The Commissioner of Income Tax-5 vs Jindal Iron and Steel Company Ltd.

This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act), challenges the order dated 31st October, 2012 passed by the Income Tax Appellate Tribunal (the Tribunal) for the Assessment Year 2001-02.

The Revenue urges the following question of law for our consideration:-

" Whether on the facts and in the circumstances of the case and in law the Tribunal is right in restore back the issue of disallowance u/s. 14A at Rs. 5,97,30,707/- to the Assessing Officer for fresh consideration?".

The issue in dispute between the parties before the Tribunal was inter alia with regard to disallowance of interest and other expenses under Section 14-A of the Act in respect of the dividend income earned by the Respondent-Assessee and the application of Rule 8D of the Income Tax Rules for the subject A. Y. 2001-02. It was the contention of the Respondent-Assessee that no interest and/or other expenses were incurred to earn dividend income, thus Section 14-A of the Act would have no application. This, in view on the decision of this Court in The Commissioner of Income Tax-3 Vs. Reliance Utilities and Power Ltd., . The impugned order restored the issue to the Assessing Officer to consider the Respondent - Assessee''s contention and in case it is held that Reliance Utilities & Power (supra) does not apply, then on application of Section 14-A of the Act, the disallowance has to be done on reasonable basis. This view was taken by the impugned order following the decision of this Court in Godrej and Boyce Mfg. Co. Ltd. Vs. Dy. Commissioner of Income Tax, Range 10(2) and Others, . It was in the above circumstances that the impugned order has merely restored the entire issue to the Assessing Officer to first consider the applicability of Reliance Utilities & Powers (supra) and if not applicable, then to determine the expenditure to be disallowed in terms of Section 14-A of the Act.

The grievance of the Revenue as urged by Mr. Tejveer Singh with the impugned order is it restoring the issue of disallowance under Section 14-A of the Act to the Assessing Officer for fresh consideration. It is submitted that the impugned order while restoring the issue to the Assessing Officer has foreclosed the issue of application of Section 14-A of the Act.

The above submission is without merit as the impugned order at Paragraph No.22 has held as under:-

"Para 22:- .... .... Looking to the entirety of the facts and circumstances, we set aside the impugned order passed by the Commissioner (Appeals) and restore back this issue to the file of the Assessing Officer who will firstly, examine the availability of interest free funds and assessee''s own funds for the purpose of making the investment and secondly, even after examining the availability of funds, it is found that borrowed funds have been utilized for the purpose of investment in shares, then disallowance can be made to the extent of interest payable on the borrowed funds which have been utilized for the purpose of acquiring the shares. The assessee will provide all the necessary information and details for adjudication of the issue. Thus, grounds no. 3, 4 and 5, are treated as partly allowed for statistical purposes."

Thus, the impugned order of the Tribunal has restored both the issue to the Assessing Officer i.e. with regard to the applicability of Section 14-A of the Act with a direction that in case the Respondent - Assessee fails to satisfy the Assessing Officer of utilization of its own funds and/or interest free funds for the purpose of making investment in the light of the order in Reliance Utilities & Power Ltd. (supra), then in that event, the disallowance be determined under Section 14-A of the Act. This, undoubtedly would be on an application of a reasonable method as held by this Court in Godrej & Boyce (supra). Thus, we are at a loss to understand the grievance of the revenue. Accordingly, the questions as proposed do not give rise to any substantial question of law. Accordingly, not entertained.

Accordingly, appeal dismissed. No order as to costs.