TML DRIVELINES LTD, MUMBAI V. ADDL CIT 2(1), MUMBAI

ITA 1035/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6815 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 14-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Depreciation; Earning of tax free income; Cost of acquisition; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1035/MUM/2017 ASSESSMENT YEAR: 2011 - 12 TATA MOTORS LTD., (SUCCESSOR TO TML DRIVELINES LTD.) BOMBAY HOUSE, 24, HOMIMODY STREET, HUTATMACHOWK, MUMBAI - 400001. VS. ADDL. COMMISSIONER OF INCOME TAX - 2(1), AAYAKARBHAVAN MUMBAI - 400020. PAN NO. AA CCT2727Q APPELLANT RESPONDENT ITA NO. 1098 /MUM/201 7 ASSESSMENT YEAR: 2011 - 12 ADDL. COMMISSIONER OF INCOME TAX - 2(1), AAYAKARBHAVAN MUMBAI - 400020. VS. M/S TML DRIVELINES LTD. (EARLIER KNOWN AS H V AXLES LTD.) 3 RD FLOOR, NANAVATIMAHALAYA, 18, HOMIMODY STREET, HUTATMACHAWK, MUMBAI - 400001 PAN NO. AACCT2727Q APPELLANT RESPONDENT ASSESSEE BY : MR. SHRIHARIIYER, AR REVENUE BY : MR. D.G. PANSARI , DR DATE OF HEARING : 09 / 0 1/201 9 DATE OF PRONOUNCEMENT: 28/02/2019 TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 2 ORDER PER N.K. PRADHAN, AM THE CAPTIONED CROSS APPEALS - ONE BY THE ASSESSEE AND ONE BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 3 , MUMBAI [IN SHORT CIT(A)] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1035/MUM/2017 ASSESSMENT YEAR: 2011 - 12 2 . THE 1ST GROUND OF APPEAL 1. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962 ('THE RULES') WITHOUT APPRECIATING THE FACT THAT NO EXPENDITURE HAD BEEN INCURRED BY THE APPELLANT IN RELATION TO EARRING EXEMPT INCOME. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES DISREGARDING THE SUBMISSION MAD E BY THE APPELLANT THAT THE ENTIRE AMOUNT OF INVESTMENT ON WHICH EXEMPT INCOME IS EARNED HAVE BEEN MADE OUT OF SELF - GENERATED FUNDS AND THAT CONSIDERING THE NATURE OF INVESTMENTS NO OTHER EXPENDITURE WAS IN FACT INCURRED. THE LD. CIT(A) OUGHT TO HAVE APPRE CIATED THAT ON THE BASIS OF THE FACTS OF THE APPELLANT, SECTION 14A AT THE ACT READ WITH RULE 8D OF THE RULES HAD NO APPLICATION. TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 3 C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISREGARDING THE FACT THAT THE CAPITA L, PROFIT RESERVES, ETC., WERE HIGHER THAN INVESTMENT IN TAX FREE SECURITIES, THEREFORE, IT IS TO BE CONSIDERED THAT INVESTMENT IS MADE OUT OF INTEREST - FREE FUNDS AVAILABLE WITH APPELLANT AND, CONSEQUENTLY, NO DISALLOWANCE U/S 14A OF THE ACT OUGHT TO BE MA DE. D) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES DISREGARDING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF G ODREJ S BOYCE MFG. CO. LTD (328 ITR 81), WHICH REQUIRES THE AO TO ESTABLISH NEXUS OF EXPENSES HAVING BEEN INCURRED FOR EARNING EXEMPT INCOME BEFORE APPLYING PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES, E) WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT GIVING A CLEAR DIRECTION OF EXCLUDING THE INVESTMENTS (BOTH, AT THE BEGINNING AND AT THE CLOSE OF THE FINANCIAL YEAR), INCOME FROM WHICH IS NOT EXEMPT, WHILE COMPUTING DISALLOWANCE UNDER SECTION 1 4A OF THE ACT READ WITH RULE 8D OF THE RULES. 3 . DURING THE COURSE OF HEARING, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT HE WOULD NOT LIKE TO PRESS GROUND NO. 1(A) TO (D). HAVING CONSIDERED IT, THE ABOVE GROUNDS OF APPEAL ARE DISMISSED AS NOT PRESSED. WE NOW TURN TO GROUND NO. 1(E). IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 30.09.2011 DECLARING TOTAL INCOME AT RS.1,51,23,13,468/ - . DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HA D CLAIMED EXEMPTION ON DIVIDEND INCOME OF RS.56,95,623/ - . THE ASSESSING OFFICER (AO) WORKED OUT THE DISALLOWANCE U/S 14A R.W. RULE 8D AT RS.36,16,277/ - AND MADE AN ADDITION OF IT TO THE NORMAL COMPUTATION AS WELL AS BOOK PROFIT U/S 115JB OF THE ACT. TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 4 IN AP PEAL, THE LD. CIT(A) AGREED WITH THE CALCULATION DONE BY THE AO AND CONFIRMED THE ABOVE DISALLOWANCE. 4 . BEFORE US, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE DECISION IN THE CASE OF ACIT V. VIREET INVESTMENT 58 ITR (T) 313 (DELHI - ITAT) (SB) AND SUBMIT S THAT THE LD. CIT(A) SHOULD HAVE GIVEN A CLEAR DIRECTION TO THE AO TO EXCLUDE THE INVESTMENTS (BOTH, AT THE BEGINNING AND AT THE CLOSE OF THE FINANCIAL YEAR), INCOME FROM WHICH IS NOT EXEMPT, WHILE COMPUTING DISALLOWANCE U/S 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT IN THE CASE OF VIREET INVESTMENT PVT. LTD . (SUPRA), THE SPECIAL BENCH OF THE TRIBUNAL HAS HELD AT PARA 11.16 THAT ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING THE AVERAGE VALUE OF INVESTMENT WHICH YIELDED EXEMPT INCOME DURING THE YEAR. THIS IS IN THE CONTEXT OF DISALLOWANCE U/S 14A R.W. RULE 8D. IN VIEW OF ABOVE DECISION , WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO CONSIDER THOSE INVESTMENTS FOR COMPUTING THE AVERAGE VA LUE OF INVESTMENTS U/S 14A R.W. RULE 8D WHICH YIELDED EXEMPT INCOME DURING THE YEAR. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE GROUND NO. 1(E) IS ALLOWED FOR STATISTICAL PURPOSES . TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 5 6 . THE 2 ND GROUND OF APPEAL 2.A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRE D IN CONFIRMING THE ADJUSTMENT TO THE BOOK PROFIT COMPUTATION UNDER SECTION 115JB OF THE ACT IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT WITHOUT APPRECIATING THE FACT THAT NO EXPENSES HAS BEEN INCURRED FOR EARNING INCOME EXEMPT FROM TAX. B ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADJUSTMENT TO BOOK PROFIT IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTION 14A I S APPLICABLE ONLY FOR COMPUTATION OF INCOME UNDER CHAPTER IV OF THE ACT AND IS NOT APPLICABLE FOR THE PURPOSE OF BOOK PROFIT COMPUTATION UNDER SECTION 115JB OF THE ACT. C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT T O HAVE APPRECIATED THAT THE PROVISIONS OF CHAPTER XII - B OF THE ACT IS A SEPARATE CODE IN ITSELF AND OTHER PROVISIONS OF THE ACT DOES NOT AFFECT THE COMPUTATION OF BOOK PROFIT UNDER CHAPTER XII - B OF THE ACT AND HENCE THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE IMPORTED INTO WHILE COMPUTING THE BOOK PROFIT U/S 115JB. D) WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT ONLY ACTUAL EXPENSE, IF ANY, INCURRED FOR EARNING EXEMPT INCOME AND DEBITED TO PROFIT AND LOSS ACCOUNT C OULD BE ADDED LO BOOK PROFIT AS PER THE PROVISION OF SECTION 115JB OF THE ACT. 7 . IN THE CASE OF VIREET INVESTMENT PVT. LTD . (SUPRA), IT IS HELD THAT THE DISALLOWANCE U/S 14A R.W. RULE 8D COULD NOT BE ADDED WHILE COMPUTING THE BOOK PROFITS IN TERMS OF SECTION 115JB AS THE EXPLANATION TO THAT SECTION DID NOT SPECIFICALLY MENTION SECTION 14A OF THE ACT. HENCE, THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) WAS TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 6 TO BE MADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED U/S 14A R.W. RULE 8D OF THE RULES. FOLLOWING THE ABOVE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, WE ALLOW THE 2ND GROUND OF APPEAL. 8 . THE 3 RD GROUND OF APPEAL 3A) ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THE LEVY OF INTEREST UNDER SECTION 234D AS MANDATORY WITHOUT APPRECIATING THE FACTS OF THE CASE AND ADJUDICATING THE ISSUE ON MERITS. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT CONSIDERING THE ISSUES DECIDED IN FAVOUR OF THE APPELLANT, INTEREST UNDER SECTION 234D (BEING CONSEQUENTIAL IN NATURE) OUGHT TO BE RE - COMPUTED. 9 . SECTION 234D HAS BEEN INSERTED W.E.F. 01.06. 2003 TO CHARGE INTEREST ON EXCESS REFUND GRANTED AT THE TIME OF SUMMARY ASSESSMENT. AS PER SECTION 234D(1), IN ANY OF THE FOLLOWING TWO CASES, INTEREST IS ATTRACTED : CASE 1 IF ANY REFUND IS GRANTED U/S 143(1) BUT NO REFUND IS DUE ON REGULAR ASSESSMENT . CASE 2 IF ANY REFUND IS GRANTED TO THE ASSESSEE U/S 143(1) AND THE REFUND SO GRANTED EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT. FOR THE AFORESAID PURPOSE, REGULAR ASSESSMENT MEANS ASSESSMENT U/S 143(3) AS IN THE INSTANT CASE. IN VIEW OF TH E ABOVE PROVISIONS, THE AO IS DIRECTED TO COMPUTE THE INTEREST ON EXCESS REFUND, AFTER EXAMINING THE RECORDS. TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 7 1 0 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ITA NO. 1098/MUM/2017 ASSESSMENT YEAR: 2011 - 12 1 1 . THE GROUNDS OF APPEAL FILED BY THE R EVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEPRECIATION AT REVALUED COST OF THE MACHINERY AND NOT WDV. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DEC ISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 1 2 . THE AO HAS OBSERVED THAT IN THE AY 2007 - 08, THE ASSESSEE HAD PURCHASED SECOND HAND PLANT & MACHINERY OF RS.11,09,20,582/ - FROM ITS HOLDING COMPANY M/S TATA MOTORS LTD. AND CAPITALIZE D AT THE WDV AS APPEARING IN THE BLOCK OF ASSETS OF THE HOLDING COMPANY. THE AO HAS FOLLOWED THE ORDER FOR THE AY 2007 - 08 WHEREIN EXCESS CLAIM OF DEPRECIATION WAS DISALLOWED. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE CONTINUED TO CLAIM DEPRECIATION ON THE INFLATED COST OF USED ASSETS. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE FILED A DIFFERENTIAL DEPRECIATION CHART AND THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.3,04,12,088/ - AS AGAINST THE ELIGIBLE DEPRECIATION OF R S.97,86,646/ - . THEREFORE, HE DISALLOWED THE EXCESS DEPRECATION OF RS.2,06,25,442/ - . 1 3 . IN APPEAL, THE LD. CIT(A) OBSERVED THAT THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON THE COST OF ACQUISITION OF ASSETS ACQUIRED FROM TML IS DECIDED IN FAVOUR OF THE AS SESSEE IN ITS OWN CASE AND ALSO IN CASE OF ITS GROUP CONCERN FOR EARLIER YEARS I.E. AY 2007 - 08 AND 2008 - 09 BY THE TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 8 ITAT. THE FOLLOWING OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008 - 09, EXTRACTED BY THE LD. CIT(A) IS AS UNDER : THE DECISION IN THE CASE OF ESSAR OIL LTD. AS ABOVE SQUARELY COVERED THE CASE OF THE ASSESSEE. THEREFORE, THE AO IS DIRECTED TO TAKE COST OF ACQUISITION OF SUCH ASSETS AS HAVE BEEN ACQUIRED BY IT FROM M/S TATA MOTORS LTD. AT THE COST AT WHICH THEY HAVE BEEN ACQUIRED MEANS THE ACTUAL CONSIDERATION PAID BY THE ASSESSEE COMPANY AND ACCORDINGLY ALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. WITH THE ABOVE REASONS, THE CIT(A) DIRECTED THE AO TO ALLOW THE DEP RECIATION. 1 4 . BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND THUS SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 1 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. AS MENTIONED BY THE LD. CIT(A) , THE ABOVE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN AY 2007 - 08 AND 2008 - 09. ALSO WE FIND THAT SIMILAR VIEW HAS BEEN TAK EN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2009 - 10 AND AY 2011 - 12. FACTS BEING IDENTICAL, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND UPHOLD THE ORDER OF THE LD. CIT(A). THUS THE APPEAL FILED BY THE R EVENUE IS DISMISSED. TATA MOTORS LTD. ITA NOS. 1035 & 1098/MUM/2017 9 1 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED, WHEREAS THE APPEAL FILED BY THE R EVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2019. SD/ - SD/ - ( PAWAN SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 28/02/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI