M/s. Richa Industries Ltd., Faridabad V. ACIT, Faridabad

CO 117/DEL/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1443 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Proportionate interest
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM & MS SUCHITRA KAMBLE, JM ITA NO.1219/DEL/2013 ASSESSMENT YEAR : 2009-10 ACIT, CIRCLE-I, BLOCK B, CGO COMPLEX, NH-IV, FARIDABAD. VS. RICHA INDUSTRIES LTD., V&PO, KANWARA KHERI, JASANA ROAD, NEAR LINGYAS INSTITUTE OF MANAGEMENT & TECHNOLOGY, FARIDABAD. PAN: AAACR7943J CO NO.117/DEL/2013 (ITA NO.1219/DEL/2013) ASSESSMENT YEAR : 2009-10 RICHA INDUSTRIES LTD., V&PO, KANWARA KHERI, JASANA ROAD, NEAR LINGYAS INSTITUTE OF MANAGEMENT & TECHNOLOGY, FARIDABAD. PAN: AAACR7943J VS. ACIT, CIRCLE-I, BLOCK B, CGO COMPLEX, NH-IV, FARIDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY KUMAR SINGLA, CA DEPTT. BY : SHRI V.R. SONBHADRA, SR.DR ITA NO.1219/DEL/2013 CO NO.117/DEL/2013 2 DATE OF HEARING : 05.10.2015 DATE OF PRONOUNCEMENT: 06.10.2015 ORDER PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE CIT(A) ON 21.1 2.2012 IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2. FIRST GROUND OF THE REVENUES APPEAL AND THE ONLY GROUND OF THE ASSESSEES CROSS OBJECTION IS AGAINST THE DELETION/ SUSTENANCE OF ADDITION ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE AMOUNT OF CAPITAL SUBSIDY ON FIXED ASSETS PURCHASED BY THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE MADE A CLAIM FOR SUBSIDY AMOUNTING TO RS.25,07,500/- WHICH WAS C REDITED TO `CAPITAL RESERVE ACCOUNT, BUT, NOT REDUCED FROM THE COST OF PLANT AND MACHINERY. THE AO, INVOKING THE PROVISIONS OF SECTION 43(1) RE AD WITH EXPLANATION 10 CAME TO HOLD THAT THIS AMOUNT OF CAPITAL SUBSIDY WA S LIABLE TO BE REDUCED FROM THE BLOCK OF FIXED ASSETS. RESULTANTLY, DEPRE CIATION AMOUNTING TO RS.3,76,125/- @ 15% ON SUCH UNREDUCED AMOUNT OF SU BSIDY FROM THE FIXED ASSETS WAS DISALLOWED. THE ASSESSEE CONTENDED BEFOR E THE LD. CIT(A) THAT ITA NO.1219/DEL/2013 CO NO.117/DEL/2013 3 THIS SUM OF RS.25,07,500/- WAS NOT ACTUALLY RECEIVE D DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION AND, HENCE, THE SAME SHOULD NOT BE REDUCED FROM THE BLOCK OF ASSETS . IT WAS FURTHER CONTENDED THAT THE ACTUAL AMOUNT OF SUBSIDY RECEIVE D IN THE SUCCEEDING YEAR MAY BE DIRECTED TO BE REDUCED FROM THE BLOCK OF FIX ED ASSETS IN SUCH A LATER YEAR ACCORDINGLY. THE LD. CIT(A) GOT CONVINCED AND ORDERED FOR THE DELETION OF ADDITION OF RS.3,76,125/-. BOTH THE SI DES ARE IN APPEAL ON THIS ISSUE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 425/DEL/2013 AND CO NO. 54/DEL/2013. VIDE ORDER DAT ED 28.8.2014, THE TRIBUNAL HAS GIVEN CERTAIN DIRECTIONS ON THIS ASPEC T OF THE MATTER. SINCE THE FACTS AND CIRCUMSTANCES OF THE YEAR UNDER CONSIDERA TION ARE ADMITTEDLY SIMILAR TO THOSE OF THE PRECEDING YEAR DECIDED BY T HE TRIBUNAL, RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE IN CONFORMITY WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL FOR THE IMMEDIATEL Y PRECEDING ASSESSMENT ITA NO.1219/DEL/2013 CO NO.117/DEL/2013 4 YEAR. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING IN SUCH PROCEEDINGS. 5. THE ONLY OTHER GROUND WHICH SURVIVES IN THE REVE NUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.8,64,000/- M ADE BY THE AO U/S 14A OF THE ACT. 6. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE INVESTED A SUM OF RS.72 LACS IN THE SHARES OF M/S RICHA INFRAS TRUCTURE LTD. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE PROPORTIONATE INTEREST BE NOT DISALLOWED U/S 14 OF THE ACT, THE ASSESSEE SUBMITTE D THAT THE INVESTMENT IN THE SHARES OF THIS COMPANY WAS FINANCED OUT OF OWN FUNDS. REJECTING THE ASSESSEES CONTENTION, THE AO COMPUTED DISALLOWANCE U/S 14A AT RS.8,64,000/- BY APPLYING INTEREST RATE OF 12% ON T HE AMOUNT OF INVESTMENT OF RS.72 LAC. IN DOING SO, HE OBSERVED THAT INCOME FROM SUCH SHARES IN THE NATURE OF DIVIDEND WOULD BE EXEMPT U/S 10(34) OF TH E ACT. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE DISALLOWANCE OF INTEREST ON PROPORTIONATE BASIS BY INVOKING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D. IT IS OBSERVED ITA NO.1219/DEL/2013 CO NO.117/DEL/2013 5 THAT SIMILAR ISSUE WAS THERE IN THE ASSESSEES APPE AL FOR AY 2008-09 AS WELL. THE TRIBUNAL HAS SUSTAINED A PART OF DISALLOW ANCE MADE U/S 14A WHILE DELETING THE OTHER PART OF THE DISALLOWANCE. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THE ISSUE UNDER CONSIDERATION ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE PRECEDING YEAR. RESPECTF ULLY FOLLOWING THE PRECEDENT AND WITHOUT GOING FURTHER INTO THE FA CTS OR LEGALITY OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR COMPUTING DISALLOWANCE, IF ANY, IN CONFO RMITY WITH THE VIEW TAKEN BY THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING YEAR. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWE D FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 06 TH OCTOBER, 2015. SD/- SD/- (SUCHITRA KAMBLE) (R.S. SYAL) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED:06 TH OCTOBER, 2015. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI