M/s Minda Industries Ltd, New Delhi V. Deputy Commissioner of Income-tax, New Delhi

ITA 2464/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7077 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K KAPOOR
• Keywords: Capital asset; Depreciation; Search and seizure; Capital receipt
• Section: 143(3); 153A; 14A; 132

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2464/DEL/2015 ASSESSMENT YEAR: 2008-09 MINDA INDUSTRIES LTD., B - 64/1, WAZIRPUR INDUSTRIAL AREA, NEW DELHI (PAN AAACM1152C) (APPELLANT) VS. DCIT, CENTRAL CIRCLE 3 NEW DELHI (RESPONDENT) A PPELLANT BY SHRI R.K. KAPOOR, C.A. RE SPONDENT BY MS. PARMITA TRIPATHI, CIT/DR SHRI ATIQ AHMED, SR. DR ORDER PER L.P. SAHU, A.M.: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-25, NEW DELHI DATED 26.02.2015 FOR THE ASSES SMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS : 1) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE IN HOLDING THA T DISALLOWANCE U/S 14A IS REQUIRED TO BE MADE EVEN IF NO DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 2) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW IN IGNORING THE BINDING PRECEDENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HOLCIM INDIA PVT. LTD. AS NOTED BY HIM IN HIS ORDER. 3) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW IN NOT APPRECIATING THAT SECTION 14A READ WITH RULE 8D IS NOT TO BE APP LIED IN A MECHANICAL WAY. DATE OF HEARING 16.07.2018 DATE OF PRONOUNCEMENT 18 .07.2018 ITA NO. 2464/DEL/2015 2 4) THE DISALLOWANCE U/S 14A RED WITH RULE 8D IS BAD IN LAW AND PRAYED TO BE DELETED. 5) THAT THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE IN HOLDING THA T THE SALES TAX SUBSIDY OF RS.59,37,318/- RECEIVED BY THE ASSESSEE IS ON REVEN UE ACCOUNT. 6) THAT THE ORDER PASSED BY THE ASSESSING OFFICER A ND UPHELD BY THE CIT(A) HOLDING THAT SUBSIDY RECEIVED IS ON REVENUE A CCOUNT IS BAD IN LAW. 7) THAT THE CIT(A) HAS GROSSLY ERRED IN LAW IN CONC URRING WITH HIS PREDECESSOR WITHOUT APPLYING HIS MIND INDEPENDENTLY ON THE ISSUE. 8) THAT THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT ACCOUNTING TREATMENT GIVEN TO THE SUBSIDY REMAIN THE SAME SINC E BEGINNING AND THE TREATMENT GIVEN BY THE ASSESSEE TO THE SALES TAX SU BSIDY RECEIVED WAS THE ONLY LEGAL PERMISSIBLE TREATMENT. 9) THAT WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE H ELD THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE WAS ON CAPITAL ACC OUNT NOT TO LIABLE TO TAX AT ALL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ORIGINAL RETURN OF INCOME DECLARING INCOME OF RS.14,50,14,400/- ON 29. 09.2008. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE IT ACT ON 25.11.20 10 AT AN INCOME OF RS.15,74,98,021/-, THEREBY MAKING ADDITION OF RS.1, 24,83,621/- UNDER VARIOUS HEADS. THE ASSESSEE CHALLENGED THE ORIGINAL ASSESSM ENT ORDER IN APPEAL BEFORE THE LD. CIT(A), WHO VIDE ORDER DATED 29.08.2011 SUS TAINED THE ADDITIONS OF RS.69,37,318/- ON ACCOUNT OF SALES TAX SUBSIDY AND RS.30,34,861/- ON ACCOUNT OF DISALLOWANCE U/S. 14A OF THE IT ACT. THE ASSESSE E CHALLENGED THIS ORDER OF LD. CIT(A) BEFORE THE TRIBUNAL, WHO IN APPEAL NO. 5251/ DEL/2011 DELETED BOTH THE ADDITION. 3. HOWEVER, AS SPEAKS THE ASSESSMENT ORDER, THE ASS ESSING OFFICER OBSERVED THAT A SEARCH AND SEIZURE OPERATION WAS CA RRIED ON 10.01.2012 ON ITA NO. 2464/DEL/2015 3 THE BASIS OF WHICH THE ASSESSING OFFICER HAS MADE A SSESSMENT ORDER U/S. 153A ON 30.03.2014 BY MAKING EXACTLY THE SAME ADDITIONS AS MADE IN THE ORIGINAL ASSESSMENT ORDER. IN THIS ORDER, THE ASSESSING OFFI CER ALSO GAVE APPEAL EFFECT OF THE ORDER OF LD. CIT(A) PASSED IN APPEAL AGAINST TH E ORIGINAL ASSESSMENT ORDER, AND REDUCED THE ADDITIONS BY RS.34,88,662/- DELETED BY THE LD. CIT(A), AND ACCORDINGLY MADE ASSESSMENT AT THE TOTAL INCOME OF RS.15,40,09,360/-. THE ASSESSEE AGAIN CARRIED THE MATTER BEFORE THE LD. CI T(A), WHO SUSTAINED THE ADDITIONS OF RS.59,37,318/- ON ACCOUNT OF SALES TAX SUBSIDY AND RS.30,34,861/- ON ACCOUNT OF DISALLOWANCE MADE U/S. 14A OF THE IT ACT. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS AG AIN IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. AR OF THE ASSESSEE SUBMITTED A SMALL WRI TTEN SYNOPSIS, WHICH READS AS UNDER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) WHO HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING O FFICER. THIS IS THE SECOND ROUND OF APPEAL BEFORE THE HON'BL E ITAT, PURSUANT TO SEARCH U/S 132 CONDUCTED ON THE ASSESSEE ON 10.01.2 012 AS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN PARA 2 . THIS ORDER OF ASSESSMENT HAS BEEN PASSED BY THE ASSESSING OFFICER U/S 153AR.W.S. 143(3) OF THE INCOME TAX ACT, 1961. AS WOULD BE NOTED FROM THE ASSESSMENT ORDER, THE AS SESSING OFFICER HAS MADE THE ADDITIONS WHICH ARE CONTESTED IN THIS APPE AL ONLY ON THE GROUND THAT THESE ADDITIONS WERE MADE IN THE ORIGINAL ASSE SSMENT ORDER U/S 143(3) ON 25.11.2010 AND THESE ADDITIONS WERE CONFI RMED BY THE LD. CIT(A) AND ASSESSEE'S APPEAL IN HON'BLE ITAT ON THESE ADDITIONS ARE PENDING. AT THE STAGE OF CIT(A), THE LD. CIT(A) ALSO MERELY FO LLOWED THE ORDER OF HIS PREDECESSOR I.E. CIT(A)-9 AND UPHELD THESE ADDITIONS AS WOULD BE NOTED FROM PAGE 8 OF CIT(A)'S ORDER ON BOTH THE ADDITIONS. ITA NO. 2464/DEL/2015 4 THE ISSUES CAME UP BEFORE HON'BLE ITAT AGAINST THE O RIGINAL ASSESSMENT ORDERS AND ORDERS OF CIT(A) AND HON'BLE ITAT HAS DELE TED BOTH THE ADDITIONS AS WOULD BE NOTED FROM THE COPY OF HON'BL E ITAT IN ITA NO. 5251/D/2011 FOR A. Y. 2008-09. IT IS FURTHER SUBMITTED THAT ASSESSING OFFICER HAS MERELY REITERATED THE EARLIER ADDITIONS MADE AND NO INCRIMINATING MATERIA L PERTAINING TO THESE ADDITIONS WAS FOUND DURING THE SEARCH ON THE ASSESS EE. THEREFORE, THE ISSUES INVOLVED IN THE PRESENT APPEAL ARE ALREADY S ETTLED AS UNDER:- GROUND NO. 1 TO 4 RAISED BY THE ASSESSEE ARE ON DISALLOWANCE U/S 14A: THIS ISSUE HAS BEEN DISCUSSED BY THE HON'BLE FOR BOT H THE YEARS I.E. A. Y. 2007-08 AND 2008-09 AT PAGE 14 OF THE HON'BLE ITAT ORDER AND IT HAS BEEN HELD BY THE HON'BLE ITAT IN PARA 22 PAGE 16 OF THE SAID ORDER THAT SINCE ASSESSEE HAS NOT EARNED ANY DIVIDEND DURING T HE A. Y. 2007-08 AND 2008-09, NO DISALLOWANCE CAN BE MADE. THE LEGAL ASP ECT PERTAINING TO THIS ISSUE IS NOW WELL SETTLED AND THE ORDER OF THE HON' BLE ITAT IN ASSESSEE'S OWN CASE ON SAME ISSUE ON SAME YEAR MAY BE FOLLOWED , IT IS RESPECTFULLY SUBMITTED. GROUND NO, 5 TO 9 SALES TAX SUBSIDY WHETHER CAPITAL RECEIPT OR REVENUE RECEIPT: THIS ISSUE HAS ALSO BEEN ADJUDICATED UPON EARLIER IN A. Y. 2008-09 BY THE HON'BLE ITAT AND THE DISCUSSIONS STARTS FROM PAGE 8 PARA 9 ENDING WITH THE FINAL CONCLUSION OF THE HON'BLE ITAT AT PAGE 14, WHEREIN IT HAS BEEN HELD THAT THE SAID SUBSIDY IS A CAPITAL RECEIPT AND THE TREATMENT GIVEN BY THE ASSESSEE TO REDUCE IT FROM THE CAPITAL ASSETS A ND GRANT DEPRECIATION ACCORDINGLY IS A CORRECT TREATMENT. IT MAY BE CLARIFIED THAT SOME OF THESE ISSUES POST SEARCH ALSO CAME UP BEFORE THE HON'BLE ITAT FOR A. Y. 2009-10, 2010-11, 2011-12, 2012-13 AND HAS BEEN DECIDED BY THE HON'BLE ITAT POST SEARCH ASS ESSMENTS AND THE ORDERS EARLIER PASSED BY THE HON'BLE ITAT UNDER SIMI LAR CIRCUMSTANCES HAVE BEEN FOLLOWED AND THE APPEAL OF THE ASSESSEE H AS BEEN ALLOWED AS PER THE COPY OF ORDER BEING FILED. IT IS, THEREFORE PRAYED THAT THE APPEAL OF THE ASSE SSEE ON BOTH THE ISSUES MAY BE ALLOWED. ITA NO. 2464/DEL/2015 5 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 6. AFTER HEARING THE SUBMISSIONS OF BOTH THE PARTIE S AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT NO ADDITION HAS BE EN MADE BY THE AO ON THE BASIS OF SEARCH AND SEIZURE OPERATION REFERRED TO A BOVE. HOWEVER, THE ADDITIONS, WHATSOEVER, MADE IN THE ORIGINAL ASSESSM ENT ORDER HAVE BEEN AGAIN REPEATED. A PERUSAL OF THE ASSESSMENT ORDER SHOWS T HAT THE AO THOUGH HAS GIVEN APPEAL EFFECT OF THE ORDER OF THE LD. CIT(A), BUT SINCE BOTH THE IMPUGNED ADDITIONS HAVE ALREADY BEEN DELETED BY THE TRIBUNAL IN APPEAL EMANATED OUT OF ORIGINAL ASSESSMENT ORDER, THERE REMAINS NO JUST IFICATION TO SUSTAIN BOTH THE IMPUGNED ADDITIONS AT THIS STAGE, IF THE APPEAL EFF ECT OF THE ORDER OF TRIBUNAL, NOTED ABOVE, IS GIVEN BY THE ASSESSING OFFICER. WE, THEREFORE, ARE NOT INCLINED TO SUPPORT THE IMPUGNED ORDER. ACCORDINGLY, THE APP EAL OF THE ASSESSEE DESERVES TO BE ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2018. SD/- SD/- (BHAVNESH SAINI) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH JULY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI