JCT Electronics Limited, Mohali V. DCIT, Mohali

ITA 1008/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86210 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S K SOOD
• Keywords: Capital asset; Depreciation; Rectification of order; Earning of tax free income; Additional evidence; Revenue expenditure
• Section: 143(3); 14A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1008/CHD/2013 (ASSESSMENT YEAR : 2006-07) JCT ELECTRONICS LIMITED, VS. THE D.C.I.T., A-32, INDUSTRIAL AREA, PHASE VII, CIRCLE 6(I), MOHALI. MOHALI PAN: AAACJ4084A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.SOOD RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 24.03.2015 DATE OF PRONOUNCEMENT : 26.03.2015 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS),CHANDIGARH DATED 23.8.2013, FOR ASSESS MENT YEAR 2006-07. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ORD ER OF THE LEARNED CIT (APPEALS) IN DISALLOWING DEPRECI ATION 2 AMOUNTING TO RS.69,79,162/- ON THE GROUND THAT MOHA LI UNIT WAS NOT OPERATIONAL DURING THE YEAR. 4. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE STA TED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESS EE BY I.T.A.T., CHANDIGARH BENCH IN THE CASE OF THE ASSE SSEE IN ITA NO.550/CHD/2011 FOR ASSESSMENT YEAR 2007-08 VIDE OR DER DATED 31.10.2014, IN WHICH IT WAS HELD AS UNDER : 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ORD ER OF LEARNED CIT (APPEALS) IN DISALLOWING DEPRECIATION AMOUNTING TO RS.56,51,251/- ON THE ASSETS HELD BY T HE ASSESSEE COMPANY AT MOHALI. THE LEARNED CIT (APPE ALS) FOUND THAT THE ASSESSEE COMPANY HAD TWO MANUFACTURI NG UNITS, ONE AT MOHALI, PUNJAB AND OTHER AT VADODARA, GUJRAT. THE OPERATION OF MOHALI UNIT WAS SUSPENDE D IN MAY, 2001 ON ACCOUNT OF LOSSES AND FINANCIAL CONSTR AINTS, ULTIMATELY LEADING TO LOCK OUT ON 13.3.2002. THE MATTER WAS ULTIMATELY REFERRED TO BIFR. THE LEARNED CIT (APPEALS) DISMISSED THIS GROUND OF APPEAL OF THE AS SESSEE BY FOLLOWING HIS APPELLATE ORDER FOR PRECEDING ASSE SSMENT YEAR 2006-07. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THE CASE OF SAME ASSESSEE FOR ASSESSMENT YEAR 20 04- 05, THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ITA NO.161 OF 2010 DATED 31.1.2011 DISMISSED SIMILAR GR OUND OF APPEAL OF THE ASSESSEE. THE ISSUE IS COVERED AG AINST THE ASSESSEE. THE COPY OF THE ORDER IS PLACED ON R ECORD. CONSIDERING THE ABOVE AND SUBMISSIONS OF THE LEARNE D COUNSEL FOR THE ASSESSEE, IT IS CLEAR THAT THE HON' BLE PUNJAB & HARYANA HIGH COURT HAS ALREADY DISMISSED T HE APPEAL OF THE ASSESSEE ON IDENTICAL ISSUE IN THE PR ECEDING ASSESSMENT YEAR 2004-05. THEREFORE, THERE IS NO M ERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED. 3 5. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS PREFERRED APPEAL IN THE HON'BLE SUPREME COURT. 6. CONSIDERING THE ABOVE SUBMISSIONS IN THE LIGHT OF THE EARLIER ORDER OF THE TRIBUNAL, WE DISMISS THIS GROUND OF APPEAL BEING COVERED AGAINST THE ASSESSEE BY THE OR DER OF THE TRIBUNAL DATED 31.10.2014. THIS GROUND OF APPEAL O F THE ASSESSEE IS, THEREFORE, DISMISSED. 7. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE DISALLOWANCE OF CLUB MEMBERSHIP FEES OF RS.2,73,866 /- PAID FOR THE SENIOR EMPLOYEES OF THE COMPANY. THE LEAR NED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY I.T.A.T., CHAN DIGARH BENCH IN THE CASE OF THE SAME ASSESSEE BY SAME ORD ER DATED 31.10.2014 (SUPRA), IN WHICH IN PARA 4 IT WAS HELD AS UNDER : 4. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ORD ER OF THE LEARNED CIT (APPEALS) IN DISALLOWING MEMBERSHIP FEE PAID TO THE CLUB IN DELHI AND ONLY OF A MINOR AMOUN T TO CLUB IN CHANDIGARH AMOUNTING TO RS.1,99,381/-. THE ASSESSEE CONTENDED BEFORE THE CIT (APPEALS) THAT DE SPITE MOHALI UNIT WAS CLOSED, THE ASSESSEE MADE EFFORTS T O REVIVE IT AND IN THIS CONNECTION, EXECUTIVES OF THE ASSESSEE COMPANY IN CHANDIGARH UTILIZED THE MEMBERSHIP OF TH E CHANDIGARH CLUB FOR FURTHERING THE BUSINESS OF THE ASSESSEE COMPANY. THE LEARNED CIT (APPEALS), HOWEV ER, FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2006-07 DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOW THE ISSUE IS COVERED BY THE JUDGMENT OF FULL BENCH OF T HE 4 HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. GROZ BECKERT ASIA LTD., 31 TAXMAN.COM 155 (P & H) IN WHICH IT WAS HELD THAT CORPORATE MEMBERSHIP HAD ADVANTAGE TO THE ASSESSEE FOR LIMITED PERIOD FOR RU NNING OF BUSINESS AND BENEFIT OF ASSESSEE AND, THEREFORE, EXPENDITURE CANNOT BE TREATED AS CAPITAL ASSET. T HE LEARNED D.R. FOR THE REVENUE DID NOT DISPUTE THIS PROPOSITION. FOLLOWING THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT ABOVE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. 8. THE LEARNED D.R FOR THE REVENUE, HOWEVER, SUBMITTED THAT THE UNIT OF THE ASSESSEE WAS CLOSED. THEREFORE, DEDUCTION SHOULD NOT BE ALLOWED. 9. THIS ISSUE IS CONSIDERED IN DETAIL ALONGWITH CL OSURE OF THE UNIT AND SIMILAR ADDITION HAS BEEN DELETED I N ASSESSMENT YEAR 2007-08 (SUPRA). FOLLOWING THE ORD ER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 DATED 31.10.20 14 (SUPRA), WE DELETE THIS ADDITION. 10. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.41,33,836/- UNDER SECTION 36(1)( VA) OF THE ACT. THE LEARNED CIT (APPEALS) NOTED THAT IN THE O RIGINAL ASSESSMENT ORDER THIS ISSUE HAS BEEN ADJUDICATED AN D HIS PREDECESSOR ALSO DISMISSED THE APPEAL. THEREFORE, THE ADDITION WAS CONFIRMED. THE LEARNED REPRESENTATIV E FOR THE ASSESSEE SUBMITTED THAT THE ORIGINAL ASSESSMENT ORD ER WAS PASSED ON 19.12.2008 UNDER SECTION 143(3) OF THE AC T IN WHICH 5 SIMILAR ADDITION WAS MADE AND THE ASSESSEE MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT BEFORE THE ASSESSING OFFICER WHICH WAS DECIDED VIDE ORDER DATED 22.3.201 0 AND IT WAS CONTENDED THAT THE ASSESSEE HAS ALREADY ADDED B ACK THE AMOUNT RESULTING IN DOUBLE ADDITION AND THE ASSESSI NG OFFICER HAS DELETED THE ADDITION. IN VIEW OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT DATED 22.3.201 0, THE ADDITION IS LIABLE TO BE DELETED BECAUSE THE LEARNE D CIT (APPEALS) CONFIRMED THE ADDITION BY FOLLOWING THE O RIGINAL ASSESSMENT ORDER. SINCE IN THE ORIGINAL ASSESSMEN T ORDER RECTIFICATION ORDER IS MADE BY THE ASSESSING OFFICE R DELETING THE SAME ADDITION, THEREFORE, THERE IS NO JUSTIFICA TION TO SUSTAIN THE ADDITION IN THE PRESENT PROCEEDINGS. T HE ADDITION IS DELETED. THE GROUND NO.3 OF THE APPEAL OF THE A SSESSEE IS ALLOWED. 12. ON GROUND NO.4, THE ASSESSEE CHALLENGED THE ADDITION OF RS.48,43,298/- IN RESPECT OF LIABILITY DUE TO M/S MICRO PRECISION INDUSTRIES. 13. THE LEARNED CIT (APPEALS) NOTED THAT M/S MICRO PRECISION INDUSTRIES HAD WRITTEN OFF OUTSTANDING DE BT OF RS.48,43,298/- IN THE NAME OF THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION. WHEN THE ASSESSING OFFICER QU ESTIONED ABOUT THE TAXABILITY OF THIS AMOUNT UNDER SECTION 4 1(1) OF THE ACT, THE ASSESSEE HAD SUBMITTED THAT M/S MICRO PREC ISION INDUSTRIES HAD NEVER INFORMED THE ASSESSEE OFFICIAL LY THAT THEY HAD GIVEN UP THE CLAIM. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ADDED THE 6 AMOUNT. THE EXPLANATION OF THE ASSESSEE BEFORE TH E LEARNED CIT (APPEALS) WAS THAT THE WRITE OFF DOES NOT MEAN THAT THE CONTRACTUAL LIABILITY HAS CEASED TO EXIST BUT IT WA S NOT ACCEPTED BY THE LEARNED CIT (APPEALS) BECAUSE THE A MOUNT WAS WRITTEN OFF BY THE CONCERNED PARTY AND THIS GROUND WAS DISMISSED. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED T HAT THE CONCERNED PARTY NEVER INFORMED THE ASSESSEE ABOUT W RITTEN OFF THE AMOUNT IN QUESTION IN THE YEAR UNDER CONSIDERAT ION. THEREFORE, NO ADDITION COULD BE MADE UNDER SECTION 41(1) OF THE ACT AND RELIED UPON THE FOLLOWING DECISIONS : I) CIT VS. SMT.SITA DEVI JUNEJA (2010) 187 TAXMAN 96 (PUNJ & HAR) II) CIT VS. PURIDEVI MAHENDRAKUMAR CHAUDHARY (2014) 41 TAXMAN.COM 329 (GUJARAT) III) CIT-IV VS. G.K. PATEL & CO. (2013) 29 TAXMANN.COM 248(GUJARAT) IV) CIT, DELHI-II VS. JAIN EXPORTS (P) LTD. (2013) 35 TAXMANN.COM 540(DELHI) V) CIT-III, VS. SHRI VARDHMAN OVERSEAS LTD. (2011) 16 TAXMANN.COM 350(DELHI) VI) ITO VS. BHAVNESH PRINTS (P) LTD. (2011) 12 TAXMANN.COM 46(AHD) VII) DCIT, VS. GCG TECHNOLOGY HOUSING PROJECTS (P) LTD. (2011) 12 TAXMANN.COM 244(DELHI) 15. ON THE OTHER HAND,, THE LEARNED D.R FOR THE RE VENUE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REFERRED TO PARA 11 OF THE ASSESSMENT ORDER AND STATED THAT WHE N THE CONCERNED PARTY HAS WRITTEN OFF THE DEBT IN QUESTIO N, IT BECOMES THE INCOME OF THE ASSESSEE. 7 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE LIGHT OF THE DECISION RELIED UPON BY THE ASSESSEE I N THE CASE OF SMT.SITA DEVI JUNEJA (SUPRA), THE ISSUE OF BILATERA L ACT OF THE ASSESSEE AND CREDITORS ON RECORD WAS NOT CONSIDERED IN THE PRESENT CASE. NOTHING HAS BEEN BROUGHT ON RECORD WHETHER THERE WAS ANY BILATERAL ACT OF THE ASSESSEE AND CRE DITORS ON RECORD FOR CESSATION OF LIABILITY. THE ASSESSEE H AS BEEN CLAIMING SINCE THE BEGINNING THAT THE CONCERNED PAR TY HAS NOT INFORMED ABOUT THE GIVING UP OF THE CLAIM IN QUESTI ON SO AS TO MAKE THE AMOUNT IN QUESTION AS INCOME OF THE ASSESS EE. NO FACTUAL FOUNDATION FOR MAKING ADDITION AGAINST THE ASSESSEE HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER . THEREFORE, THE MATTER REQUIRES RECONSIDERATION AT T HE LEVEL OF THE ASSESSING OFFICER IN THE LIGHT OF THE DECISIONS CITED BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE. WE ACCORD INGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTO RE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH DIR ECTION TO REDECIDE THIS ISSUE STRICTLY IN ACCORDANCE WITH SEC TION 41(1) OF THE ACT AND IN THE LIGHT OF THE DECISIONS CITED BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE BEFORE US. THE AS SESSING OFFICER SHALL GIVE REASONABLE SUFFICIENT OPPORTUNIT IES OF BEING HEARD TO THE ASSESSEE. 17. IN THE RESULT, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8 18. ON GROUND NO.5, THE ASSESSEE CHALLENGED THE DISALLOWANCE OF RS.21,59,067/- UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER ON PERUSAL OF THE BALANCE SHE ET NOTED THAT THE ASSESSEE INVESTED A SUM OF RS.1.57 CRORES IN SHARES AND HAS EARNED DIVIDEND INCOME OF RS.28,000/-. AS THE DIVIDEND INCOME IS EXEMPT FROM TAX, THE EXPENSES IN CURRED TO EARN EXEMPT INCOME INCLUDING INTEREST EXPENSES ON I NVESTMENT IN SHARES ARE NOT ALLOWABLE UNDER SECTION 14A OF TH E ACT. THE ASSESSEE HAS ALSO NOT APPORTIONED/REDUCED SUCH EXPE NSES IN RELATION TO INVESTMENT MADE TO EARN EXEMPT INCOME F ROM THE TOTAL INTEREST EXPENSES INCURRED. THE ASSESSING OF FICER, THEREFORE, MADE DISALLOWANCE UNDER SECTION 14A OF T HE ACT. 19. THE LEARNED CIT (APPEALS) NOTED THAT RULE 8D H AS BEEN INCORPORATED W.E.F. 24.3.2008 AND SO AS NOT AP PLICABLE TO THE YEAR IN QUESTION BUT SOME METHOD OF COMPUTATION HAS TO BE APPLIED TO DETERMINE THE EXPENDITURE RELATING TO THE EXEMPT INCOME AND ACCORDINGLY FOLLOWING THE DECISION OF TH E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES, 286 ITR 1(P&H) DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 20. ON CONSIDERATION OF THE FINDINGS OF FACT RECOR DED BY THE ASSESSING OFFICER AND IN THE ABSENCE OF MATERIA L ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFE RE WITH THE ORDERS OF THE AUTHORITIES BELOW. THIS GROUND OF AP PEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 9 21. ON GROUND NO.6, THE ASSESSEE CHALLENGED THE ADDITION OF RS.7,40,000/-. THE BRIEF FACTS ARE TH AT THE ASSESSEE CLAIMED EXPENDITURE AMOUNTING TO RS.18,50, 000/- UNDER THE HEAD SOFTWARE AND COMPUTERIZATION EXPENS ES. THE ASSESSEE HAD CLAIMED THAT THE EXPENDITURE WAS INCUR RED ON COMPUTER STATIONERY, CONSUMABLES AND MAINTENANCE OF HARDWARE, ETC. BUT NO EVIDENCE WAS PRODUCED TO SUPP ORT THE CLAIM. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED . THE ASSESSING OFFICER TREATED THE AMOUNT AS CAPITAL EXP ENSES AND ALLOWED DEPRECIATION @ 60% RESULTING INTO ADDITION OF RS.7,40,000/-. 22. THE LEARNED CIT (APPEALS) ON THE SAME REASONIN G ALSO CONFIRMED THE ADDITION AND DISMISSED THIS GROU ND OF APPEAL OF THE ASSESSEE. 23. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSE SSEE. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE FILED LIST OF EXPENDITURE ON THIS ISSUE TO CLAIM THAT THE SAME WE RE REVENUE EXPENDITURE. HOWEVER, IT IS A FACT THAT NO EVIDEN CE WAS PRODUCED EITHER BEFORE THE ASSESSING OFFICER OR BEF ORE THE LEARNED CIT (APPEALS) TO SUPPORT THE CLAIM THAT THE EXPENDITURE WAS REVENUE IN NATURE. THE LEARNED CIT (APPEALS) ALSO NOTED THAT THE FINDING OF FACT RECORDED BY THE ASSESSING OFFICER HAS NOT BEEN CONTROVERTED BY THE ASSESSEE B EFORE HIM. THE LIST OF EXPENDITURE FILED BEFORE US FOR THE FIR ST TIME WOULD NOT REVEAL ANYTHING AND AS SUCH, COULD NOT BE TAKEN INTO CONSIDERATION PARTICULARLY WHEN NO PROPER PETITION IS FILED FOR 10 ADMISSION OF THE ADDITIONAL EVIDENCE. IN THE ABSEN CE OF ANY MATERIAL ON RECORD, WE DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE ORDER OF THE LEARNED CIT (APPEAL S). THIS GROUND OF APPEAL OF THE ASSESSEE IS ACCORDINGLY DIS MISSED. 24. NO OTHER POINT IS ARGUED OR PRESSED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MARCH, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH MARCH, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH