Banpal Oil Chem Pvt.Ltd., Palanpur V. The ACIT, B.K.Circle, Palanpur

ITA 1939/AHD/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6329 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR
• Keywords: Business expenditure; Earning of tax free income
• Section: 143(3); 14A; 80IB; 37(1); 80IA; 201; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER BANPAL OILCHEM PVT. LTD. PALANPUR PAN: AAACB8589Q (APPELLANT) VS THE ACIT, B.K. CIRCLE, PALANPUR (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI TUSHAR HEMANI & SHRI P.B. PARMAR , A.R S . DATE OF HEARING : 23 - 09 - 2 019 DATE OF PRONOUNCEMENT : 21 - 10 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2009 - 10 , ARI SES FROM ORDER OF THE CIT(A) - I, AHMEDABAD DATED 28 - 04 - 2 014 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCE S OF THE APPELLANT'S CASE, THE L D. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT ON THE DEPB BENEFIT AND VKUY BENEFIT WITHOUT APPRECIATING T HE FACT THAT SUCH BENEFITS ARE D ERIVED FROM EXPORT OF GOODS MANUFACTURED BY APPELLANT WHICH IS DIRECTLY RELATED TO THE BUSINESS OF IT. I T A NO . 1939 / A HD/20 14 A SS ESSMENT YEAR 2009 - 10 I.T.A NO. 1939 /AHD/20 14 A.Y. 2009 - 10 PAGE NO BANPAL OILCHEM PVT. LTD. VS. ACIT 2 2.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE L D. CIT(A) ERRED IN CONFIRMING DISALLOWANCE MADE BY LD. ASSESSING OFFICER OF RS. 11,97 ,252/ - (12% OF RS. 99,77,100) U/S SECTION 14A OF THE ACT FOR THE INTEREST ON MONEY BORROWED FOR INVESTMENT MADE IN BANPAL AGRO TECH PVT . LTD. I.E. SUBSIDIARY COMPANY OF THE ASSESSEE. IT MAY BE DELETED. 2.2 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANT'S CASE, THE L D. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF INTEREST U/S. 14A INTEREST WITHOUT \ APPRECIATING THE FACTS THAT THE INVESTMENT IS FROM SUBSIDIARY COMPANY AND FOR THE PURPOSE OF BUSINESS. 2.3 IN LAW AND IN THE FACTS AND CIRCUMSTAN CES OF THE APPELLANT'S CASE, THE ID. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF INTEREST U/S. 14A INTEREST WITHOUT APPRECIATING THE FACTS THAT THE INTEREST FREE OWN FUNDS WERE FAR IN EXCESS OF THE FUNDS INVESTED IN INVESTMENTS CONSIDERED FOR DISALLOWANCE U/ S 14A. 2.4 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE ID, C1T(A) ERRED IN UPHOLDING DISALLOWANCE OF INTEREST U/S. 14A INTEREST WITHOUT APPRECIATING THAT NO EXEMPT INCOME WAS EARNED DURING THE YEAR UNDER CONSIDERATION. 3. I N LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE ID. CIT(A) ERRED IN CONFIRMING DISALLOWANCE MADE BY LD. ASSESSING OFFICER ON AMOUNT OF RS.15,88,600/ - BY CONSIDERING THE SAME AS SALES TAX PENALTY WHEREAS IN FACT THE SAME IS INTEREST PA YABLE ON REGULAR PURCHASE TAX AND IS ALLOWABLE BUSINESS EXPENDITURE U/S 37(1) OF THE ACT BEING LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE ASSESSING OFFICER MAY BE DIRECTED TO DELETE THE DISALLOWANCE MADE. 4.1 IN LAW AND IN THE FA CTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE ID. CIT(A) ERRED IN UPHOLDING PEAK OF ALLEGED UNACCOUNTED CASH TRANSACTIONS FOR RS. 90,95,190 WITHOUT APPRECIATING THAT SAME IS ALREADY COVERED BY DISCLOSURE OF RS. 2 CRORE MADE IN A.Y. 2010 - 11. 4.2 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE ID. CIT(A) ERRED IN UPHOLDING PEAK OF ALLEGED UNACCOUNTED CASH TRANSACTIONS CONSIDERING PEAK COMPUTED AT THE END OF EACH ENTRY AS AGAINST PEAK COMPUTED ON DAILY BALANCES. THE ID. CIT(A) OU GHT TO HAVE RESTRICTED PEAK ADDITION TO RS. 31,83,719 AS COMPUTED BY A.O. IN ALTERNATE WORKING IN REMAND PROCEEDINGS. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTIO N U/S 80IB ON DISALLOWANCE OF PEAK, DISALLOWANCE U/S 14A AND DISALLOWANCE OF SALES TAX PENALTY. 3. THE FACT IN BRIEF IS THAT RETURN OF IN COME DECLARING INCOME OF RS. 43,6 3 , 820/ - WAS FIELD ON 29 TH SEP, 2009. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT U/S. 143(3) OF THE ACT AND ORDER U/S. 143(3) PASSED ON 16 TH DECEMBER, 2011. THE ASSESSING OFFICER HAS MADE MULTIPLE ADDITIONS. THE ASSESSEE HAS FILED APPEAL ON VARIOUS ADDITIONS WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A). THE REMAINING FACTS ARE DISCUSSED WHILE ADJUDI CATING THE DIFFERENT GROUNDS OF APPEAL OF THE ASSESSEE AS UNDER: - GROUND NO. 1 (CONFIRMING DISALLOWANCE OF RS. 18 , 63 , 248/ - U/S. 80IB OF THE ACT) 4. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB TO THE AMOUNT OF RS. 18 , 63 , 2 48/ - . THE ASSESSING OFFICER OBSERVED THAT THE AFORESAID DEDUCTION U/S. 80IB WAS CLAIMED ON THE D EPB AND NKUY BENEFITS . THE ASSESSING OFFICER HAS STATED THAT AS PER T HE DECISION OF HON BLE SUPREME COURT IN THE CASE O F LIB ERTY INDIA 317 ITR 218 DEDUCTION U/S. 80IB CANNOT BE CLAIMED ON THE DEPB I.T.A NO. 1939 /AHD/20 14 A.Y. 2009 - 10 PAGE NO BANPAL OILCHEM PVT. LTD. VS. ACIT 3 INCOME , IT HAS TO BE EXCLUDED WHILE CALCULATING THE DE DUCTION U/S. 80IB OF THE ACT. ACCORDINGLY , THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IB ON TH E AFORESAI D INCOME . THE ASSESSEE HAS FIL E D APPEAL B EFOR E THE LD. CIT(A) AND THE LD. CIT(A) HAS DISM ISSED THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. WE CONSIDER THAT THE HON BLE SUPREME COURT IN THE CASE OF LIBERTY IN DIA VS. CIT 317 ITR 218 HAS HELD THAT DEPB BENEFITS ARE ON ACCOUNT OF STATUTORY PROVISIONS IN CUSTOM ACT FRAMED BY T H E GOVERNMENT THEREFORE PROFIT SO DERIVED DO NOT FORM PART OF NET PROFIT OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR PURPOSES OF SECTION 80IB, 80 I AND 80IA . T HEREFORE FOLLOWING THE DECISION OF HON BLE SUPREME COURT AS CITED ABOVE , THE ASSESSEE IS NOT ENTITLED TO CLAIM D EDUCTION U/S. 80IB OF DEPB AND V KUY BENEFITS. ACCORDINGLY , WE DO NOT FIND ANY SUBSTANCE IN THIS GROUND OF APPEAL OF THE ASSESSE E AND THE SAME IS DISMISSED. GROUND NO. 2( CONFIRMING DISALLOWANCE OF RS. 11,97,252/ - U/S. 14A OF THE ACT) 6. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER STATED THAT ASSESSEE HAS MADE INVESTMENT TO THE AMOUNT OF RS. 99 , 77 , 100/ - IN SHARE CAPITAL OF BANPAL AGRO TECH PVT. LTD. AND ALSO INCURRED INTEREST EXPENSES. THE ASSESSING OFFICER HAS APPLIED PROVISION OF SECTION 14A AND DISALLOWED RS. 11 , 97 , 252/ - WHICH WAS CONFIRMED BY THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS BROUGHT TO OUR NOTICE THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME THEREFORE THE DECISION OF LD. CIT(A) IN SUSTAINING THE DISALLOWANCE MADE U/S. 14A IS NOT JUSTIFIED. ON THE I.T.A NO. 1939 /AHD/20 14 A.Y. 2009 - 10 PAGE NO BANPAL OILCHEM PVT. LTD. VS. ACIT 4 OTHER HAND LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTRADICT THE FACTS REPORTED BY THE LD. COUNSEL. 7. WE HAVE HEARD BOTH THE SIDES AND NOTICED THAT IT IS UNDISPUTED FACT THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION, THEREFORE, AFTER FOLLOWING THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY PVT. LTD. 372 ITR 97 WE CONSID ER THAT NO DISALLOWANCE U/S. 14A IS TO BE MADE. THEREFORE, THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. GROUND NO. 3 ( CONFIRMING DISALLOWANCE OF RS. 15 , 88 , 600/ - U/S. 37 OF THE ACT) 8. DURING THE COURSE OF ASSES SMENT, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 15 , 88 , 600/ - ON THE GROUND THAT SALE TAX PENALTY WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE U/S. 37 OF THE ACT. THE LD. CIT(A) HAS SUSTAIN ED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . 9. D URING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US , THE LD. COUNSEL CONTENDED THAT AASSESSEE HAD PAID INTEREST OF RS. 15 ,8 8 , 600/ - CHARGED BY THE SALES T AX DEPARTMENT AS INTEREST ON PURCHASE TAX LIABILI TY . THE LD. CO U NSE L HAS ALSO PLACED RELIANCE ON T H E DECISION OF PRAKASH COTTON MILLS PVT. LTD. VS. CIT ( 1993) 201 ITR 684 (SC) AND LACHMANDAS MATHURADAS VS. CIT (2002) 254 ITR 799 (SC). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS S UPPORTED THE ORDER OF LD. CIT(A). 10 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WITH THE ASSISTANCE OF LD. REPRESENTATIVES , WE HAVE PERUSED THE PAGE I.T.A NO. 1939 /AHD/20 14 A.Y. 2009 - 10 PAGE NO BANPAL OILCHEM PVT. LTD. VS. ACIT 5 NO. 23 OF THE PAPER BOOK CO NTAINING THE LEDGER ACCOUNT OF SALE TAX DEFER RED ACCOUNT DEMONSTRATING THAT ON 22 ND SEP, 2008, THE ASSESSEE HAS CREDITED AN AMOUNT OF RS. 1 5,88,600/ - AS INTEREST ACCOUNT LATE PAYMENT. THE LD. COUNSEL HAS ALSO REFERRED PAGE NO. 24 OF T HE PAPER BOOK AS LEDGE R OF INTEREST ACCOUNT SHOWING INCLUDING OF INTEREST ACCOUNT ON ACCOUNT OF LATE PAYMENT OF SALES TAX. THE LD. COUNSEL HAS ALSO REFERRED PAGE NO. 17 OF THE PAPER BOOK AS SCHEDULE XVI OF INTEREST & FINANCE CHARGES WHEREIN INTEREST AMOUNT HAS BEEN DEBITED BY RS. 1 6 ,4 9 , 274/ - AND PAGE NO. 23 AS SALES TA X ORDER. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND THAT ASSESSEE HAD PAID INTEREST ON DEFERMENT OF SALE TAX LIABILITY AND THE LOW LOWER AUTHORITIES HAD FAILED TO ESTABLISHED THAT IMPUGNED AMOUNT WAS PAID ON ACCOUNT OF LEVYING OF ANY PENA LTY BY THE SALES TAX DEPTT. CONSIDERING ABOVE, WE ARE NOT INCLINED WITH THE DECISION OF LD. CIT(A), THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. GROUND NO. 4 (CONFIRMING ADDITION OF RS. 90 , 95 , 190/ - ) 1 1. ON THIS ISSUE, D URING THE C OURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. REPRESENTATIVES HAVE BROUGHT TO OUR NOTICE THAT LD. CIT(A) HAS GIVEN SET OFF OF THE ADDITION MADE IN THE NEXT ASSESSMENT YEAR , THEREFORE , AFTER CO NSIDERING THAT, SET OFF HAS BEEN IN THE NEXT YEAR, WE DO NOT FIN D ANY SUBSTANCE IN TH IS GROUND OF APPEAL OF THE ASSESSEE AND THE SAME STANDS DISMISSED. GROUND NO. 5 12 . SINCE THE LD. CIT(A) HAS ALLOWED SET OF F OF PEAK IN THE NEXT ASSESSMENT YEAR OUT OF THE 2 CR ORE INCOME DISCLOSED BY THE ASSESSEE , THEREFORE , THIS I.T.A NO. 1939 /AHD/20 14 A.Y. 2009 - 10 PAGE NO BANPAL OILCHEM PVT. LTD. VS. ACIT 6 G ROUND OF APPEAL OF THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED. 13 . IN THE RESULT, THE APPEAL OF THE ASESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 10 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /10 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,