ACIT, Chandigarh V. M/s A.B. Sugars Ltd., Chandigarh

ITA 1051/CHANDI/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6527 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 06-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Keywords: Depreciation; Additional depreciation; Earning of tax free income
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 1051/CHD/2018 / ASSESSMENT YEAR : 2011-12 THE DCIT, CIRCLE 1(1), CHANDIGARH M/S A.B. SUGARS LTD., (FORMERLY KNOWN AS M/S GURU TEG BAHADUR SUGAR LTD.,) H.NO. 77,SECTOR 11-A, CHANDIGARH ./PAN NO: AABCG3045M / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI T.N. SINGLA, CA ' ! / REVENUE BY : SH. SANDEEP DAHIYA, CA # $ % /DATE OF HEARING : 21.02.2019 &'() % / DATE OF PRONOUNCEMENT : 21.02.2019 ') / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 8.5.2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEA L:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL O F THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 21,50,686/- MADE U/S 36(L)(III) OF THE I.T. ACT, 19 61, IGNORING THAT THE ASSESSEE HAS NOT MAIN TAINED ITA NO. 1051/CHD/2018- M/S A.B. SUGARS LTD., CHANDIGARH 2 ANY SEPARATE ACCOUNT FOR INTEREST BEARING / INTEREST FREE AND HENCE THE AMOUNT ADVANC ED TO SISTER CONCERN CANNOT BE SAID TO BE MADE FORM INTER EST FREE FUNDS ONLY. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 21,50,686/- MADE U/S 36(L)(III) OF THE I.T.ACT, 196 1, IGNORING THAT THE ASSESSEE HAS FAILED TO ESTABLISH ANY BUSINESS EXPEDIENCY FOR ADVANCING SUCH A HUGE SUM T O ITS CONCERN. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 21,50,686/- MADE U/S 36(L)(III) OF THE I.T. ACT, 19 61, BASED ON THE SUBMISSION OF THE ASSESSEE IGNORING TH AT NEITHER THE ASSESSED HAS BROUGHT THIS FACT INTO THE NOTICE OF AO DURING THE ASSESSMENT PROCEEDINGS NOR THIS FACT IS APPARENT FR OM THE RECORDS, THEREFORE THE SUBMISSION OF THE ASSE SSEE IS NOTHING BUT AN AFTER-THOUGHT ONLY. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 11,08,624/- MADE U/S 14A OF THE I.T. ACT, 1961, TO RS. 1.19 LACS WITHOUT TAKING COGNIZANCE OF CIRCULAR NO. 5 OF 2014 OF CBDT ON THIS ISSUE, WHEREIN IT HAS BEEN CLARIFIED THAT THE PROVISION OF SECTION 14A ARE APPLICABLE EVEN WHEN NO EXEMPT INCOME HAS BEEN EARNED. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE ITAT HAS ERRED IN DELETING THE ADDIT ION MADE ON ACCOUNT OF CAPITALIZATION OF INTEREST RELAT ED TO CWIP AS THERE WAS A HUGE ADDITION OF FIXED ASSET S AND INTEREST WAS REQUIRED TO BE CAPITALIZED ON ACCO UNT OF CWIP. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT{A) HAS ERRED IN DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AS THE ASSESSING OFFICER HAD MADE A COMBINED DISALLOWANCE ON ACCOUNT OF EXCESS DEPRECIATION & ADDITIONAL DEPRECIATION AMOUNTING TO RS. 5,56,98,007/- AND THE ASSEESSEE HAS FAILED TO PROVE HOW EXCESS RATES OF DEPRECIATION WERE ALLOWABLE ON THE ITEMS AND THE ITA NO. 1051/CHD/2018- M/S A.B. SUGARS LTD., CHANDIGARH 3 ASSESSEE ALSO FAILED TO PROVE THAT THOSE ITEMS WERE BEING USED IN ITS BUSINESS. 8. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 9. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 3. GROUND NOS. 1 TO 4 : VIDE GROUND NOS, 1 TO 4, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE A DDITION OF RS. 21,50,686/- WHICH WAS MADE BY THE ASSESSING OFFICE R U/S 36(1) (III) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. THE ASSESSING OFFICER HAD MADE THE IMPUGNED ADDI TIONS ON ACCOUNT OF NOTIONAL DISALLOWANCE OF INTEREST EXPENDITURE IN RESPECT OF THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE TO ITS SISTER C ONCERN. THE ASSESSEE TOOK THE PLEA BEFORE THE LD. CIT(A) THAT, FIRSTLY, THE ADVANCES WERE MADE OUT OF BUSINESS EXPEDIENCY AND SECONDLY, THAT ASSES SEE HAD ITS OWN / INTEREST FREE SUFFICIENT FUNDS TO MEET THE INVESTM ENT. 5. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER WHILE RELYING UPON THE DECISION OF THE HON'BLE JURI SDICTIONAL HIGH COURT IN BRIGHT ENTERPRISES (ITA NO. 224 OF 2013) AND JUD GEMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S HERO CYCLES (63 TA XMAN 308), WHEREIN, IT HAS BEEN HELD THAT IF ASSESSEE HAD FUNDS / INTER EST FREE FUNDS AVAILABLE WITH IT TO MAKE INVESTMENT, THE PRESUMPTION WILL BE THAT INVESTMENT MADE BY THE ASSESSEE IS OUT OF OWN FUNDS. 6. NOW THE ISSUE IS ALSO SQUARELY COVERED BY THE D ECISION OF THE ITA NO. 1051/CHD/2018- M/S A.B. SUGARS LTD., CHANDIGARH 4 HON'BLE SUPREME COURT IN IN CIT VS. RELIANCE INDUS TRIES LTD [2019] 102 TAXMANN.COM 52 (SC) / 410 ITR 466 (SC). WE, THERE FORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE. 7. GROUND NO.5 : VIDE THIS GROUND, THE REVENUE HAS AGITATED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 1 1,08,624/- U/S 14A OF THE ACT AT RS. 1.19 LACS. THE LD. CIT(A) WHILE RE LYING UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF JOI NT INVESTMENT PVT LTD. (ITA NO. 117/2015) AND IN THE CASE OF M/S EXPIRE PA CKAGING PVT LTD. IN ITA NO. 415 OF 2015 (P&H) HAS RESTRICTED THE DISAL LOWANCE U/S 14A OF THE ACT TO THE EXTENT OF TAX EXEMPT INCOME EARNED BY T HE ASSESSEE. THE ISSUE IS SQUARELY COVERED BY THE VARIOUS DECISIONS OF THE HON'BLE HIGH COURTS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF CIT VS. WINSOME TEXTILES (2009) 319 ITR 204 (P&H) AND HON'BLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD VS. ITO (2015) 378 ITR 33 (DELHI) AND OF THE HON'BLE GUJARAT HIG H COURT IN THE CASE OF CORRTECH ENERGY P. LTD. (2014) 45 TAXMAN.COM 116 AND FURTHER OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS . M/S SHIVAM MOTORS (P) LTD (2014) 272 CTR (ALL) 277 AND VARIOUS OTHER CASE LAWS. IN ALL THE ABOVE REFERRED TO CASE LAWS, THE HON'BLE HIGH COURT S HAVE BEEN UNANIMOUS TO HOLD THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE TAX EXEMPT INCOME EARNED BY THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) ON THIS ISSUE. 8. GROUND NO.6: VIDE GROUND NO.6, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF CAPITALIZATION OF INTEREST RELATING TO CAPITAL WORK IN PROGRESS. THE LD. ITA NO. 1051/CHD/2018- M/S A.B. SUGARS LTD., CHANDIGARH 5 CIT(A) HAS DEALT WITH THIS ISSUE IN PARA 8 OF THE I MPUGNED ORDER, WHEREIN, HE WHILE RELYING UPON THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 HELD THAT THE FUNDS INVESTED IN THE ASSETS WERE ONLY A SMALL PERCENTAGE OF TOTAL FIX ED ASSETS AND COULD NOT BE TERMED AS SUBSTANTIAL EXPANSION AND, THEREFORE, T HE ADDITION COULD NOT BE MADE UNDER THE PROVISO TO SECTION 36(1)(III) OF THE ACT. NO DISTINGUISHING FACT OR CONTRARY DECISION HAS BEEN CITED BY THE LD . DR ON THIS ISSUE. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN TH E ORDER OF THE CIT(A) ON THIS ISSUE ALSO. 9. GROUND NO.7: VIDE THIS GROUND, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE O F ADDITIONAL DEPRECIATION MADE BY THE ASSESSING OFFICER. A PERUS AL OF THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE REVEALS THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN RESPECT OF VARIOUS ITEMS. HOWEVER, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ADDITIONAL DEP RECIATION CLAIMED IN RESPECT OF EACH OF THE ITEMS AND ALLOW DEPRECIATION AND ADDITIONAL DEPRECIATION AS PER SCHEDULE BY APPLYING DIFFERENT RATE OF DEPRECIATION APPLICABLE AS PER RULES. 10. WE FIND THAT THE LD. CIT(A) HAS NOT DELETED THE ADDITION ON THIS ISSUE, RATHER, HE HAS DIRECTED THE ASSESSING OFFIC ER TO EXAMINE EACH ITEM AND ALLOW THE DEPRECIATION AND ADDITIONAL DEPRECIAT ION IN ACCORDANCE WITH LAW AND AS PER RULES. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A) ON THIS ISSUE ALSO. ITA NO. 1051/CHD/2018- M/S A.B. SUGARS LTD., CHANDIGARH 6 11. GROUND NOS. 8 & 9 ARE GENERAL AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN THE RESULT, THERE IS NO MERIT IN THE APPEAL OF T HE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT ON 21.02.2019. SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 21.02.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR