u/s 143(2) and 143(1) were issued and served upon the assessee. The assessee company was engaged in the business of transportation of cargo through barges from mother vessel to jetty in case of import and vice versa in case of export. The assessee company was also during the business of transportation of cargo from one part to another performs incidental activities like stevedoring, loading, unloading at jetty, internal haulage etc. The assessee claimed the exempt income in a sum of Rs.78,98,916/- The assessee suo moto disallowed u/s 14A read with Rule 8D at Rs.5,43,248/-. Notice was given to the assessee and after reply of the assessee, the expenditure to earn the exempt income was assessed in a sum of Rs.1,31,5318/-. Feeling aggrieved, the assessee filed an appeal before the CIT(Appeals) and the CIT(Appeals) remanded the issue to AO to consider the investment which has been shown in the table mentioned below :
S.No. Nature of Name of the Invt. S on Invt. S on Remarks. Investment company 31.03.015 31.03.2014 (Rs.) 1 Non currentInvt - CGU Logistic -- 123,750.000 Disposals Trade Ltd. during the year 2 Non currentInvt- SBIMF A-11 50,000,000 -- New Non Trade Growth 385 acquisition days during the year. SBIMF SDFS 50,000,000 -- -do- HDFC FMP 100,000,000 -do- Regular Growth 367 days HDFC FMP 59,000,000 -do- 1184D January 2015 A.Y.2015-16 3. Investment in Aluminium 450,000 450,000 Quotes equity instruments Industries investments. (quoted) Canara Bank 199,500 199,500 Quoted investments and also dividend earned Punjab 1,435,980 1,435,980 Quoted National Bank investments About 2,345,711 2,345,711 Quoted Laboratories investments and also dividend earned 4 Current Investments Canara Robeco 87,968,650 164,385,482 Disposals and Savings Plus also dividend Fund earned Canara 56,847,068 Disposals and RobecoTresury also dividend Advantage earned Fund SBIMF SDFS 50,00,000,000 Disposals A-11 during the year SBI Mutual 50,000,000 Disposals Fund (SDFC) during the year 3. Feeling aggrieved, the assessee filed the present appeal before us.
We have heard the arguments advanced by the learned representatives of the parties and perused the records. At the very outset the learned representative of the assessee has argued that the investment which yielded the exempt income is liable to be considered to assess the expenditure towards the exempt income u/s 14A read with Rule 8D. Learned representative of the assessee has placed reliance on the decision in the case of Vireet Investment 82 taxmann.com 415. However, on the other hand, the learned representative of the Department has refuted the said contentions. A.Y.2015-16 5. The Special Bench of ITAT, Delhi in the case of Vireet Investment 82 taxmann.com. 415 has observed as under :
“11.17. As far as argument relating to meaning to be ascribed to the phrase „shall not‟ used in Rule 8D(2)(iii) is concerned, the Revenue‟s contention is that it refers to those investments which did not yield any exempt income during the year but if income would have been yielded it would have remain exempt. There is no dispute that if an investment has yielded exempt income in a particular year then it will enter the computation of average value of investments for the purposes of Rule 8D(2)(iii). The assessee‟s contention that if there is no certainty that an income, which is exempt in current year, will continue to be so in future years and, therefore, that investment should also be excluded, is hypothetical and cannot be accepted. 11.18. In view of above discussion, the matter is restored back to the file of AO for recomputing the disallowance u/s 14A in terms of above observations. Thus, revenue‟s appeal is dismissed and assessee‟s cross-objection, on the issue in question, stand allowed for statistical purposes, in terms indicated above.
Now we will consider the other two grounds. As far as ground no. 3 is concerned, we do not find any reason to interfere with the order of ld. CIT(A) because ld. CIT(A) has only referred the matter to AO for verifying the revised computation u/s 94(7) with reference to record date and not with respect to date of receipt of dividend. We do not find any infirmity in the order of CIT(A) on this issue.
As regards addition of Rs. 4,02,58,032/-, we find that the entire addition had been made because assessee did not charge any interest from loanees. However, admittedly assessee had not claimed any interest expenditure and, therefore, there was no reason for making any addition on the ground of interest being not charged by assessee. Ld. counsel has relied on following decisions for the proposition that only real income can be taxed and not notional income. - ShoorjiVallabhdas& Co. 46 ITR 144 (SC); - Godhra Electricity Co. Ltd.v. . CIT 225 ITR 746 (SC); - CIT vs. A. Raman & Co. 67 ITR 11(SC); - UCO Bank v. CIT 237 ITR 889 (SC); - Airport Authority of India v. CIT 340 ITR 407 (Del. )(FB); - CIT v. Motor Credit Co. P. Ltd. 127 ITR 572 (Mad.); - JCIT v. Pankaj Oxygen Ltd. 78 TTJ 119 (Nag.) - ACIT vs. Manick Chand Damani 72 TTJ 675 (Cal.). 13.1. After hearing both the parties, we do not find any reason to interfere in the order of ld. CIT(A), because the issue that only real income and not notional income is taxable, is no more resintgra in view of aforementioned decisions, ITA. No.5815/M/2018 A.Y.2015-16 particularly when no interest was paid by assessee on its borrowings. We, therefore, confirm the order of ld. CIT(A). This ground is dismissed.
In the result, revenue‟s appeal is partly allowed and the assessee‟s cross- objection stands allowed for statistical purposes.”
In view of the observation made by the Special Bench Delhi in the case of Vireet Investment, we set aside the finding of the CIT(Appeals) on the issue and direct the AO to assess the expenses to earn the exempt income by excluding the investment which did not yield the exempt income. Accordingly, we decide this issue in favour of the assessee. Reasons for delay in pronouncement of order 6.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 07/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub- clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. This period could be extended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall not ordinarily exceed a period of 30 days. 6.2 Although the order was well drafted as well as approved before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over A.Y.2015-16 the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices.
6.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon’ble President and Hon’ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018) order dated 14/05/2020 held as under: -
However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5)The pronouncement may be in any of the following manners: — (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board.
Quite clearly, “ordinarily” the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Hon‟ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] A.Y.2015-16 wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile(emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon‟ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon‟ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon‟ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. A.Y.2015-16 force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term „force majeure‟ has been defined in Black‟s Law Dictionary, as „an event or effect that can be neither anticipated nor controlled‟ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excludingat least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon‟ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon‟ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon‟ble jurisdictional High Court and Hon‟ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case. A.Y.2015-16 Driving strength from the ratio of aforesaid decision, we exclude the period of lockdown while computing the limitation provided under Rule 34(5) and proceed with pronouncement of the order. 7. In the result the appeal filed by the assessee is allowed. Order pronounced in the open court on this 06/07/2020 Sd/- Sd/- (PRAMOD KUMAR) (AMARJIT SINGH) VICE PRESIDENT JUDICIAL MEMBER Mumbai; Dated : 06/07/ 2020. Wakode, Sr.P.S. Copy of the Order forwarded to :