M/S PUNJAB STATE COOP MILK PRODUCERS FEDERATION LTD.,CHANDIGARH vs. ACIT, C-4(1), CHANDIGARH

आदेश/ORDER PER ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Chandigarh (in short ‘CIT(A)’ dated 18.1.2018 passed u/s 250(6) of the Income Tax At, 1961 (hereinafter referred to as ‘Act’).

“1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the disallowances as per rule 8D ignoring the fact that the said disallowance resulted to further addition to the income of the assessee which is not permissible in law as

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it resulted in enhancement in income of the assessee by Rs.3,21,88,682/-.” 3. Brief facts relating to the case are that the assessee

had claimed deduction u/s 80P(2)(d) of the Act in respect of

interest earned from the member Societies. The assessee

did not take into account the entire expenditure

attributable to the earning of interest income while

computing this deduction. The A.O. noted that the Tribunal

had decided this issue against the assessee for assessment

years 2002-03, 2005-06 and 2006-07 in the earlier year,

the appeal of the assessee against which had been

dismissed by the Hon'ble High Court. The A.O., therefore,

recomputed the expenses following the order of the

Tribunal and accordingly disallowed the expenses to the

tune of Rs.60,58,021/- out of financial and administrative

expenses attributing the same to the earning of interest

income. The matter went up to the I.T.A.T. who restored

the issue back to the A.O. for recomputing the disallowance

as per the provisions of section 14A r.w.r. 8D of the Income

Tax Rules, 1962. In the set aside proceedings the A.O.

accordingly computed the disallowance at Rs.3,82,46,703/-

which was upheld by the CIT(A).

pursuant to the directions of the Tribunal the A.O. could

not have enhanced the disallowance since it is settled law

that the I.T.A.T. has no power of enhancement. Reliance

was placed on the following case laws:

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1) Mcorp Global(P) Ltd. Vs. CIT, Ghaziabad(SC)(2009)178 Taxman 347, 309 ITR 434(SC)(2009), 222 CTR 110 (SC)(2009) 2) Sanmar Specialty Chemicals Ltd. Vs. Income Tax Officer, Company Ward VI(1), Chennai 3) Fidelity Shares & Securities Ltd. Vs. Deputy Commissioner of Income/tax(Assessment) (2017) 82 Taxmann.com 108(Gujarat)/390 ITR 267 5. The Ld. DR, on the other hand, heavily relied upon the

order of the CIT(A) stating that the case laws relied upon by

the assessee are of no assistance to it since the CIT(A) had

rightly pointed out that the assessee himself had pleaded

before the I.T.A.T. that calculation of the disallowance to

be worked out as per section 14A r.w.r. 8D of the Income

Tax Rules and the finding of the A.O. as a consequence is

what the assessee itself wanted. The Ld. DR pointed out

from the order of the CIT(A) that in fact, the law had been

correctly applied in the present case and that in earlier

years when similar application of Rule 8D had resulted

either in no change in the disallowance or reduction in the

disallowance, the assessee had accepted the same.

Therefore, the law having to be applied uniformly, the same

cannot be changed in the impugned year merely on the

ground that it has resulted in enhancement of disallowance

which is impermissible as per settled position of law. Our

attention was drawn to the relevant findings of the CIT(A)

at para 9.3.2 of his order as under:

“9.3.2 After considering the above case laws, I proceed to examine the facts of the assessee's case. In the present case the assessee had itself pleaded before the ITAT in ground no 3 that " the order of the assessing officer as upheld by the Commissioner of

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Income Tax, Chandigarh holding Rs 60,58,021/- as expense attributable to the deduction u/s 80P(2)d on the basis of earlier years more so when rule 8D was applicable to determine such expense is bad in law and need to be set aside". Thus the assessee had itself requested the ITAT that the provisions of rule 8D may be applied to it. The decisions quoted by the assessee are different in facts as in no such case the enhancement had resulted in consequence of a prayer by the assessee himself. The finding is not adverse to the assessee but to the contrary it is what the assessee himself wanted. If the consequence of the correct application of law results in more disallowance, the same is not contrary to law. The increase in the disallowance has resulted from the correct application of rule 8D. Moreover in other years where the similar application rule 8D has resulted in either no change in the disallowance or reduced the disallowance, the same has been accepted by the assessee. Such a position is not permissible in law. The law has to be applied uniformly in all the years. Thus I do not find any infirmity in the order of the AO and the same is upheld. Ground of appeal no 4 is dismissed.” 6. We have considered the rival contentions and gone through the orders of the authorities below and also carefully gone through the case laws referred to before us. The issue to be decided and adjudicated by us is whether pursuant to the directions of the I.T.A.T. the disallowance of expenses relatable to earning of interest income eligible for deduction u/s 80P of the ACT, computed by the AO, which was more than that disallowed in the original proceedings was permissible as per law. The contention of the Ld.Counsel for the assessee is that the ITAT having no power of enhancement u/s 254 of the Act, the AO could not have enhanced the amount of disallowance pursuant to direction of the ITAT. The contention of the Revenue on the other hand is that, the enhancement has resulted on account of the prayer of the assessee itself to apply Rule 8D

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enhancing the disallowance which the ITAT has no powers

to direct and that even otherwise ,such disallowance

calculated in other years has been accepted by the

assessee. Therefore, the Ld.DR has contended that the

disallowance has been correctly worked out as per law and

cannot now be challenged for the aforestated reason.

Ld.Counsel for the assessee at all. In fact we find that the

ITAT in the present case has not directed any enhancement

of disallowance at all. The ITAT had only laid down a

principle to apply Rule 8D for calculating the disallowance,

that too judiciously accepting the contention of the

assessee in this regard. This is evident from para 13 & 14

of the order of the ITAT which is reproduced hereunder:

“Therefore following the order of the Hon'ble High Court in ITA No.444 of 2011 and we decide this issue against the assessee."1?was also contended that in any case Rule 8D has become applicable from assessment year 2008-09 and therefore for computing the disallowance under Rule 8D read with section 14-A, disallowance should be calculated as per this Rule. 14. We find merit in this contention and therefore set aside the order of Ld. CIT(A) and remit the matter back to the file of AO for re-computing the disallowance U/s 14-A read with Rule 8P(2)(d). 15. In the result appeal of the assessee is allowed for statistical purposes.” While giving the direction it was not in the knowledge of

the ITAT that it would result in enhancement of

disallowance.For that matter even the assessee was also not

aware of this fact ,or it would not have made such a request

in the first place.That the direction resulted in

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enhancement of disallowance is only consequential. In such

circumstances it cannot be said that the ITAT had directed

for enhancement of the disallowance. The ITAT had only

directed application of a particular method for calculating

the disallowance,which is a direction regarding

applicability of correct law, and while giving such directions

courts cannot possibly take note of the consequences of the

same whether it results in enhancement or reduction of

addition/disallowance made. It is not the case that the

direction of the ITAT was to disallow a specific sum

,applying a particular Rule. It is only in such cases that

the direction could be said to be for enhancing disallowance

,which undoubtedly the ITAT has no power.In the present

case,the quantum of disallowance had not been specified by

the ITAT in its direction nor was it known to it,as stated

above. The direction was only confined to applicability of a

particular method/Rule for calculating disallowance.In

such cases the direction given by the ITAT ,cannot by any

stretch of logic be said to be a direction for enhancement of

disallowance made.The case laws relied upon by the

Ld.Counsel for the assessee are of no assistance since in

the facts of those cases the direction of the ITAT was to

enhance the income/disallowance.In the case of Mcorp

Global(supra) ,relied upon by the Ld.Counsel for the

assessee,the assessee had claimed depreciation of

Rs.1,80,30,489/- on leased assets ,which the AO had

disallowed to the extent of Rs.48,21,694/-,allowing the

balance of Rs.1,32,08,795/-.The ITAT directed disallowance

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of entire depreciation,to which the Hon’ble Supreme

courtheld that it was not empowered to take back the

benefit granted by the AO.Clearly ,the direction of the ITAT

in the said case was to enhance the disallowance of

depreciation ,which was ruled out by the apex court.In the

case of Sanmar Speciality (supra),the question framed

before the Hon’ble Madras High Court was whether the

Tribunal was empowered to give such directions to the AO,

knowing that they would result in enhancing the

assessment.This was answered in the negative by the

Hon’ble High Court relying upon the law laid down in this

regard by the apex court in Mcorp Global(supra).The

question framed was as under:

“2.Whether on the facts and in the circumstances of the case the Tribunal was right in directing the assessing officer to determine the depreciation or business loss of each year and to carry forward lower of two for adjustment which will result in enhancement of assessment for which the Tribunal has no power”

Clearly in the aforesaid case also the direction of the

Tribunal was to enhance the assessment after making

certain adjustments, since as is evident from the question

framed, the direction was to make certain adjustments

which would result in enhancement of assessment,meaning

thereby that there was no doubt that the adjustments would

result in enhancement and knowing the same the direction

of the Tribunal was for all purposes specifically for

enhancement. In the present case neither the Tribunal nor

the assessee were in the know that the direction would

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result in enhancing the disallowance which was only

consequential therefore. The direction ,in the impugned

case therefore ,as held by us above,cannot be said to be for

enhancing the disallowance. In the case of Fidelity

Shares(supra) ,the question before the Hon’ble Gujrat High

Court was:

“5.Whether the Tribunal had power to pass such an order whereby the total income of the assessee was far more than the total income assessed by the assessing officer and that too in the absence of any grounds of appeal taken by the Revenue praying for such decision and without hearing the assessee on such proposed result” The facts before the Hon’ble High court was that ,the AO

had reduced the deduction claimed by the assessee u/s

80HHC of the Act from Rs.1.96 crores to Rs.1.33 crores

which was rectified by him u/s 154 to Rs.1.29 crores.The

CIT(A) had allowed assessees claim upto Rs.1.95 crores.The

ITAT in turn had reduced the claim to even less than what

was allowed by the AO to Rs.48.92 lacs. In this case also

there was a specific direction for enhancing the income of

the assessee.Therefore the same is distinguishable from

the present case where such specific direction is clearly

absent.

Moreover as rightly pointed out by the Ld.DR on the basis

of the argument of the assessee in this regard,judiciously

accepting the argument ,a principle was laid down by the

Tribunal in consonance with law.This principle was

beneficial and thus accepted by the assessee in other

years,whereas in the impugned year,the assessee has come

up with a grievance against the said principle laid down

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,since it did not benefit it.A principle laid down in consonance with law cannot be altered depending upon the benefit derived or not derived.Any outcome would be the result of following the due process of implementation of the principle laid down and interpretation of law and it cannot be changed at the whims and fancies of any party involved.

The ground of appeal raised by the assessee is, therefore, dismissed.

Sd/- Sd/- संजय गग� अ�नपणा� ग�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 17th December, 2018 *रती*

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आय�त / CIT 4. आयकर आय�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar