V2 Retail Ltd., Kolkata V. DCIT, CIR-10, KOLKATA, Kolkata

ITA 1174/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1056 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU
• Assessee Lawyers: NIRAV SHETH
• Keywords: Depreciation; Additional depreciation; Deemed dividend

Judgement Text

1 ITA NO.1174/KOL/2014 V2 RETAIL LTD., AY, 2010-11 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1174/KOL/2014 ASSESSMENT YEAR: 2010-11 V2 RETAIL LTD. (PAN:AABCV5632P) VS. DEPUTY COMMISSI ONER OF INCOME-TAX, CIRCLE-10, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 05.10.2017 DATE OF PRONOUNCEMENT 22.11.2017 FOR THE APPELLANT SHRI NIRAV SHETH, AR FOR THE RESPONDENT SHRI DAVID Z. CHAWNGTHU, ADDL. C IT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-XII, KOLKATA DATED 21.03.2014 FOR AY 2010-11. 2. AT THE OUTSET ITSELF, THE LD. AR STATED THAT THE ASSESSEE DOES NOT INTEND TO PRESS GROUND NOS. 1 AND 2 WHICH READ AS UNDER: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. AO ERRED IN DISALLOWING THE ASSESSEES CLAIM OF WRITE OFF SUNDRY BALANCES AMOUN TING TO RS.1,40,33,201/- AND THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO . 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN DISALLOWING THE ASSESSEES CLAIM OF WRITE OFF OF ADVANCES AMOUNTING TO RS.1,96,27,737/- AND THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE LD. AO. 3. IN THE LIGHT OF THE AFORESAID SUBMISSION OF THE ASSESSEES AR, WE DISMISS THESE GROUNDS OF APPEAL OF THE ASSESSEE. 4. GROUND NO. 4 IS AGAINST THE ORDER OF THE LD. CIT (A) IN NOT ALLOWING DEPRECIATION AT 80% ON ELECTRIC GENSET. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THIS ISSUE IS NO LONGER RES INTEGRA SINCE IN ASSESS EES OWN CASE FOR AY 2009-10. THE TRIBUNAL HAS GIVEN RELIEF TO THE ASSESSEE BY OBSERV ING AS UNDER: 2 ITA NO.1174/KOL/2014 V2 RETAIL LTD., AY, 2010-11 3.4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY TH E DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF AGARWAL TRANSFORMERS PVT. LTD. , SUPRA WHEREIN IT WAS HELD AS UNDER: ..IN ORDER TO APPRECIATE THE CONTROVERSY INVOLVED , IT WILL BE CONVENIENT TO EXTRACT THE RELEVANT ENTRY AT CLAUSE (XIII) OF ITEM 10A OF APPENDIX I APPENDED TO INCOME-TAX RULES, WHICH READS AS FOLLOWS: 'ANY SPECIAL DEVICES INCLUDING ELECTRIC GENERATORS AND PUMPS RUNNING ON WIND ENERGY.' 3, ACCORDING TO THE RULES OF CONSTRUCTION, WHERE TW O OR MORE WORDS WHICH ARE SUSCEPTIBLE OF ANALOGOUS MEANING ARE COUPLED TOGETH ER NOSCITUR A SOCIIS, THEY ARE UNDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOUR FROM EACH OTHER, THE MEANING OF THE MORE GENERAL BEING R ESTRICTED TO A SENSE ANALOGOUS TO THAT OF THE LESS GENERAL. THUS. IN OUR VIEW THE WOR D 'ELECTRIC GENERATOR' MUST BE CONSTRUED AS EJUSDEM GENERIS. THE ELECTRIC GENERATO R BY ITSELF GENERATE ELECTRICITY AND, THEREFORE, DO NOT FALL WITHIN THE RENEWABLE ENERGY DEVICES. IT IS DIFFERENT FROM PUMPS RUN ON WIND ENERGY, WHICH FALLS WITHIN THE RENEWABL E ENERGY DEVICES. THUS, IT IS ERRONEOUS TO SAY THAT THE CONDITION 'RUN ON WIND EN ERGY' IS ALSO ATTACHED TO ELECTRIC GENERATORS. EVEN GRAMMATICALLY NEITHER, NOR THE WOR D 'BOTH' IS USED AFTER THE WORD 'PUMPS' IN THE RELEVANT ENTRY AND THIS ALSO CLARIFI ES THAT THE CONDITION 'RUNNING ON' WIND 'ENERGY' IS ONLY ATTACHED TO THE WORD 'PUMPS' AND NOT TO THE ELECTRIC GENERATORS. A FURTHER READING OF THE ENTRY SHOWS THAT IT IS INC LUSIVE, IT REFERS TO TWO DIFFERENT ITEMS NAMELY, ELECTRIC GENERATORS AND SECONDLY THE PUMPS RUNNING ON WIND ENERGY. THUS, IN OUR VIEW THE ELECTRIC GENERATOR CLEARLY FAILS UNDER THE RENEWABLE ENERGY DEVICES AND THE TRIBUNAL HAS RIGHTLY ALLOWED THE DEPRECIATION A T THE RATE OF 30 PER CENT ON THE BASIS OF ITEM 10A, CLAUSE (XIII), OF APPENDIX 1. 4. THE REFERENCE IS ACCORDINGLY ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN IN THE AFORESAID DECISION, WE ALLOW THE GROUND NO. 3 OF ASSESSEES APPEAL. SO RESPECTFULLY, FOLLOWING THE COORDINATE BENCH DEC ISION, WE ARE INCLINED TO GIVE RELIEF TO THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 5. GROUND NO. 5 IS IN RESPECT OF DENIAL OF ADDITION AL DEPRECIATION ON NEW PLANT AND MACHINERY. AT THE OUTSET ITSELF, THE LD. COUNSEL F OR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THE VERY SAME ISSUE HAS BEEN DECIDED IN A SSESSEES OWN CASE FOR THE YEAR 2009-10 WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HELD IN PARA 2.5 AS UNDER: 2.5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. FOR THE SAKE OF CONVENIENCE THE PROVISIONS OF SECTION 32(1) (IIA) OF THE ACT ARE REPRODUCED HEREUNDER: 32(1) IN RESPECT OF DEPRECIATION OF (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING (OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER), A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHI NERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). 3 ITA NO.1174/KOL/2014 V2 RETAIL LTD., AY, 2010-11 PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTA LLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION , INCLUDING ACCOMMODATION IN THE NATU RE OF A GUEST HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICL ES; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUA L COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERW ISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSIONOF ANY ONE PREVIOUS YEAR. 2.6. WE FIND THAT INSTALLATION OF NEW PLANT AND MAC HINERY IN SALES OUTLET/RETAIL OFFICE WOULD FALL UNDER CLAUSE (B) OF PROVISO TO SECTION 32(1)(I IA) OF THE ACT. WE ARE IN COMPLETE AGREEMENT WITH THE ARGUMENTS ADVANCED BY THE LD. DR. NEEDLESS TO MENTION THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF HAVING ITS WRITTEN DOWN VALUE IN CREASED DUE TO ADDITIONAL DEPRECIATION GETTING DISALLOWED. THE LD. AO IS DIRECTED TO REWOR K THE WRITTEN DOWN VALUE ACCORDINGLY AND GIVE BENEFIT OF INCREASED DEPRECIATION IN THE SUBSE QUENT YEARS AS A CONSEQUENTIAL IMPACT. ACCORDINGLY, GROUND NOS. 1 AND 2 RAISED BY THE ASSE SSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE SAME, WE ALSO DIRECT THE SAME RELIEF WHICH HAS BEEN PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. COMING TO THE OTHER ISSUE I.E. GROUND NO.3 IN RE SPECT TO THE LD. CIT(A)S CONFIRMING THE ACTION OF THE AO IN TREATING THE LOAN GIVEN BY UNICORN MARKETING PRIVATE LIMITED TO THE ASSESSEE COMPANY TO THE TUNE OF RS.2,74,82,063/- AS DEEMED DIVIDEND. AT THE OUTSET ITSELF IT WAS BROUGHT TO OUR KNOWLEDGE THAT THE LENDER COMPAN Y FROM WHOM IT IS ALLEGED THAT LOAN HAS BEEN TAKEN BY THE ASSESSEE I.E. M/S. UNICORN MA RKETING PVT. LTD. IS TAKEN AS TRUE THEN ALSO THE DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOM E-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IS NOT ATTRACTED. THE LD. AR CONTEND ED THAT THE ASSESSEE COMPANY DOES NOT HAVE SHAREHOLDING IN M/S. UNICORN MARKETING PRIVATE LIMITED, THE LENDER COMPANY. THOUGH THE ASSESSEE DISPUTES AS TO WHETHER LOAN HAS BEEN TAKEN BY THE ASSESSEE, HOWEVER, ACCORDING TO ASSESSEE, THE AMOUNT IN QUESTION CANNO T BE BROUGHT TO TAX UNDER THE DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT FOR THE SIMPLE RE ASON THAT THE ASSESSEE COMPANY IS NOT A SUBSTANTIAL SHAREHOLDER HAVING MORE THAN 10% SHAREH OLDING IN THE LENDER COMPANY I.E.IN M/S. UNICORN MARKETING PVT. LTD. FOR THIS PROPOSIT ION, THE ASSESSEE RELIED ON THE ORDER OF THE HONBLE DELHI HIGH COURT IN CIT VS. BIKANER CUI SINE (P) LTD. VS. CIT (2014) 45 TAXMANN.COM 253 (DEL.) IN WHICH THE HONBLE HIGH CO URT HAS HELD AS UNDER (HEAD-NOTE): SECTION 2(22) OF THE INCOME-TAX ACT, 1961 DEEME D DIVIDEND (LOANS OR ADVANCES)-ASSESSEE- COMPANY RECEIVED CERTAIN AMOUNT AS UNSECURED LOAN B Y BIPS-ASSESSING OFFICER INVOKED 4 ITA NO.1174/KOL/2014 V2 RETAIL LTD., AY, 2010-11 PROVISION OF SECTION 2(22)(E) AND THEREBY MADE ADDI TION ON GROUND THAT ASSESSEE-COMPANY AND BIPS HAD COMMON SHAREHOLDER WHETHER SINCE ASSESSE E-COMPANY ITSELF WAS NOT A SHAREHOLDER IN PAYER COMPANY BIPS, AMOUNT OF LOAN C OULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22) IN HANDS OF ASSESSEE-COMPANY-H ELD, YES (PARAS 2 & 3) (IN FAVOUR OF ASSESSEE). 7. ASSESSEE HAS ALSO RELIED ON THE ORDER OF HONBLE DELHI HIGH COURT IN CIT VS. MCC MARKETING (P) LTD. (2011 16 TAXMANN.COM 411 (DEL) W HEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER (HEAD-NOTE): SECTION 2(22) OF THE INCOME-TAX ACT, 1961 - DEEME D DIVIDEND - ASSESSMENT YEAR 2006-07 - ASSESSEE, A PRIVATE LIMITED COMPANY, RECEIVED A CER TAIN AMOUNT AS UNSECURED LOAN FROM ITS SISTER CONCERN BY NAME MIPL - ASSESSING OFFICER HAV ING NOTICED THAT ONE A WAS HOLDING MORE THAN 20 PER CENT SHARES IN BOTH MIPL AND ASSES SEE-COMPANY INVOKED PROVISIONS OF SECTION 2(22)(E) AND MADE ADDITION OF AFORESAID AMO UNT TO INCOME OF ASSESSEE - WHETHER IN VIEW OF JUDGMENT OF DELHI HIGH COURT RENDERED IN CA SE OF CIT V. ANKITECH (P.) LTD. [2011] 199 TAXMAN 341 /11 TAXMANN.COM 100, PROVISIONS OF S ECTION 2(22)(E) WERE NOT ATTRACTED IN INSTANT CASE - HELD, YES - WHETHER, THEREFORE, IMPU GNED ADDITION MADE BY ASSESSING OFFICER UNDER SECTION 2(22)(E) WAS NOT JUSTIFIED - HELD, YE S [IN FAVOUR OF ASSESSEE] 8. WE NOTE THAT THE AO HAS MADE THE ADDITION ON THE BASIS THAT THE ASSESSEE COMPANY HAS SECURED UNSECURED LOAN FROM M/S. UNICORN MARKET ING PVT. LTD. IN WHICH THE SUBSTANTIAL SHAREHOLDER M/S. RICON COMMODITIES PVT. LTD. (HAVIN G SHAREHOLDING 22.05%) OF ASSESSEE COMPANY; AND M/S. RICON COMMODITIES PVT. LTD. HAS S HAREHOLDING OF 44.16% I.E. MORE THAN 10% OF SHAREHOLDING IN LENDER COMPANY M/S. UNICORN MARKETING PVT. LTD. SO, THE AO HAS MADE THE HAS MADE THE ADDITION U/S. 2(22)(E) OF TH E ACT. SO, IT IS THE CASE OF THE AO THAT SINCE M/S. RICON COMMODITIES PVT. LTD. HAS SUBSTANT IAL SHAREHOLDING IN BOTH ASSESSEE COMPANY AND THE LENDER COMPANY M/S. UNICORN MARKETI NG PVT. LTD., SO THE LOAN TAKEN BY ASSESSEE COMPANY SHOULD BE TREATED AS DEEMED DIVIDE ND. WE NOTE THAT IT IS NO WHERE THE CASE OF THE AO THAT THE ASSESSEE COMPANY IS A SUBST ANTIAL SHAREHOLDER OF M/S. UNICORN MARKETING PVT. LTD. AND ACCORDING TO THE SUBMISSION OF THE LD. AR, THE ASSESSEE COMPANY DOES NOT HAVE THE SHAREHOLDING OF M/S. UNICORN MARK ETING PVT. LTD. WHICH IS SUPPOSED TO HAVE GIVEN LOAN TO ASSESSEE COMPANY WHICH FACT ITSE LF HAS BEEN DISPUTED. HOWEVER, ACCORDING TO ASSESSEE COMPANY, EVEN IF FOR ARGUMENT SAKE IT IS TAKEN AS LOAN GIVEN BY M/S. UNICORN MARKETING PVT. LTD. TO ASSESSEE COMPANY, ST ILL SEC. 2(22)(E) OF THE ACT IS NOT ATTRACTED BECAUSE THE ASSESSEE COMPANY IS NOT A SUB STANTIAL SHAREHOLDER OF M/S. UNICORN MARKETING PVT. LTD. THE DEEMED DIVIDEND U/S. 2(22)( E) OF THE ACT IS NOT AT ALL ATTRACTED. IN SUCH A SCENARIO, WE ARE UNABLE TO ACCEPT THE AOS A DDITION OF RS.2,74,82,063/- U/S. 2(22)(E) 5 ITA NO.1174/KOL/2014 V2 RETAIL LTD., AY, 2010-11 OF THE ACT WHICH HAS BEEN RESTRICTED BY THE LD. CIT (A) TO RS.44,83,088/- WHICH IS TO THE EXTENT OF ACCUMULATED PROFIT OF M/S. UNICORN MARKET ING PVT. LTD. AS ON 01.04.2009. WE FIND THAT THE AO AS WELL AS THE LD. CIT(A) ERRED IN MAKING THE ADDITION APPLYING SEC. 2(22)(E) OF THE ACT WHICH CANNOT BE INVOKED TO TAX THE AMOUNT IN QUESTION. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22ND N OVEMBER, 2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22ND NOVEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. V2 RELTAIL LTD., C/O CHHAPARIA & ASSOCIATES, CHARTERED ACCOUNTANTS, 8, CAMAC STREET, SHANTINIKETAN BUILDIN G, 5 TH FLOOR, ROOM NO. 2, KOLKATA-700 017. 2 RESPONDENT DCIT, CIRCLE-10, KOLKATA. 3. THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY