M/s. Nandan Exim Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

CO 149/AHD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9651 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.1260/AHD/2011 A.Y. 2008-09 DY. CIT, CIRCLE-5, AHMEDABAD. VS NANDAN EXIM LTD., SURVEY NO.198, 203/2, SAIJPUR-GOPALPUR, PIRANA ROAD PIPALEJ, AHMEDABAD. PAN: AAACN 5327L (APPELLANT) (RESPONDENT) CO NO.149/AHD/2011 A.Y. 2008-09 NANDAN EXIM LTD., SURVEY NO.198, 203/2, SAIJPUR-GOPALPUR, PIRANA ROAD PIPALEJ, AHMEDABAD. PAN: AAACN 5327L VS DY. CIT, CIRCLE-5, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J.P. JHANGID, SR.D.R. ASSESSEE(S) BY : SHRI P.M. MEHTA, A.R. / DATE OF HEARING : 27/06/2014 / DATE OF PRONOUNCEMENT: 30/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER REVENUE IS IN APPEAL AND THE RESPONDENT-ASSESSEE IS IN CROSS- OBJECTION ARISING FROM THE ORDER OF LEARNED CIT(A)- XI, AHMEDABAD DATED 22.02.2011. GROUNDS RAISED BY THE REVENUE ARE HEREBY DECIDED AS FOLLOWS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST U /S.14A OF RS.13,11,030/- ITA NO.1260/AHD/2011 & CO NO.149/AHD/2011 DY. CIT, CIRCLE-5, AHMEDABAD VS. NANDAN EXIM LTD. A.Y.2008-09. - 2 2. AN ASSESSMENT WAS FRAMED U/S.143(3), VIDE ORDER DATED 29.03.2010 ACCORDING TO WHICH THE ASSESSEE COMPANY IS IN THE B USINESS OF MANUFACTURING OF DENIM AND ALSO TRADING OF FABRICS. IT WAS NOTED BY THE AO THAT SUBSTANTIAL INVESTMENT AMOUNTING TO RS.6,23 ,03,240/- IN SHARES AND SECURITIES WAS MADE. IN VIEW OF THE PROVISIONS OF SECTION 10(34), THE SAID INCOME ON THE INVESTMENT WAS EXEMPTED. NEXT OB SERVATION OF THE AO WAS THAT THERE WERE INTEREST BEARING SECURED LOA NS OF RS.222.34 CRORES AND UNSECURED LOANS OF RS.48.20 CRORES. IT W AS ALSO FOUND THAT THE ASSESSEE HAD PAID INTEREST OF RS.14,80,92,140/-. TH E AO HAS, THEREFORE, INVOKED THE PROVISIONS OF SECTION 14A AND A PROPORT IONATE DISALLOWANCE OF INTEREST WAS MADE AS PER THE FOLLOWING FORMULA: INVESTMENT IN SHARES X RATE OF INTEREST 100 RS.1,45,67,000 X 9% = RS.13,11,030/- 100 2.1 THE DISALLOWANCE OF RS.13,11,030/- WAS CHALLENG ED BEFORE LEARNED CIT(A) WHO HAS FOLLOWED AN EARLIER ORDER OF HIS PRE DECESSOR AND FINALLY HELD AS UNDER: SIMILAR ISSUE WAS DECIDED BY CIT(A)-XXI, AHMEDABAD IN THE APPELLANTS OWN CASE FOR A.Y.2007-08 IN APPEAL NO.CIT(A)-XXI/16 0/ADD. R.-5/10-11 DATED 31.02.2010. IT IS FURTHER SEEN THAT DURING TH E YEAR UNDER CONSIDERATION THERE IS NO FRESH INVESTMENT. FACTS REMAINING THE S AME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE BY HIM OF RS.13,11,030/- U/S.14A OF THE ACT. THIS GROU ND OF APPEAL IS ALLOWED. 3. WITH THIS BRIEF FACTUAL BACKGROUND, WE HAVE HEAR D BOTH THE SIDES. ON ONE HAND, THE LEARNED DR HAS SUPPORTED THE ORDER OF THE AO BUT ON THE OTHER HAND, LEARNED AR HAS PLEADED THAT THE ISS UE IS COVERED BY AN ORDER OF THE TRIBUNAL PRONOUNCED IN ASSESSEES OWN CASE. WHAT WE HAVE ITA NO.1260/AHD/2011 & CO NO.149/AHD/2011 DY. CIT, CIRCLE-5, AHMEDABAD VS. NANDAN EXIM LTD. A.Y.2008-09. - 3 NOTED THAT THE LEARNED CIT(A) HAS FOLLOWED THE VERD ICT ON THIS ISSUE PRONOUNCED FOR A.Y. 2007-08. THAT ORDER OF LEARNED CIT(A) WAS CHALLENGED BY THE REVENUE DEPARTMENT BEFORE HONBLE ITAT. THE RESPECTED CO-ORDINATE BENCH C IN ITA NOS.601 AND 225/AHD/2011 AND 2419/AHD/10 (A.Y.2005-06, 2006-07 AND 2007-08) IN A SSESSEES OWN CASE, VIDE ORDER DATED 29.11.2013 HAS DEALT WITH TH IS ISSUE IN PARAGRAPH 9 AS UNDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AND THERE FORE THERE WAS NO JUSTIFICATION FOR PRESUMING THAT ANY PART OF INTERE ST BEARING LOAN HAS BEEN UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. HE HAS FURTHER NOTED THAT THE CAPITAL AND RESERVES OF THE ASSESSEE WAS TO THE EXT ENT OF RS.66 CRORES AS AGAINST THE INVESTMENT OF RS. 6 CRORES WHICH ALSO S HOWS THAT THERE CANNOT BE ANY PRESUMPTION OF USE OF BORROWED FUNDS FOR SUCH I NVESTMENTS. THE ASSESSEE HAS SUBMITTED THAT MAJOR INVESTMENTS MADE IN EARLIE R YEARS WERE OUT OF INTEREST FREE UNSECURED LOANS. THIS SUBMISSION OF A SSESSEE HAS NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY CONTRARY MA TERIAL ON RECORD. BEFORE US, THE REVENUE HAS NOT CONTROVERTED THE FINDINGS O F CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESA ID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 4. IN VIEW OF THE ORDER OF THE RESPECTED CO-ORDINAT E BENCH AND ALSO IN VIEW OF THE FACT THAT LEARNED CIT(A) HAS GIVEN A FINDING THAT FOR THE YEAR UNDER CONSIDERATION THE FACTS WERE IDENTICAL W ITH THE FACTS FOR A.Y.2007-08, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL AS CITED SUPRA, WE HEREBY DISMISS, THIS GR OUND OF THE REVENUE ON THE SAME LINES AS HELD IN THE PAST. RESULTANTLY, REVENUES GROUND IS DISMISSED. 5. GROUND NO.2 IS REPRODUCED BELOW: THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED I N LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION ON MOTOR- CAR OF RS.6,19,251/- ITA NO.1260/AHD/2011 & CO NO.149/AHD/2011 DY. CIT, CIRCLE-5, AHMEDABAD VS. NANDAN EXIM LTD. A.Y.2008-09. - 4 6. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD CLA IMED DEPRECIATION ON CARS AT RS.6,19,251/- IT WAS FOUND THAT THE CARS WERE REGISTERED IN THE NAME OF DIRECTORS. THE AO HAS DENIED THE CLAIM OF T HE ASSESSEE THAT THE CARS WERE ISSUED FOR THE PURPOSE OF THE BUSINESS; T HEREFORE, ENTITLED FOR THE CLAIM OF DEPRECIATION. THE CLAIM OF DEPRECIATIO N AT RS.6,19,251/- WAS DISALLOWED. 7. ON THIS ISSUE, LEARNED CIT(A) HAS HELD THAT IN A SSESSEES OWN CASE FOR A.Y.2006-07 AND A.Y.2007-08, IT WAS ALREADY DEC IDED BY HIS PREDECESSOR IN FAVOUR OF THE ASSESSEE. FOR THOSE YE ARS, THE REVENUE HAS CHALLENGED THE SAID VERDICT OF LEARNED CIT(A) BEFOR E THE TRIBUNAL. 8. NOW BEFORE US, AN ORDER OF ITAT C BENCH DATED 29.11.2013 (SUPRA) HAS BEEN FILED WHEREIN VIDE PARAGRAPH 13 TH E ISSUE WAS DECIDED IN ASSESSEES FAVOUR, RELEVANT PORTION REPRODUCED BELO W: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT A.O. HAS ONLY DISALLOWED THE CLAIM OF DEPRECIATION FOR THE REASON THAT THE VEHICLE WAS IN THE NAME OF THE DIRECTOR AN D NOT IN THE NAME OF THE ASSESSEE. BEFORE US, THE REVENUE HAS NOT BROUGHT AN Y MATERIAL ON RECORD TO DEMONSTRATE THAT THE PURCHASE OF VEHICLE WAS NOT OU T OF THE FUNDS OF THE ASSESSEE AND FURTHER THE VEHICLE WAS NOT USED FOR T HE PURPOSE OF BUSINESS OF THE ASSESSEE. THE SUBMISSION OF THE A.R. THAT NO DE PRECIATION HAS BEEN CLAIMED BY THE DIRECTORS WITH RESPECT TO THE AFORES AID VEHICLE IN THEIR INDIVIDUAL RETURN HAS ALSO NOT BEEN CONTROVERTED BY REVENUE. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GR OUND OF REVENUE IS DISMISSED. 8.1 ONCE, A VIEW HAS ALREADY BEEN TAKEN BY A RESPEC TED CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN THE PAST YEARS, THE REFORE, WE FIND NO REASON TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE SAM E. RESULTANTLY, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. ITA NO.1260/AHD/2011 & CO NO.149/AHD/2011 DY. CIT, CIRCLE-5, AHMEDABAD VS. NANDAN EXIM LTD. A.Y.2008-09. - 5 9. THE RESPONDENT ASSESSEE HAS FILED A CO AND THE G ROUND IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.10,88,079/- ON A CCOUNT OF UNDER VALUATION OF CLOSING STOCK OF RAW MATERIAL. THE LEARNED CIT(A ) OUGHT TO HAVE APPRECIATED THAT APPELLANT HAS FOLLOWED CONSISTENT METHOD OF VALUATION OF CLOSING STOCK AND AS THERE IS NO CHANGE IN FACTS IN CURRENT YEAR. CIT(A) OUGHT TO HAVE DELETED THE ADDITION. 10. IT WAS NOTED THAT THE OVERHEAD EXPENSES ON PURC HASE OF RAW MATERIAL HAVE NOT BEEN CONSIDERED FOR THE PURPOSE O F VALUATION OF THE CLOSING STOCK OF RAW MATERIAL. THE AO HAS GIVEN THE LIST OF THOSE OVERHEAD EXPENSES SUCH AS OCTROI (INWARD CHARGES), CLEARING AND FORWARDING CHARGES, ETC. AMOUNTING TO RS.10,88,079/ -. THE SAME WAS TAXED IN THE HANDS OF THE ASSESSEE. 11. WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT( A), IT WAS HELD THAT IN ASSESSEES OWN CASE IN THE PAST FOR A.Y. 20 07-08, LEARNED CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE. IN THAT YEAR AS WELL THE ASSESSEE HAS CHALLENGED THE VERDICT OF THE ASSESSEE THROUGH A CROSS OBJECTION AND THAT CROSS OBJECTION OF THE ASSESSEE WAS ALSO DISMISSED. 11.1 BEFORE US THE ASSESSEES CO BEARING NO.283/AHD /2010 ARISING FROM THE APPEAL OF THE REVENUE FOR A.Y.2007-08 AS R EFERRED ABOVE ORDER DATED 29.11.2013 HAS BEEN PLACED, WHEREIN IT WAS HE LD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT CIT(A) BY PLACING RELIANCE ON THE DECI SION OF BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS PVT. LTD . HAD DIRECTED THE A.O. TO CONSIDER THE INCREASED VALUE IN CLOSING STOCK FO R THE YEAR UNDER APPEAL AS PART OF VALUE OF OPENING STOCK FOR A.Y. 2008-09. WE FIND NO ERROR IN THE ORDER OF CIT(A) AND THUS THIS GROUND OF ASSESSEE IS DISMI SSED. ITA NO.1260/AHD/2011 & CO NO.149/AHD/2011 DY. CIT, CIRCLE-5, AHMEDABAD VS. NANDAN EXIM LTD. A.Y.2008-09. - 6 11.2 FOLLOWING THE AFOREMENTIONED JUDGMENT OF THE RESPEC TED ITAT BENCH FOR THIS YEAR AS WELL THE CROSS OBJECTION OF THE ASSESSEE IS HEREBY DISMISSED. 12. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 30/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD