The Asstt. Commissioner of Income Tax, Circle-4(1)(2), Ahmedabad V. Smt. Voltamp Transformers Ltd., Ahmedabad

ITA 1323/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9886 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 31-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Bad and doubtful debts; Rule 8D
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 1323 & 1249/AHD/2017 (ASSESSMENT YEAR: 2013-14) A.C.I.T., CIRCLE-4(1)(2), AHMEDABAD V/S M/S. VOLTAMP TRANSFORMERS LIMITED 312, SANMAN-II, OPP. RELIANCE PETROL PUMP, PRHLADNAGAR, SATELLITE, AHMEDABAD- 380051 (APPELLANT) (RESPONDENT) PAN: AAACV5048G APPELLANT BY : SHRI ANANDKUMAR SR. D.R. RESPONDENT BY: SHRI ASHWIN SHAH & BHADRESH GANDHA KWALA ( )/ ORDER DATE OF HEARING : 08 -05-201 9 DATE OF PRONOUNCEMENT : 13 -05-2019 PER AMARJIT SINGH, A.M. 1. ITA NOS. 1323 & 1249/AHD/2017 ARE CROSS APPEALS BY THE REVENUE AND THE ASSESSEE PREFERRED AGAINST THE ORDER OF THE LD. CIT (A)-8, AHMEDABAD DATED 03.03.2017 PERTAINING TO A.Y. 2013-14. ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 2 ITA NO. 1323/AHD/2017 OF REVENUES APPEAL 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS F ILED RETURN OF INCOME DECLARING INCOME OF RS. 40527601/- ON 25.09.2013. S UBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/ S. 143(2) OF THE ACT ON 08.09.2014. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRANSFORMERS. THE REMAINING FACT O F THE CASE ARE DISCUSSED BY ADJUDICATING THE DIFFERENT GROUND OF APPEAL FILE D BY THE ASSESSEE AS UNDER. 3. 1 ST GROUND IS WITH REGARD TO DELETING THE ADDITION OF RS. 2,98,57,398/- IN RESPECT OF CENVAT CREDIT RECEIVABLE U/S. 145A OF TH E ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. HAS NOTICED THAT ASSESSEE HAS SHOWN AMOUNT RECEIVABLE ON ACCOUNT OF UNUTILIZED/CLOSING BALANCE ON ACCOUNT OF MODVAT/CENVAT CREDIT UNDER TH E HEAD LOANS AND ADVANCES AND THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK. THE A.O. WAS OF THE VIEW THAT AS PER PROVISION OF S ECTION 145A SUCH TAXES WERE REQUIRED TO BE INCLUDED IN THE VALUE OF CLOSIN G STOCK. THE ASSESSEE HAS EXPLAINED THAT IT HAS FOLLOWED THE EXCLUSIVE METHOD OF ACCOUNTING AND HAS ALSO SUBMITTED THE STATEMENT SHOWING THAT AFTER FOL LOWING THE INCLUSIVE METHOD OF ACCOUNTING, THERE WAS NO EFFECT/IMPACT IN THE PROFIT AND LOSS ACCOUNT. THE A.O. HAS NOT ACCEPTED THE SUBMISSION O F THE ASSESSEE AND STATED THAT AS PER THE PROVISION OF SECTION 145A, ALL THE TAXES/DUTY/CESS/FEE HAVE TO BE INCLUDED WHILE VALUING THE CLOSING STOCK OF INVE NTORY. CONSEQUENTLY, THE A.O. HAS INCLUDED THE SUM OF RS. 2,98,57,398/- PERT AINING TO CENVAT ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 3 CREDIT RECEIVABLE AND SERVICE TAX RECEIVABLE IN THE VALUE OF CLOSING STOCK AS ON 31.03.2013 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT ON THE SIMILAR ISSUE AND FACT, THE ITAT BENCH IN THE CASE OF THE ASSESSEE IT SELF FOR ASSESSMENT YEAR 2009-10 HAS HELD THAT NO ADDITION CAN BE MADE U/S 1 45A OF THE ACT SINCE THE ASSESSEE HAS FOLLOWED THE EXCLUSIVE METHOD. 6. 2 ND GROUND IS WITH REGARD TO DELETING THE ADDITION OF RS. 69,22,190/- ON ACCOUNT OF DISALLOWANCE U/S 14A R.W.R 8D. 7. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAS NOT ICED THAT ASSESSEE HAS EARNED EXEMPT INCOME OF RS. 2,40,90,979/-. HOWEVER, AGAINST THE SAID INCOME, THE ASSESSEE HAS DISALLOWED EXPENDITURE OF RS. 20,25,500/- U/S. 14A AS EXPENDITURE RELATING TO THE EXEMPT INCOME. THE A .O. HAS STATED THAT ASSESSEE HAS MADE SUBSTANTIAL AMOUNT OF INVESTMENT IN VARIOUS MUTUAL FUND, HOWEVER, IT HAS NOT GIVEN WORKING OF DISALLOWING TH E AFORESAID AMOUNT OF RS. 20,25,508/- U/S. 14A OF THE ACT. THEREFORE, ASS ESSEE WAS ASKED TO EXPLAIN WHY NOT DISALLOWANCE SHOULD BE WORKED OUT A CCORDING TO SECTION 14A R.W.R. 8D OF THE I.T. RULE. THE ASSESSEE HAS EX PLAINED THAT THE COLLECTION OF MUTUAL FUND DIVIDEND WAS RECEIVED BY ELECTRONIC MODE AND THERE WAS NO QUESTION OF INCURRING ANY MORE EXPENDITURE AND ACTU AL EXPENDITURE INCURRED HAS ALREADY BEEN DISALLOWED. IT IS FURTHER STATED T HAT ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE. THE A.O. HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT ASSESSEE HAS NOT SUBMITTED DA Y TO DAY FUND FLOW INVESTED IN THE SHARES AND MUTUAL FUNDS. IT WAS ALS O STATED THAT THE ASSESSEE ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 4 COULD NOT PROVE THAT THERE WAS NO DIVERSION OF INTE REST BEARING FUND TOWARDS INVESTMENT IN THE MUTUAL FUND. THEREAFTER, THE A.O. HAS COMPUTED DISALLOWANCE U/S. 14A OF THE ACT IN ACCORDANCE WITH THE PROVISION OF RULE 8D TO THE AMOUNT OF RS. 89,47,690/- AND AFTER REDUCING THE DISALLOWANCE MADE BY THE ASSESSEE ITSELF OF RS. 20,25,500/-. HE HAS M ADE ADDITION OF RS. 69,22,190/- U/S. 14A OF THE ACT. 8. AGGRIEVED, ASSESSEE HAS FILED APPEAL BEFORE THE LD . CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF ITAT, AHMEDABAD ON THE SAME ISSUE AND SIMILAR FACTS IN TH E CASE OF ASSESSEE ITSELF IN ASSESSMENT YEAR 2009-10. 9. 3 RD GROUND IS WITH REGARD TO DELETING THE ADDITION OF RS. 69,22,190/- MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE U/S. 14A R.W.R. 8D. 10. THE ASSESSING OFFICER HAS COMPUTED THE BOOK PROFIT U/S. 115JB AND IN THE COMPUTATION HE HAS ADDED THE AMOUNT OF RS. 69,22,19 0/- WHICH WAS DISALLOWED U/S. 14A R.W.R. 8D OF THE ACT. 11. AGGRIEVED, ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE AFTER REFERR ING THE CASE OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE FER TILIZER & CHEMICAL LTD. 358 ITR 323 STATING THAT IF THE ADDITION IS DELETED IN REGULAR ASSESSMENT, THE QUESTION OF ANY ADDITION U/S. 115JB DOES NOT ARISE. 12. 4 TH GROUND IS WITH REGARD TO DELETING THE ADDITION OF RS. 1,89,16,687/- ON ACCOUNT OF PROVISION OF DOUBTFUL DEBTS. ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 5 13. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAS NOT ICED THAT ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 1,89,16,687/- IN THE PROFI T AND LOSS ACCOUNT AS PROVISION FOR BAD AND DOUBTFUL DEBTS. THE A.O. HAS STATED THAT AS PER PROVISION OF SECTION 36(1)(VII) ANY BAD DEBT OR PAR T THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE IN THE ACCOUNT OF TH E ASSESSEE, THEREFORE, THE CLAIM OF THE ASSESSEE WAS NOT SUSTAINABLE. ACCORDIN GLY, THE A.O. HAS DISALLOWED THE AFORESAID CLAIM AND ADDED TO THE TOT AL INCOME OF THE ASSESSEE. 14. AGGRIEVED, ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER AFTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF VIJAYA BANK VS. CIT 323 ITR 166 STATING THAT THE RATIO OF THE AFORE SAID CASE IS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE SINCE THE ASS ESSEE HAS MADE PROVISION IN THE PROFIT AND LOSS ACCOUNT AND HAS REDUCED FROM TH E DOUBTFUL DEBT IN THE BALANCE SHEET. THEREFORE, IT AMOUNT TO ACTUAL WRITE OFF. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN RESPECT OF GROUND NO. 1 RELATING TO DELETING THE AD DITION OF RS. 2,98,57,398/- MADE ON ACCOUNT OF ADDITION OF CENVAT CREDIT RECEIV ABLE AND GROUND NO. 2 PERTAINING TO ADDITION OF RS. 69,22,190/- MADE ON A CCOUNT OF DISALLOWANCE U/S. 14A R.W.R. 8D THE LD. COUNSEL HAS BROUGHT TO O UR NOTICE THAT IN THE CASE OF THE ASSESSEE ITSELF, THE ITAT AHMEDABAD BENCH HA S HELD THAT NO ADDITION CAN BE MADE U/S. 145A SINCE THE ASSESSEE FOLLOWS TH E EXCLUSIVE METHOD AND SIMILARLY THE SECOND GROUND OF APPEAL PERTAINING TO DISALLOWANCE U/S. 14A IS ALSO COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER O F THE ITAT AHMEDABAD FOR THE A.Y. 2009-10 IN THE CASE OF THE ASSESSEE IT SELF. THE LD. D.R. WAS FAIR ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 6 ENOUGH TO COULD NOT CONTROVERT THESE FACTS WITH ANY MATERIAL. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE MATERIAL ON RECORD AND NOTICED THAT IN RESPECT OF GROUND NO. 1, THE LD. CIT(A) AT PARA 4.1 OF HIS ORDER DELETED THE IMPUGNED ADDITION HOLDING THAT ITAT AHMEDABAD ON SIMILAR FACTS AND SAME ISSUE FOR A.Y. 2009-10 IN THE CASE OF THE ASSESSEE ITSELF HOLDING THAT NO ADDITION CAN BE MADE U/S. 14 5A SINCE THE ASSESSEE FOLLOWS THE INCLUSIVE METHOD. SIMILARLY, FOLLOWING THE ORDER OF THE ITAT AHMEDABAD ON THE SECOND ISSUE, THE LD. CIT(A) AT PA RA 5 OF HIS ORDER HAS DELETED THE ADDITION MADE U/S. 14A R.W.R. 8D OF THE I.T. RULE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH AS ELABORATED IN THE FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THEREFORE GROUND NO. 1 AND GROUND NO. 2 OF APPEAL O F THE REVENUE ARE DISMISSED. SIMILARLY, IN RESPECT OF THIRD GROUND OF APPEAL, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD. CIT(A) IN DELETING THE ADDITION AFTER FOLLOWING DECISION OF THE HONBLE GUJARAT HIGH COUR T IN THE CASE OF GUJARAT STATE FERTILIZERS & CHEMICAL LTD. 358 ITR 323. THER EFORE, WE JUSTIFY THE DECISION OF LD. CIT(A) HOLDING THAT IF THE ADDITION IS DELETED IN REGULAR ASSESSMENT THE QUESTION OF ANY ADDITION UNDER SECTI ON 115JB DOES NOT ARISE. REGARDING 4 TH GROUND OF APPEAL IN RESPECT OF DISALLOWANCE OF RS. 1,89,16,687/- AS PROVISION FOR DOUBTFUL DEBT, AFTE R CONSIDERING THE FACT THAT THE ASSESSEE HAS MADE PROVISION IN THE P & L ACCOUN T AND HAS ALSO REDUCED FROM THE DOUBTFUL DEBT IN THE BALANCE SHEET, THEREF ORE, THE LD. CIT(A) AFTER FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VIJAYA BANK 323 ITR 166, THE LD. CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE WILL BE ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 36(1)(VII) AS PER THE FINDING OF THE HONBLE SUPREME COURT SUBJECT TO VER IFICATION BY THE A.O. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE ALS O STANDS DISMISSED. ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 7 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 1249/AHD/2017 OF ASSES SEES APPEAL 17. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS AG AINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR EXPENSES OF RS. 1,89,478/- ON THE GROUND THAT THE SAME WAS NOT ACCR UED. 18. THE BRIEF FACT ON THIS ISSUE IS THAT DURING THE ASS ESSMENT PROCEEDINGS, THE A.O. HAS NOTICED THAT ASSESSEE HAS INCLUDED AN AMOU NT OF RS. 4,20,278/- UNDER THE HEAD PROFESSIONAL EXPENSES AS PROVISION F OR EXPENSES. THE A.O. WAS OF THE VIEW THAT THE AFORESAID AMOUNT WAS A PRO VISION ONLY AND NOT ACTUAL EXPENSES. THEREFORE, ASKED THE ASSESSEE TO E XPLAIN WHY THESE EXPENSES SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME. THE ASSESSEE EXPLAINED THAT PROVISION OF AFORESAID EXPENSES WAS MADE FOR THE SERVICES RENDERED BY THE PARTIES BUT DUE TO SOME REASON, THE INVOICES WERE PENDING FROM THE SIDES OF THE PARTY. THE A.O. HAS NOT ACCEP TED THE EXPLANATION OF THE ASSESSEE STATING THAT ONLY EXPENSES WHICH WERE ACTU ALLY INCURRED, PAID OR PAYABLE WERE TO BE ALLOWED AS PER THE ACT. THEREFOR E, THE PROVISION EXPENSES OF RS. 4,20,278/- WAS DISALLOWED AND ADDED TO THE T OTAL INCOME OF THE ASSESSEE. 19. AGGRIEVED, ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE STATI NG THAT ONLY RS. 25000, 44,000/- AND RS. 1,61,800/- WERE ACCRUED DURING THE RELEVANT PREVIOUS YEAR AND REST OF THE EXPENSES WERE ACCRUED AND CRYSTALLI ZED IN THE NEXT YEAR. ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 8 20. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE U S, THE LD. COUNSEL HAS SUBMITTED A PAPER BOOK COMPRISING OF DOCUMENTS AND INFORMATION FURNISHED BEFORE A.O. AND LD. CIT(A) IN THE ASSESSMENT AND AP PELLATE PROCEEDINGS. THE LD. COUNSEL HAS VEHEMENTLY CONTENDED THAT THE LOWER AUTHORITIES HAS NOT CONSIDERED THE CONTENTS OF THE MATERIAL AVAILABLE I N THE PAPER BOOK DEMONSTRATING THAT EXCEPT PAYMENT OF RS. 11,000/- T O MOHAN ASSOCIATE ALL OTHER PAYMENT HAVE BEEN MADE IN RESPECT OF SERVICES RENDERED IN THE F.Y. 2012-13 THEREFORE THE EXPENSES WERE ACCRUED DURING THE RELEVANT YEAR. ON THE OTHER HAND, THE LD. D.R. HAS SUPPORTED THE ORDE R OF LD. CIT(A). 21. WE HAVE HEARD THE RIVAL CONTENTIONS. WITH THE ASSIS TANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE PAPER BOO K AND MATERIAL ON RECORD. IT IS NOTICED THAT ASSESSEE HAS FURNISHED T HE DETAIL OF NATURE OF SERVICES RENDERED, THE PERIOD OF RENDERING OF SERVI CES, INVOICE AND DATE ETC. ON THE BASIS OF THE CONTENTS OF THE DOCUMENTS PLACE D IN THE PAPER BOOK THE LD. COUNSEL HAS CONTENDED THAT EXCEPT PAYMENT OF RS . 11,000/- MADE TO MOHAN ASSOCIATES FOR THE SERVICES RENDERED ON 26.07 .2013 TO 29.07.2013 IN ALL OTHER CASES THE PERIOD OF RENDERING OF SERVICES FALL IN THE PREVIOUS YEAR 2012-13 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSI DERATION. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE OBSERVE NEITH ER A.O. NOR LD. CIT(A) HAS GIVEN SPECIFIC FINDINGS TO CONTRAVENE THE DOCUM ENTS/MATERIALS FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. THEREFORE, WE CONSIDER IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO DE CIDE AFRESH AFTER CONSIDERING THE MATERIAL/DOCUMENTS PLACED IN THE PAPER BOOK IN SUPPORT OF ITS CLAIM THAT SERVICES WERE RENDERED IN THE F.Y. 2012-13 AND THE EXPENSES CLAIMED WERE INCURRED IN THE PREVIOUS YEAR. ACCORDINGLY, THIS IS SUE IS RESTORED TO THE FILE OF ITA NOS. 132 3 & 1249/AHD/2017 . A.Y. 2013-14 9 THE A.O. AS DIRECTED ABOVE TO BE DECIDED A FRESH AF TER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05- 2019 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIALMEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 13/05/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD