ACIT CIRCLE 11(3)(2), MUMBAI vs. TEJASKIRAN PHARMACHEM P.LTD, MUMBAI

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of the ITAT for Assessment Year 2011-12 in the assessee’s own case. Department had not accepted the decision of Hon’ble ITAT for Assessment Year 2011-12 on merit. However, the appeal was not file because of low tax effect. “2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has ignored the decision given in assessment for the earlier year are not binding either on the assessee or the department in subsequent year. In the decision of radhasaomi Satsang, (2002-TIOL-745-SC-IT) the Hon’ble Supreme Court acknowledged that there is no res judicata as regards assessment orders and assessment for one year may not bind the officer for the next year. This is consistent with view of the Hon’ble Supreme Court “there is no such thing as res judicata in Income Tax matters.

The brief, facts of the case are that the assessee has e- filed its return of income for A.Y. 2013-14 on 26/09/2013 declaring total income of Rs.10,31,30,930/- Further the case was selected for scrutiny hence, notice u/s. 143(2) was issued and served on the assessee. In response to the same, the assessee filed basic details such as copy of return, audit report, profit & loss account, balance sheet and accompanying enclosures. The assessee is engaged in the business of investment and finance. For the relevant year, the assessee has credited to the profit & loss account receipts aggregating to Rs.56,01,85,732/- on account of income from PMS, commission, interest etc. after debiting various expenses such as expenses relating to PMS and other expenses, net profit of Rs.52,15,61,232/- has been debited to the profit & loss account. After claiming exemption in respect of dividend receipts, deduction under Chapter VIA on account of donation u/s. 80G etc., total income of Rs.10,31,30,930/- has been offered for taxation.

During the course of assessment proceedings, it was noticed that the appellant had made investments in exempt income yielding assets amounting to Rs. 1,77,03,02,692/- as on 31/03/2013. The ensuing dividend of Rs. 41,87,68,957/- has been claimed as exempt by virtue of Section 10(38) of the Act. In the computation of total income, the assessee has suo moto made disallowance of Rs. 45,028/- u/s. 14A of the Act. In this regard, during the course of assessment proceedings, the assessee was asked to furnish detailed working of the disallowance of Rs. 45,028/- worked out u/s. 14A with respect to expenses incurred in relation to exempt income. From the details submitted by the assessee before the Assessing Officer, it was noticed that the said disallowance has not been worked out in accordance with the method prescribed in Rule 8D of the Income-tax Rules, 1962. Further, it was seen that in the computation of income the assessee has restricted disallowance u/s. 14A to Rs. 45,028/- i.e. 100% of certain expenses debited to the profit & loss account. The assessee contended before the Assessing Officer that only administrative expenses and not portfolio related expenses should he considered for disallowance u/s. 14A of the Act.

The assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the submissions of the assessee, deleted the additions holding as under:-

Against above order revenue is in appeal before us.

We have heard both the counsel and perused the records. We find that in this case the Ld. CIT(A) has followed the earlier tribunal order for the proposition that the disallowance under section 14A cannot exceed the expenditure incurred and booked in this regard. The Revenue is now aggrieved that it has not accepted those ITAT Order’s. We find that it is not the case that those ITAT order’s have any defect or they are reversed by honourable High Court. Just because revenue has not accepted those ITAT order’s the same does not cease to have value as precedent. Since, the issue is covered by the order of ITAT, hence, we do not find any infirmity in the Ld. CIT(A) following the same.

Accordingly, we uphold the order of Ld. CIT(A).

In the result, the appeal by the revenue stands dismissed.