The ACIT, Circle-5, Ahmedabad V. Omkar Textile Mills Ltd., Ahmedabad

ITA 1963/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0499 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-01-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL KUMAR
• Keywords: Depreciation; Earning of tax free income
• Section: 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 1745/ AHD/2012 (ASSESSMENT YEAR 2009-10) OMKAR TEXTILE MILLS PVT. LTD., 212, NEW CLOTH MARKET, O/S RAIPUR GATE, AHMEDABAD-02 VS. ACIT (OSD) CIRCLE 5, AHMEDABAD I.T.A.NO. 1963/AHD/2012 (ASSESSMENT YEAR 2009-10) ACIT (OSD) CIRCLE 5, VS. OMKAR TEXTILE MILLS PVT. LTD., AHMEDABAD 212, NEW CLOTH MARKET, O/S RAIPUR GATE, AHMEDABAD-02 PAN/GIR NO. : AAACO2424M (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI GAURAV NAHTA, AR RESPONDENT BY: SHRI RAHUL KUMAR, SR. DR DATE OF HEARING: 24.01.2013 DATE OF PRONOUNCEMENT: 28.02.2013 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XI, AHMEDA BAD DATED 13.06.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE ASSESS EE IN I.T.A.NO. 1745/AHD/2012. GROUND NO.1 IS AS UNDER: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN PA SSING APPELLATE ORDER DATED 13.06.2011 FOR ASSESSMENT YEAR 2009-10 IN THE CASE OF I.T.A.NO.1745,1963 /AHD/2012 2 APPELLANT BY CONFIRMING THE DISALLOWANCE OF RS.2,51 ,055/- MADE BY THE A.O. U/S 14A. 2.1 IT WAS SUBMITTED BY THE LD. A.R. THAT SECTION 1 4A RULE 8D CAN BE INVOKED ONLY WHEN THE A.O. IS NOT SATISFIED WITH RE GARD TO THE ACCOUNTS OF THE ASSESSEE THAT THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE IS NOT CORRECT AND, THEREFORE, IN THE PRESENT CASE, DISALL OWANCE MADE BY THE A.O. IS NOT JUSTIFIED. IN SUPPORT O THIS CONTENTION, RE LIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF BALRAMPUR CHINI MILLS LTD. VS DCIT AS REPORTED IN 140 TTJ (UO) 73. LD. D.R. OF T HE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.1.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD. A.R. WE FIND TH AT IT IS NOTED BY HE A.O. ON PAGE 2 OF THE ASSESSMENT ORDER THAT VARIOUS INVESTMENTS HAD BEEN MADE BY THE ASSESSEE AND IT WAS SUBMITTED BY THE AS SESSEE BEFORE THE A.O. THAT THESE INVESTMENTS WERE FINANCED BY INTERN AL ACCRUALS ONLY AND NO INTEREST BEARING BORROWED FUNDS WERE UTILIZED FO R MAKING THESE INVESTMENTS. IT IS FURTHER NOTED BY THE A.O. THAT THE ASSESSEE HAD FAILED TO FURNISH ANY FUND FLOW STATEMENT TO SUBSTANTIATE ITS CLAIM THAT THE INVESTMENTS HAVE BEEN MADE THROUGH INTERNAL ACCRUAL S ONLY. AFTER MAKING THIS OBSERVATION, THE A.O. MADE DISALLOWANCE U/S 14A AS PER RULE 8D AND THE DISALLOWANCE WAS WORKED OUT BY THE A.O. TO THE EXTENT OF RS.2,51,055/- INCLUDING INTEREST OF RS.2,21,980/- A ND OTHER EXPENSES OF RS.29,075/-. LD. CIT(A) HAS CONFIRMED THE ORDER OF THE A.O. ON THIS ISSUE BY MAKING THIS OBSERVATION THAT THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE OF RS.218.80 LACS AND THE ASSESSEE HAS INVESTED A SUM OF RS.58.15 LACS IN EQUITY SHARES AND THE A.O. HAS MAD E THIS DISALLOWANCE AS PER THE PROVISIONS OF RULE 8D OF THE I T RULES 1962 . THIS FACT COULD NOT I.T.A.NO.1745,1963 /AHD/2012 3 BE CONTROVERTED BY THE LD. A.R AND HIS ONLY ARGUMEN T IS THE RELIANCE PLACED BY HIM ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF BALRAMPUR CHINI MILLS LTD. (SUPRA). IN THAT CASE, IT IS NOTE D BY THE TRIBUNAL THAT AS PER FUND FLOW STATEMENT, IT IS CLEAR THAT THE ENTIR E AMOUNT OF INVESTMENT, YIELDING TAX FREE DIVIDEND INCOME TO THE ASSESSEE W AS ACQUIRED FROM ITS OWN FUNDS REPRESENTED BY SHARE CAPITAL AND RESERVES AND NOT OUT OF THE BORROWINGS. IN THE PRESENT CASE, A CLEAR FINDING I S GIVEN BY THE A.O. IN THE ASSESSMENT ORDER THAT FUND FLOW STATEMENT WAS N OT FURNISHED BEFORE HIM AND THE SAME HAS NOT BEEN FURNISHED BEFORE LD. CIT(A) OR EVEN BEFORE US AND HENCE, THE FACTS OF THE PRESENT CASE ARE DIFFERENT THAN THE FACTS IN THE CASE OF BALRAMPUR CHINI MILLS LTD. (SU PRA) AND THEREFORE, THIS TRIBUNAL DECISION IS NOT APPLICABLE IN THE PRESENT CASE. THERE IS ONE MORE DIFFERENCE OF FACTS. IN THAT CASE, IN RESPECT OF E XEMPT INCOME OF DIVIDEND OF RS.108.72 LACS, THE ASSESSEE ITSELF HAS OFFERED A SUM OF RS.1,49,995/- AS EXPENSES ATTRIBUTABLE TO SUCH EXEMPT INCOME AND DIS ALLOWING IT FORM ITS CLAIM UNDER THE PROVISIONS OF SECTION 14A OF THE IN COME TAX ACT, 1961 AND THIS WAS SUPPORTED BY A CERTIFICATE FROM STATUT ORY AUDITORS. THE BASIS OF THE TRIBUNAL DECISION IS THIS THAT NEITHER THE A UDITORS NOR THE A.O. AND NOR LD. CIT(A) HAVE POINTED OUT ANY DEFECT IN THE C ORRECTNESS OF THE ASSESSEES CLAIM OF EXPENDITURE AMOUNTING TO RS.1,4 9,995/-. IN THE PRESENT CASE, NO SUCH DISALLOWANCE WAS MADE BY THE ASSESSEE ITSELF U/S 14A WHICH WAS DULY CERTIFIED BY THE AUDITORS. HENC E, THIS TRIBUNAL DECISION IS NOT APPLICABLE IN THE PRESENT CASE FOR THIS REASON ALSO. THIS DISALLOWANCE WAS MADE BY THE A.O. AS PER RULE 8D, W HICH IS APPLICABLE IN THE PRESENT CASE AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO .1 IS REJECTED. 2.2 GROUND NO.2 IS AS UNDER: I.T.A.NO.1745,1963 /AHD/2012 4 LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIR MING THE = ADDITION OF RS.2,09,878/- OUT O TRAVELING EXPENSES. 2.2.1 IT IS SUBMITTED BY THE LD. A.R. THAT THE DISA LLOWANCE IS MADE BY THE A.O. TO THE EXTENT OF 1/5 TH OF THE TOTAL TRAVELING EXPENSES ON AD-HOC BASIS AND, THEREFORE, THE SAME IS NOT JUSTIFIED. AS AGAI NST THIS, LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT LD. CIT(A) HAS FOLLOWED A DECISION IN THE ASSE SSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR 2008-09 AND NOTHING HAS B EEN BROUGHT ON RECORD BEFORE US THAT THE DECISION OF LD. CIT(A) IN EARLIER YEAR HAS BEEN REVERSED BY THE TRIBUNAL. LD. CIT(A) IN HIS ORDER FOR ASSESSMENT YEAR 2008-09 HAS ALSO REFERRED TO THE ASSESSMENT YEAR 20 07-08 AND IT IS ALSO NOTED BY HIM THAT THE FACTS ARE IDENTICAL TO THE FA CTS IN ASSESSMENT YEAR 2007-08. THIS IS ALSO NOTED BY LD. CIT(A) THAT THE DIRECTORS HAVE UNDERTAKEN FOREIGN TRAVELING WITHOUT ANY EXPORT BUS INESS AND, THEREFORE, ASSESSEE HAS FAILED TO JUSTIFY HUGE EXPENSES ON FOR EIGN TRAVELING. IN THE PRESENT YEAR ALSO, IT IS NOT SHOWN BEFORE US THAT T HERE WAS ANY EXPORT/IMPORT BUSINESS OF THE ASSESSEE JUSTIFYING F OREIGN TRAVELING AND CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REA SON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. GROUND NO. 2 IS ALSO REJECTED. 2.3 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 3. NOW, WE TAKE UP THE REVENUES APPEAL IN I.T.A.NO . 1963/AHD/2012. 3.1 GROUND NO.1 IS AS UNDER: LD. I HA ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION CLAIMED U/S 32 ON VEHICLES NOT OWNED B Y THE ASSESSEE. I.T.A.NO.1745,1963 /AHD/2012 5 3.1.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 3.1.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) PER PARA 6.3 AND 6.4 OF HIS ORDER WHICH ARE REPRODUCED BELOW FOR THE SAKE OF RE ADY REFERENCE. I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. I H AVE ALSO PERUSED VARIOUS EVIDENCES FILED BY THE APPELLANT DURING ASS ESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. I HAV E ALSO GONE THOUGH THE CASE LAWS RELIED UPON BY THE APPELLANT. IT IS SEEN THAT APPELLANT HAS CLAIMED DEPRECIATION ON MOTOR CAR OF RS.9,19,445/-, WHICH WAS PURCHASED BY IT IN EARLIER YEARS. IN THE EARLIER YEARS, DEPRECIATION ON THESE CARS HAS BEEN ALLOWED. THE AP PELLANT ALSO PURCHASED MOTOR CARS OF RS.7,50,805/- DURING THE YE AR UNDER CONSIDERATION. THE DEPRECIATION CLAIMED ON THESE CA RS OF RS. 1,87,701/-WAS ALSO DISALLOWED BY THE A.O. DISALLOWA NCE OF DEPRECIATION WAS MADE AS THESE CARS WERE REGISTERED IN THE NAME OF DIRECTORS. PERUSAL OF BALANCE SHEET OF THE APPELLAN T FURTHER REVEALS THAT THESE CARS ARE DULY REFLECTED IN THE BALANCE S HEET OF THE APPELLANT. TO BE VERY PRECISE, THE APPELLANT HAS DE CLARED CLOSING BALANCE OF VEHICLES OF RS. 1,16,15,264/- AS ON 31-3 -2009 IN THE BLOCK OF ASSETS. THESE CARS FORMS PART OF THE ABOVE SAID ASSETS. THE APPELLANT HAS ALSO RAISED LOANS AGAINST THESE VEHIC LES OF RS. 17,80,750/- WHICH FORMS PART OF SCHEDULE 'C' OF THE BALANCE SHEET. THESE FACTS CLEARLY REVEALS THAT THESE CARS WERE PU RCHASED FROM THE FUNDS OF THE APPELLANT. PERUSAL OF PROFIT AND LOSS ACCOUNT FURTHER REVEALS THAT APPELLANT HAS INCURRED VEHICLE RUNNING AND VEHICLE REPAIRING AND MAINTENANCE EXPENSES OF RS.5,53,014/- . THE A.O. HAS ALLOWED THESE EXPENSES. THIS FACT CLEARLY INDIC ATE THAT THESE CARS WERE USED FOR THE PURPOSE OF BUSINESS OF THE A PPELLANT. SINCE THESE CARS WERE PURCHASED FROM THE FINANCE OF THE A PPELLANT AND THE SAME WAS USED FOR THE PURPOSE OF APPELLANT'S BUSINE SS, ACCORDINGLY I AM OF THE CONSIDERED VIEW THAT APPELLANT IS ENTIT LED TO CLAIM DEPRECIATION ON THESE CARS. IN THIS REGARD, APPELLA NT HAD RIGHTLY PLACED RELIANCE ON THE FOLLOWING CASES. CIT VS. NID ISH TRANSPORT CORPORATION (1990) 185 ITR 669 (KERALA) CIT VS. SAL KIA TRANSPORT ASSOCIATES (1983) 143 ITR 39 (CAL.) CIT V S. MIRZA ATAULLAHA BAIZ (1983) 292 ITR 291 (BOMBAY) CIT V/S. ORIENT LONGMAL P. LTD. (1997) 227 ITR 68 (A.P.) I.T.A.NO.1745,1963 /AHD/2012 6 6.4 I HAVE ALSO PERUSED ORDER OF HON'BLE ITAT IN TH E CASE OF SANTOSH STARCH LTD. V/S. DCIT (OSD), CIRCLE 8, AHME DABAD IN ITA NO.18847AHD/2010 DTD. 19-11-2010 FOR A.Y. 2007-08. IN THIS CASE, HON'BLE ITAT HAD DECIDED SIMILAR ISSUE IN FAV OUR OF THIS APPELLANT. IN THIS CASE, HON'BLE ITAT FOLLOWED RATI O OF MYSORE MINERALS LTD. V/S. CIT (1999) 239 ITR 775 (S.C.) AN D CIT V/S. PODAR CEMENT PVT.LTD. & OTHERS (1997) 226 ITR 625 ( S.C.). IN VIEW OF THE ABOVE, I HOLD THAT APPELLANT IS ENTITLE D TO CLAIM DEPRECIATION ON THE MOTOR CARS REGISTERED IN THE NA ME OF DIRECTORS. ACCORDINGLY, DISALLOWANCE OF DEPRECIATION OF RS.11, 07,146/- MADE BY THE A O IS ORDERED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 3.1.3 FROM THE ABOVE TWO PARAS OF HE ORDER OF LD. C IT(A), WE FIND THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER AFTER A NALYZING ALL THE FACTS. HE HAS ALSO NOTED THAT THE A.O. HAS DULY ALLOWED DE DUCTION ON ACCOUNT OF VEHICLE RUNNING AND REPAIRING EXPENSES. IT IS ALSO NOTED BY LD. CIT(A) THAT THE VEHICLES ARE DULY SHOWN IN THE BALANCE SHE ET AND THE ASSESSEE HAS BORROWED FUNDS ALSO FOR PURCHASE OF THESE VEHICLES AND SIMPLY BECAUSE THE VEHICLES ARE REGISTERED IN THE NAME OF THE DIRE CTOR, DEPRECIATION CANNOT BE DISALLOWED. IN THIS REGARD, HE HAS FOLLO WED VARIOUS JUDGEMENTS ALSO NOTED IN PARA 6.4 OF HIS ORDER AND CONSIDERING AL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD . CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS REJECTED. 3.2 GROUND NO.2 IS AS UNDER: LD. CIT(A) HA ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.28,094/- MADE ON ACCOUNT OF LATE PAYMENT O EMPLO YEES CONTRIBUTION OF PF U/S 2(24) R.W.S. 36(1)(VA) OF TH E INCOME TAX ACT, 1961. 3.2.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). I.T.A.NO.1745,1963 /AHD/2012 7 3.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. THIS ISSUE IS NOW FULLY COVERED IN FAVOUR OF THE ASSESSEE BY T HE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ALOM EXT RUSIONS LTD. AS REPORTED IN 227 CTR 417. RESPECTFULLY FOLLOWING TH IS JUDGMENT OF HONBLE APEX COURT, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 3.3 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 4. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE A S WELL AS APPEAL OF THE REVENUE BOTH ARE DISMISSED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE SP. AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 19/02/2013 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/02/2013.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 28/02/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.28/2 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28/02/2013 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. .