Commissioner of Income Tax vs Meditab Specialities Pvt. Ltd.

This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 20th July, 2012 passed by the Income Tax Appellate Tribunal (the Tribunal) for the Assessment Year 2008-09.

The Revenue has raised the following questions of law for our consideration:

"(a) Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in setting aside the disallowance made u/s 14A r.w.r. 8D and directing the A. O. for making a reasonable disallowance u/s 14A of the Act only on account of administrative cost in respect of dividend income of Rs.6,04,337/- thereby ignoring the decision of the Hon''ble High Court in t he case of Godrej and Boyce Mfg. Co. Ltd. Vs. Dy. Commissioner of Income Tax, Range 10(2) and Others, , wherein it is held that Rule 8D is a reasonable method for making the disallowance u/s 14A and it is applicable for the A. Y. 2008-09?

(b) Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in holding that the disallowance u/s 14A cannot be made in respect of income of SEZ, stating that the income of the assessee from SEZ is eligible for deduction u/s 80IA/IB or u/s 10AA and both are deduction provisions, ignoring that the assessee is not eligible for deduction 80IA/IB as the assessee is not a developer of SEZ and the assessee is eligible for exemption u/s 10AA, which falls in Chapter III appearing in the Act under the head " Incomes which do not form part of total income" and therefore the income of the assessee from SEZ is exempt income?"

The Counsel for the parties are agreed that the impugned order of the Tribunal on the above two issues be set aside and the matter be restored to the Tribunal for fresh adjudication on both the issues.

So far as Question (a) is concerned, the Tribunal by the impugned order restored the issue of disallowance under Section 14A of the Act on account of administrative costs incurred to earn exempt divided income to the Assessing Officer. The contention of the Revenue is that in view of the decision of this Court in Godrej and Boyce Mfg. Co. Ltd. Vs. Dy. Commissioner of Income Tax, Range 10(2) and Others, of the Income Tax Rules (Rules) is to be applied and the directions to adopt a reasonable method of disallowance, is not correct.

Mr. Joshi, learned Counsel appearing for the Respondent-Assessee states that even if Rule 8D of the Rules is applied, the tax effect would be very negligible. Therefore, he is instructed not to contest the same. However, this concession on the part of the Respondent Assessee should not be held against him in any other proceedings. The offer made by Mr. Joshi is a reasonable. However, as we are remanding the issue to the Tribunal, it would be for the Tribunal to consider the same.

So far as Question (b) is concerned, we find that the impugned order of the Tribunal on the above issue has followed its order dated 8th June, 2012 in the Respondent Assessee''s own case for the Assessment Year 2007-08. There has been no independent application of mind to this issue in the impugned order. The order of the Tribunal for Assessment Year 2007-08 was a subject matter of appeal by the Revenue being Income Tax Appeal No. 241 of 2013. In that appeal, this Court by its order dated 5th March, 2013 specifically clarified that the observations made with regard to the above issue be ignored as the observations made with regard thereto were beyond a scope of the appeal before the Tribunal.

In view of the above, we set aside the impugned order on both the aforesaid questions and restore the same to the Tribunal to decide it afresh on merits, after considering the rival submissions. All contentions left open.

Accordingly appeal disposed of with the above observations.