DCIT, Circle - 5, Kolkata, Kolkata V. M/s. Kesoram Industries Ltd., Kolkata

ITA 190/KOL/2011

• Counselvise Citation: 19023514 RSA 2011
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 29-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-02-2011
• Court: TRIBUNAL
• Department Lawyers: D R SINDHAL
• Assessee Lawyers: A K GUPTA
• Keywords: Depreciation
• Section: 14A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 190/KOL/2011 %& '(/ ASSESSMENT YEAR : 2007-08 (*+ / APPELLANT ) D.C.I.T., CIRCLE-5, KOLKATA - % - - VERSUS - . (-.*+/ RESPONDENT ) M/S. KESORAM INDUSTRIES LTD., KOLKATA (PAN :: AABCK 2417 P) *+ / 0 '/ FOR THE APPELLANT: SHRI D.R.SINDHAL -.*+ / 0 '/ FOR THE RESPONDENT: SHRI A.K.GUPTA 1%2 / !# /DATE OF HEARING : 02.11.2011. 3' / !# /DATE OF PRONOUNCEMENT : 02.11.2011. '4 / ORDER ( (( ( . .. . ! ! ! !. .. . ) )) ), , , , '# PER SHRI C.D.RAO, AM THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER DATED 30.11.2010 OF THE LD. CIT(A)-VI, KOLKATA PERTAINING TO A.YR. 2007-08. 2. THE FIRST ISSUE RAISED BY THE REVENUE IN THIS A PPEAL IS RELATING TO DELETION OF ADDITION OF EXCESS DEPRECIATION CLAIMED OF RS.1,35, 87,876/-. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE CLAIMED DEPRECIATION OF RS.109,13,25,097/- IN THE RETURN OF INCOME. THE ASS ESSEE CLAIMED THIS DEPRECIATION ON AN ENHANCED WDV BY ASSUMING THAT THE DEPRECIATION F OR ASSESSMENT YEAR 1999-2000 WAS NOT ALLOWED TO IT. WHILE DOING THE SCRUTINY ASS ESSMENT ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.1,35,87,876/-. THE OBSER VATIONS OF LD. CIT(A) ON THE ACTION OF ASSESSING OFFICER ARE AS UNDER :- 2 FOR A.YR. 1999-2000, THE ASSESSEE DID NOT CLAIM AN Y DEPRECIATION ON CERTAIN ASSETS ADDED TO THE BLOCK IN ITS RETURN OF INCOME BUT LATE R ON MAY, 24, 2001 THE ASSESSEE FILED AN APPLICATION U/S. 154 WHICH WAS REJECTED BY A.O. ON 05/05/2006. THE ASSESSEE DID NOT TAKE ANY FURTHER STEP TO CHALLENGE THE ORDER OF A. O. FOR THE SUBSEQUENT ASSTT. YEARS NAMELY 2000-01, 200 1-02, 2002-03 AND 2003-04 THE ASSESSEE CLAIMED DEPRECIATION IN ITS RETURNS BY COM PUTING THE WRITTEN DOWN VALUE (WDV) OF THE BLOCK IN ACCORD WITH ITS CLAIM MADE, I N THE RECTIFICATION APPLICATION FILED ON 24/05/2001 FOR A.Y.1999-00. THE ASSESSEE FILED T HREE RECTIFICATION APPLICATIONS FOR A. YS. 2 000-01, 2001-02 & 2002-03 STATING THAT THE OPENING WDV OF THE BLOCK OF ASSETS FOR THE SAID A. YS. SHOULD BE ENHANCED IN AC CORD WITH HIS ORDER DT. 05/05/06 REJECTING THE CLAIM FOR DEPRECIATION FOR THE A. Y. 1999-00 THE A. 0. AGAIN REJECTED THE RECTIFICATION APPLICAT IONS FILED BY THE ASSESSEE FOR A. YS. 2000-01, 2001-02 AND 2002-03 STATING THAT THERE WAS NO GROUND FOR RECTIFICATION SINCE THE DEPRECIATION HAD BEEN ALLOWED AS CLAIMED BY THE ASSESSEE IN ITS RETURN ITSELF AND THE ISSUE WAS ALSO DEBATABLE. - AGAINST THE SAID THREE ORDERS REJECTING THE APPLICA TIONS FOR RECTIFICATION FOR A. YS. 2001-02, 2001-02 AND 2002-03, ASSESSEE FILED THREE APPEALS BEFORE LD. CIT(A), WHO ALLOWED SUCH APPEALS AND DIRECTED THE A.O. TO DETER MINE WDV OF THE BLOCK OF ASSETS. THE DEPARTMENT HAS PREFERRED THESE THREE APPEALS AG AINST THE ORDER OF LD CIT(A). FOR THE A. Y. 2003-04, THE ASSESSE WAS IN APPEAL BE FORE CIT(A) AND TOOK AN ADDITIONAL GROUND CLAIMING DEPRECIATION ON SUCH HIG HER WDV OF THE BLOCK OF ASSETS AS A RESULT OF DENIAL OF THE DEPRECIATION FOR A. Y. 1999-00, WHICH WAS REJECTED BY THE CIT(A). AGAINST THE ORDER OF LD. CIT(A) FOR A.Y 200 3-04, THE ASSESSEE FILED AN APPEAL BEFORE HONBLE TRIBUNAL. THE HONBLE ITAT IN ITA NO .308/KOL/07 DIRECTED THE A.O. TO DETERMINE THE CORRECT OPENING WDV OF THE BLOCK O F ASSETS IN ACCORDANCE WITH THE PROVISIONS OF SEC. 43(6)(C)(II) OF THE I.TACT. THEREFORE, THE ISSUE IS WHETHER THE A. 0. WAS BOUND TO RECTIFY THE WDV OF THE BLOCK OF ASSETS FOR THE THREE SUBSEQUENT A. YS. INVOLVED CON SEQUENT UPON REJECTION OF THE CLAIM FOR DEPRECIATION FOR A. Y. 1999-00. THE HONBLE ITAT UPHELD THE DECISION OF LD. CIT(A) HOLDING THAT THE APPLICATION FOR RECTIFICATION FILED BY THE ASSESSEE WAS JUST AND PR OPER. THUS IN ALL THE ASSESSMENT YEARS SUBSEQUENT TO ASSE SSMENT YEAR 1999- 2000 THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ENHANCED W DV ON THE GROUND THAT ITS REQUEST FOR ALLOWING DEPRECIATION FOR ASSESSMENT YE AR 1999- 2000 HAD BEEN REJECTED. IN ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2007-0 8 THE PLEA OF THE ASSESSEE FOR ALLOWING DEPRECIATION ON ENHANCED VALUE OF WDV HAS BEEN ACCEPTED IN APPEAL. HOWEVER, IN THE ASSESSMENT ORDER THE A.O. DID NOT A CCEPT THIS CLAIM OF THE ASSESSEE ON THE GROUND THAT FOR THE ASSESSMENT YEARS 2001-02 TO 2005-06 THE DEPARTMENT HAD GONE IN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE DECISIONS OF HONBLE ITAT, KOLKATA IN THIS MATTER. THUS THE A.O. DISALLOWED AN AMOUNT OF RS.L,35,87,876/- AS EXCESS DEPRECIATION CLAIMED. 3.1. ON APPEAL LD. CIT(A ) AFTER TAKING INTO CO NSIDERATION OF THE VARIOUS DOCUMENTS FILED BY ASSESSEE BEFORE HIM AND FOLLOWING THE DECI SIONS OF THE ITAT, KOLKATA FROM 2001-02 TO 2005-06 DELETED THE DISALLOWANCE OF RS.1 ,35,87,876/- MADE BY AO. 3 4. AT THE TIME OF HEARING THE LD. DR APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDERS OF AO AND FURTHER SUBMITTED THAT ORDERS OF THE ITAT HAS NOT BEEN ACCEPTED BY THE REVENUE AND HAS FILED APPEAL BEFORE THE HON BLE HIGH COURT. THEREFORE HE REQUESTED TO UPHELD THE ORDER OF AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARIN G ON BEHALF OF ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREFUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF THE FACT THAT THIS IS SUE IS SQUARELY COVERED BY THE DECISIONS OF ITAT, KOLKATA FOR A.YRS. 2001-02 TO 20 05-06 IN FAVOUR OF THE ASSESSEE. THE LD. CIT(A) BY FOLLOWING THE DECISIONS OF THIS T RIBUNAL HAS DELETED THE DISALLOWANCE. WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) AND CONFIRM THE SAME. 6.1. IT IS FURTHER OBSERVED THAT THE FILING OF APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE DECISION OF THIS TRIBUNAL FOR A.YRS.200 1-02 TO 2005-06 WILL NOT HAVE ANY EFFECT SINCE THE HONBLE HIGH COURT HAS NEITHER SET ASIDE THE ORDERS OF THE TRIBUNAL NOR GRANTED ANY STAY. 7. IN THE RESULT GROUND NO.1 OF THE REVENUE S APPEAL IS DISMISSED. 8. THE SECOND ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS RELATING TO RESTRICTION OF DISALLOWANCE U/S 14A TO 1% OF THE DIVIDEND INCOME. 9. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.4,89,60,099/- WHICH HAS BEEN CLAIMED BY IT AS EX EMPT. THE AO BY RELYING ON THE DECISION OF HONBLE ITAT (SPL.BENCH)MUMBAI IN THE C ASE OF M/.S DAGA CAPITAL MANAGEMENT PVT. LTD. DISALLOWED AN AMOUNT OF RS.73, 66,549/- U/S 14A OF THE IT ACT BY APPLYING RULE 8D OF THE IT RULES. 9.1. ON APPEAL LD. CIT(A) HAS RESTRICTED THE DISALL OWANCE TO 1% OF THE DIVIDEND INCOME BY OBSERVING THE DISALLOWANCE U/S 14A CANNOT BE MADE BY APPLYING PROVISIONS OF RULE 8D BECAUSE THE SAID PROVISIONS ARE APPLICAB LE FROM A.Y.2008-09 AS HELD BY 4 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG.CO LTD. VS DCIT REPORTED IN 234 CTR 1 (BOM). IT IS OBSERVED THAT IN THE PRESENT CASE THE ASSESSMENT YEAR INVOLVED IS ASSTT.YEAR 2007-08. IT HAS BEEN HE LD BY THE HONBLE ITAT, KOLKATA, IN NUMBER OF CASES, THAT 1% OF EXEMPTED INCOME MAY BE TREATED AS EXPENDITURE INCURRED IN RELATION TO EARNING OF EXEMPTED INCOME. 9.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 10. THE LD. DR APPEARING ON BEHALF OF THE REVENUE R ELIED ON THE ORDERS OF AO. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE RELIED ON THE ORDERS OF LD. CIT(A). 11. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD IT IS OBSERVED THAT BY SUSTAINI NG THE DISALLOWANCE U/S 14A AT 1% OF THE DIVIDEND INCOME LD. CIT(A) HAS FOLLOWED THIS TR IBUNALS DECISION. THEREFORE, WE FIND NO INFIRMITY IN THE ORDERS OF LD. CIT(A) TO BE INTERFERED WITH. HENCE WE DISMISS THE APPEAL OF THE REVENUE. 12. IN THE RESULT GROUND NO.2 OF THE REVENUES APP EAL IS DISMISSED. 13. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.11.2011. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 02.11.2011. R.G.(.P.S.) 5 '4 / -5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1. KESORAM INDUSTRIES LTD., 9/1, R.N.MUKHERJEE ROAD, K OLKATA-700001. 2 THE D.C.I.T., CIRCLE-5, KOLKATA. 3. THE CIT, 4. THE CIT(A)-VI, KOLKATA. 5. DR, KOLKATA BENCHES, KOLKATA .5 -/ TRUE COPY, '4%1/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES