DCIT LTU-1, CHENNAI V. Wheels India Limited, CHENNAI

ITA 2395/CHNY/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4099 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 28-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Capital expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2395/CHNY/2017 ( )( / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, LTU 1, CHENNAI. V. M/S WHEELS INDIA LIMITED, PADI, CHENNAI - 600 050. PAN : AAACW 0315 K (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NO.2341/CHNY/2017 ( )( / ASSESSMENT YEAR : 2012-13 M/S WHEELS INDIA LIMITED, PADI, CHENNAI - 600 050. V. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU 2, CHENNAI - 600 101. (+,/ APPELLANT) (-.+,/ RESPONDENT) / 0 1 /REVENUE BY : DR. M. SRINIVASA RAO, CIT (23 0 1 /ASSESSEE BY : SH. R. VIJAYARAGHAVAN, ADVOCATE 4 0 3% / DATE OF HEARING : 27.09.2018 5') 0 3% / DATE OF PRONOUNCEMENT : 11.10.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH REVENUE AND THE ASSESSEE HAVE FILED THE APP EALS AGAINST THE VERY SAME ORDER OF THE COMMISSIONER OF INCOME TAX 2 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 (APPEALS)-17, CHENNAI, DATED 30.06.2017 AND PERTAIN S TO ASSESSMENT YEAR 2012-13. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. LETS FIRST TAKE REVENUES APPEAL IN I.T.A. NO.2395/CHNY/2017. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WEIG HTED DEDUCTION CLAIMED UNDER SECTION 35(2AB) OF THE INCOME-TAX ACT , 1961 (IN SHORT 'THE ACT'). 4. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEPA RTMENTAL REPRESENTATIVE AND SH. R. VIJAYARAGHAVAN, THE LD.CO UNSEL FOR THE ASSESSEE. THE CIT(APPEALS) FOUND THAT THE PROVISIO N FOR LEAVE SALARY PAYABLE TO THE PERSONNEL WORKING AT RESEARCH & DEVELOPMENT FACILITY WAS DISALLOWED BY THE ASSESSIN G OFFICER. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE PROVISION FOR LEAVE SALARY WAS CLAI MED AT 100% AND THE ASSESSEE HAS CLAIMED WEIGHTED DEDUCTION UNDER S ECTION 35(2AB) OF THE ACT. HENCE, THE ASSESSING OFFICER F OUND THAT THE PROVISION FOR LEAVE SALARY CANNOT BE ALLOWED. THE CIT(APPEALS), AFTER REFERRING TO THE ORDER OF THIS TRIBUNAL IN TH E ASSESSEE'S OWN 3 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 CASE FOR ASSESSMENT YEAR 2010-11 IN I.T.A. NO.383/M DS/2014 DATED 26.09.2014, ALLOWED THE CLAIM OF THE ASSESSEE. SIN CE THE CIT(APPEALS) HAS FOLLOWED THE ORDER OF THIS TRIBUNA L IN THE ASSESSEE'S OWN CASE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO THE CLAIM OF THE ASSESSEE ON ACCOUNT OF UNREALISED EXCH ANGE LOSS IN RESPECT OF DERIVATIVE TRANSACTIONS. 6. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEPA RTMENTAL REPRESENTATIVE AND SH. R. VIJAYARAGHAVAN, THE LD.CO UNSEL FOR THE ASSESSEE. ACCORDING TO THE LD. COUNSEL FOR THE AS SESSEE, INTEREST ON WORKING CAPITAL EXPENDITURE IS REVENUE EXPENDITU RE. THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE UNREALISED LOSS WAS DUE TO REINSTATEMENT OF FORWARD CONTRACT I N RESPECT OF THE AMOUNT OF LOSS ON REINSTATING THE CONTRACTS AS ON T HE CLOSING DATE OF THE ACCOUNTING YEAR. IN THIS CASE, THE CIT(APPEALS ) DIRECTED THE ASSESSING OFFICER TO VERIFY THE MATTER IN THE ABSEN CE OF DETAILS OF THE FORWARD CONTRACT ON THE LOANS BORROWED. THEREFORE, THIS TRIBUNAL DO 4 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DEPRE CIATION ON UPS. 8. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEPA RTMENTAL REPRESENTATIVE AND SH. R. VIJAYARAGHAVAN, THE LD.CO UNSEL FOR THE ASSESSEE. UPS IS A PART OF COMPUTER. THEREFORE, T HE CIT(APPEALS) HAS RIGHTLY ALLOWED THE DEPRECIATION AT THE RATE OF 60%. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 9. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE UNDER SECTION 14A OF THE ACT. 10. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEP ARTMENTAL REPRESENTATIVE AND SH. R. VIJAYARAGHAVAN, THE LD.CO UNSEL FOR THE ASSESSEE. ADMITTEDLY, THERE WAS NO DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THER EFORE, IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN REDINGTON (IND IA) LTD. V. ADDL. CIT (2017) 77 TAXMANN.COM 257, THE ASSESSING OFFICE R CANNOT 5 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 DISALLOW ANY EXPENDITURE UNDER SECTION 14A OF THE A CT. IN FACT, THE CIT(APPEALS) HAS FOLLOWED THE JUDGMENT OF MADRAS HI GH COURT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 12. NOW COMING TO THE ASSESSEES APPEAL IN I.T.A. NO.2341/CHNY/2017. 13. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DIS ALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT. 14. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE A SSESSEE, SUBMITTED THAT THE ASSESSEE HAS CAPITALIZED THE NOT IONAL INTEREST WHICH IS ATTRIBUTABLE TO THE FIXED ASSET ON UTILIZA TION OF BORROWED FUNDS. THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE HAS BORROWED WORKING CAPITAL FUND, THEREFORE, THE NOTIONAL INTER EST HAS TO BE CAPITALIZED AS PER ACCOUNTING STANDARD 16. 15. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEP ARTMENTAL REPRESENTATIVE ALSO. THE LOAN BORROWED AND USED FO R CAPITAL 6 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 PURPOSE HAS TO BE CAPITALIZED TILL THE CAPITAL BORR OWED WAS PUT TO USE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY DISAL LOWED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY TH E SAME IS CONFIRMED. 16. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF EXPENDITURE UNDER SECTION 35(2AB) OF THE ACT. 17. WE HEARD BOTH DR. M. SRINIVASA RAO, THE LD. DEP ARTMENTAL REPRESENTATIVE AND SH. R. VIJAYARAGHAVAN, THE LD.CO UNSEL FOR THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED THE CLA IM OF THE ASSESSEE ON THE GROUND DSIR HAS NOT APPROVED THE PR OJECT. IT IS NOT THE CASE OF THE ASSESSEE THAT DSIR HAS GRANTED ITS APPROVAL. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 18. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO THE DIRECTION OF THE CIT(APPEALS) TO CONSIDER WHETHER T HE FORWARD CONTRACT WAS IN EXCESS OF THE EXPORT TURNOVER OF TH E ASSESSEE AND 7 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 ALSO TO EXAMINE WHETHER THERE WAS ANY PREMATURE CAN CELLATION OF FORWARD CONTRACT. 19. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE A SSESSEE, SUBMITTED THAT THE ASSESSING OFFICER RE-EXAMINED TH E MATTER AS PER THE DIRECTION OF THE CIT(APPEALS) AND ALLOWED THE C LAIM OF THE ASSESSEE. THEREFORE, THIS GROUND BECOMES INFRUCTUO US. ACCORDINGLY, THE LD.COUNSEL SUBMITTED THAT HE IS NO T PRESSING THIS ISSUE. IN VIEW OF THE ABOVE, THIS GROUND IS DISMIS SED AS NOT PRESSED. 20. THE NEXT ISSUE ARISES FOR CONSIDERATION IS REIN STATEMENT OF WORKING CAPITAL (PACKING CREDIT FACILITY LOAN). 21. WE SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR TH E ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT FOREIGN EXCHANGE LOSS O UTSTANDING WAS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. ACCORDIN G TO THE LD. COUNSEL, THE ASSESSEE IN FACT DEBITED THE SAME IN T HE PROFIT & LOSS ACCOUNT. THEREFORE, IT HAS TO BE VERIFIED BY THE A SSESSING OFFICER. 8 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 22. ON THE CONTRARY, DR. M. SRINIVASA RAO, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT SINCE THE ASSESSEE C LAIMS THAT IT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT, THE ASSES SING OFFICER HAS TO VERIFY WHETHER IT IS A QUANTIFIED DEBIT OR NOT. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF B OTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE OF LOSS ARISING F ROM REINSTATEMENT OF WORKING CAPITAL IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE TH E MATTER IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD AND VERIF Y WHETHER THE ASSESSEE HAS DEBITED THE LOSS TO PROFIT & LOSS ACCO UNT AS CLAIMED AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 24. IN THE RESULT, THE REVENUES APPEAL IN I.T.A. NO.2395/CHNY/2017 IS DISMISSED, WHEREAS, THE ASSESS EES APPEAL IN I.T.A. NO.2341/CHNY/2017 IS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. 9 I.T.A. NO.2395/CHNY/17 I.T.A. NO.2341/CHNY/17 ORDER PRONOUNCED IN THE COURT ON 11 TH OCTOBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 11 TH OCTOBER, 2018. KRI. 0 -389 :9)3 /COPY TO: 1. (23 /ASSESSEE 2. ASSESSING OFFICER 3. 4 ;3 () /CIT(A)-17, CHENNAI. 4. CIT (LTU), CHENNAI 5. 9< -3 /DR 6. ( = /GF.