Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 17202 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-03-2025
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Assessment Year
2018-2019
Judgement Text
" \n \nIN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI \n \nBEFORE SHRI SAKTIJIT DEY, VP AND \nSHRI NARENDRA KUMAR BILLAIYA, AM \n \nITA No.4564/Mum/2024 \n(Assessment Year: 2018-19) \n \nDy. CIT, Central Circle-3(3) \nRoom No. 406, Kautilya Bhawan, \nBandra Kurla Complex, Bandra (E), \nMumbai-400 051 \nVs. \nWelspun Living Limited (Formerly \nknown as Welspun India Ltd.) \nB Wing, 9th Floor, Trade World, \nLower Parel, Delisle Road, S.O. \nMumbai-400 013 \n \nPAN/GIR No. AAACW 1259 N \n(Appellant) \n: \n(Respondent) \n \nAppellant by \n: \nShri Harsh M. Kapadia & \nShri Ajay Nagpal \nRespondent by \n: \nDr. Kishor Dhule \n \nDate of Hearing \n: \n25.02.2025 \nDate of Pronouncement \n: \n07.03.2025 \n \nO R D E R \nPer Saktijit Dey, VP: \n \nThis is an appeal by the Revenue against order dated 12.07.2024 of learned \nCommissioner of Income Tax (Appeals)-51, Mumbai (‘ld.CIT(A) for short), pertaining \nto assessment year (A.Y.) 2018-19. \n \n2. \nIn ground nos. 1 and 2, the Revenue has challenged deletion of disallowance \nmade u/s. 14A of the Income Tax Act, 1961 read with Rule 8D, while computing \nincome under the normal provisions of the Act, as also, while computing book profit \nu/s. 115JB of the Act. \n \n\n2 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \n3. \nBriefly the facts are, the assessee is a resident corporate entity stated to be \nengaged in the business of manufacturing of Terry Towels, Cotton Yarn, Bath rugs and \nbedding products and trading in cotton yarn and fabric, etc. It is also engaged in \ngeneration of power. Be that as it may, for the assessment year under dispute, the \nassessee had filed its return of income on 01.12.2018, declaring total income of \nRs.222,39,01,090/- under the normal provisions of the Act and book profit of \nRs.3,81,32,06,474/- u/s. 115JB of the Act. In course of assessment proceeding, the \nAssessing Officer (AO) noticed that the assessee had made substantial investment in \nassets capable of generating exempt income. Whereas, the assessee had not made any \ndisallowance u/s. 14A read with Rule 8D. He, therefore, called upon the assessee to \nshow cause why disallowance should not be made u/s. 14A read with Rule 8D. In \nresponse to the query raised, the assessee submitted that in the year under consideration \nit had shown exempt income of Rs.4/- only. Thus, it was submitted that no disallowance \nin excess of the exempt income can be made. The assessee further submitted that since \nit had not incurred any expenditure for earning exempt income, no disallowance should \nbe made. The A.O. however, did not accept the contentions of the assessee. Applying \nRule 8D(2)(iii), he disallowed 0.5% out of the average value of investment towards \nexpenses incurred for earning exempt income, in terms u/s.14A of the Act. Ultimately, \nhe worked out the disallowance at Rs.5,19,76,494/-. \n \n4. \nThe assessee contested the aforesaid disallowance before first appellate \nauthority. Having factually found that in the year under consideration, the assessee had \nearned exempt income only to the extent of Rs.4/-, the first appellate authority directed \n\n3 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \nthe A.O. to restrict the disallowance to the quantum of exempt income earned by the \nassessee. \n \n5. \nWe have considered rival submissions and perused the materials available on \nrecord. Undoubtedly, the disallowance computed by A.O. u/s. 14A read with Rule 8D \nis based on the average value of investment made by the assessee in exempt income \nyielding assets. Whereas, it is a fact on record that in the previous year relevant to \nassessment year under dispute, the assessee had earned exempt income only to the tune \nof Rs.4/-. Now, it is fairly well settled that disallowance u/s. 14A read with Rule 8D in \na particular assessment year cannot exceed the quantum of exempt income earned in \nthe said year. Therefore, the disallowance made by the A.O. u/s. 14A read with Rule \n8D could not have exceeded the quantum of income earned by the assessee. In view of \nthe aforesaid, we do not find any infirmity in the decision of the first appellate authority \nin deleting the disallowance made u/s. 14A read with Rule 8D, while computing income \nunder the normal provisions of the Act. Insofar as, similar disallowance made while \ncomputing book profit u/s. 115JB of the Act, we concur with the decision of first \nappellate authority that since the provisions contained u/s. 115JB of the Act do not \nprovide for any disallowance with reference to section 14A read with Rule 8D, no such \ndisallowance could have been made. In view of the afore-said, grounds are dismissed. \n \n6. \nIn ground no. 3, the Revenue has challenged the deletion of disallowance of \nRs.48,50,000/- made u/s. 69A of the Act. Briefly the facts are, as alleged by the A.O., \nin course of a search and seizure operation carried out in case of the assessee, evidences \nwere found indicating that the assessee had received an amount of Rs.48,50,000/-, being \n\n4 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \ncompensation in cash from an Indian entity, namely, M/s. Bianco Textiles India Ltd. \ntowards defective machinery supplied by its parent company in Italy, namely, M/s. \nBianco SPA. He further observed that in course of such search and seizure operation, \nstatements u/s. 132(4) of the Act was recorded from one of the employees of the \nassessee, namely, Shri Amit Bhandari, Vice President (Projects), wherein he confirmed \nthat Rs.48,50,000/- was received in two installments from Biacon Textiles India Pvt. \nLtd. towards cash compensation for a defective machine purchased from its parent \ncompany in Italy. In this context, the A.O. further observed that the fact of receipt of \ncash compensation was also corrborated by an email communication received from Shri \nDhaval Gandhi. Though, the assessee completely denied of having entered into any \nsuch transaction, however, rejecting assessee’s explanation, A.O. proceeded to add the \namount of Rs.48,50,000/- u/s. 69A of the Act. \n \n7. \nThe assessee contested the afore-said addition before first appellate authority. \n \n8. \nAfter considering the submissions made and evidences available on record, the \nfirst appellate authority, being convinced with the fact that the assessee had not received \nany cash compensation as alleged by the A.O., deleted the addition. \n \n9. \nWe have considered rival submissions and perused the materials available on \nrecord. It is evident that the A.O. has made the disputed addition primarily based on the \nstatement recorded from Shri Amit Bhandari working as VP (Projects) with the assessee \ncompany and an email communication between the assessee company and Biacon \nTextile India Ltd. Insofar as, the statement recorded u/s. 132(4) of the Act from Shri \n\n5 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \nAmit Bhandari is concerned, it is a fact on record that subsequently the concerned \nperson has retracted the statement on the ground that it was taken under compelling \ncircumstances. Furthermore, in course of hearing, we had an occasion to factually verify \nthe email communication between the assessee and Biacon Textile. On such \nverification, we observed that the finding of first appellate authority that the said email \nnowhere speaks of anything about any cash compensation, is clearly borne out. \nTherefore, the email communication cannot be considered as an evidence, \ndemonstrating cash compensation transaction between the assessee and another Indian \ncompany. We have further observed, the first appellate authority has recorded a factual \nfinding that in course of assessment proceeding, the A.O. had not made any independent \nenquiry either with Biacon Textile Ltd. or its parent company in Italy. When the \nassessee has denied of receiving any cash compensation, the logical thing to do for the \nA.O. was to make enquiry and bring enough corroborative evidence on record to prove \nreceipt of cash compensation by taking up enquiry with the other party, who, allegedly \npaid cash compensation. Admittedly, no such enquiry has been taken up by the A.O., \nto elicit the actual facts. Thus, in absence of any corroborative evidence on record to \nback his finding that the assessee has actually received the cash compensation \namounting to Rs.48,50,000/-, no addition can be made merely on conjectures and \nsurmises. Therefore, we uphold the decision of the first appellate authority on the issue. \nGround raised is dismissed. \n \n10. \nIn ground nos. 4 & 5, the Revenue has challenged the deletion of disallowance \nmade u/s. 80IA of the Act. Briefly the facts are in the return of income filed for the \n\n6 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \nimpugned assessment year, the assessee had claimed deductions u/s. 80IA and 80JJ/JJA \nof the Act. While verifying assessee’s claim of such deductions, A.O. noticed that the \nreturn of income for the impugned assessment year was not filed within the prescribed \ntime limit as provided u/s. 139(1) of the Act. Further, insofar as the claim of deduction \nu/s. 80IA of the Act is concerned, the A.O. observed that the undertaking in respect of \nwhich the assessee had claimed deduction was acquired by the assessee by way of \nslump sale. Therefore, he held that the assessee is not eligible to claim deduction in \nrespect to such undertaking. Accordingly, he disallowed assessee’s claim. \nSubsequently, the A.O. having been appraised of the fact that the delay in filing the \nreturn of income was condoned by Central Board of Direct Taxes (CBDT), allowed the \nassessee’s claim of deduction u/s. 80JJ /80JJA of the Act. However, he stuck to his \ndecision of disallowing the deduction u/s. 80IA of the Act on the ground that the \nundertaking /unit was acquired by the assessee through a slump sale. \n \n11. \nBeing aggrieved with such disallowance, the assessee challenged it before the \nfirst appellate authority. \n \n12. \nWhile considering assessee’s submission in context of facts and materials on \nrecord, ld. CIT(A) being convinced that the conditions of section 80IA are fulfilled, \nallowed assessee’s claim of deduction. \n \n13. \nWe have considered rival submissions and perused the materials on record. As \ndiscussed earlier, the A.O. disallowed assessee’s claim of deduction u/s. 80IA of the \nAct primarily on two grounds. Firstly, the return of income for the year under \n\n7 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \nconsideration was filed belatedly and secondly, the plant and machinery having been \nacquired through a slump sale, the assessee does not satisfy the eligibility conditions. \nInsofar as, belated filing of the return of income is concerned, undisputedly, CBDT has \ncondone such delay and A.O. accepts such factual position. Thus, the only thing which \nneeds to be addressed is whether the assessee satisfies the condition of section 80IA of \nthe Act. As could be seen from the facts and materials on record, the assessee had \nclaimed deduction u/s. 80IA of the Act, for an amount of Rs.30,49,31,288/-. The \ndeductions claimed is split between the following two units: \n1. Captive Power Plant 15MV – Vapi (Rs.26,01,68,676/-) \n2. Captive Power Plant 12MV – Anjar (Rs.4,47,68,612/-) \n \n14. \nThus, as could be seen from the above, the deduction u/s. 80IA of the Act was in \nrespect of two independent undertakings/units. Whereas, in the assessment order, the \nA.O. has mixed up the facts and wrongly concluded that the entire deduction was in \nrespect of Captive Power Plant at Anjar, which was acquired by assessee through slump \nsale. On perusal of materials on record, it is evident, in course of assessment proceeding \nitself the assessee had furnished enough evidence to demonstrate that deduction claimed \nu/s. 80IA of the Act was in respect of two separate units. In fact, the tax audit report \nalso discloses such fact. It is further relevant to observe, the Captive Power Plant at \nVapi was set up by the assessee itself, whereas, the Captive Power Plant at Anjar was \nacquired through slump sale. In course of appellate proceeding, the first appellate \nauthority has gone through the entire gamut evidences available on record and recorded \na factual finding that not only deduction u/. 80IA of the Act was in respect of two \nseparate and independent units, but the Captive Power Plant at Vapi was set up by the \n\n8 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \nassessee on its own. Therefore, as far as the claim of deduction u/s. 80IA of the Act for \nthe unit at Vapi is concerned, the finding of the A.O. is factually incorrect. Hence, \nunacceptable. Therefore, the claim of deduction u/s. 80IA of the Act in respect of \nCaptive Power Plant at Vapi land is clearly allowable. Insofar as, Captive Power Plant \nat Anjar is concerned, acquired through slum sale, the facts on record clearly reveals \nthat the undertaking was eligible for deduction u/s. 80IA of the Act due to fulfillment \nof the conditions mentioned in the said provision. Merely because of change of the \nownership of the undertaking it would not get disentitled from availing deductions u/s. \n80IA of the Act for remaining years for which deduction has not been claimed. As \nrightly observed by the first appellate authority, deduction u/s. 80IA of the Act is qua \nundertaking and not qua the assessee. Since, the Revenue has not brought on record any \ncogent material to controvert the factual findings of the first appellate authority, while \ndeciding the issue, we are inclined to uphold the decision of first appellate authority by \ndismissing the ground raised. \n \n15. \nIn the result, the appeal is dismissed. \nOrder pronounced in the open court on 07.03.2025 \n \n \n \n Sd/- \n \n Sd/- \n (Narendra Kumar Billaiya) (Saktijit Dey) \n Accountant Member Vice President \nMumbai; Dated : 07.03.2025 \nRoshani, Sr. PS \n \nCopy of the Order forwarded to : \n \n1. \nThe Appellant \n2. \nThe Respondent \n3. \nThe CIT(A) \n4. \nCIT - concerned \n\n9 \nITA No. 4564/Mum/2024 (A.Y. 2018-19) \nDy. CIT vs. Welspun Living Limited \n \n \n \n5. \nDR, ITAT, Mumbai \n6. \nGuard File \n BY ORDER, \n \n \n(Dy./Asstt. Registrar) \nITAT, Mumbai \n \n \n"
Mehul