BLA Industries Pvt Ltd, Mumbai V. DCIT Cir - 2, Kol, Kolkata

CO 107/KOL/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0247 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 29-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 16-11-2012
• Court: TRIBUNAL
• Department Lawyers: DIPANKAR MUKHOPADHYAY
• Assessee Lawyers: S M SURANA
• Keywords: Capital asset
• Section: 43B; 14A

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) BEFORE , /AND , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA , AM ] / I.T.A NO. 1434 /KOL/201 2 / ASSESSMENT YEAR : 200 8 - 0 9 DEPUTY COMMISSIONER OF INCOME - TAX, VS. M/S. BLA INDUSTRIES PVT. LTD. CIRCLE - 2 , KOLKATA. (PAN:AABC B3505D ) ( /APPELLANT ) ( / RESPONDENT ) & C.O. NO.107/KOL/2012 IN / I.T.A NO. 1434 /KOL/201 2 / ASSESSMENT YEAR : 2008 - 0 9 M/S. BLA INDUSTRIES PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 2, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 0 9 . 01 .201 5 DATE OF PRONOUNCEMENT: 16 . 01 .201 5 FOR THE REVENUE : SHRI DIPANKAR MUKHOPADHYAY, JCIT, SR. DR FOR THE ASSESSEE : SHRI S. M. SURANA , ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESSEE ARE ARISING OUT OF ORDER OF CIT (A) - I , KOLKATA IN APPEAL NO. 268/CIT(A) - 1/R - 2/10 - 11 DATED 0 2 . 0 7 .201 2 . ASSESSMENT WAS FRAMED BY ADDL. CIT, RANGE - 2 , KOLKATA U/S. 1 43(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 8 - 0 9 VIDE HIS ORDER DATED 3 0 . 1 2 .20 1 0 . 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF BANK CHARGES AND INTEREST AMOUNTING TO RS.12,20,049/ - AS AGAINST THE DISALLOWA NCE MADE BY AO AT RS.18,37,293/ - BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) & (III) OF THE I. T. RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES). FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. TH AT THE FACTS AND CIRCUMSTANCES OF THE CASE CIT(A) ERRED IN EXCLUDING INTEREST OF RS.36,72,000/ - BEING PAID TO BANK WHILE QUANTIFYING AMOUNT OF EXPENDITURE BY WAY OF INTEREST. 2 ITA NO. 1434 /K/20 1 2 M/S. BLA INDUSTRIES PVT. LTD. AY 200 8 - 0 9 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE CIT(A) WHILE CALCULATING THE AVERAGE OF TOT AL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE HAS INCLUDED GROSS CURRENT LIABILITY AND PROVISION TAKEN BY AO. 3. BRIEFLY STATED FACTS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS INVOKED THE PROVISIONS OF SECTION 14A OF THE A CT READ WITH RULE 8D OF THE RULES AND MADE DISALLOWANCE AS UNDER: (A) UNDER RULE 8D(2)(II) OF THE RULES I.E. THE DISALLOWANCE OF INTEREST AT RS.14,87,836/ - AND (B) UNDER RULE 8D(2)(III) OF THE RULES AVERAGE VALUE OF INVESTMENT AT RS.3,49,457/ - THEREBY THE TOTAL DISALLOWANCE MADE WAS RS.18,37,293/ - . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE PARTLY DELETED THE DISALLOWANCE AT RS.12,20,049/ - AND RETAINED THE BALANCE DISALLOWANCE AT RS.6,12,326/ - BY OBSERVING AS UNDER: AFTER CAREFUL CONSIDERATION OF THE WRITTEN SUBMISSION AND A SSESSMENT ORDER, IT IS NOTICED THAT THE DISPUTE RELATES TO ADOPTION OF THE FIGURES WHILE COMPUTING THE DISALLOWANCE UNDER RULE 8D READ WITH SEC.14A OF THE I. T. ACT, ASSESSEE HAD PRODUCED THE COPY OF BALANCE SHEET FOR THE AY - 2008 - 09 THE AVERAGE COST OF TOTAL ASSETS SHOULD BE ADOPTED AT RS . 40 ,12,4 1,652/ - AS A G AINST R S.30,42,44,897/ - ADOPTED BY ASSESS ING OFFICER SINCE THE ASSESSING OFFICER INCLUDED THE CURRENT LIABILITIES AND PROVI SI ONS WHILE COMPUTING THE RULE 8D DISALLOWANCE. SIMILARLY, AVERAGE TOTAL INVESTMENT SHOULD BE ADOPTED AT RS.6,84,21,046/ - AS AGAINST RS.6,98,91,467/ - ADOPTED BY ASSESSING OFFICER SINCE HE WRONGLY CONSIDERED THE VALUE OF LAND FOR RS.14,70,421/ - . THE ASSESSING OFFICER ALSO WRONGLY CONSIDERED THE BANK CHARGES OF RS.12,20,049/ - AS PART OF INTEREST. ASSESSEE IN THE BUSINESS OF MI NING AND SALE OF COAL WITH TURNOVER OF RS. 45.73 CRORES. IT IS CONTENDED BY A/R THAT THE SECURED LOAN WAS UTILIZED FOR THE PURPOSE OF ACQUISITION OF ASSETS RELATED TO MINING BUSINESS SO INTEREST PAID TO BANK SHOULD BE EXCLUDED WHILE COMPUTING THE DISALLOWA NCE UNDER RULE 8D, KEEPING THE ABOVE FACTS AND CIRCUMSTANCES THE INTEREST PAID TO OTHERS OF RS.15,84,657/ - ON LOANS RAISED UNDER THE HEAD UNSECURED LOANS RAISED (SCHEDULE - 18) IS RELATABLE TO INVESTMENT ON WHICH EXEMPT DIVIDEND WAS EARNED AND ACCORDINGLY D ISALLOWANCE UNDER RULE 8D(2)(III) IS WORKED AS UNDER: RS.15,84,657/ - X RS. 6,84,21,046 / RS.40,12,41,652 =RS.2,70,221/ - DISALLOWANCE IN TERMS OF RULE 8D(2)(III) IS RE - WORKED AS UNDER: 0.5% OF AVERAGE VALUE OF INVESTMENT = RS. 3,42,106/ - AND TOTAL DISALLOWANCE U/S 14A IS WORKED AT RS. 6,12,326/ - AS AGAINST RS.18,37,293/ - COMPUTED ASSESSING OFFICER. HENCE GROUND NO 2 TO 4 IS PARTLY ALLOWED.' AGGRIEVED AGAINST PART DELETION OF DISALLOWANCE, REVENUE CAME IN APPEAL BEFORE US. 4. WE HAVE HE ARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS TAKEN THE AVERAGE TOTAL OF ASSET AT RS.30,42,44,897/ - AS AGAINST THE TOTAL ASSET DECLARED BY THE ASSESSEE IN ITS BALANCE SHEET AT RS.40,12,41,652/ - . THE AS SESSEE HAS FILED REVISED CALCULATION OF AVERAGE OF ASSETS BASED ON CURRENT RATES AND 3 ITA NO. 1434 /K/20 1 2 M/S. BLA INDUSTRIES PVT. LTD. AY 200 8 - 0 9 PROVISIONS OF RS.5,16,84,941/ - AND CLOSING BALANCE AT RS.1,42,38,569/ - WHICH IS REDUCED FROM THE TOTAL ASSETS AS UNDER: OPENING ASSETS RS.34,04,17,841/ - CLOSING ASSETS RS.46,20,65,464/ - AVERAGE ASSETS RS.40,12,41,652/ - ACCORDINGLY, THE ASSESSEE CONTESTED THAT THE TOTAL DISALLOWANCE CANNOT MORE THAN RS.2,70,221/ - UNDER RULE 8D(III) OF THE RULES I.E. OF AVERAGE OF INVESTMENTS. AS FAR AS INTEREST AND BANK CHARGES OF R S.12,20,049/ - THE ASSESSEE CONTESTED THAT THE ENTIRE SECURED LOAN HAS BEEN UTILIZED FOR ACQUISITION OF CAPITAL ASSETS RELATING TO BUSINESS OF MINING AND SALE OF COAL WHERE THE ASSESSEE S TURNOVER IS MORE THAN RS.45.73 CR. WE FIND FROM THE ACCOUNTS OF ASSESSEE THAT IT HAS BEEN DEMONSTRATED BY LD. COUNSEL FOR THE ASSESSEE THAT THE MAJOR SECURED LOANS WER E UTILIZED FOR THE PURPOSE OF ACQUISITION OF ASSETS RELATING TO MINING BUSINESS AND INTEREST PAID TO THE BANK IS FOR THE PURPOSE OF BUSINESS AND NOT FOR THE PURPOSES OF ACQUIRING ASSETS GIVING EXEMPTED INCOME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CIT( A) HAS RIGHTLY MADE DISALLOWANCE OF INTEREST AND BANK CHARGES TO THE TUNE OF RS.12,20,049/ - AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO ON ACCOUNT OF PROVISIONS FOR BONUS U/S. 43B OF THE ACT AMOUNTING TO RS.33,246/ - . FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: 3 . THAT ON THE FACTS OF THE CASE, LD. CIT(A) HAD ERRED IN DELETING DISALLOWANCE OF RS.33,246/ - ON ACCOUNT OF PROVISION FOR BONUS U/S. 43B(C) OF THE I. T. ACT. 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE PROVISIONS FOR BONUS WAS NOT ALLOWED AS PER DEDUCTION IN THE YEAR OF MAKING OF PROVISI ON OR IN EARLIER YEARS OR LATTER YEARS AS THE SAME WAS NOT ACTUALLY PAID. AS PER THE PROVISIONS OF SECTION 43B OF THE ACT, THE PROVISION FOR BONUS IS TO BE ALLOWED AS A DEDUCTION IN THE YEAR OF ACTUAL PAYMENT AND NOT OTHERWISE. ONCE THE PROVISION IS NOT ALLOWED AS DEDUCTION, THE RIGHT BACK OF THE PROVISION FOR BONUS CANNOT BE TREATED AS INCOME. IN TERM OF THE ABOVE, WE CONFIRM THE ORDER OF CIT(A ) AND THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 7. COMING TO THE CROSS OBJECTION OF THE ASSESSEE. THE ONLY ISSUE IN THIS CROSS OBJECTION OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE FOR PROVISION OF LEAVE ENCASHMENT DEBITED DURING THE YEAR FOR A SUM OF RS.11,55,127/ - . AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE DEDUCTION ON ACCOUNT OF PROVISION OF LEAVE ENCASHMENT WAS MADE ON THE BASIS OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN 4 ITA NO. 1434 /K/20 1 2 M/S. BLA INDUSTRIES PVT. LTD. AY 200 8 - 0 9 THE CASE OF EXIDE INDUSTRIES LTD . VS. UNION OF INDIA (2007) 292 ITR 470 , BUT HE FAIRLY CONCEDED THAT SUBSEQUENTLY HON'BLE S UPREME COURT HAS STAYED THIS JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER 08 - 05 - 2009 BY FOLLOWING OBSERVATIONS: - PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APPEALS, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH HAS A CCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSES SEE WOULD, DURING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON THE STATUE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT LET HO N'BLE SUPREME COURT DECIDE THE ISSUE AND BY THAT TIME THE MATTER CAN BE REMITTED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN TERM OF THE DECISION OF HON'BLE SUPREME COURT. ON THIS, LD. CIT DR HAS NOT OBJECTED TO THE SAME. ACCORDINGLY, WE SET ASIDE TH IS ISSUE TO THE FILE OF THE AO TO AWAIT THE DECISION OF HON'BLE SUPREME COURT AND DECIDE THE ISSUE ACCORDINGLY. THIS ISSUE OF ASSESSEE S CROSS OBJECTION APPEAL IS REMITTED BACK TO THE FILE OF AO AND ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AND CROSS OBJECTION OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 9 . ORDER IS PRONOUNCED IN THE OPEN COURT , 1 6 . 0 1 . 2 0 1 5 S D / - S D / - , , ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 6 T H JANUARY , 201 5 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT DCIT, CIRCLE - 2 , KOLKATA. 2 / RESPONDENT M/S . BLA INDUSTRIES PVT. LTD., 84, MAKER CHAMBER, 3, NIRMAN POINT, MUMBAI - 400021. . 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .