The DCIT, Circle-4(1)(1), Ahmedabad V. Shree Ram Multi Tech Ltd, Ahmedabad

ITA 1500/AHD/2019

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0101 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 11-09-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-10-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Initiation of penalty proceedings; Tax effect; Revised return; TDS
• Section: 142(1); 115JB; 143(1); 274; 143(2); 191

Judgement Text

ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No.1540/Ahd/2019 Assessment Year: 2012-13 Shree Rama Multi-Tech Limited, 603, Shikhar Building, Near Vadilal House, Navrangpura, Ahmedabad – 380 009. [PAN – AAJCS 1563 N] Vs. Income Tax Officer, Ward – 4(1)(3), Ahmedabad. ITA No.1500/Ahd/2019 Assessment Year: 2012-13 D.C.I.T., Circle – 4(1)(1), Ahmedabad. Vs. Shree Rama Multi-Tech Limited, 301, Corporate House, Opp. Torrent House, Near Income Tax Circle, Ahmedabad – 380 009. [PAN – AAJCS 1563 N] ITA No.1501/Ahd/2019 Assessment Year: 2013-14 D.C.I.T., Circle – 4(1)(1), Ahmedabad. Vs. Shree Rama Multi-Tech Limited, 301, Corporate House, Opp. Torrent House, Near Income Tax Circle, Ahmedabad – 380 009. [PAN – AAJCS 1563 N] ITA No.1541/Ahd/2019 Assessment Year: 2013-14 Shree Rama Multi-Tech Limited, 603, Shikhar Building, Near Vadilal House, Navrangpura, Ahmedabad – 380 009. [PAN – AAJCS 1563 N] Vs. D.C.I.T., Circle – 4(1)(1), Ahmedabad. (Appellants) (Respondents) Assessee by Shri S.N. Soparkar, AR with Shri Hemanshu Shah, CA & Shri Parin Shah, AR Revenue by Shri Kamlesh Makwana, CIT (DR) ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 2 of 8 Da te o f He a r in g 12.09.2023 Da te o f P ro n o u n ce m e n t 08.11.2023 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : ITA Nos.1540 & 1500/Ahd/2019 are cross appeals filed by the Assessee & Revenue against order dated 24.07.2019 passed by the CIT(A)-8, Ahmedabad for the Assessment Year 2012-13 and ITA Nos.1501 & 1541/Ahd/2019 are cross appeals filed by the Revenue & Assessee against order dated 24.07.2019 passed by the CIT(A)-8, Ahmedabad for the Assessment Year 2013-14 respectively. 2. As we are firstly taking up the Cross Appeals filed by the Assessee and Revenue for the Assessment Year 2012-13 as lead appeals, i.e. ITA Nos.1540/Ahd/2019 & 1500/Ahd/2019, the grounds raised in these appeals are reproduced as under :- ITA No.1540/Ahd/2019 for A.Y. 2012-13 by the Assessee “1. Ld. CIT(A) erred in law and on facts confirming addition made by AO of Rs.57,44,05 000/- of surplus generated on One Time Settlement (OTS) invoking Section 28(iv) r w s 41(1) of the Act as income of the appellant. 2. Ld. CIT(A) erred in law and on facts to hold the surplus chargeable to tax u/s.28(iv) r w s 41(1) of the Act when the appellant neither claimed the loan amount so waived off as deduction nor claimed interest paid on such loan as deduction during the earlier years. 3. Ld. CIT(A) erred in law and on facts not following the ratio of judgment of Hon'ble Apex Court of Mahindra and Mahindra Ltd. (2018) 404 ITR 001 holding that Section 28(iv) will have no application to OTS as the benefits are in the nature of cash or money & also Section 41(1) has no application to waiver of loan as it does not amount to cessation of trading liability. 4. Ld. CIT(A) erred in law and on facts confirming disallowance made by AO of depreciation amount of Rs.70,205/- claimed on a standby unit used for the activity of sizing of tarpaulin products. 5. Ld. CIT(A) erred in law and on facts confirming disallowance made by AO of depreciation of Rs.44,30,656/- following orders of earlier years. 6. Levy of interest u/s.234A/234B, 234C & 234D of the Act is unjustified. ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 3 of 8 7. Initiation of penalty proceedings u/s.271(1)(c) of the Act is unjustified.” The assessee has also raised one additional ground of appeal in the A.Y. 2012- 13 which reads as under: “On the facts and in the circumstances of the case and in law, credit of TDS of Rs.16,52,430/- as claimed in the return of income filed was not granted by the ld. Assessing Officer.” ITA No.1500/Ahd/2019 for A.Y. 2012-13 by the Revenue “1. That the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of excess claim of depreciation of Rs.8,26,36,888/- u/s.43(1) of the Income Tax Act, 1961. 2. That the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.25,18,441/- made u/s.24 of the Income Tax Act, 1961.” 3. The assessee company is engaged in the business of manufacturer of multi- layered tubes, printed products including labels/stickers and other speciality packaging and plastic products and polished diamonds. Return of income for A.Y. 2012-13 was filed on 30.09.2012 with returned total income at Rs. Nil with claim of carry forward of loss for the current Assessment Year at Rs.2,51,99,260/-. Thereafter, the assessee filed the revised return of income on 29.03.2013 with returned total income at Rs. Nil with claim of carry forward of loss at Rs.2,48,04,157/-. The same was processed under Section 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny under CASS and statutory notice under Section 143(2) of the Act was issued on 08.08.2013 which was duly served upon the assessee company. Thereafter, detailed questionnaire alongwith notice under Section 142(1) of the Act dated 14.09.2014 was issued and served upon the assessee. In response to the said notices, Chartered Accountant of the assessee duly authorised by the assessee Company attended the assessment proceedings and filed requisite details. The Assessing Officer observed that there was a surplus generated on one time settlement on term loan and after taking cognisance of the reply of the assessee, made addition of Rs.57,44,05,000/- under Section 28(iv) read with Section 41(1) of the Act. The Assessing Officer alternately made disallowance of Rs.8,26,36,888/- in respect of differential sum representing excess claim of depreciation in respect of applicability of Section 43(1) of the Act. The Assessing Officer further made disallowance of Rs.1,32,445/- in respect of depreciation claimed on asset and disallowance of ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 4 of 8 Rs.44,30,656/- in respect of depreciation connecting survey action as well as disallowance of Rs.70,205/- in respect of depreciation on closed unit. The Assessing Officer also made disallowance of Rs.25,18,441/- in respect of claim of deduction under Section 24 of the Act. The Assessing Officer further held that sum of Rs.57,44,05,000/- is to be necessarily included in the book profit computed under Section 115JB of the Act in respect of surplus generated on waiver of loan and the same should be treated as income component under MAT provision. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. Before us, the assessee as well as the Revenue is in appeal and, therefore, we are taking ITA No.1540/Ahd/2019 for A.Y. 2012-13 filed by the assessee as ground nos.4 & 5 of the assessee’s appeal are also contested in the Revenue’s appeal as well. 6. As regards ground nos.1, 2 & 3, the Ld. AR submitted that the CIT(A), while making the addition of Rs.57,44,05,000/- of surplus generated on one time settlement invoking Section 28(iv) read with section 41(1) of the Act as income, erred in holding that surplus are chargeable to tax but in assessee’s case the assessee has not claimed waiver of loan amount or interest paid on loan as deduction during earlier years. In fact, the Assessing Officer has not taken cognisance of the decision of Hon’ble Apex Court in the case of Mahindra and Mahindra Limited, 404 ITR 001, wherein it was held that Section 28(iv) will have no application to one time settlement as the benefits are in nature of cash and also Section 41(1) has no application to waiver of loan. The Ld. AR relied upon the decision of Hon’ble Gujarat High Court in the case of CIT vs. Gujarat State Fertilizers & Chemicals Limited (2013), 217 taxman 343, decision of Hon’ble Madras High Court in the case of CIT vs. Ramaniyam Homes (P.) Ltd., 384 ITR 530, decision of Hon’ble Bombay High Court ain the case of PCIT vs. Sicom Limited (2020), 274 Taxman 58 and also relied upon the decision of Hon’ble Apex Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd., 222 ITR 344 (SC). The Ld. AR also relied upon the decision of the Tribunal in the case of Ravidra Arunachala Nadar vs. ACIT (2021) 191 ITD 520, ITO vs. Sri Vasavi Polymers (P) Ltd. ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 5 of 8 (2020) 183 ITD 586 and DCIT vs. Ramani Exports ITA No.609 & 608/Mum/2023, order dated 16.05.2023. 7. The Ld. DR submitted that the assessee has not proved the purpose as to whether there was cessation of liability is not attracted in the particular one time settlement. Ld. DR further submitted that the Assessing Officer rightly made addition as the waiver of loan amount will also be as per Section 28(iv) read with Section 41(1) of the Act as income. Ld. DR relied upon the Assessment Order and the order of the CIT(A). 8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has not claimed any waiver of loan amount or interest paid on loan as deduction during the earlier years. Since the assessee has come forward for one time settlement in the subsequent years which as per the decision of Hon’ble Apex Court in the case of Mahindra and Mahindra (supra) appears to be in the nature of cash and, therefore, Section 41(1) of the Act will not be attracted in respect of waiver of loan as the one time settlement has been in respect of the loan for which the assessee has paid interest in the earlier years and it cannot be termed as complete waiver of loan. Thus, the Assessing Officer as well as the CIT(A) was not right in making the addition of Rs.57,44,05,000/- of surplus generated on one time settlement. Thus, ground nos.1, 2 & 3 of the assessee’s appeal are allowed. 9. As regards to ground no.4 relating to confirming disallowance of depreciation amounting to Rs.70,205/- claimed on a standby unit used for activity of sizing of tarpaulin products, the ld. AR submitted that the CIT(A) has followed A.Y. 2008-09 for which the assessee contested the same before the Tribunal and the Tribunal vide order dated 31.08.2018 dismissed the appeal of the Revenue on low tax effect but as per the submissions of the assessee, the depreciation claim on a standby unit used for activity of sizing of tarpaulin products has to be allowable depreciation and, therefore, the same should have been allowed by the Assessing Officer. 10. The Ld. DR relied upon the Assessment Order and the order of the CIT(A) ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 6 of 8 11. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the depreciation claimed on a standby unit used for activity of sizing of tarpaulin products is part and parcel of the asset and the assessee has rightly claimed the depreciation and the same should have allowed by the Assessing Officer. Thus, ground no.4 of the assessee’s appeal is allowed. 12. As regards to ground no.5 relating to confirming disallowance of depreciation of Rs.44,30,656/- by following orders of earlier Assessment Years, the ld. AR submitted that the said issue has been decided in favour of the assessee for A.Ys. 2002-03, 2005-06, 2006-07 till 2009-10. 13. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 14. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the very basis upon which the depreciation has been disallowed by the earlier year’s order have been decided by the Tribunal in assessee’s favour and, therefore, ground no.5 is allowed. 15. As regards to additional ground of appeal relating to credit of TDS of Rs.16,52,430/- as claimed in the return of income, the Ld. AR submitted that the same should be remanded back for verification before the Assessing Officer. 16. The Ld. DR relied upon the Assessment Order and the order of the CIT(A) 17. We have heard both the parties and perused all the relevant material available on record. It appears that in respect of TDS of Rs.16,52,430/- as claimed in the return of income filed by the assessee needs verification, therefore, we are remanding back this issue to the file of the Assessing Officer for proper verification and adjudication and grant the credit of TDS as entitled to the assessee as per Income Tax Statute. Needles to say, the assessee be given opportunity of hearing by following the principles of natural justice. Thus, the additional ground is partly allowed for statistical purpose. ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 7 of 8 18. As regards Department’s appeal for A.Y. 2012-13, ground no.1 is in respect of excess claim of depreciation of Rs.8,26,36,888/- under Section 43(1) of the Act, the Ld. DR relied upon the Assessment Order and submitted that the assessee claimed total depreciation under Income Tax Act at Rs.13,30,49,189/-whereas allowable depreciation under Income Tax Act after reducing the actual cost by surplus amount generated due to waiver of loan works out to Rs.5,04,12,301/- and, therefore, the differential sum representing excess claim of depreciation was rightly added. 19. The Ld. AR relied upon the order of the CIT(A). 20. We have heard both the parties and perused all the relevant material available on record. Since ground no.1 has been allowed in assessee’s appeal, the observations of the CIT(A) that since the assessee has asserted that the loans which were written off by way of one time settlement generating on surplus amounting to Rs.57.44 Crores were utilised for acquisition of capital asset and if such surplus is considered to be capital in nature then such surplus needs to be reduced from the actual cost of the depreciable assets as per the provisions of Section 43(1) of the Act. This needs verification and, therefore, ground no.1 of Revenue’s appeal is remanded back to the file of the Assessing Officer or verifying the same after taking cognisance of ground nos.1, 2 & 3 of assessee’s appeal as observed by us hereinabove paragraphs. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. Thus ground no.1 of Revenue’s appeal for A.Y. 2012-13 is partly allowed for statistical purpose. 21. As regards to ground no.2 of Revenue’s appeal, deleting the disallowance of Rs.25,18,441/- made under Section 24 of the Act, the Ld. DR relied upon the Assessment Order. 22. The Ld. AR relied upon the order of the CIT(A) and submitted that the CIT(A) has followed A.Y. 2010-11 which has been confirmed by the Tribunal 23. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the disallowance of Rs.25,18,441/- in respect of income from rent of factory building amounts to income from house property and, ITA Nos.1540, 1500, 1501 & 1541/Ahd/2019 A.Ys: 2012-13, 2012-13, 2013-14 & 2013-14 Page 8 of 8 therefore, was rightly deleted by the CIT(A). There is no need to interfere with the same finding of the CIT(A). Hence, ground no.2 of Revenue’s appeal for A.Y. 2012-13 is dismissed. 24. Thus, ITA No.1540/Ahd/2019 for A.Y. 2012-13 filed by the assessee and ITA No.1500/Ahd/2019 for A.Y. 2012-13 filed by the Revenue both are partly allowed for statistical purpose. 25. As regards to ITA No.1541/Ahd/2019 and 1501/Ahd/2019 filed by the assessee and Revenue respectively for Assessment Year 2013-14, these appeals are identical to that of A.Y. 2012-13 and, therefore, the same are also partly allowed for Statistical purpose. 26. In the result, all the four appeals are partly allowed for statistical purpose. Order pronounced in the open Court on this 8 th November, 2023. Sd/- Sd/- (WASEEM AHMED) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 8 th day of November, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE CO Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad