Deep Industries Ltd., Ahmedabad V. The Addl.CIT, Range-1, Ahmedabad

ITA 247/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9886 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: TUSHAR HEMANI WITH P B PARMAR
• Keywords: Proportionate interest; Tax effect; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO.247 /AHD/2014 (ASSESSMENT YEAR:2008-09) DEEP INDUSTRIES LTD. 6 TH FLOOR, ASTRON TOWER, OPP. FUN REPUBLIC, S. G. HIGHWAY, AHMEDABAD APPELL ANT VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-1, 3 RD FLOOR, PRATYSKSH KAR BHAVAN, AMBAWADI, AHMEDABAD RESPONDENT & ITA NO. 444/AHD/2014 (ASSESSMENT YEAR:2008-09) ACIT (OSD), RANGE-1, A WING, ROOM NO. 308, 3 RD FLOOR, PRATYAKHA KAR BHAVAN, AMBAWADI, AHMEDABAD 380015 APPELLANT VS. M/S. DEEP INDUSTRIES LTD. OPP: SURYANARAYAN BUNGLOWS, SABARMATI KALOL STATE HIGHWAY, SABARMATI, AHMEDABAD 380005 RESPONDENT PAN: AAACD6915E ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 2 - / BY ASSESSEE : SHRI TUSHAR HEMANI WITH P. B. PARMAR, A.R. / BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /DATE OF HEARING : 01.09.2016 /DATE OF PRONOUNCEMENT : 30.11.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE ASSESSEE AND REVENUE HAVE FILED THE INSTANT CRO SS APPEALS FOR ASSESSMENT YEAR 2008-09 AGAINST CIT(A)-III, AHMEDAB ADS ORDER DATED 27.11.2013 PASSED IN CASE NO. CIT(A)-III/257/ADDL.C IT-1/12-13 IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. WE FIRST COME TO ASSESSEES APPEAL ITA NO.247/AH D/2014. IT RAISES THREE SUBSTANTIVE GROUNDS. FIRST ONE AMONGST THEM CHALLENGES BOTH THE LOWER AUTHORITIES ACTION IN DISALLOWING THE SUM IN QUEST ION OF RS.2,02,500/- INCURRED IN ORDER TO INCREASE ASSESSEES AUTHORIZED SHARE CAPITAL. THIS SUM COMPRISES OF FRANKING CHARGES OF RS.1,77,500/- FOR FILING FORM V FOLLOWED BY THE LETTER HEAD OF FILING FEES AMOUNTING TO RS.2500 0/-. BOTH THE LOWER AUTHORITIES QUOTE HONBLE APEX COURTS DECISION IN BROOKE BOND INDIA VS. CIT 225 ITR 798 (SC) AS FOLLOWED IN CASE OF M/S. VAREL I TEXTILES INDUSTRIES VS. CIT (2006) 284 ITR 238 (GUJ.). LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUES IN FAVOUR OF ASSESSEES GRIEVANCE PLEADED IN THE INSTANT GROUND. HE HOWEVER FAILS TO REBUT APPLICATION OF T HE ABOVE CASE LAW SQUARELY COVERING THE ISSUE. THIS FIRST SUBSTANTIVE GROUND IS ACCORDINGLY REJECTED. ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 3 - 3. THE ASSESSEES SECOND SUBSTANTIVE GROUND CHALLEN GES ADDITION OF RS.1,14,457/- MADE BY BOTH THE LOWER AUTHORITIES ON ACCOUNT OF RECONCILIATION OF RECEIPTS WITH TDS CERTIFICATE. THE ASSESSING OF FICER NOTICED ASSESSEES CLAIM OF TDS DEDUCTIONS TO THE TUNE OF RS.50,80,968 /-. HE SOUGHT TO RECONCILE THE SAID FIGURE IN ASSESSEES BOOK STATIN G LESSER INCOME. THE ASSESSEES LETTER DATED 19.10.2010 CLARIFIED THE SA ID SHORT FALL AS UNDER: SR.NO. PARTICULARS AMOUNT(RS.) 1. SELAN EXPLORATION TECHNOLOGY LTD. 9000 INCOME IS OF MARCH 2007 ACCOUNTED IN FY 2006- 07 BUT TDS DEDUCTED BY SELAN IN FY 2007- 08. WE ENCLOSE HEREWITH COPY OF INCOME VOUCHER AND: ACCOUNT OF 2006-07 AS PER ANNEXURE-1 2. INDIAN OIL CORPORATIONS LTD; THE SAID DIFFERENCE IS MAINLY DUE TO 3 REASONS I. INCOME OF FEBRUARY 2007 ACCOUNTED IN BY IOC IN FY 2007- 08 WE ENCLOSE AND ACCOUNT OF 2006-07 AS PER 14276 II. NO TDS DEDUCTED BY IOC ON PAYMENT -7696 III. INCOME OF FEB AND MARCH 2008 ACCOUNTED IN APRIL 2008, BUT TDS CLAIMED IN FY 2007-08 98878 INDIAN OIL CORPORATION LTD. 105457 AS PER NORMAL PRACTICE FOLLOWED BY COMPANY, WE ACCO UNTS THE HIRE CHARGES INCOME ONLY AFTER APPROVAL OF BILLS FROM; I OCL SINCE THE FINAL ACCOUNTS FOR FY 2007-08 WERE FINALISED ON 15.04.200 8 AND SAID BILLS OF RS. 98S78/- WERE NOT APPROVED BY IOCL UP TO THAT DATE, SAME COULD NOT BE ACCOUNTED IN THAT YEAR. WE CAME TO KNOW ABOUT BILL CLEARANCE ONLY AT THE TIME OF RECEIPT OF TDS CERTIFICATE, PAYMENT FOR THE SAID BILL WAS ALSO RECEIVED IN MAY 2008 SO WE HAVE ACCOUNTED THE SAME IN APRIL 2008. SINCE ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 4 - THE TAX RATE FOR FY 2007-08 AND FY 2008-09 ARE SAME AND THERE IS NO INTENTION TO ESCAPE INCOME, WE REQUEST YOU TO CONSI DER THE DIFFERENCE. 4. THE ASSESSING OFFICER QUOTED SECTION 199 R.W. RU LE 37BA(3) OF THE INCOME TAX RULES TO CONCLUDE THAT CREDIT OF TDS DED UCTION IS TO BE GIVEN IN ASSESSMENT YEAR IN WHICH INCOME IS ASSESSABLE. HE THUS CONCLUDED THAT THE CORRESPONDING INCOME IS ASSESSABLE IN THE IMPUGNED ASSESSMENT YEAR ONLY. HE WOULD ACCORDINGLY ADD THE SUM IN QUESTION OF RS. 1,14,457/- COMPRISING OF THE ABOVE TWO RECEIPTS OF RS.9000/- + 1,05,457/- IN QUESTION. 5. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) DO ES NOT DISTURB THE ASSESSING OFFICERS FINDING IN PRINCIPLE. THE ASSE SSEE APPEARS TO HAVE RAISED AN ALTERNATIVE CONTENTION OF HAVING DECLARED THE IN COME IN QUESTION IN THE SUCCEEDING ASSESSMENT YEAR. THE CIT(A) DIRECTS THE ASSESSING AUTHORITY TO VERIFY THIS PLEA AND RECTIFY ASSESSMENT IN ASSESSEE S CASE FOR THE SAID ASSESSMENT YEAR TO THE EXTENT OF THE IMPUGNED SUM I N ORDER TO AVOID DOUBLE TAXATION. 6. WE HAVE HEARD BOTH THE PARTIES. LEARNED COUNSEL SUBMITS THAT SECTION 199 OF THE ACT STANDS AMENDED W.E.F. 01.04.2008 AS APPLICABLE IN THE IMPUGNED ASSESSMENT YEAR. HIS CASE IS THAT THIS AM ENDED STATUTORY PROVISION PROVIDES THAT IF TDS IS DEDUCTED AND PAID TO THE GO VERNMENT, THEN IRRESPECTIVE OF THE FACT THAT INCOME ON WHICH TDS H AS BEEN DEDUCTED PERTAINS TO ANY OTHER ASSESSMENT YEAR, CREDIT FOR THE TDS MU ST BE GIVEN IN THE YEAR IN WHICH THE SAME IS DEDUCTED AND PAID TO THE GOVERNME NT. THE ASSESSEES FURTHER CONTENTS THAT PURPOSE OF THE SAID AMENDMENT IS TO REMOVE DIFFICULTIES QUA TIMING DIFFERENCE IN THE YEAR OF ACCOUNTING INC OME AND CLAIM OF CORRESPONDING TDS CREDITS. HIS FURTHER PLEA IS THA T CORRELATION BETWEEN INCOME AND TDS IN QUESTION NEED NOT BE ESTABLISHED ANY MORE. ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 5 - 7. THE REVENUE STRONGLY SUPPORTS THE CIT (A)S ORDE R UPHOLDING ASSESSING OFFICERS ACTION. 8. HEARD BOTH SIDES. CASE FILE PERUSED. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEES INCOME IN QUESTION HAS BEEN ADM ITTEDLY SUBJECTED TO TDS DEDUCTION IN THE IMPUGNED ASSESSMENT YEAR DESPITE T HE FACT THAT IT HAS NOT DECLARED ITS ENTIRE RECEIPT AS INCOME OF THE RELEVA NT PREVIOUS YEAR. BOTH THE LOWER AUTHORITIES QUOTE SECTION 199 OF THE ACT R.W . RULE 37BA (3) OF THE INCOME TAX RULES. WE FIRST COME TO THIS STATUTORY PROVISION AS AMENDED FROM 01.04.2009 APPLICABLE FROM THE IMPUGNED ASSESS MENT YEAR 2008-09. SECTION 199(1) PROVIDES THAT CREDIT FOR THE TDS DED UCTION AND PAID TO THE CENTRAL GOVERNMENT IS TO BE TREATED AS PAYMENT OF T AX OF THE DEDUCTEE ASSESSEE. THIS IS FOLLOWED BY SUB-SECTION 2 IN ANY CASE IS NOT RELEVANT HERE SO FAR AS THE ISSUE IN QUESTION IS CONCERNED. SUB SEC TION 3 TO SECTION 199 PRESCRIBES THAT THE BOARD MAY FRAMED RULES REGARDIN G SUB SECTION 1 & 2 HEREINABOVE FOR THE PURPOSE OF GIVING CREDIT OF TDS DEDUCTED OR TAXES PAID AND ALSO THE ASSESSMENT YEAR FOR WHICH SUCH CREDIT MAY BE GIVEN. 9. WE PROCEED FURTHER AND COME TO RULE 37BA OF THE INCOME TAX RULES IN ITS AMENDED AVATAR W.E.F. 01.04.2009. A CO-ORDI NATE BENCH OF THIS TRIBUNAL IN PARMANAND TIWARI VS. ITO ITA NO.2417/KOL/2013 HO LDS THAT THIS AMENDED RULE IS RETROSPECTIVELY APPLICABLE FROM 01.04.2008 BEING CLARIFICATORY IN NATURE IN ORDER TO REMOVE DIFFICULTY. WE REITERATE THAT WE ARE IN ASSESSMENT YEAR 2008-09. BOTH THE LOWER AUTHORITIES QUOTE RUL E 37BA(3) TO CONCLUDE THAT THE IMPUGNED INCOME NOT DECLARED IN THE IMPUGN ED ASSESSMENT YEAR DESERVES TO BE ADDED SO AS TO ENSURE COMPLIANCE OF THIS RULE. WE OBSERVE IN THESE FACTS THAT THIS ACTION ON PART OF BOTH THE LO WER AUTHORITIES GOES CONTRARY TO THE ABOVE STATED RULE. IT MAINLY TALKS ABOUT CR EDIT FOR TDS DEDUCTION AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT FOR THE A SSESSMENT YEAR FOR WHICH ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 6 - SUCH INCOME IS ASSESSABLE AND NOT VICE VERSA SINCE THE AUTHORITIES BELOW RATHER ADDED THE INCOME IN THE IMPUGNED ASSESSMENT YEAR. WE FURTHER NOTICE THAT CLAUSE (II) OF SUB-RULE 3 OF RULE 37BA ENVISAG ES THAT CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOSE Y EARS IN THE SAME PROPORTION IN WHICH THE INCOME IS ASSESSABLE TO TAX. WE REPEAT ONCE AGAIN THAT THIS CLAUSE NO WHERE PRESCRIBES ADDITION OF INCOME COMPO NENT SINCE DEALING WITH TDS CREDIT ISSUE ONLY. WE RATHER OBSERVE THAT THES E EXPRESSIONS MAKE IT CLEAR THAT MAIN ENDEAVOR IN THE RULE IN QUESTION DEALS WI TH AN ISSUE WHEREIN AN INCOME IS SPLIT OVER IN MORE THAN ONE ASSESSMENT YE AR AS AGAINST FACTS OF THE CASE WHEREIN THERE IS NO SUCH CIRCUMSTANCE. WE THUS CONCLUDE THAT THE IMPUGNED ADDITION IS NOT SUSTAINABLE. THE SAME STA NDS DELETED. 10. THE ASSESSEES THIRD SUBSTANTIVE GROUND CHALLEN GES SECTION 14A DISALLOWANCE OF RS.10,51,614/- COMPRISING OF PROPOR TIONATE INTEREST AND ADMINISTRATIVE EXPENSES FIGURES OF RS.1,93,297/- AN D RS.8,58,317/-; RESPECTIVELY. THE ASSESSEES DIVIDEND INCOME IS RS .1,29,31,565/-. IT CLAIMS TO HAVE NOT INCURRED ANY EXPENDITURE REGARDING THE SAME. THE ASSESSING OFFICER DOES NOT APPEAR TO HAVE RECORDED ANY SATISF ACTION QUA THIS OBJECTION AFTER HAVING REGARD TO ASSESSEES BOOKS STIPULATED IN SECTION 14A(2) OF THE ACT AND COMPUTED THE CORRESPONDING DISALLOWANCE AS INDICATED HEREINABOVE. THE CIT(A) AFFIRMS ASSESSING OFFICERS ACTION. 11. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES FIRST ARGUMENT IS THAT IT HAD SUFFICIENT INTEREST FREE FUNDS OF RS.71,14,36,5 70/- IN THE NATURE OF RESERVES AND SURPLUS AS ON 31.03.2009 AGAINST INVES TMENTS OF RS.7,28,88,623/-. LD. COUNSEL QUOTES HONBLE JURISD ICTIONAL HIGH COURTS DECISION IN CIT VS. TORRENT POWER LTD. (2014) 363 I TR 474 (GUJ.) AND CIT VS. SUZLON ENERGY LTD. 354 ITR 630 DELETING IDENTIC AL DISALLOWANCES IN CASE OF SURPLUS INTEREST FREE FUNDS. LD. DEPARTMENTAL R EPRESENTATIVE FAILS TO REBUT ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 7 - THIS FACTUAL POSITION. WE ACCORDINGLY HOLD THAT TH E IMPUGNED PROPORTIONATE INTEREST DISALLOWANCE OF RS.1,93,297/- IS NOT SUSTA INABLE. THE SAME STANDS DELETED. 12. WE NOW COME TO ADMINISTRATIVE EXPENSES COMPONEN T OF RS.8,58,317/-. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER HAS NOT REBUTTED ASSESSEES MAIN CONTENTION TO HAVE NOT INCURRED ANY ADMINISTRA TIVE EXPENDITURE IN EARNING THE DIVIDEND INCOME IN QUESTION. NEITHER O F THE LOWER AUTHORITY REBUTS THIS CONTENTION BY REFERRING TO FACTS OF THE CASE. WE NOTICE IN THIS BACKDROP THAT HONBLE JURISDICTIONAL HIGH COURT IN PCIT VS. INDIA GELATINE & CHEMICALS LTD. (2015) 376 ITR 553 (GUJ.) UPHOLDS TR IBUNALS ORDER DELETING ADMINISTRATIVE EXPENDITURE DISALLOWANCE IN SIMILAR CIRCUMSTANCES. WE DRAW SUPPORT THEREFROM TO DELETE THIS COMPONENT OF THE I MPUGNED SECTION 14 DISALLOWANCE AS WELL. THE ASSESSEE SUCCEEDS IN THI RD AND LAST SUBSTANTIVE GROUND. ITS APPEAL ITA NO.247/AHD/2014 IS PARTLY A CCEPTED. 13. THIS LEAVES US WITH REVENUES CROSS APPEAL RAIS ING SOLE SUBSTANTIVE GROUND IN CHALLENGING THE CIT(A)S ORDER DIRECTING THE ASSESSING OFFICER TO ALLOW ENHANCED DEDUCTION U/S.35B OVER AND ABOVE THE ORIGINAL CLAIM OF RS.35.89 LACS MADE IN THE RETURN OF INCOME. THE AS SESSEE SOUGHT TO ENHANCE THE SAID CLAIM TO THE TUNE OF RS.61,21,968/-. LD. COUNSEL REPRESENTING ASSESSEE STATES IN THIS BACKDROP THAT THE INSTANT R EVENUES APPEAL DOES NOT SATISFY THE THRESHOLD TAX EFFECT LIMIT OF RS.10 LAC S AS PROVIDED IN BOARDS CIRCULAR NO. 21/2015 DATED 10.12.2015. 14. WE FURTHER NOTICE THAT REVENUES ARGUMENTS ON M ERITS QUOTE HONBLE APEX COURTS DECISION IN GOETZE INDIA LTD. VS. CIT (2006) 284 ITR 323 (SC) THAT ASSESSEES ABOVE CLAIM IS NOT ADMISSIBLE FOR W ANT OF REVISED RETURN. A PERUSAL OF THE SAID CASE LAW MAKES IT CLEAR THAT TH EIR LORDSHIPS CONCLUDE THAT ITA NO.247 & 444 AHD 2014 (M/. DEEP INDUSTRIES LTD. VS. ACIT) A.Y. 2008-09 - 8 - THE ABOVE PRE-CONDITION OF REVISED RETURN DOES NOT IMPINGE UPON JURISDICTION OF APPELLATE AUTHORITIES INCLUDING THIS TRIBUNAL UN DER THE PROVISIONS OF INCOME TAX ACT. WE THUS REJECT THIS REVENUES APPEAL ON M ERITS AS WELL. 15. ASSESSS APPEAL ITA NO. 247/AHD/2014 IS PARTLY ALLOWED AND REVENUES APPEAL ITA NO.444/AHD/2014 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF NOVEMBER, 2016.] SD/- SD/- (PRAMOD KUMAR) (S . S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/11/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0