The DCIT, Circle-1(1), Baroda V. BANCO PRODUCTS (INDIA) LTD., Baroda

ITA 1446/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80459 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Opportunity of being heard; Earning of tax free income; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 14A; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S). ITA NO(S) / CO NO(S) ASSESSMENT YEAR(S) APPEAL(S) / CO(S) BY APPELLANT VS. RESPONDENT APPELLANT (S) RESPONDENT (S) 1. 1446/AHD/2010 2007-08 DCIT CIRCLE-1(1) BARODA M/S.BANCO PRODUCTS (I) LTD. BIL, NEAR BHAILI RAILWAY STATION PADRA ROAD, BARODA 391410 PAN:AAACB 8630 L 2. CO NO.183/AHD/10 (IN ITA NO.1446/AHD/10) 2007-08 BANCO PRODUCTS (I) LTD. BARODA DCIT CIRCLE-1(1) BARODA 3. 3183/AHD/2010 2000 - 01 - DO - ASSESSEE - DO - REVENUE REVENUE BY : SHRI ROOPCHAND SR.DR ASSESSEE BY : SHRI BHAVIN MARFATIA,AR / DATE OF HEARING 22/09/2014 !' / DATE OF PRONOUNCEMENT 30 /10/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THE REVENUE AND THE ASSESSEE BOTH HAVE CHALLENGED THE ORDER OF THE COMMISSIONER-OF INCOME TAX (APPEALS)-I, BARODA (CIT(A) IN SHORT) DATED 15/12/2009 FOR AY 2007-08 BY WAY OF AP PEAL AND CROSS- OBJECTION RESPECTIVELY. ASSESSEE ALSO FILED AN AP PEAL FOR AY 2000-01 AGAINST THE ORDER OF LD.CIT(A)-I, BARODA DATED 01/0 9/2010. THESE WERE ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 2 - HEARD TOGETHER AND ARE BEING DISPOSED OF BY A CONSO LIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE REVENUES APPEAL FOR AY 2 007-08 AND THE ASSESSEES CROSS OBJECTION THEREOF. 2.1. REVENUES APPEAL IN ITA NO.1446/AHD/2010 FOR A Y 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES O THE CASE AN D IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION AMOU NTING TO RS.23,64,019/- MADE ON ACCOUNT OF CAPITAL EXPENDITU RE IRRESPECTIVE OF THE FACT HUGE EXPENDITURE TOWARDS R EPAIR AND MAINTENANCE ON MACHINERY AND PLANT MADE, WHICH EXTE NDED THE LIFE TIME, RELYING ON THE DECISION OF THE HON.SUPRE ME COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS PVT.LTD . (2007) 293 ITR 201 (SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.2,05,481/- MADE ON ACCOUNT OF DISALLOWANCE U/S.1 4A OF THE ACT OF THE EXPENSES INCURRED FOR EARNING DIVIDEND I NCOME EXEMPT U/S.10(34)/10(35) OF THE ACT IRRESPECTIVE OF DECISION OF CIT VS ABHISHEK LAND PVT.LTD. 286 ITR 01 CT & H HI GH COURT WHEREIN IT WAS HELD THAT THE ONUS WAS ENTIRELY ON T HE ASSESSEE TO PROVE THAT ALL THE BORROWED FUNDS WERE USED FOR BUSINESS. IN TERMS OF SECTION 106 OF THE EVIDENCE ACT, THE ASSES SEE WAS UNDER OBLIGATION TO PROVE THAT INTEREST BEARING FUN D WAS NOT USED FOR INVESTMENT YIELDING EXEMPT INCOME. 3. DISALLOWANCE OF DEDN.U/S.80IA(4)(IV) OF RS.3,14,275 : THE CIT(A) DELETED THE ADDITION RELYING ON THE DECISION OF THE ITAT IN THE CASE OF ALEMBIC LTD. FOR A.Y. 2003-04 VIDE I TA NO.3594/AHD/2007. IN THE SAID DECISION, THE ITAT D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT DISCUSSING AND MENTIONING THE FACTS OF THE CASE AND DECISION OF TH E ITAT, CHENNAI IN CHETTINAD CEMENT CORPORATION LTD. IN ITA NO.1026 ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 3 - (MAD)/2005 FOR A.Y. 2001-02 AND ACCORDING TO WHICH THE DEDUCTION U/S.80IA(4) IS NOT ALLOWABLE TO THE ASSES SEE FOR GENERATING POWER FOR CAPTIVE CONSUMPTION. THEREFOR E, 2 ND APPEAL IS RECOMMENDED ON THIS ISSUE. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTE R THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL THE ORDER OF THE CIT(APPEALS) TO THE ABOVE EXTENT M AY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 02/09/2008, THEREBY THE ASSESSING OFFICER (A O IN SHORT) MADE DISALLOWANCE/ADDITIONS ON ACCOUNT OF REPAIRS AND MA INTENANCE TO PLANT & MACHINERY TREATED AS REVENUE IN NATURE INSTEAD OF C APITAL IN NATURE AND ADDITION MADE INVOKING PROVISIONS OF SECTION 14A AN D ALSO DISALLOWANCES OF RS.3,14,275/- U/S.80IA(4) OF THE ACT. 4. FIRST GROUND IS AGAINST THE DELETION OF ADDITION AMOUNTING TO RS.23,64,019/- MADE ON ACCOUNT OF THE CAPITAL EXPEN DITURE. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN D ELETING THE ADDITION. HE SUBMITTED THAT THE LD.CIT(A) HAS WRONGLY APPLIED THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS PVT.LTD. REPORTED AT (2007) 293 ITR 201(SC). HE SUBMITTED THAT THE EXPENDITURE IS INCURRED FOR ENDURING BENEFITS A ND BY MAKING SUCH EXPENDITURE THE LIFE OF PLANT & MACHINERY HAS FURTH ER EXTENDED. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 4 - THEREFORE, SUCH EXPENDITURE IS IN THE NATURE OF CAP ITAL AND NOT IN THE NATURE OF REVENUE AS DECIDED BY THE LD.CIT(A). 4.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT OUT OF DISALLOWANCE OF EXPENDITURE OF RS.23,64,019/- INCLU DED AMOUNT OF RS.3,11,405/- AND AMOUNT OF RS.4,26,400/-. SUCH AD DITIONS WERE MADE IN THE AY 2006-07 ALSO AND THE HONBLE TRIBUNAL (ITAT D BENCH AHMEDABAD) IN ITA NO.1105/AHD/2010 VIDE ORDER DATED 25/10/2012 HAD DELETED THE ADDITION. THEREFORE, THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT THE O THER EXPENDITURE ARE EX- FACIE REVENUE IN NATURE. THE LD.CIT(A) HAS GIVEN A FINDING ON FACT WHICH CALLS FOR NO INTERFERENCE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE I N PARA-4.3 OF HIS ORDER BY OBSERVING AS UNDER:- 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.A R AND THE FACTS OF THE CASE. IN VARIOUS CASES THE SUPREME COURT AN D OTHER HIGH COURTS HAVE HELD THAT REPLACEMENT OF PARTS OF A LAR GE MACHINE WOULD NOT AMOUNT TO CREATION OF ANY NEW ASSET OR IN CURRING OF CAPITAL EXPENDITURE. WHERE THE MANUFACTURING ACTIV ITY IS CARRIED ON BY MACHINES COMPRISING OF VARIOUS PARTS, AND WHE RE ONE OR MORE OF THE PARTS IS REPLACED, IT WOULD NOT AMOUNT TO REPLACEMENT OF THE WHOLE. THIS PROPOSITION HAS BEEN REITERATE D BY THE SUPREME COURT IN THE CASE OF SARAVANA SPINNING MILLS, IN TH E CONTEXT OF A CARDING MACHINE, IN THE FOLLOWING TERMS: ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 5 - SIMILARLY, IN THE CARDING DEPARTMENT WE HAVE CARDI NG MACHINES WITH AUTOLEVELERS. IF THE AUTOLEVELER FAI LS, THE CARDING MACHINE BECOMES NON-FUNCTIONAL. IF AN AUTO LEVELER IS TO BE REPAIRED THEN THAT REPAIR WOULD COME WITHI N THE CONNOTATION OF THE WORD CURRENT REPAIRS BECAUSE I T IS A PART OF THE CARDING MACHINE. EVEN IF IN A GIVEN CA SE, REPLACEMENT OF AN AUTOLEVELER COULD COME WITHIN THE CONNOTATION OF THE WORD CURRENT REPAIRS IF THE OL D PART IS NOT AVAILABLE IN THE MARKET. IT IS A CURRENT REPA IR BECAUSE THE CARDING MACHINE REMAINS AN ASSET WITHOUT ANY CH ANGE EVEN AFTER REPAIR OR REPLACEMENT OF THE AUTOLEVELER . TO GIVE AN EXAMPLE, A COMPRESSOR IS AN IMPORTANT PART OF AN AIR- CONDITION MACHINE. REPAIR OF THE COMPRESSOR WILL C OME IN THE CONNOTATION OF THE WORD CURRENT REPAIRS IN SE CTION 31(I) OF THE SAID ACT BECAUSE THE ASSESSEE DOES NOT REPLACE THE AIR-CONDITION MACHINE. AT THE HIGHEST, HE REPL ACES A PART OF THE AIR-CONDITION MACHINE. SO IS THE CASE OF THE PICTURE TUBE IN A TELEVISION SET, WHEN THE PICTURE TUBE IS REPLACED THE TELEVISION SET IS NOT REPLACED, THEREF ORE, SUCH REPAIRS ALONE CAN COME WITHIN THE CONNOTATION OF TH E WORD CURRENT REPAIRS IN SECTION 31(I) OF THE SAID ACT AS IT STOOD AT THE MATERIAL TIME. THEY ARE EFFECTED TO PRESERV E AND MAINTAIN THE ASSET, VIZ, AIR-CONDITIONER OR CARDING MACHINE. 4.3.1. HENCE, JUDICIAL OPINION IS QUITE CLEARLY ART ICULATED TO THE EFFECT THAT REPLACEMENT OF ONE OR MORE PART(S) OF C APITAL ASSET WOULD CONSTITUTE REVENUE EXPENDITURE AND NOT CAPITA L EXPENDITURE. IF PRESERVATION OF THE CAPITAL ASSET ENTAILS REPLAC EMENT OF WORN-OUT PARTS, SUCH EXPENSES WOULD BE REVENUE IN NATURE. 4.3.2 SO FAR AS ITEM NO.(1) ABOVE IS CONCERNED IN R ESPECT OF RS.3,11,405/-, IT IS SEEN THAT THE EXPENSES WERE I NCURRED ON PURCHASE OF BAND KNIVES FOR USE IN SPLITTING MACHIN E. THE NATURE OF THE ITEMS INDICATES THAT IT IS A SPARE PART WHIC H REQUIRES FREQUENT REPLACEMENT. FURTHER, THE BANK KNIVES DO NOT HAVE ANY APPLICATION OTHER THAN AS PART OF THE SPLITTING MACHINE. HENCE , THE EXPENDITURE ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 6 - INCURRED ON PURCHASE OF SUCH SMALL PARTS WOULD, IN MY OPINION, CONSTITUTE REVENUE EXPENDITURE. ACCORDINGLY, THE D ISALLOWANCE OF RS.3,11,405/- IS DIRECTED TO BE DELETED. 4.3.3 REGARDING EXPENSES OF RS.4,26,400/- ON ROLLER REPAIRING, DISCUSSED AT ITEM NO.(2) ABOVE, IT IS VERY CLEAR TH AT THE EXPENDITURE INCURRED ON REMOVING ROLLER JAM IN ORDER TO MAKE IT FUNCTIONAL WOULD CONSTITUTE REVENUE EXPENDITURE AND NOT CAPITA L EXPENDITURE. HENCE, THE DISALLOWANCE OF RS.4,26,400/- IS DELETED . 4.3.4 REGARDING ITEM NOS.(3), (5) & (6) INVOLVING A GGREGATE EXPENSES OF RS.11,65,906, IT IS APPARENT FROM THE N ATURE OF THE PARTS REPLACED THAT THEY WERE SMALL PARTS OF LARGE MACHINES, WHICH MAY REQUIRE REPLACEMENT ON BEING WORN OUT. BUT INC URRING EXPENDITURE ON PURCHASE OF SUCH ITEMS, NO NEW ASSET S CAME INTO EXISTENCE WHICH WERE CAPABLE OF PRODUCING ANY SALEA BLE ITEM. ACCORDINGLY, IT IS HELD THAT EXPENDITURE ON REPLACE MENT OF SUCH PARTS WAS REVENUE IN NATURE. ACCORDINGLY, THE DISA LLOWANCE OF RS.11,65,906 IS DIRECTED TO BE DELETED. 4.3.5. REGARDING EXPENSES OF RS.4,60,308 ON SPARES OF FURNACE [AT ITEM NO.(4) ABOVE], IT IS CLEAR THAT THE PARTS PURC HASED WERE CONSUMABLES AND THEREFORE NOT CAPITAL IN NATURE. THE EXPENSES WERE INCURRED MAINLY ON REPLACEMENT OF SPARES USED TO MEASURE THE FURNACE TEMPERATURE, EXCESS TEMPERATURE, ZONE T EMPERATURE, DETECT FLAME, MEASUREMENT AND CONTROL OF CONVEYOR S PEED, ETC. REPLACEMENT OF SPARES DOES NOT CREATE ANY CAPITAL A SSET. HENCE, THE DISALLOWANCE OF RS.4,60,308/- IS DELETED. 5.1. THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO FILED A CHART ALONG WITH ANNEXURE A, WHICH IS REPRODUCED HEREUNDER:- ANNEXURE-A SR.NO.OF AO AMOUNT (RS.) PAGE NO. REMARKS 1. 3,11,405 161-165 77-82 ADDITION OF RS.3,11,405 REPRESENT EXPENSES INCURRED ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 7 - FOR PURCHASE OF BANK KNIVES. FOR AY 2006-07 IN ITA NO.1105/A/2010 IN THE CASE OF THE ASSESSEE ON SIMILAR ISSUE ADDITION WAS DELETED. REFER PAPER BOOK PAGE NO.161 TO 165, PARTICULARLY PAGE NO.164. 2. 4,26,400 161-165 76 ADDITION OF RS.4,26,400 REPRESENT EXPENSES INCURRED ON REMOVING ROLLER JAM. FOR AY 2006-07 IN ITA NO.1105/A/2010 IN THE CASE OF THE ASSESSEE ON SIMILAR ISSUE ADDITION WAS DELETED. REFER PAPER BOOK PAGE NO.161 TO 165, PARTICULARLY PAGE NO.164-165. 3. 2,21,126 83 -88 THE EXPENSES ARE INCURRED FOR REPAIRING OF OIL GAP DIAL GUAGE FOR CALENDAR MACHINE. THIS IS ALSO CALLED THICKNESS GUAGE. THIS GUAGE IS USED TO MEASURE TH E GAP BETWEEN 2 ROLLERS. CONSUMPTON OF MATERIAL, CONTROL AND MONITORING OF SHEET THICKNESS IS POSSIBLE DUE TO THIS GUAGE. THE EXPENSES ARE INCURRED ON ROUTINE REPAIRS AND DOES NOT CREATE ANY NEW ASSET NOR INCREASE THE PRODUCTIVE CAPACITY. THE EXPENSES ARE MAINLY ON REPLACEMENT OF WORN OUT PARTS. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 8 - 4. 4,60,308 89 -89 THE EXPENSES ARE INCURRED ON SPARES OF FURNACE. THE EXPENSES ARE INCURRED MAINLY ON REPLACEMENT OF SHARES USED TO MEASURE THE FURNACE TEMPERATURE, EXCESS TEMPERATURE, ZONE TEMPERATURE, DETECT FLAME, MEASURE AND CONTROL OF CONVEYOR SPEED, ETC. THE EXPENSES MAINLY ON ACCOUNT OF CONSUMABLES AND THEREFORE NOT CAPITAL IN NATURE. UTILITY OF EACH AND EVERY PART IS MENTIONED ON PAGE NO.72- 73 OF THE PAPER BOOK. UNIT COST OF EACH ITEM IS VERY LESS. 5. 5,1 9,144 107 - 113 THE EXPENSES ARE INCURRED FOR THE PURPOSE OF MAINTAINING THE TUBE MILL MACHINE. TUBE MILLS IS AN IMPORTED MACHINE APPROXIMATELY COSTING RS.5.00 CRORES AND MORE. SINCE THE PARTS ARE IMPORTED, THE COST IS HIGH. THE PARTS PURCHASED ARE MAINLY CONSUMABLES AND REQUIRED TO BE REPLACED AS AND WHEN THE LIFE OF THE SPARE IS OVER. IN VIEW OF THE SAME THERE IS NO CAPITAL EXPENDITURE INCURRED. THE EXPENSES ARE MAINLY ON REPLACEMENT OF WORN OUT PARTS AND THEREFORE NOT CAPITAL IN 6. 4,25,636 100-106 ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 9 - NATURE. THE UTILITY OF EACH AND EVERY PART IS MENTIONED ON PAGE 73 OF THE PAPER BOOK. UNIT COST OF EACH ITEM IS VERY LESS. 5.2. WE FIND THAT IN RESPECT OF THE ADDITION(S) OF RS.3,11,405/- AND RS.4,26,400/- MENTIONED AT SL.NO.1 AND 2 OF ABOVE C HART, SUCH ADDITIONS WERE ALSO MADE IN EARLIER YEARS AND THE TRIBUNAL HA S DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO.1105/AHD/2010. TH EREFORE, FOLLOWING THE SAME VIEW, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) SO FAR THESE TWO ADDITIONS ARE CONCNERED. IN RESPE CT OF THE OTHER ADDITIONS MENTIONED AT SL.NOS.3,4,5 & 6 OF THE AFOREMENTIONED ANNEXURE-A, THE LD.CIT(A) HAS GIVEN A FINDING ON FACT THAT SUCH EXP ENDITURE IS IN REVENUE NATURE, THE LD.SR.DR HAS NOT POINTED OUT ANY MATERI AL ON RECORD SUGGESTING THAT THE FINDING OF THE LD.CIT(A) IS NOT CORRECT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMI TY IN THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. 6. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.2,05,481/- MADE ON ACCOUNT OF 2,05,481/- MADE ON ACCOUNT OF DI SALLOWANCE U/S.14A. 6.1. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THIS ISSUE IS WRONGLY TAKE AND HAS BECOME INFRUCTUOUS AS THE LD.CIT(A), IN FACT, HAS CONFIRMED THE ADDITION AGAINST WHICH THE ASSESSEE HAS FILED ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 10 - CROSS-OBJECTION. THIS SUBMISSION OF THE ASSESSEE I S NOT CONTROVERTED BY THE LD.SR.DR, THEREFORE GROUND IS REJECTED BEING NO T MAINTAINABLE. 7. GROUND NO.3 IS AGAINST THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IA(4)(IV) OF THE ACT OF RS.3,14,275/-. THE S R.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION. 7.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL (ITA T D BENCH AHMEDABAD) IN FAVOUR OF ASSESSEE IN THE CASE OF GR OUP-CONCERN M/S. ALUMINIUM LTD.- REVENUES APPEAL FOR AY 2007-08 IN ITA NO.1106/AHD/2010 DATED 25/10/2012. HE DREW OUR ATT ENTION TOWARDS PAGE NOS.175 TO 180 OF THE PAPER-BOOK. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN THIS CASE ALSO, THE LD.CIT(A) IN PA RA-6 OF HIS ORDER HAS GIVEN AN ELABORATE FINDING AND FOLLOWED THE DECISIO N(S) OF THE COORDINATE BENCH (ITAT MUMBAI BENCH) RENDERED IN CASE OF WES T COAST PAPER MILLS VS. ACIT (103 ITD 19) AND ITAT CHENNAI BENCH RENDERED IN THE CASE OF MOHAN BREWERIES & DISTILLERIES LTD. VS. ACI T (114 TTJ 532) AND OTHER CASE-LAWS. THEREFORE, WE DO NOT ANY INFIRMIT Y IN THE FINDING OF THE LD.CIT(A), SAME IS HEREBY UPHELD. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 11 - 9. AS A RESULT, REVENUES APPEAL IS DISMISSED. 10. NOW, WE TAKE UP THE ASSESSEES CROSS-OBJECTION NO.183/AHD/2010 FOR AY 2007-08 (ARISING OUT OF ITA NO.1446/AHD/2010 - AY 2007-08), WHEREIN FOLLOWING G ROUNDS HAVE BEEN RAISED BY THE ASSESSEE. 1. ALL THE GROUNDS OF CROSS OBJECTIONS IN THIS CRO SS OBJECTIONS ARE MUTUALLY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OT HER. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASS ESSING OFFICER IN MAKING A DISALLOWANCE OF RS.2,05,481/- BY INVOKI NG PROVISION OF SECTION 14A OF THE INCOME TAX ACT, 196 1. 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASS ESSING OFFICER IN COMPUTING THE DISALLOWANCE U/S.14A OF AT RS.2,05 ,481/-. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASS ESSING OFFICER IN CHARGING INTEREST U/S.234B AND 234D OF THE INCOM E TAX ACT, 1961. 3. YOUR RESPONDENT CRAVES A RIGHT TO ADD TO OR AMEND, ALTER, SUBSTITUTE, DELETE OR WITHDRAW ALL OR ANY OF THE GR OUNDS OF CROSS OBJECTIONS. 11. GROUND NOS.1 & 1.1 ARE AGAINST IN CONFIRMING TH E ADDITION OF RS.2,05,481/- BY THE LD.CIT(A). THE LD.COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE AO HAS APPLIED RULE 8-D R.W.S.14 A OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HON BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ & BOYCE MFG.CO .LTD. VS. DY.CIT REPORTED AT (2010) 328 ITR 81 (BOM.) HAS HELD THAT RULE 8D WOULD BE APPLICABLE ONLY FROM AY 2008-09. THEREFORE, INVOKI NG THE PROVISIONS OF ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 12 - RULE 8-D IS NOT JUSTIFIED. HE SUBMITTED THAT THERE IS A REDUCTION IN THE INVESTMENT IN THE CURRENT YEAR. HE DREW OUR ATTENT ION TOWARDS PAGE NOS.33 & 34 OF THE PAPER-BOOK, WHEREIN SHOWN THE T OTAL INVESTMENTS HAVE GONE DOWN FROM RS.1,28,07,854/- TO RS.94,05,80 9/-. 11.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENT RELIED UPON BY THE LD.COUN SEL FOR THE ASSESSEE. WE FIND MERIT IN THE CONTENTION OF THE LD.COUNSEL F OR THE ASSESSEE THAT RULE 8D WOULD BE APPLICABLE ONLY WITH EFFECT FROM A Y 2008-09 IN VIEW OF THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDE RED IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD.(SUPRA). THEREFORE, THE AO WAS NOT JUSTIFIED IN COMPUTING THE DISALLOWANCE BY INVOKING THE PROVISIONS OF RULE 8D OF THE I.T. RULES, 1962. WE FIND THAT THE AO HAS OBSERVED THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.19,31,316/- AND LONG TERM CAP ITAL GAIN ON THE SALE OF EQUITY SHARES WHICH IS EXEMPT UNDER THE IT ACT. THE AO HAS OBSERVED THAT THE ASSESSEE HAS NOT GIVEN DETAILS AS TO WHEN SHARES WERE ACQUIRED AND WHAT WAS THE SOURCE OF FINANCING COST OF ACQUISITION OF SHARES, ETC. IN EARLIER YEARS AND CURRENT YEAR. IT IS NOT DISPUTED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME, THEREFORE THE E XPENDITURE RELATED TO ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 13 - EARNING OF SUCH INCOME WOULD BE DISALLOWABLE IN TER MS OF THE PROVISIONS OF SECTION 14A OF THE ACT. 12.1. AFTER CONSIDERING THE TOTALITY OF THE FACTS O F THE CASE, A REASONABLE VIEW HAS TO BE TAKEN AND DISALLOWANCE OF RS.2,05,48 1/- IS RESTRICTED TO DISALLOWANCE OF RS.1 LAC. THUS, THIS GROUND OF ASS ESSEES CROSS OBJECTION IS PARTLY ALLOWED. 13. GROUND NO.2 IS AGAINST IN CHARGING THE INTEREST U/S.234B AND 234D OF THE IT ACT, 1961. THIS ISSUE IS CONSEQUENTIAL IN NATURE. 14. GROUND NO.3 IS GENERAL IN NATURE NEEDS NO INDEP ENDENT ADJUDICATION. 15. AS A RESULT, ASSESSEES CROSS OBJECTION IS PART LY ALLOWED. 16. LAST, WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.3183/AHD/2010 FOR AY 2000-01. THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUAL LY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN REJECTING THE APPLICATION OF THE APPELLANT MADE U/S.154 WITHO UT GIVING THE APPELLANT AN OPPORTUNITY OF BEING HEARD. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 14 - 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN NOT RECTIFYING THE MISTAKE WITH RESPECT TO INCOME FROM SALES MADE TO M/S.YOGI ENGINEERING WORKS AMOUNTING TO RS.4,46, 353/- DESPITE THE FACT THAT THE SAID SALES WAS ALREADY IN CLUDED IN THE INCOME OF THE APPELLANT FOR AY 99-00 BEFORE THE SET TLEMENT COMMISSION. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN NOT RECTIFYING THE MISTAKE WITH RESPECT TO PROVISION OF RS.3,08,225/- FOR DEBIT NOTES RECEIVED FROM M/S.MARUTI UDYOG LTD. DESPITE THE FACT THAT THE DEDUCTION IN RESPECT OF EXCESS PROVIS ION WAS NOT CLAIMED IN AY 99-00 AND THEREFORE QUESTION OF CHARG ING TO TAX THE AMOUNT WRITTEN BACK DOES NOT ARISE. 16.1. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE APPLICATION MADE U/S.154 OF THE ACT WAS REJECTED BY THE AO WITHOUT G IVING AN OPPORTUNITY TO THE ASSESSEE. HE FURTHER SUBMITTED THAT THE INC OME FROM SALES MADE TO M/S.YOGI ENGINEERING WORKS AMOUNTING TO RS.4,46,353 /- WAS ALREADY INCLUDED IN THE INCOME OF THE ASSESSEE FOR AY 1999- 2000 BEFORE THE SETTLEMENT COMMISSION. WITH RESPECT TO THE PROVISI ON OF RS.3,08,225/- FOR DEBIT NOTES RECEIVED FROM M/S.MARUTI UDYOG LTD. , THE EXCESS PROVISION WAS NOT CLAIMED IN AY 1999-2000, THEREFOR E THE QUESTION OF CHARGING TO TAX THE AMOUNT WRITTEN BACK DOES NOT AR ISE. 16.2. ON THE CONTRARY, THE LD.SR.DR SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 15 - WE FIND THAT THE LD.CIT(A) HAS DISMISSED THE APPEAL VIDE PARA-5 OF HIS ORDER, BY OBSERVING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS OF THE APPELLANT. A PERUSAL OF THE ORD ER OF THE SETTLEMENT COMMISSION DT.13.6.02, DOES NOT INDICATE THAT THE AFORESAID INCOMES WERE OFFERED FOR TAXATION. THE APPELLANT HAS REFERRED TO ANNEXURE F WHICH IS NOT FILED BEFORE TH E UNDERSIGNED. IN ANY CASE THE SETTLEMENT COMMISSION HAS NOT PASSE D THE FINAL ORDER AGREEING WITH THE CONTENTIONS OF THE APPELLAN T. THERE IS NO NOTE IN THE RETURN FOR AY 00-01 WHICH WOULD PROVIDE A CLARIFICATION TO THE AO ABOUT THE PROCEEDINGS BEFOR E THE SETTLEMENT COMMISSION. IN MY HUMBLE VIEW THUS THE AO WAS JUST IFIED IN REJECTING THE APPLICATION U/S 154 ON THE GROUND THA T THERE IS NO MISTAKE APPARENT FROM RECORD. 17.1. THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED O N RECORD THE ORDER DATED 28/05/2007 OF THE INCOME TAX SETTLEMENT COMMI SSION (ADDITIONAL BENCH) MUMBAI BENCH IN SETTLEMENT APPLICATION NOS. 10/B/030/1999- 2000/IT, 10/B/001/2000-2001/IT AND 10/B/022/2000-20 11/IT IN THE CASE OF ASSESSEE. THEREFORE, AFTER CONSIDERING THE TOT ALITY OF THE FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESS EE IS REQUIRED TO BE VERIFIED AT THE LEVEL OF AO. IF THE AO FINDS THAT THE CONTENTION OF THE ASSESSEE IS CORRECT AS PER THE ORDER OF THE INCOME- TAX SETTLEMENT COMMISSION, THEN THE AO IS DIRECTED TO RECTIFY THE MISTAKE BY EXERCISING HIS POWER VESTED U/S.154 OF THE ACT. THUS, THE A PPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.144 6/AHD/2010-AY 2007-08 (BY REVENUE) CO NO.183/AHD/2010-AY 2007-08(BY ASSESSEE) ITA NO.3183/AHD/2010-AY 2000-01 (BY ASSESSEE) DCIT VS. M/S.BANCO PRODUCTS (I) LTD. - 16 - 18. IN THE COMBINED RESULT, REVENUES APPEAL IS DIS MISSED AND ASSESSEES CROSS-OBJECTION IS PARTLY ALLOWED. ASSE SSEES APPEAL (I.E. ITA NO.3183/AHD/2010) FOR AY 2000-01 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/10 /2014 (..,.../ T.C. NAIR, SR. PS !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. /0/12 3 / CONCERNED CIT 4. 3 ( * ) / THE CIT(A)-I, BARODA 5. 45- 12 , *12' , 0 / DR, ITAT, AHMEDABAD 6. 5789 / GUARD FILE. / BY ORDER, .4* - //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12/27.10.14 (DICTATION-PAD 14+3PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17/27.10.14 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BA CK TO THE SR.P.S./P.S.30.10.14 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.10.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER