JAYSHREE PETROCHEMICALS P.LTD, MUMBAI V. DCIT CEN CIR 33, MUMBAI

ITA 1286/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3100 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI R.C.SHARMA (AM) AND SHRI RAM LAL NEGI (JM ) ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S. JAYSHREE PETROCHEMICALS P.LTD. 11/12 RAGHUVANSHI MILL COMPOUND, LOWER PAREL, MUMBAI- 400013. PAN: AAACJ0934B VS. THE DY. CIT CENTRAL CIRCLE - 33, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. SANAT KAPOOR RESPONDENT BY : SMT. ANUPAMA SINGLA DATE OF HEARING: 2 7/04/2016 DATE OF PRONOUNCEMENT: 17/06/20 16 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE IMPUGNED ORDER DATED 30/12/2013 PASSED BY THE LD. CIT(APPEAL S)-41, MUMBAI, FOR THE ASST. YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT/A SSESSEE, ENGAGED IN THE BUSINESS OF TRADING OF FABRICS, TRADING OF SECURITI ES AND INVESTMENTS, FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 93,901/-. AF TER SCRUTINY, THE AO MADE CERTAIN DISALLOWANCES AND PASSED ASSESSMENT ORDER D ETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 27,37,400/-. THE ASSE SSMENT ORDER WAS CHALLENGED BY THE ASSESSEE BEFORE THE CIT(A). THE L D. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND AGAINST THE SAID ORDER T HE ASSESSEE HAS FILED THE PRESENT APPEAL ON THE FOLLOWING EFFECTIVE GROUNDS:- 2 ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-41, MUMBAI (CIT(A)), ON THE FACTS OF THE CASE AND IN LAW, ER RED IN UPHOLDING THE ORDER OF THE DEPUTY COMMISSIONER, CENTRAL CIRCLE-33 (ASSESSING OFFICER)(AO) DATED 11/02/2013, CONFIRMING ADDITIO NS OF RS.1,22,875, ON ACCOUNT OF DISALLOWANCE OF DEPRECIA TION FOR ALLEGED ABSENCE OF MANUFACTURING ACTIVITIES. CIT(A) OUGHT TO HAVE CONFINED THE DISALLOWANCE TO THE ACTUAL AMOUNT OF DEPRECIATION CLAIMED AS PER INCOME TAX RULES, IN STEAD OF CONFIRMING DISALLOWANCE OF DEPRECIATION AS PROVIDED IN BOOKS OF ACCOUNTS, AS IS EVIDENT FROM THE ORDER OF AO ITSELF AND WAS FURTHER POINTED OUT IN THE COURSE OF HEARING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 26,2 3,914/- U/S 14A READ WITH RULE 8D. CIT(A) OUGHT TO HAVE FOLLOWED THE ORDERS OF HIS PRE DECESSOR FOR AY 2009-10 WHEN FACTS ARE EXACTLY THE SAME FOR ASSESSM ENT YEAR UNDER PRESENT APPEAL I.E. AY 2010-11 AND NOTHING TO CONTRARY HAS BEEN BROUGHT ON RECORDS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PA RTIES AND ALSO PERUSED THE MATERIAL PLACED BEFORE US. THE FIRST GROUND PERTAIN S TO CONFIRMATION OF DISALLOWANCE OF RS. 1,22,875/- (DEPRECIATION CLAIME D BY THE ASSESSEE ON PLANT AND MACHINERY). WE NOTICE THAT LD. CIT(A) HAS DISMI SSED THIS GROUND OF APPEAL HOLDING THAT THE A.R. OF THE APPELLANT IN THE COU RSE OF HEARING OF THE PRESENT APPEAL ON 20.12,2013 STATED THAT THE APPELLANT DOES NOT WISH TO PRESS THE 3 ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 GROUND ANYMORE . BEFORE US, THIS GROUND WAS NOT PRESSED BY THE LD. AR. HENCE, WE DISMISS THIS GROUND OF APPEAL AS NOT PRES SED. 4. THE SECOND GROUND PERTAINS TO CONFIRMATION OF D ISALLOWANCE OF RS. 26,23,914 UNDER SECTION 14A OF THE INCOME TAX ACT R EAD WITH RULE 8D OF THE INCOME TAX RULES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION DATED17.9.2014 RENDERED BY THE ITAT MUMBAI IN ASSESSEES OWN CASE ITA NO.1720/M/2013, DY. CIT VS JAYASHREE PETROCHEMICALS. PVT. LTD., FOR THE ASSESSMENT YEAR 2009- 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE, SUBMITTED THAT THE LD. CIT(A) WAS NOT BOUND TO FOLLOW THE ORDER PA SSED BY HIS PREDECESSOR THEREFORE THERE IS NO INFIRMITY IN THE IMPUGNED ORD ER. 5. WE NOTICE THAT THE IDENTICAL ISSUE WAS DECIDED BY THE LD. CIT(A) IN ASSESSEES OWN APPEAL FILED AGAINST THE ASSESSMENT ORDER IN RESPECT OF ASSESSMENT YEAR 2009-10. THE SAID ORDER WAS CHALLEN GED BY THE DEPARTMENT BEFORE THE ITAT. THE COORDINATE BENCH OF ITAT DISM ISSED THE REVENUES APPEAL HOLDING AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT MAY BE OBSERVED THAT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. 328 ITR 81, THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT RULE 8D R.W.S. 14A( 2) IS NOT ARBITRARY OR UNREASONABLE AND ALSO NOT RETROSPECTIV E AND APPLIES FROM A.Y. 2008-09. IT HAS BEEN FURTHER HELD THAT UN DER SECTION 14A OF THE INCOME TAX ACT, RESORT CAN BE MADE TO RULE 8D O F THE INCOME TAX RULES FOR DETERMINING THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, IF, THE AO IS NOT SATISFIED WITH THE CORREC TNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE . THE SATISFACTION OF THE ASSESSING OFFICER HAS TO BE ARR IVED AT, HAVING 4 ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 REGARD TO THE ACCOUNTS OF THE ASSESSEE. SUB SECTION (2) DOES NOT IPSO FACTO ENABLE THE ASSESSING OFFICER TO APPLY THE MET HOD PRESCRIBED BY THE RULES STRAIGHTAWAY WITHOUT CONSIDERING WHETHER THE CLAIM MADE BY THE ASSESSEE IN RESPECT SUCH EXPENDITURE IS CORR ECT. THE SATISFACTION OF THE ASSESSING OFFICER MUST BE ARRIV ED AT ON AN OBJECTIVE BASIS. IN A SITUATION WHERE THE ACCOUNTS OF THE ASSESSEE FURNISH AN OBJECTIVE BASIS FOR THE ASSESSING OFFICE R TO ARRIVE AT A SATISFACTION IN REGARD TO THE CORRECTNESS OF THE CL AIM OF THE ASSESSEE, THERE WOULD BE NO WARRANT FOR TAKING RECOURSE TO TH E METHOD PRESCRIBED BY THE RULES. AN OBJECTIVE SATISFACTION CONTEMPLATES A NOTICE TO THE ASSESSEE, AN OPPORTUNITY TO THE ASSES SEE TO PLACE ON RECORD ALL THE RELEVANT FACTS INCLUDING HIS ACCOUNT S AND RECORDING OF REASONS BY THE ASSESSING OFFICER IN THE EVENT THAT HE COMES TO THE CONCLUSION THAT HE IS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE. 7. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER RE VEALS THAT THE AO HAD NOT FOLLOWED THE GUIDELINES OF OBJECTIVE SATISF ACTION AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN GODREJ & BOYCE( SUPRA) WHILE MAKING THE DISALLOWANCE. HE WITHOUT RECORDING ANY R EASONING FOR HIS DISSATISFACTION WITH REGARD TO THE WORKING/CLAIM OF THE ASSESSEE, STRAIGHTAWAY APPLIED RULE 8D AGAINST THE MANDATE OF THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT. 8. IT MAY BE FURTHER OBSERVED THAT RULE 8D (2) ( III) CAN BE INVOKED FOR CALCULATING ATTRIBUTABLE EXPENSES INCURRED TOWARDS EARNING OF EXEMPT INCOME OUT OF COMMON ADMINISTRATIVE EXPENSES. IN TH E CASE IN HAND, THE SPECIFIC CLAIM OF THE ASSESSEE THAT NO ADMINIST RATIVE EXPENSES FOR EARNING OF EXEMPT INCOME OF RS. 625/ HAD BEEN INCU RRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, HAD N OT BEEN DENIED 5 ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 BY THE AO EITHER, DURING THE ASSESSMENT PROCEEDINGS , OR DURING THE RELEVANT PROCEEDINGS. THE AO DID NOT RECORD ANY DIS SATISFACTION REGARDING THE ABOVE CLAIM OF THE ASSESSEE. IT WAS N OT THE CASE OF THE AO THAT ANY EXPENDITURE WAS INCURRED BY THE ASSESSE E TOWARDS EARNING OF EXEMPT INCOME IN QUESTION OUT OF THE INF RASTRUCTURAL AND ADMINISTRATIVE EXPENSES CLAIMED TO BE INCURRED FOR EARNING OF BUSINESS INCOME BY THE ASSESSEE. EVEN THE ASSESSEE DURING THE YEAR HAD NOT MADE ANY INVESTMENTS. THE DIVIDEND INCOME O F RS. 6 25/ WAS EARNED BY THE ASSESSEE OUT OF THE EARLIER YEAR INVESTMENTS. EVEN FOR THE EARLIER YEAR ALSO, THE DISALLOWANCE MADE BY THE AO UNDER RULE 8D (2) (III) ON ACCOUNT OF MARGINAL AND ADMIN HAS B EEN DELETED BY THE TRIBUNAL VIDE ITA NO 3889/M/2011 ON 25.07.12. 6. THIS GROUND OF APPEAL IS IDENTICAL TO THE GRO UND OF APPEAL IN ASSESSEES OWN CASE, DY. CIT VS. JAYASHREE PETROCHEMICALS. PVT . LTD. FOR THE A.Y.2009-10 (SUPRA) AND THE COORDINATE BENCH VIDE ORDER DATED 1 7.9.2014, HAS ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THERE FORE, RESPECTFULLY FOLLOWING THE ORDER PASSED BY THE CO-ORDINATE BENCH, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 17 TH. JUNE, 2016. SD/- SD/- ( R.C.SHARMA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 17/06/2016 6 ITA NO. 1286/MUM/2014 ASSESSMENT YEAR: 2010-11 / 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// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI