IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA-382-2019 (O&M) Date of Decision : 6.2.2020 Pr. Commissioner of Income Tax-2, Chandigarh Appellant Versus M/s. TDS Management Consultant Pvt. Ld. Respondent CORAM : HON'BLE MR.JUSTICE AJAY TEWARI : HON'BLE MR.JUSTICE AVNEESH JHINGAN Present : Ms. Urvashi Dhugga, Sr. Standing counsel for appellant. *** AJAY TEWARI, J. (Oral) 1. This appeal has been by Revenue under Section 260-A of Income Tax Act, 1961 (for short 'the Act') against order dated 27.3.2019 relating to assessment year 2014-2015 of Income Tax Appellate Tribunal Division Bench Chandigarh, in M.A. No. 50/Chd/2019 in ITA No. 656/Chd/2018 (Annxure A-4) claiming following questions of law :- (i) Whether on facts and in circumstances of case, order of Hon'ble ITAT in dismissing Miscellaneous application without going through merits of case is not perverse and legal issue raised by revenue before it should be reinstated and decided on merits ? (ii) Whether on facts and in circumstances of case, Hon'ble ITAT is justified in dismissing Miscellaneous application of Revenue without discussing merits ignoring legislative intent expressed in CBDT's ANURADHA 2020.02.12 17:37 I attest to accuracy and integrity of this document ITA-382-2019 (O&M) 2 Circular No. 5/2014 dated 11.02.2014, which explicitly states that expenses relatable to earning of exempt income have to be considered for disallowances irrespective of fact whether any such income has been earned during F.Y. or not as confirmed by Apex Court in Maxopp Investment Ltd. Vs. CIT, 91 Taxman.com 154 (SC) ? (iii) Whether on facts and in circumstances of case, Hon'ble ITAT is justified in dismissing Miscellaneous application of Revenue, without appreciating fact that applicability of section 14A or Rule 8D does not depend on earning of income as held by Supreme Court in case of CIT vs. Rajender Prasad Moody (1978), 115 ITR 519 ? (iv) Whether on facts and in circumstances of case, Hon'ble ITAT is justified in dismissing Miscellaneous application and not deciding merits, without appreciating fact that there is no such restriction to disallow interest to extent exempt income stipulated either in section 14A of Income Tax Act or Rule 8D of Income Tax Rule ? (v) Whether on facts and in circumstances of case, Hon'ble ITAT is justified in dismissing Miscellaneous application and not deciding merits, ignoring principal of apportionment regardless of exempt income laid down by Hon'ble Supreme Court decision in CIT vs. Walfor Share and stock Brokers P Ltd : 326 ITR 1 (SC) and upheld by Hon'ble Supreme Court in 91 Taxmann.com 154 (SC) ? (vi) Whether on facts and in circumstances of case, Hon'ble ITAT is justified in dismissing Miscellaneous application of Revenue and not deciding merits, whereas disallowances wa restricted by Ld. CIT (A) to extent except income earned ignoring fact that Hon'ble Supreme Court of India in Civil Appeal No. 1423 of 2015 filed by Avon Cycles Ltd. Decided with Maxopp ANURADHA 2020.02.12 17:37 I attest to accuracy and integrity of this document ITA-382-2019 (O&M) 3 Investment Ltd. And many other cases decided issue in favour of department ? (vii) Whether on facts and in circumstances of case and in law, Hon'ble ITAT has erred in dismissing Miscellaneous application and not deciding merits of case because order of Ld. CIT Appeal is perverse in holding that it is now 'res integra' that disallowances u/s 14A cannot exceed exempt income, when Supreme Court has upheld principles of apportionment and department is in SLP on same issue in cases of Moderate Leasing and Capital Services Pvt. Ltd in ITA No. 102 of 2018, A.Y. 2009-10 and Matrix Cellular Services (P) Ltd. in ITA No. 484 of 20174 and Nilgiri Infrastructure Development Ltd. in ITA No. 135 of 2016 and Instant Holding Ltd. in ITA No. 2168 of 2011 ? (viii) Whether on facts and in circumstances of case and in law, Hon'ble ITAT has erred in dismissing Miscellaneous application and not deciding merits of case ignoring legality of CBDT Circular No. 5 of 2014 which is in consonance with legislative intent behind Section 14A and charging sections 4 and 5 of Income Tax Act, 1961, which lay down that total income under Act would include income from all sources whether received , deemed to be received , accrued or deemed to accrue ? 2. Brief facts of case are that originally appeal of Revenue was dismissed by Tribunal on account of low tax effect in view of CBDT Circular No. 03 of 2018 dated 11.7.2018. Thereafter, application for rectification was filed which was dismissed vide impugned order holding that this was outside scope of rectification. Today, learned counsel has argued that case was wrongly dismissed on account of low tax effect whereas it was covered by exceptions in Circular. However, when we go through circular, only item which could be possibly related is para No. 10 of circular which is quoted herein below ANURADHA 2020.02.12 17:37 I attest to accuracy and integrity of this document ITA-382-2019 (O&M) 4 :- 10. Adverse judgments relating to following issues should be contested on merits notwithstanding that tax effect entailed is less than monetary limits specified in para 3 above or there is no tax effect : (a) Where Constitutional validity of provisions of Act or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in case has been accepted by Department, or (d) Where addition relates to undisclosed foreign assets/band account. 3. only point to which this argument can be relatable is Clause 10 (b). We asked learned counsel where any Notification, Order, Instruction or Circular has been held to be illegal or ultra vires. Her argument is that though no Order, Notification, Instructions or Circular has been held to be legal or ultra vires but effect of said Circular has not been correctly understood. In our considered view, that is beyond exception clause count down by circular. 4. Accordingly, no substantial question of law proposed arises. Consequently, appeal stands dismissed. 5. Since main case has been dismissed, pending application, if any, also stands disposed of. (AJAY TEWARI) JUDGE (AVNEESH JHINGAN) JUDGE 6.2.2020 anuradha Whether speaking/reasoned - Yes/No Whether reportable - Yes/No ANURADHA 2020.02.12 17:37 I attest to accuracy and integrity of this document Pr. Commissioner of Income-tax-2, Chandigarh v. TDS Management Consultant Pvt. Ld