ITO, New Delhi V. M/s Continental Device India Ltd., New Delhi

ITA 1758/DEL/2011

• Counselvise Citation: 175820114 RSA 2011
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R K KAPOOR
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SMT. DIVA SINGH AND SHRI K.G. BANSAL ITA NO. 1758(DEL)/2011 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, M/ S CONTINENTAL DEVICE LTD., WARD 3(4), NEW DELHI. VS. C-120, N ARAINA INDUSTRIAL AREA, PHASE-I, NEW DELHI. PAN: AAACC1835E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GARG, SR. D.R . RESPONDENT BY : SHRI R.K. KAPOOR, C.A. DATE OF HEARIN G: 08.12.2011 DATE OF PRONOU NCEMENT: 23.12.2011. ORDER PER K.G. BANSAL : AM IN THIS APPEAL THE REVENUE HAS TAKEN UP TWO GROUNDS REGARDING THE DISALLOWANCE TO BE MADE U/S 14A OF THE INCOM E-TAX ACT, 1961 (THE ACT FOR SHORT); AND THE RATE OF DEPRECIATION A PPLICABLE IN RESPECT OF COMPUTER PERIPHERALS. 2. THE FACTS IN REGARD TO THE FIRST GROUND ARE THAT THE ASSESSEE HAD DECLARED DIVIDEND INCOME OF RS. 92,44,795/-, AND LONG-TERM CAPITAL GAIN ON SALE OF SHARES/UNITS OF RS. 7,89,18,387/-. THESE I NCOMES WERE NOT INCLUDED ITA NO. 1758(DEL)/2011 2 IN THE TOTAL INCOME UNDER SECTIONS 10(34) AND 10 (38) OF THE ACT. AS PER THE ASSESSMENT ORDER, THE ASSESSEE DID NOT DIS ALLOW ANY EXPENDITURE INCURRED IN RELATION TO EARNING OF THESE INCOMES. IT WAS SUBMITTED THAT NO EXPENDITURE IS DIRECTLY ATTRIBUTABLE TO THE EARN ING OF THESE INCOMES. THE AO HOWEVER DID NOT ACCEPT THIS SUBMISSION. IT IS MENTIONED THAT A PART OF MANAGERIAL AND ESTABLISHMENT EXPENSES ARE ATTRIBUTABLE TO THE EARNING OF THESE INCOMES FOR THE REASON THAT CONSTANT MO NITORING OF THE INVESTMENT IS REQUIRED. HE, THEREFORE, WORKED OUT AN AMOUN T OF RS. 21,24,541/- AS DISALLOWABLE U/S 14-A. THIS MATTER WAS TAKEN UP BEFORE THE LD. CIT(APPEALS). IT WAS SUBMITTED BEFORE HER THAT ANY DISALLOWANCE UNDER THE AFORESAID PROVISION REQUIRES A FINDING THA T THE EXPENDITURE HAS BEEN INCURRED IN RELATION TO EARNING THE INCOME. NO D ISALLOWANCE CAN BE MADE ON ESTIMATE BASIS. RULE 8D IS ALSO NOT APPLICABL E FOR COMPUTING THE INCOME OF THIS YEAR. AFTER CONSIDERING THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE ASSESSEE AND THE DECISION OF THE TRIBUNAL I N THE CASE OF WIMCO SEEDLING LTD. VS. DCIT, 109 TTJ 462 (TM) AND AC IT VS. EICHER LTD., 101 TTJ 369, THE DISALLOWANCE MADE BY THE AO WA S DELETED. HOWEVER, SHE ALSO RECORDED THE FINDING THAT THE ASSESSE E HAS OFFERED FOR DISALLOWANCE THE SALARY EXPENDITURE OF RS. 1,66 ,432/-. THEREFORE, THE DISALLOWANCE WAS LIMITED TO RS. 1,66,432/-. ITA NO. 1758(DEL)/2011 3 3. BEFORE US, IT IS THE COMMON CASE OF BOTH THE P ARTIES THAT THE ISSUE IS NO LONGER RES-INTEGRA. THE SAME IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT, BEING THE JURISDICTIONAL HIGH C OURT, IN THE CASE OF MAXOPP INVESTMENT LTD. IN I.T.A. NO. 687/2009. T HIS DECISION WAS NOT AVAILABLE BEFORE EITHER OF THE LOWER AUTHORITIES. THEREFORE, THE MATTER MAY BE RESTORED TO THE FILE OF THE AO TO CONSIDER TH E FACTS AND DECIDE THE MATTER OF DISALLOWANCE IN ACCORDANCE WITH THIS DE CISION. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, WE RESTORE THE MA TTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION OF THE GROUND IN THE LIGHT OF THE DECISION IN THE CASE OF MAXOPP INVESTMENT LTD. (SUPRA) OR ANY OTHER DECIS ION OF THE JURISDICTIONAL HIGH COURT OR SUPREME COURT WHICH MAY BECOME AVA ILABLE AT THE TIME OF MAKING ASSESSMENT. IN THE RESULT, THE GROUND IS TREATED AS ALLOWED. 3.1 IN REGARD TO THE QUESTION REGARDING THE RATE O F DEPRECIATION APPLICABLE ON COMPUTER PERIPHERALS, THE FINDING O F THE AO IS THAT PRINTER STYLUS, PRINTER AND BUSINESS CARD READER ARE NOT COMPUTERS, THEREFORE, THE APPLICABLE RATE IS 15%. THIS HAS LED TO REDUCT ION IN THE DEDUCTION BY AN AMOUNT OF RS. 35,732/-. THE LD. CIT(APPEALS) HA S ALLOWED THE HIGHER RATE OF 60% BY FOLLOWING THE DECISION OF HONBL E DELHI HIGH COURT IN THE ITA NO. 1758(DEL)/2011 4 CASE OF BSES YAMUNA POWER LTD. IN I.T.A. NO. 1 267/2010 DATED 31.08.2010. SINCE THE FINDING OF THE LD. CIT(APP EALS) IS BASED UPON THE DECISION OF JURISDICTIONAL HIGH COURT, THE SAME IS UPHELD. THUS, GROUND NO. 2 IS DISMISSED. 4. IN THE RESULT, THE APPEAL IS TREATED AS PART LY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (DIVA SINGH) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S CONTINENTAL DEVICE INDIA LTD., NEW DELHI. ITO, WARD-3(4), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.