DCIT,Circle-10(1), Kolkata, Kolkata V. M/s Multitech Auto Pvt. Ltd.,

ITA 2276/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6310 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2276/KOL/2016 ASSESSMENT YEAR:2013-14 DCIT, CIRCLE-10[1] AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 / V/S . M/S MULTITECH AUTO PVT.LTD. A-5, NEAR INDUSTRIAL ESTATE AREA, ADITYAPUR, JAMSHEDPUR [ PAN NO.AACCM 1149 H ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT-DR /BY RESPONDENT NONE /DATE OF HEARING 15-02-2018 /DATE OF PRONOUNCEMENT 09-05-2018 /O R D E R PER S.S.VISWANETHRA RAVI, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 07.09.2016 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA FOR ASSESSMENT YEAR 2013-14 PASSED BY DATED 12.08.2013. 2. GROUND NO. 1 IS RELATING TO DELETION OF ADDITIO N MADE U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT). 3. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFI CER FOUND THAT ASSESSEE RECEIVED 1,75,70,220/- TOWARDS LOAN FROM COBOL MANAGEMENT (P ) LTD. FURTHER THE AO WAS OF THE OPINION THAT SHRI ATUL DUA AND SMT. P OONAM DUA ARE THE COMMON SHAREHOLDERS IN THE CAPACITY OF SHAREHOLDERS HAVING SUBSTANTIAL INTEREST WITH MORE THAN 20% HOLDING IN THE ASSESSEE-COMPANY AND AS WELL AS IN THE SAID COBOL MANAGEMENT ITA NO2276/KOL/2016 A.Y. 2013-14 DCIT CIR-10(1) KOL. VS. M/S MULTITECH A UTO PVT.LTD. PAGE 2 (P) LTD. THE AO WAS OF THE OPINION THAT ANY TRANSAC TIONS IN THE FORM OF LOAN OR ADVANCED IS COVERED BY THE DEFINITION U/S 2(22)(E) OF THE ACT AND ADDED AN AMOUNT OF 37,32,369/- TOTAL INCOME OF ASSESSEE. 4. LD. CIT(A) ON EXAMINATION OF MATERIAL EVIDENCE O N RECORD AND BY PLACING RELIANCE ON THE DECISION OF HON'BLE SPECIAL BENCH O F THE ITAT IN THE CASE OF BHOWMICK COLOUR PVT. LTD OF MUMBAI TRIBUNAL DELETED THE SAID ADDITION MADE BY THE AO. THE RELEVANT PORTION OF ORDER OF CIT(A) IS REPR ODUCED HEREIN BELOW:- 4.2 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF T HE APPELLANT AS WELL AS THE ASSESSMENT ORDER ON THE ISSUE. I HAVE ALSO CONSIDER ED THE VARIOUS JUDICIAL DECISIONS ON THE MATTER AS SUBMITTED IN THE FOREGOING. I HAVE ALSO GONE THROUGH THE MATERIALS ON RECORD IN THIS REGARD. ON A CAREFUL CONSIDERATION O F THE MATTER, I FIND FORCE IN THE ARGUMENT ADVANCED BY THE AR OF THE APPELLANT. IN A NUTSHELL, SECTION 2(22)(E) OF THE ACT IS ATTRACTED IN A CASE WHERE THERE IS AN ADVANC E OF LOAN TO THE SHAREHOLDER OF THE COMPANY GIVING THE LOAN IN WHICH THE RECIPIENT OF T HE LOAN HAPPENS TO HOLD MORE THAN 10% OF THE SHARES IN THE LENDING COMPANY. I FIND TH AT LOAN WAS GIVEN BY ONE COMPANY (COBOL MANAGEMENT(P) LTD.) TO ANOTHER COMPANY (M/S MULTITECH AUTO (P) LTD.) AND THAT THE LATTER WAS NOT A SHAREHOLDER IN THE FORMER . ONLY THE COMMON SHAREHOLDERS AS MENTIONED SUPRA HAD MORE THAN 10% STAKES IN BOTH TH E COMPANIES. THE STATUS OF COMPANY BEING A SEPARATE ENTITY, THERE IS NO BASIS FOR TREATING THE COMPANYS LOAN TO BE THAT OF THE SHAREHOLDERS WHICH WOULD WARRANT TH E ATTRACTION OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT. THE MATTER IS WELL SET TLED, INTER ALIA, IN THE CASE DECIDED BY THE SPECIAL BENCH, ITAT, MUMBAI IN THE CASE OF ACI T, CIRCLE-33, MUMBAI VS. BHAUMIK COLOUR (P) LTD. IN ITA NO.5030(MUM) OF 2004 FOR AY 1997-98 DATED 19.11.2008. IN VIEW OF THIS, I DO NOT FIND THE ACTI ON OF THE AO TO BE ENDORSABLE AT THE APPELLATE STAGE FOR WHICH IT IS NOW DIRECTED THAT A DDITION OF 37,32,369/- MADE IN THIS REGARD BE DELETED. THE AO IS DIRECTED ACCORDINGLY. 5. LD. DR RELIED ON THE ORDER OF AO. NONE APPEARED ON BEHALF OF ASSESSEE. 6. HEARD THE LD. DR AND PERUSED THE MATERIAL AVAILA BLE ON RECORD. WE FIND THAT AO ON AN IMPRESSION THAT THE TWO SHAREHOLDERS I.E. ATUL DUA AND SMST. POONAM DUA ARE COMMON SHAREHOLDERS HAVING 20% HOLDING IN ASSES SEE-COMPANY AND M/S COBOL MANAGEMENT (P) LTD. TREATED THE AMOUNT AS DEEMED D IVIDEND. CIT(A) PLACING RELIANCE IN THE CASE OF SPECIAL BENCH MUMBAI BHOWM ICK COLOUR PVT. LTD. DELETED THE SAID ADDITION MADE BY ASSESSING OFFICER. IT IS NOTI CED THAT ASSESSEE IS NOT THE SHAREHOLDERS IN M/S COBOL MANAGEMENT (P) LTD. THE C IT(A) FOUND SATISFIED ON EXAMINATION OF RECORD AVAILABLE BEFORE HIM THAT THE ASSESSEE AND M/S COBOL ITA NO2276/KOL/2016 A.Y. 2013-14 DCIT CIR-10(1) KOL. VS. M/S MULTITECH A UTO PVT.LTD. PAGE 3 MANAGEMENT (P) LTD. ARE SEPARATE ENTITIES AND FOUND NO BASIS FOR TREATING THE LOAN GIVEN BY THE M/S COBOL MANAGEMENT (P) LTD. TO ASSES SEE TO BE THAT OF SHAREHOLDERS I.E. ATUL DUA AND POONAM DUA. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO.1 RAISED BY REVENUE IS DISMISSED. 7. GROUND NO.2 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF CLAIM OF ADDITIONAL DEPRECIATION. 8. THE AO DISALLOWED THE CLAIM OF ADDITIONAL DEPREC IATION ON THE EXPENDITURE INCURRED TOWARDS CORRECTION, COMMISSIONING AND INST ALLATION OF MACHINERY. ACCORDING TO CIT(A) THE ACTUAL COST OF MACHINERIES AND PLANT INCLUDES THE COST OF ERECTION, COMMISSION AND INSTALLATION CHARGES AND ALLOWED ADD ITIONAL DEPRECIATION. 9. LD. DR RELIED ON THE ORDER OF AO. 10. HEARD THE LD. DR AND PERUSED MATERIAL AVAILABLE ON RECORD. THE ASSESSEE INCURRED AN AMOUNT OF 19,50,90,000/- TOWARDS EXPENDITURE INCURRED ON EREC TION, COMMISSIONING AND INSTALLATION CHARGES AND INTEREST ON THE MACHINERIES AND CLAIMED DEPRECIATION ON MACHINERY. THE ASSESSING OFFICER WA S OF THE OPINION THIS AMOUNTS INCURRED AS ABOVE WERE NOT ACTUALLY PART OF THE COS T OF SAID PLANT AND MACHINERY AND DID NOT CONSIDER THE SAID AMOUNT IN THE CLAIM OF AD DITIONAL DEPRECIATION. WE FIND THAT CIT(A) RIGHTLY HELD THE ACTUAL COST INCLUDES THE AM OUNT INCURRED TOWARD ERECTION COMMISSION AND INSTALLATION PLANT AND MACHINERIES T HEREBY CIT(A) RIGHTLY DELETED THE ADDITION, AND THE RELEVANT PORTION IN PARA 6.2 WHI CH IS REPRODUCED AS UNDER:- 6.2 I HAVE CONSIDERED THE SUBMISSION OF THE AR OF T HE APPELLANT AS WELL AS THE ASSESSMENT ORDER. IMPUGNED ORDER FIND THAT THE AO H AS NOT CONSIDERED THE SUM OF 19,50,909/- WHICH WAS INCURRED BY THE APPELLANT TOW ARDS ERECTION, COMMISSIONING, INSTALLATION, INTEREST ON THE MACHINERIES. ACCORDIN G TO THE AO THESE AMOUNTS WILL NOT FORM A PART OF MACHINERIES AND THEREFORE THE AO DID NOT ALLOW ADDITIONAL DEPRECIATION ON THESE AMOUNTS. I AGREE WITH THE CON TENTION OF THE AR THAT THE ACTUAL COST OF MACHINERIES AND PLANT SHOULD NECESSARY INCL UDE ERECTION, COMMISSIONING AND INSTALLATION CHARGES. IN MY CONSIDERED OPINION, OF THE MACHINERIES ARE NOT ERECTED OR INSTALLED THE MACHINE CANNOT BE PUT TO USE. THEREFO RE, THE ACTUAL COST OF PLANT OR ITA NO2276/KOL/2016 A.Y. 2013-14 DCIT CIR-10(1) KOL. VS. M/S MULTITECH A UTO PVT.LTD. PAGE 4 MACHINERY ELIGIBLE FOR DEPRECIATION SHOULD NECESSAR Y INCLUDE THE COST OF ERECTION AND INSTALLATION. IN VIEW OF THE FOREGOING, I DIRECT TH E AO TO ALLOW ADDITIONAL DEPRECIATION OF 2,06,771/- A CLAIMED BY THE APPELLANT. THIS GROUND IS ALLOWED. 11. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). WE UPHOLD THE SAME. GROUND NO.2 IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09/05/2018 SD/- SD/- ( !) (#$ !) (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS % - 09/05/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-10(1), AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 2. /RESPONDENT-M/S MULTITECH AUTO PVT. LTD. A-5, NR. I NDUSTRIAL ESTATE AREA, ADITDYAYAP UAR, JAMSHEDPUR 3. ( + / CONCERNED CIT 4. + - / CIT (A) 5. , $$( , ( / DR, ITAT, KOLKATA 6. 0 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO (,