DCIT 2(2), MUMBAI V. KAYTEE CORPORATION P.LD, MUMBAI

ITA 2277/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1202 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PERTAINS TO A Y
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Revised return

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , , , BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM / I.T.A. NO.2277/MUM/2013 ( !' #' / ASSESSMENT YEAR:2009-10) DY. COMMISSIONER OF INCOME TAX CIRCLE 2(2) AAYAKAR BHAVAN, ROOM NO.545, 5 TH FLOOR, M.K.ROAD, MUMBAI - 400020 / VS. M/S. KAYTEE CORPORATION PVT. LTD. 7, MALHOTRA HOUSE, 2 ND FLOOR WALCHAND HIRACHAND MARG, OPP. GPO, FORT, MUMBAI - 400001 ./ ./PAN/GIR NO. : AAACK1732E ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 28.02.2017 /DATE OF PRONOUNCEMENT: 12.04.2017 / O R D E R PER SHAMIM YAHYA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, MUMBAI [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 31.12.2012 AND PERTAINS TO A.Y.2006-07. REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: MS. AARTI VISSANJI ITA NO.2277/MUM/2013 A.Y.2009-10 2 2. THE GROUNDS OF APPEAL ARE AS UNDER:-:- 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND F ACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEPRECIATION O N MOTOR CAR, IGNORING THAT AO HAD CORRECTLY DISALLOWED THE CLAIM AS THE CAR WAS NOT REGISTERED IN THE COMPANYS NAME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN EXCLUDING THE INTEREST OF R S.31,07,917/- FROM THE COMPUTATION OF DISALLOWANCE U/S.14A, HOLDI NG THAT INTEREST ON CAR LOAN, PACKING CREDIT INTEREST AND T ERM LOAN INTEREST CANNOT BE ATTRIBUTED TO INVESTMENT IN SECU RITIES, IGNORING THAT THE SAID INTEREST IS RELATED TO ASSETS AND NOT TO INCOME AND THEREFORE CANNOT BE EXCLUDED FROM THE GROSS INTERES T. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF PRIOR PERIOD EXPENSES DISALLOWED IN A.Y.2007-08, IGNORING THAT T HE ASSESSEE HAD NOT MADE A CLAIM IN ITS RETURN FOR THE A.Y.2006 -07 NOR FILED A REVISED RETURN OF CLAIM THE SAID EXPENSES, WHICH IS IN CONTRAVENTION OF THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF GOETZ (INDIA) LTD. [284 ITR 323]. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASID E AND THAT OF THE AO RESTORED. APROPOS GROUND NO. 1:- 3. ON THIS ISSUE ASSESSING OFFICER DISALLOWED THE C LAIM OF DEPRECIATION ON MOTOR CAR SINCE THE SAME WAS REGIST ERED IN THE NAME OF THE DIRECTOR AND NOT THE COMPANY. BEFORE THE LE ARNED CIT(A) ASSESSEE SUBMITTED THAT PURCHASE CONSIDERATION HAS BEEN PAID BY THE ASSESSEE COMPANY AND THE MOTOR CAR WAS ACCOUNTED FO R IN THE BOOKS OF THE ASSESSEE COMPANY AS PART ITS FIXED ASSETS. TH AT THE MOTOR CAR WAS ITA NO.2277/MUM/2013 A.Y.2009-10 3 USED FOR THE BUSINESS PURPOSE OF THE COMPANY. CONS IDERING THE ABOVE LEARNED CIT(A) HELD AS UNDER:- 3.3 IN MYSORE MINERALS LTD. VS. CIT (1999) 156 CTR (SC) 1 : (1999) 239 ITR 775 (SC) THE SUPREME COURT HAS HELD THAT ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HA VING RIGHT TO USE AND OCCUPY THE PROPERTY IN HIS OWN RIGHT WOULD BE T HE OWNER OF BUILDING FOR THE PURPOSE OF S. 32(1) THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED, AND HE WOULD BE ENTIT LED TO DEPRECIATION THEREON. 3.4 IN VIEW OF THE AFORESAID FACTS AND CASE LAWS, T HE DEPRECIATION DISALLOWED BY THE AO AMOUNTING TO RS.2,49,149/- IS DELETED. 4. AGAINST THE ABOVE SAID ORDER THE REVENUE IS IN A PPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECO RDS. LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DEC ISION OF INCOME TAX APPELLATE TRIBUNAL IN CASE OF EDWISE CONSULTANT S PVT. LTD. IN ITA NO.391/MUM/2011 VIDE ORDER DATED 19.04.2013. O N THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE RELIED UPON T HE ORDER OF THE SAME ASSESSEE FOR SUBSEQUENT ASSESSMENT YEAR VIDE O RDER DATED 14.10.2015 IN WHICH THE TRIBUNAL HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE. 5. ON CAREFUL CONSIDERATION WE FIND THAT THE INCOME TAX APPELLATE TRIBUNAL IN ITS ORDER DATED 14.10.2015 IN THE CASE OF EDWISE CONSULTANTS PVT. LTD. HAS HELD AS UNDER:- WE HAVE HEARD THE PARTIES ON THIS ISSUE AND PERUSE D THE RECORD. WE NOTICE THAT THE HONBLE GUJARAT HIGH COURT HAS CONS IDERED IDENTICAL ISSUE IN THE CASE OF ARAVALI FINLEASE LTD. (SUPRA) AND HAS TAKEN THE DECISION THAT THE DEPRECIATION IS ALLOWABLE IN THE HANDS OF THE COMPANY, ITA NO.2277/MUM/2013 A.Y.2009-10 4 EVEN IF IT IS REGISTERED IN THE NAME OF ITS DIRECTO R PROVIDED THAT THE VEHICLE IS USED FOR THE PURPOSE OF BUSINESS OF COMPANY AND INCOME DERIVED THERE FROM WAS SHOWN AS INCOME OF THE COMPANY. IN THE IN STANT CASE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE VEHICLE S ARE USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. IN TH E INSTANT CASE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE VEHICLE S ARE USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. IN TH E CASE OF BASTI SUGAR MILLS CO. LTD. (SUPRA), THE HONBLE DELHI HIGH COUR T APPROVED THE DECISION OF THE TRIBUNAL IN HOLDING THAT, SINCE VEH ICLE IS A MOVABLE ASSET, THE REGISTRATION AS REQUIRED IN THE CASE OF TRANSFE R OF IMMOVABLE PROPERTY IS NOT A CONDITION PRECEDENT FOR LEGAL OWNERSHIP. IN THE INSTANT CASE, THE FUNDS FOR PURCHASE OF VEHICLES HAVE BEEN PROVIDED B Y THE ASSESSEE COMPANY AND THEY HAVE BEEN SHOWN AS ASSETS OF THE A SSESSEE COMPANY. HENCE, IN OUR VIEW, THE ASSESSEE COMPANY SHOULD BE CONSIDERED AS OWNER FOR ALL PRACTICAL PURPOSES AND HENCE IT IS ENTITLED FOR DEPRECIATION. IN VIEW OF THE DIRECTION DECISION OF HONBLE GUJARAT H IGH COURT IS AVAILABLE ON THIS ISSUE, WE PREFER TO FOLLOW THE SA ME TO THAT RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y.200 7-08. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEPRECIATION ON VEHICLES. 6. SINCE ABOVE DECISION OF THE TRIBUNAL HAS BEEN PA SSED AFTER TAKING INTO ACCOUNT HONBLE GUJARAT HIGH COURT AND HONBLE DELHI HIGH COURT DECISIONS, FOLLOWING THE ABOVE SAID DECI SIONS WE UPHOLD THE ORDER OF THE LEARNED CIT(A). HENCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. APROPOS GROUND NO. 2:- 7. ON THIS ISSUE THE ASSESSE HAD EXPLAINED TO THE A SSESSING OFFICER AS UNDER:- DURING THE YEAR UNDER ASSESSMENT, OUR ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. OUR ASSESSEE HAS NOT INCURRED ANY E XPENSES FOR EARNING NIL EXEMPT INCOME. OUR ASSESSEE HAS NOT INCURRED ANY EXPENSES FOR EARNING NIL EXEMPT INCOME. THERE ARE NO DIRECT / INDIRECT EXPENSES INCURRED BY OUR ASSESSEE FOR EARNING NIL EXEMPT I NCOME. AS NO ITA NO.2277/MUM/2013 A.Y.2009-10 5 DEDUCTION HAVE BEEN CLAIMED, QUESTION OF DISALLOWAN CE OF SUCH EXPENSES U/S.14A DOES NOT ARISE. 8. ASSESSING OFFICER DID NOT ACCEPT THIS PROPOSITIO N. HE PROCEEDED TO MAKE DISALLOWANCE UNDER RULE 8D BY PLA CING RELIANCE UPON THE DECISION OF THE INCOME TAX APPELLATE TRIBU NAL, SPECIAL BENCH IN THE CASE OF M/S. DAGA CAPITAL MANAGEMENT. ACCORDINGLY, HE MADE A DISALLOWANCE OF RS.2,74,112/-. UPON ASSE SSEES APPEAL LEARNED CIT(A) HELD THAT ASSESSEE SHOULD BE GRANTED RELIEF FOR THE INTEREST PAID ON CAR LOAN, PACKING CREDIT INTEREST AND TERM LOAN INTEREST WHICH CANNOT BE ATTRIBUTED TO INVESTMENT IN SECURIT IES. THIS RESULTED IN THE DISALLOWANCE BEING RESTRICTED TO RS.69,140/- . AGAINST THIS ORDER REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE BOTH THE COUNSEL AND PERUSED THE RECORDS . WE FIND THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN T HE PRESENT ASSESSMENT YEAR. HENCE ON THE BASIS OF HONBLE DEL HI HIGH COURT DECISION IN THE CASE OF CHEMINVEST LTD. VS. CIT (37 8 ITR 33), SINCE NO EXEMPT INCOME HAS BEEN EARNED NO DISALLOWANCE U/ S.14A OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) IS LIABL E TO BE MADE. HOWEVER, IN THIS CASE CIT(A) HAS AFFIRMED THE DISAL LOWANCE OF RS.69,140/-. IN THIS VIEW OF THE MATTER REVENUE CA NNOT HAVE ANY GRIEVANCE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). APROPOS GROUND NO. 3:- 10. BRIEF FACTS ON THIS ISSUE ARE AS UNDER:- ITA NO.2277/MUM/2013 A.Y.2009-10 6 7.1 THE ASSESSE DURING THE COURSE OF APPELLATE PRO CEEDINGS VIDE LETTER DATED 03.12.2008 STATED THAT THE ASSESSEE HA S DISALLOWED AN EXPENDITURE OF RS.32,74,839/- IN A.Y.2007-08 AS PRIOR PERIOD EXPENSES. THEREFORE THE SAME SHOULD BE ALLOWED AS EXPENDITURE DURING THE YEAR AS THE SAME PERTAINS TO THE A.Y. UN DER QUESTION. 7.2 THE AO DID NOT CONSIDER THE APPELLANTS CLAIM S TATING THAT THE APPELLANT HAS NOT FILED ANY REVISED RETURN AS REQUI RED IN THE CASE OF GOETZ INDIA (LTD.) 284 ITR 323. 11. UPON ASSESSEES APPEAL LEARNED CIT(A) HELD THAT ASSESSING OFFICER HAS NOT DOUBTED THAT THE EXPENDITURE DOES N OT PERTAIN TO THE YEAR UNDER CONSIDERATION BUT HIS ONLY OBJECTION IS THAT THE ASSESSEE HAS NOT FILED THE REVISED RETURN. THE LEARNED CIT(A) P LACED RELIANCE UPON THE HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF BALMUKUND ACHARYA, ITA 217/2001 310 ITR 310. HE HELD THAT PR IOR PERIOD EXPENSES ARE THEREFORE ALLOWED. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSING OFFICER HAS NOT ACCEPTED THE AS SESSEES CLAIM OF PRIOR PERIOD EXPENDITURE ON THE BASIS THAT ASSESSEE HAS NOT FILED REVISED RETURN. NOWHERE IN THE ASSESSMENT ORDER, A SSESSING OFFICER HAS MENTIONED THAT OTHERWISE HE IS SATISFIED WITH THE E XPENDITURE CLAIMED. IN OUR CONSIDERED OPINION LEARNED CIT(A) HAS ERRED IN APPRECIATING THESE ASPECT SINCE ASSESSING OFFICER HAS NOT EXAMIN ED THE VERACITY OF THESE EXPENDITURES. WE REMAND THE ISSUE TO THE FIL E OF THE ASSESSING OFFICER. ASSESSING OFFICER WILL EXAMINE THE VERACI TY OF THESE ITA NO.2277/MUM/2013 A.Y.2009-10 7 EXPENDITURES AND ALLOW ACCORDINGLY AS PER LAW. NEE DLESS TO AS ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 13. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017 . SD/- SD/- (RAVISH SOOD) (SHAMIM YAHYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12 TH ' , 2017 MP () *#) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ( ) / THE CIT(A)- 4. ' / CIT 5. * , * , / DR, ITAT, MUMBAI 6. ) +, / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI