TVS Electronics Limited, CHENNAI V. DCIT, CHENNAI

CO 35/CHNY/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2320 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.16/MDS/2016 & C.O.NO.35/MDS/2016 / ASSESSMENT YEAR : 2011-12 THE ASSTT. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 3(1) CHENNAI VS. M/S TVS ELECTR ONICS LTD JAYALAKSHMI ESTATES NO.29, HADDOWS ROAD CHENNAI 600 006 [PAN AAACI 0886 K ] (APPELLANT) (RESPONDENT /CROSS OBJECTOR ) DEPARTMENT BY : SHRI P. RADHAKRISHNAN, JCIT ASSESSEE BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 28 - 0 3 - 2016 / DATE OF PRONOUNCEMENT : 12 - 05 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTIO N OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE C OMMISSIONER OF INCOME-TAX (APPEALS)-11, CHENNAI, DATED 27.10.2015 FOR ASSESSMENT YEAR 2011-12. ITA NO. 16/16 CO 35/16 :- 2 -: 2. SHRI P. RADHAKRISHNAN LD. DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT. 3. THE ASSESSING OFFICER MADE ADDITION OF ` 1,99,53,980/- U/S 14A OF THE ACT. THE ASSESSEE FILED A WORKING BEFO RE THE CIT(A). THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE WORKING MADE BY THE ASSESSEE AND THEREAFTER IF IT IS FOUND CORRECT THEN TO RESTRICT THE DISALLOWANCE AS COMPUTED BY THE ASSESSEE. ACCORD ING TO THE LD. DR, SINCE THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN RESPECT OF THE INCOME WHICH WAS EXEMPT FROM TAXATION, THE ASSESSIN G OFFICER HAS RIGHTLY COMPUTED THE EXPENDITURE BY APPLYING RULE 8 D OF THE INCOME- TAX RULES. IN THE ABSENCE OF ANY ERROR IN THE EXPE NDITURE COMPUTED BY THE ASSESSING OFFICER UNDER RULE 8D, THE CIT(A) IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO VERIFY THE WORKI NG MADE BY THE ASSESSEE. 4. ON THE CONTRARY, SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT EARN ED ANY DIVIDEND INCOME DURING THE YEAR UNDER CONSIDERATION. THE MA IN ACTIVITY OF THE ASSESSEE WAS TO PROVIDE BUSINESS AUXILIARY SERVICE AND LENDING. THEREFORE, THE EXPENDITURE INCURRED IS ONLY TOWARDS EARNING THE TAXABLE INCOME AND NO PART OF THE INCOME WHICH WAS EXEMPT FROM TAXATION FORMS PART OF THE TOTAL INCOME DURING THE YEAR UNDER ITA NO. 16/16 CO 35/16 :- 3 -: CONSIDERATION. ACCORDING TO THE LD. COUNSEL, AT TH E BEST, THE AVERAGE INVESTMENT HAS TO BE CONSIDERED UNDER RULE 8D WHILE WORKING OUT THE DISALLOWANCE. HOWEVER, THE ASSESSING OFFICER HAS T AKEN THE AGGREGATE VALUE OF INVESTMENT. REFERRING TO LIMB (III) OF RU LE 8D(2), THE LD. COUNSEL SUBMITTED THAT THE AVERAGE INVESTMENT INCLU DES THE CONTRIBUTION TO THE UNITS OF TVS SHRIRAM GROWTH FUN D WHOSE INCOME WAS SUBJECT TO TAXATION IN THE HANDS OF THE COMPANY U/S 115JU OF THE ACT. THEREFORE, THE TAXABLE INCOME HAS TO BE EXCLU DED WHILE COMPUTING THE EXPENDITURE UNDER RULE 8D. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSING OFFICER COMPUTED THE EXPENDITURE U/S 14A R.W.R 8D AT ` 1,99,53,980/-. THE ASSESSEE APPARENTLY FILED A WORKING FOR DISALLOWAN CE UNDER RULE 8D. AS PER THE WORKING OF THE ASSESSEE, THE EXPENDITUR E COMES TO ONLY ` 50,363/-. THE CIT(A) DIRECTED THE ASSESSING OFFICE R TO VERIFY THE WORKING MADE BY THE ASSESSEE AND IF IT IS FOUND CO RRECT, SUBSTITUTE THE SAME IN PLACE OF ` 1,99,53,980/- AS ADOPTED BY THE ASSESSING OFFICER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROVISIONS OF RULE 8D IS MANDATORY FOR COMPUTING THE DISALLOWANCE DURI NG THE YEAR UNDER CONSIDERATION. THEREFORE, THE WORKING MADE BY THE ASSESSEE HAS ALSO TO BE TAKEN INTO CONSIDERATION BY THE ASSESSING OFF ICER. SINCE THE ITA NO. 16/16 CO 35/16 :- 4 -: CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE WORKING MADE BY THE ASSESSEE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. HOWEVER, IT IS MADE CLEAR THAT THE ASSESSING OFFICER SHALL VERIFY THE WORKING MADE BY THE ASSESSEE AND IF THE WORKING IS MADE AS PER RULE 8D, THE ASSESSING O FFICER MAY FOLLOW THE SAME. IF FOR ANY REASON, THE ASSESSING OFFICER CAME TO KNOW THAT THE WORKING MADE BY THE ASSESSEE IS NOT IN ACCORDA NCE WITH RULE 8D, THEN IT IS OPEN TO THE ASSESSING OFFICER TO RECOMPU TE THE DISALLOWANCE/EXPENDITURE AND ADD THE SAME TO THE TO TAL INCOME OF THE ASSESSEE. WITH THE ABOVE OBSERVATION, THE ORDER OF THE CIT(A) IS CONFIRMED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDITIO N ON ACCOUNT OF UNEXPIRED VALUE OF AMC. 7. SHRI P. RADHAKRISHNAN, LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THE CIT(A), BY FOLLOWING THE ORDER O F THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 ALL OWED THE CLAIM OF THE ASSESSEE. THE REVENUE HAS ALREADY FILED AN AP PEAL BEFORE THE MADRAS HIGH COURT AGAINST THE ORDER OF THIS TRIBUNA L FOR ASSESSMENT YEAR 2005-06 AND THE SAME IS PENDING. THEREFORE, TO KEEP THE MATTER ALIVE, THE REVENUE FILED THE APPEAL BEFORE THIS TRI BUNAL. ITA NO. 16/16 CO 35/16 :- 5 -: 8. WE HEARD SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE ALSO. THE LD. COUNSEL SUBMITTED THAT THE ISSUE ARISES FOR CONSIDERATION IS UNEXPIRED VALUE OF AMC RECEIVED DU RING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE COULD NOT RECOGNIZE THE REVENUE FOR THE UNEXPIRED VALUE O F AMC. ACCORDING TO THE LD. COUNSEL, IN VIEW OF THE MATCHING CONCEPT OF INCOME AND EXPENDITURE, THE ASSESSEE COULD NOT RECOGNIZE THE REVENUE DURING THE UNEXPIRED PERIOD. THIS TRIBUNAL AFTER EXAMINING AN IDENTICAL SITUATION IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06, ALLOWED THE CLAIM OF THE ASSESSEE. IN FACT, THE CIT(A), A FTER REPRODUCING THE OBSERVATION MADE BY THIS TRIBUNAL FOR ASSESSMENT Y EAR 2005-06 IN I.T.A.NO.811/MDS/2010, ALLOWED THE CLAIM OF THE AS SESSEE. MERELY BECAUSE THE REVENUES APPEAL IS PENDING BEFORE THE MADRAS HIGH COURT, THAT CANNOT BE A REASON TO TAKE A DIFFERENT VIEW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPIRED VALUE OF AMC WAS EXAMINED BY THIS TRIBUNAL IN ASSESSEES OWN CASE F OR ASSESSMENT YEAR 2005-06 IN I.T.A.NO.811/MDS/2010. THIS TRIBUNAL FO UND THAT THE CONTENTION OF THE ASSESSEE THAT IT COULD NOT RECOG NIZE REVENUE FOR THE UNEXPIRED PERIOD OF AMC IS ON STRONG FOOTING. THIS TRIBUNAL FURTHER FOUND THAT THE UNEXPIRED PERIOD AMC COULD BE CONSID ERED ONLY IN THE ITA NO. 16/16 CO 35/16 :- 6 -: SUBSEQUENT YEAR AND NOT IN THE RELEVANT PREVIOUS Y EAR. ACCORDINGLY, AN IDENTICAL ORDER OF THE CIT(A) WAS CONFIRMED BY T HIS TRIBUNAL. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESS EE, THE CIT(A) HAS REPRODUCED THE OBSERVATION MADE BY THIS TRIBUNAL AN D ALLOWED THE CLAIM OF THE ASSESSEE. SINCE THE CIT(A) FOLLOWED THE ORDER OF THIS TRIBUNAL, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF THE CIT(A). AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASS ESSEE A MERE PENDENCY OF APPEAL BEFORE THE HIGH COURT AGAINST TH E ORDER OF THIS TRIBUNAL CANNOT BE A REASON TO TAKE A DIFFERENT VIE W. IT IS NOBODYS CASE THAT THE ORDER OF THIS TRIBUNAL IS STAYED BY T HE HIGH COURT. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THIS CIT(A) AND ACCORDINGLY THE S AME IS CONFIRMED. 10. NOW COMING TO THE CROSS OBJECTION OF THE ASSESSEE, THE ONLY ISSUE RAISED BY THE ASSESSEE IS ADDITIONAL DEPRECI ATION. 11. SHRI R.VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED ADDITIONAL DEP RECIATION U/S 32(1)(IIA)OF THE ACT IN RESPECT OF THE MACHINERY I NSTALLED IN EARLIER ASSESSMENT YEAR AND USED FOR BUSINESS OF THE ASSES SEE LESS THAN 180 DAYS. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION @ 20% IN THE EARLIER ASSESS MENT YEAR. THE ASSESSING OFFICER COULD NOT ALLOW 20% DEPRECIATION SINCE THE ITA NO. 16/16 CO 35/16 :- 7 -: MACHINERY WAS USED FOR LESS THAN 180 DAYS. IN FACT , THE ASSESSING OFFICER ALLOWED ONLY 10% OF THE ADDITIONAL DEPRECIA TION, THEREFORE, THE BALANCE 10% OF THE DEPRECIATION WAS CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICE R, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE IS NO PROVISION IN THE INCOME-TAX ACT, 1961 TO CARRY FORW ARD THE ADDITIONAL DEPRECIATION TO THE SUBSEQUENT ASSESSMENT YEAR. PL ACING RELIANCE ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS M/S RITTAL INDIA PVT. LTD, I.T.A.NO.590 OF 2015, DATED 4.1.2016, THE LD. COUNSEL SUBMITTED THAT ON IDENTICAL SET OF FACTS, T HE KARNATAKA HIGH COURT ALLOWED THE ADDITIONAL DEPRECIATION IN THE NE XT ASSESSMENT YEAR. IN VIEW OF THE JUDGMENT OF THE KARNATAKA HIGH COURT , ACCORDING TO THE LD. COUNSEL, THE CIT(A) IS NOT JUSTIFIED IN REJECTI NG THE CLAIM OF THE ASSESSEE. 12. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DR SUBM ITTED THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION WHICH COULD NOT BE ALLOWED IN THE EARLIER ASSESSMENT YEAR TO THE EXTEN T OF 10%. THE CIT(A) BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN T HE CASE OF BRAKES INDIA IN I.T.A.NO. 1069/MDS/2010 DATED 5.1.2012, DI SALLOWED THE CLAIM OF THE ASSESSEE. SINCE THE CIT(A) HAS FOLLOWED TH E ORDER OF THIS TRIBUNAL, ACCORDING TO THE LD. DR, NO INTERFERENCE IN THE ORDER OF THE CIT(A) IS CALLED FOR. ITA NO. 16/16 CO 35/16 :- 8 -: 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER ALLOWED 10% ADDITIONAL DEPRECIATION IN THE EARLIER ASSESSMENT YEAR IN RESPECT OF THE MACHINERY INSTALLED AND USED FOR LES S THAN 180 DAYS. THE ASSESSEE CLAIMED THE BALANCE 10% ADDITIONAL DE PRECIATION DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICE R DISALLOWED THE CLAIM ON THE GROUND THAT THERE IS NO PROVISION IN T HE INCOME-TAX ACT, 1961 TO CARRY FORWARD THE ADDITIONAL DEPRECIATION TO THE SUBSEQUENT ASSESSMENT YEAR. THE CIT(A) CONFIRMED THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN THE CASE OF BRAKES INDIA(SUPRA). WE FIND THAT THE KARNATAKA HIGH COURT IN THE CASE OF M/S RITTAL INDIA PVT. LTD(SUPR A) CONSIDERED AN IDENTICAL ISSUE AND PLACING RELIANCE ON THE EARLIER DIVISION BENCH JUDGMENT OF THE KARNATAKA HIGH COURT IN CIT VS M/S RITTAL INDIA PVT. LTD DATED 24.11.2015, FOUND THAT THE ASSESSEE IS E NTITLED FOR THE BALANCE 10% ADDITIONAL DEPRECIATION IN THE SUBSEQU ENT YEAR. IN VIEW OF THE JUDGMENT OF THE KARNATAKA HIGH COURT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ORDER OF THIS TRIBUNAL IN THE CASE OF BRAKES INDIA (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE KARNATAK A HIGH COURT IN M/S RITTAL INDIA PVT. LTD(SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED FOR THE BALANCE ADDI TIONAL DEPRECIATION TO ITA NO. 16/16 CO 35/16 :- 9 -: THE EXTENT OF 10% DURING THE YEAR UNDER CONSIDERATI ON. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE REMAINING 10% ADDI TIONAL DEPRECIATION DURING THE YEAR UNDER CONSIDERATION. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 12 TH MAY, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF