Asian Granito India Ltd., Ahmedabad V. The Dy.CIT, Circle-1, Ahmedabad

ITA 1244/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0551 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: A L THAKKAR
• Keywords: Depreciation; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201; 143(2)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MUDHIMITA ROY, JUDICIAL MEMBER ./I.T.A. NOS. 1244 & 1718/AHD/2015 ( / ASSESSMENT YEAR: 2010-11) ASIAN GRANITO INDIA LTD. 202, DEV ARC, OPP. ISKON TEMPLE, S.G. HIGHWAY, AHMEDABAD-380015 / VS. DCIT CRICLE-1, AHMEDABAD ./ ./PAN/GIR NO. : AAF CA2 340 H ( /APPELLANT ) .. ( / RESPONDENT ) DCIT CRICLE-1(1)(1), AHMEDABAD / VS. ASIAN GRANITO INDIA LTD. 202, DEV ARC, OPP. ISKON TEMPLE, S.G. HIGHWAY, AHMEDABAD-380015 ./ ./PAN/GIR NO. : AAF CA2 340 H ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A. L. THAKKAR, AR / RESPONDENT BY: SHRI L. P. JAIN, SR. DR ! /DATE OF HEARING 03/09/2019 '# ! / DATE OF PRONOUNCEMENT 16/09/2019 $% /O R D E R PER AMARJIT SINGH - AM: THESE TWO APPEALS ONE APPEAL FILED BY THE ASSESSEE A ND THE OTHER APPEAL FILED BY THE REVENUE FOR A.Y. 2010-11, ARISE FROM ORDER O F THE CIT(A)-1, AHMEDABAD ITA NOS. 1244 & 1718/AHD/2015 [ASIAN GRANITO INDIA LTD. VS. DCIT] A.Y. 2011-11 2 DATED 26.02.2015, IN PROCEEDINGS UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 1718/AHD/2015(REVENUES APPEAL):- 2. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS. 12,55,06,230/- WAS FILED ON 30.09.2010. THE CASE WA S SUBJECT TO SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 30.08.2 011. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED ON 18.03.2013. FURTHER FA CTS OF THE CASE PERTAINING TO THE GROUNDS OF APPEAL FILED BY THE REVENUE ARE DISCUSSE D WHILE ADJUDICATING THESE GROUNDS OF APPEAL AS UNDER. FIRST GROUND OF APPEAL:- DISALLOWANCE U/S. 35D:- 3. THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 65,57,17 2/- ON ACCOUNT OF PUBLIC ISSUE EXPENSES U/S. 35D OF THE ACT. THE AO HAS DIS ALLOWED THE CLAIM OF EXPENSES STATING THAT THE ASSESSEE HAS INCURRED THE EXPENSES FOR INCREASE IN THE AUTHORISED CAPITAL OF THE COMPANY AND THE SAME IS NOT ALLOWABL E UNDER SUB-SECTION 2 OF SEC. 35D OF THE ACT. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD . CIT(A). THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. SECOND GROUND OF APPEAL:- PERTAINING TO DELETING THE DISALLOWANCE OF RS. 9,6 30/- MADE U/S. 14A R.W. RULE 8D(2)(II) OF THE I. T. RULE:- 5. THE ASSESSEE HAS CLAIMED DIVIDEND INCOME TO THE A MOUNT OF RS. 76,108/- AS EXEMPT FROM TAX. THE ASSESSEE EXPLAINED THAT IT HAS NOT INCURRED ANY EXPENSES RELATING TO EARNING EXEMPT INCOME AND STATED THAT T HE EXEMPT DIVIDEND WAS EARNED ON THE INVESTMENT WHICH WAS MADE IN THE EARLIER YEA RS. THE AO HAS NOT AGREED ITA NOS. 1244 & 1718/AHD/2015 [ASIAN GRANITO INDIA LTD. VS. DCIT] A.Y. 2011-11 3 WITH THE EXPLANATION OF THE ASSESSE AND COMPUTED TH E DISALLOWANCE U/S. 14A AS PRESCRIBED UNDER RULE 8D OF THE I. T. RULE TO THE AM OUNT OF RS. 12,130/-. 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE C IT(A). THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 9,630./- AFTER REFERRIN G THE DECISION OF HIS PREDECESSOR THAT ASSESSEE HAS NOT INCURRED ANY EXPENSES RELATI NG TO INTEREST EXPENDITURE PERTAINING TO INVEST MADE ON WHICH IT HAD EARNED EX EMPT INCOME. THE CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS. 2, 500/- FOR ADMINISTRATIVE EXPENSES INCURRED ON EARNING EXEMPT INCOME. THIRD GROUND OF APPEAL:- DELETING THE ADDITION OF RS. 90,72,239/- ON ACCOUN T OF DISALLOWANCE OF UNUTILISED CENVAT CREDIT:- 7. THE AO NOTICED THAT THERE WAS UNUTILISED CENVAT CRE DIT SHOWN BY THE ASSESSEE IN COLUMN NO. 22(A) OF 3CD REPORT AND FURT HER NOTICED THAT ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD FOR ACCOUNTING CENVAT AS AG AINST INCLUSIVE METHOD MANDATED U/S. 145A OF THE ACT. THE AO HAS OBSERVED THAT AS PER THE PROVISION OF SEC. 145A OF THE ACT THE UNUTILISED CENVAT CREDIT HAD TO BE INCLUDED IN THE CLOSING STOCK OF RAW MATERIAL AS WORK-IN-PROGRESS A ND THE EXCISE DUTY PAID ON UNSOLD FINISHED GOODS TO BE INCLUDED IN THE INVENTO RY OF THE FINISHED GOODS. THEREFORE, HE WAS OF THE VIEW THAT UNUTILISED CENVAT CREDIT HAD TO BE INCLUDED IN THE CLOSING STOCK OF RAW MATERIAL FOR REDUCING THE COST OF CONSUMPTION OF GOODS CHARGED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, THE AO HAS ADDED UNUTILISED CENVAT CREDIT OF RS. 90,72,239/- TO THE TOTAL INCOME OF THE ASSESSEE. 8. AGGRIEVED ASSESSEE HAS FILED BEFORE THE CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION AFTER FOLLOWING THE VARIOUS DE CISION OF THE ITAT AHMEDABAD ON THE ISSUE. 9. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE US THE LD. COUNSEL HAS CONTENDED THAT IDENTICAL ISSUE ON SIMILAR FACT IN T HE CASE OF THE ASSESSEE ITSELF HAS ITA NOS. 1244 & 1718/AHD/2015 [ASIAN GRANITO INDIA LTD. VS. DCIT] A.Y. 2011-11 4 BEEN DECIDED BY THE ITAT AHMEDABAD VIDE ITA NO. 1147/ AHD/2013 IN FAVOUR OF THE ASSESSEE ITSELF. 10. THE LD. DR COULD NOT CONTROVERT THE AFORESAID MA TERIAL FACT STATED BY THE LD. COUNSEL. 11. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES WE HAVE GONE THROUGH THE ABOVE CITED ORDER OF THE ITAT AHMEDABAD AND NOTICE TH AT VIDE PARA 3 OF THE ABOVE CITED ORDER THE ISSUE OF DEDUCTION OF AMORTISATION OF PRELIMINARY EXPENSES U/S. 35D HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. RELEVA NT PART OF THE DECISION OF THE ITAT IS REPRODUCED AS UNDER:- 3. LEARNED DEPARTMENTAL REPRESENTATIVE SEEKS TO RE AD SECTION 35D(2)(C)(IV) OF THE ACT TO PLEAD THAT THE CIT(A) HAS ERRED IN LAW A S WELL AS ON FACTS IN ALLOWING THE IMPUGNED AMORTIZATION ON PRELIMINARY EXPENSES TO TH E ASSESSEE. HE HOWEVER FAILS TO DISPUTE THE CRUCIAL FACT THAT THE IMPUNGED ASSESSME NT YEAR IS NOT THE FIRST YEAR OF THE ASSESSEE RAISING THE INSTANT AMORTIZATION CLAIM. I T HAS COME ON RECORD THAT THE ASSESSING OFFICER HAD HIMSELF ALLOWED THE VERY RELI EF OF 20% IN PRECEDING ASSESSMENT YEAR WHILST FRAMING A REGULAR ASSESSMENT. THE INST ANT ISSUE BEFORE US IS THEREFORE MERELY A CONSEQUENTIAL ONE SINCE THE EARLIER RELIEF GRANTED TO THE ASSESSEE HEREINABOVE HAS ATTAINED FINALITY. WE THEREFORE SE E NO REASON TO INTERFERE THE CIT(A)S ABOVE EXTRACTED CONCLUSION DELETING THE IM PUGNED DISALLOWANCE OF AMORTIZATION OF PRELIMINARY EXPENSES AS PER THE REF ERRED CASE LAW. THIS FIRST SUBSTANTIVE GROUND FAILS ACCORDINGLY. AFTER CONSIDERING THE DECISION OF THE CO-ORDINATE BENCH ITAT AHMEDABAD IN THE CASE OF THE ASSESSEE ON THE IDENTICAL ISSUE BASED ON SIMILAR FACT WE DO NOT FIND ANY MERIT ON THIS GROUND OF APPEAL OF THE REVE NUE. THEREFORE, THIS GROUND OF APPEAL IS REJECTED. 12. REGARDING DISALLOWANCE U/S. 14A OF THE ACT THE ITAT HAS ALSO ADJUDICATED VIDE PARA 4 OF THE ORDER THAT THE ASSESSEE WAS HAVI NG INTEREST FREE FUND TO THE TUNE OF RS. 201 CRORES AS AGAINST ITS INVESTMENT MADE IN MUTUAL FUND AMOUNTING TO RS. 5 LACS ONLY. THEREFORE, THE APPEAL OF THE REVENUE W AS DISMISSED. CONSIDERING THE AFORESAID FACTS ON SIMILAR ISSUE WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL OF THE REVENUE, THEREFORE, THE SAME STAND DISMISSED. ITA NOS. 1244 & 1718/AHD/2015 [ASIAN GRANITO INDIA LTD. VS. DCIT] A.Y. 2011-11 5 13. REGARDING THIRD ISSUE OF ADDITION OF UNUTILISED CENVAT CREDIT U/S. 145A OF THE ACT WE HAVE NOTICED THAT THE CO-ORDINATE BENCH OF THE ITAT VIDE AFORESAID ORDER HAS ADJUDICATED THE SIMILAR ISSUE ON IDENTICA L FACTS IN THE CASE OF THE ASSESSEE ITSELF IN THE FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE CO- ORDINATE BENCH IS REPRODUCED AS UNDER:- 6. HEARD BOTH THE PARTIES REITERATING THEIR RESPEC TIVE STANDS THEIR RESPECTIVE STANDS IN SUPPORT OF AND AGAINST THE IMPUGNED CLOSI NG STOCK ADDITION MADE IN THE COURSE OF ASSESSMENT AND DELETED DURING LOWER APPEL LATE PROCEEDINGS. THERE CAN HARDLY BE ANY DISPUTE IN VIEW OF CATENA OF ABOVE RE FERRED CASE LAW THAT THE IMPUGNED ADDITION IS A REVENUE NEUTRAL CASE SINCE ANY ADJUST MENT MADE IN CLOSING STOCK FOLLOWS A CONSEQUENTIAL INCREASE IN OPENING STOCK OF THE SU CCEEDING ASSESSMENT YEAR AS WELL. THE ASSESSEE HAS ALREADY DEMONSTRATED DURING THE CO URSE OF LOWER APPELLATE PROCEEDINGS THAT THERE IS NO REVENUE EFFECT EITHER WAY IF IT FOLLOWS INCLUSIVE OR EXCLUSIVE METHOD QUA THE CENVAT CREDIT. LEARNED DE PARTMENTAL REPRESENTATIVE FAILS TO REBUT THIS CLINCHING FACTUAL POSITION. WE THEREFORE AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. THE REVENUE FAILS IN ITS LAST SUBSTANTIVE GROUND AS WELL. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH ON SIMILAR ISSUE AND IDENTICAL FACT IN THE CASE OF THE ASSESSE E ITSELF AS ELABORATED ABOVE WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. T HEREFORE, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 1244/AHD/2015(ASSESSEES APPEAL):- 14. GROUND NO. 1 IS NOT PRESSED. THEREFORE, THIS G ROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 15. GROUND NO. 2 IS REGARDING DISALLOWANCE OF RS. 4 1,38,742/- AND RS. 6,859/- BEING THE AMOUNT OF EMPLOYEES CONTRIBUTION TO PROVI DENT FUND AND ESI U/S. 2,(24)(X) R.W.S. 36(1)(VA) OF THE ACT. THE AFORESA ID ADDITION WAS MADE AS THE ASSESSEE HAS DEPOSITED THE EMPLOYEES CONTRIBUTION T O PROVIDENT FUND AS WELL AS ESI AFTER THE DUE DATE PRESCRIBED IN THE RELEVANT AC T. THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE. 16. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSU E. AFTER FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD ITA NOS. 1244 & 1718/AHD/2015 [ASIAN GRANITO INDIA LTD. VS. DCIT] A.Y. 2011-11 6 TRANSPORT CORPORATION IN TAX APPEAL NO. 637 OF 2013 W E DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE AS THE ASSESSEE SHALL NO T BE ENTITLED TO DEDUCTION OF SUCH SUM IN COMPUTING THE INCOME UNTIL SUCH SUM IS CREDI TED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE PRESCRIBED IN THE RELEVANT ACT. THEREFORE, THIS GRO UND OF APPEAL OF THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND APPEAL OF THE ASSESSEE ARE DISMISSED. SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 16/09/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. &' ( / CONCERNED CIT 4. ( - / CIT (A) 5. )*+ ' , ! ' , ,-$&$ / DR, ITAT, AHMEDABAD 6. +. / / GUARD FILE. BY ORDER / $% , 0 / , ! ' , ,-$&$ 1 1.DATE OF DICTATION ON 12.09.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 13.09.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 13.09.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 13.09.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR . P.S./P.S 16.09.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16.09.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 16/09/2019