The Dy. CIT, Circle-1(1)(2), Ahmedabad V. M/s. Chiripal Industries Ltd., Ahmedabad

ITA 2582/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8324 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 22-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV NAHATA
• Keywords: Depreciation; Earning of tax free income; Bad and doubtful debts; Scheme of amalgamation; Capital expenditure; Rule 8D
• Section: 143(3); 14A; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHRI AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER THE DCIT, CIRCLE - 1(1)(2), AHMEDABAD (APPELLANT) VS M/S. CHIRIPAL INDUSTRIES, SURVEY NO. 199/200/1, 2 SAIJPUR GOPALPUR PIRANA ROAD PIPLRJ AHMEDABAD - 382405 PAN: AAACC8513E (RESPONDENT) REVENUE BY : S H RI MUDIT N AGPAL , SR. D . R. ASSESSEE BY: SHRI GAURAV NAHATA, A.R. DATE OF HEARING : 20 - 03 - 2 019 DATE OF PRONOUNCEMENT : 27 - 03 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUN TANT MEMBER : - THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER LD. CIT(A) - 1 AHMEDABAD IN DELETING THE DISALLOWANCE U/S. 80IA OF R S. 3 , 96 , 92 , 887/ - AND RESTRICTING THE DISALLOWANCE U/S.14A OF RS. 94 , 21 , 047/ - TO RS. 2 LACS. 2. THE BRIEF FACT OF TH E CASE IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON VERIFICATION OF THE COMPUTATION OF INCOME, THE ASSESSING I T A NO . 2582 / A HD/20 17 A SS ESSMENT YEAR 2014 - 15 I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 2 OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 3,96,92,887/ - U/S. 80IA OF THE ACT. ON VERIFICATION OF FORM 10CCB, THE ASSESS ING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN ACTIVITY OF POWER GENERATION AND TOTAL VALUE OF MACHINERY AND PLANTS USED FOR THE SAID ACTIVITY WAS AT RS. 766.44 LACS AND THE POWER PLANT WAS ORIGINALLY INSTALLED BY THE ERSTWHILE OWNER M/S. SHANTI PROCESSING LTD PRIOR TO 01 - 04 - 2005. THE TOTAL VALUE OF POWER PLANT AS ON 31 ST MARCH, 2008 WAS RS. 7,66,75,468/ - OUT OF WHICH VALUE OF OLD MACHINERY WAS RS. 7,11,23,416/ - . HE WAS OF THE VIEW THAT THE POWER PLANT SET UP BY THE ASSESSEE WAS NOT A NEW POWER PLANT AND IT WA S FORMED BY TRANSFER OF OLD AND PREVIOUSLY USED MACHINERY THE VALUE OF WHICH WAS MORE THAN 90% OF THE TOTAL VALUE OF PLANT. IN VIEW OF THIS HE WAS OF THE OPINION THAT CLAIM OF ASSESSEE WAS NOT ALLOWABLE. HE WAS OF THE VIEW THAT THE POWER PLANT IN QUESTIO N WAS ALREADY USED BY SHANTI PROCESSING LTD. WHICH HAD SUBSEQUENTLY AMALGAMATED WITH THE ASSESSEE COMPANY. THE POWER PLANT WAS ORIGINALLY INSTALLED BY THE ERSTWHILE OWNER DURING FINANCIAL YEAR 2005 - 06. ORIGINAL COST OF PLANT WAS RS. 7,11,23,416/ - AND TH IS VALUE REPRESENT THE COST TO THE PREVIOUS OWNER MAINLY INCURRED DURING FINANCIAL YEAR 2004 - 05 AND INSTALLATION OF THE SAME WAS MADE DURING FINANCIAL YEAR 2005 - 06. HE HAS FURTHER STATED THAT AS PER PROVISIONS OF SECTION 80IA(12) WHEN ANY UNDERTAKING OF A N INDIAN COMPANY WHICH IS ENTITLED TO DEDUCTION UNDER THIS SECTION IS TRANSFERRED BEFORE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION TO ANOTHER COMPANY THEN CLAUSE (B) THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE AMALGAMATED COMPANY AS THEY WOULD H AVE APPLIED TO THE AMALGAMATING COMPANY IF THE AMALGAMATION HAD NOT TAKEN PLACE. HE HAS FURTHER STATED THAT IN THIS CASE IT IS NOT CLEAR WHETHER THE AMALGAMATING COMPANY I.E. SHANTI I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 3 PROCESSING LTD. WAS ELIGIBLE FOR CLAIMING U/S. 80IA OR NOT IN THE FIRST P LACE. IN VIEW OF THE SAME, THE CLAIM OF THE ASSESSEE WAS DISALLOWED. 3. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE STATING THAT WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2012 - 13. THE APPEAL OF THE ASSESSEE WAS ALLOWED BASED ON SIMILAR FACTS AND ISSUE. THE RELEVANT PART OF DECISION OF LD. CIT(A) IS AS UNDER: - I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION FILED BY THE APPELLANT. THE ASSESSEE COMPANY IS AN AM ALGAMATED COMPANY WHEREIN SHANTI PROCESSOR LTD WAS MERGED WITH THE ASSESSEE COMPANY WEF 01/04/2005 AS PER THE ORDER OF HON'BLE HIGH COURT OF GUJARAT DATED 31/03/2006. THE POWER PLANT WAS INSTALLED IN SHANTI PROCESSORS LTD. THE ASSESSING OFFICER HAS DISALLO WED THE CLAIM OF APPELLANT DEDUUCTION U/S 80IA ON TWO GROUNDS; FIRST, PLANT AND MACHINERY WAS OLD AND SECONDLY, IT WAS NOT CLEAR TO HIM WHETHER SHANTI PROCESSOR WAS ELIGIBLE TO CLAIM DEDUCTION. THE APPELLANT HAS SUBMITTED THAT ENTIRE PLANT WAS NEW ONE AND MACHINERY WERE PURCHASED BY SHANTI PROCESSOR LTD WHICH WAS AMALGAMATING COMPANY AND SINCE THE SAME WERE NOT USED PRIOR TO 01/04/2005, THE ASSETS CANNOT BE TREATED AS OLD MACHINERY. AS REGARDS ELIGIBILITY OF DEDUCTION, IT IS STATED BY THE APPELLANT THAT COM PANY HAD FULFILLED ALL THE REQUIRED CONDITION AND THEREFORE IT WAS ELIGIBLE. THE APPELLANT HAS FURTHER STATED THAT THE A.O. HAS NOT SPECIFICALLY POINTED OUT WHY THERE WAS ANY DOUBT IN THE MATTER. AS THE A.O. HAS NOT BROUGHT ON RECORD ANY ADVERSE MATERIAL I N THIS REGARDS, THE PRESUMPTION MADE BY HIM IS ON GUESS WORK AND NOT TENABLE IN THE EYES OF LAW. THE APPELLANT FURTHER SUBMITS THAT THE A.O. IN THE ASSESSMENT ORDER U/S. 143(3) FOR A.Y.2009 - 10 & A.Y.2010 - 11 HAD ALLOWED THE DEDUCTION CLAIMED ON IDENTICAL IS SUE AND THEREFORE SUCH REMARK FOR THE YEAR IS UNWARRANTED TO THE FACTS. 8.4. THE SUBMISSION OF THE ASSESSEE HAS BEEN GONE THROUGH CAREFULLY. UNDER SECTION 80IA, AN INDUSTRIAL UNDERTAKING WHICH GENERATES/DISTRIBUTES POWER CAN CLAIM DEDUCTION WITH FOLLOWING CONDITIONS: - > IT SHOULD BE A NEW UNDERTAKING > IT IS SET UP IN ANY PART OF INDIA FOR THE GENERATION OR GENERATION AND DISTRIBUTION OF POWER > IT SHOULD NOT BE FORMED BY TRANSFER OF OLD PLANT AND MACHINERY WITH RESTRICTION THAT VALUE OF OLD MACHINERY SH OULD NOT BE MORE THAN 20% OF THE TOTAL VALUE OF THE PLANT. > THE ACTIVITY SHOULD COMMENCE DURING THE SPECIFIED PERIOD. BEFORE GOING INTO THE MERIT OF THE ASSESSEE'S CASE FOR DEDUCTION U/S. 80IA(4) OF THE ACT, IT IS VERY IMPORTANT TO LOOK AT THE FACTS OF THE CASE RELATING TO THE CLAIM OF DEDUCTION U/S. 80IA(4) OF THE ACT THE ASSESSEE WAS HITHERTO CARRYING ON THE BUSINESS OF MANUFACTURING OF TRADING OF YARN, FABRICS AND GARMENT. THE ASSESSEE HAS STARTED THE GENERATION OF ENERGY IN THE PREVIOUS YEAR RELEVAN T TO A.Y. 2006 - 07 AND STARTED CLAIMING DEDUCTION U/S. 80IA(4) OF THE ACT FROM ASSESSMENT YEAR 2009 - 10, WHICH WAS FIRST YEAR OF ITS CLAIMED THE SAME WAS ALLOWED MEANING THEREBY THE A.O. WAS SATISFIED THAT THE APPELLANT HAD FULFILLED ALL THE CONDITIONS. AS S TATED ABOVE, THE PLANT & MACHINERY VALUING RS. 7,11,23,416/ - WERE INSTALLED IN THE FACTORY OF ERSTWHILE SHANTI PROCESSOR LTD. WHICH WAS TRANSFERRED TO CHIRIPAL INDUSTRIES LTD. ON AMALGAMATION BY THE ORDER OF GUJARAT HIGH COURT. THE POWER PLANT WAS ORIGINAL LY INSTALLED BY THE ERSTWHILE OWNER DURING FINANCIAL YEAR 2005 - 06. THE ORIGINAL COST OF THE SAID PLANT WHICH INCLUDED COAL HANDLING SYSTEM, BOILERS, STEAM TURBINE AND ELECTRICAL FITTINGS WAS OF RS.7,11,23,416/ - . THIS VALUE REPRESENTS THE COST TO THE I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 4 PREVIO US OWNER MAINLY INCURRED DURING FY 2004 - 05 THE INSTALLATION OF WHICH WAS DURING FY 2005 - 06. AS PER THE PROVISIONS OF SECTION 80IA(12) WHEN ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO DEDUCTION UNDER THIS SECTION IS TRANSFERRED BEFORE THE EXPI RY OF THE PERIOD SPECIFIED IN THIS SECTION TO ANOTHER INDIAN COMPANY THEN AS PER CLAUSE (B) THE PROVISION OF THIS SECTION SHALL APPLY TO THE AMALGAMATED COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING COMPANY IF THE AMALGAMATION HAD NOT TAKEN PLACE. THE CRUCIAL POINT IS THAT THE PROVISIONS OF SUB SECTION (12) WOULD ONLY APPLY IF THE AMALGAMATING COMPANY WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA. THE FACTS, ASSESSMENT ORDER AS WELL AS WRITTEN SUBMISSION PUT FORTH BY THE A.R., IT WOULD BE PROPER TO LOOK INTO THE RELEVANT PROVISION OF THE ACT WHICH READS AS FOLLOW: - 801A (12) WHERE ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO THE DEDUCTION UNDER THIS SECTION IS TRANSFERRED, BEFORE THE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION, TO ANO THER INDIAN COMPANY IN A SCHEME OF AMALGAMATION OR DEMERGER - (A) NO DEDUCTION SHALL BE ADMISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE DEMERGED COMPANY FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKES PLACE; AND (B) THE PROVI SIONS OF THEIR SECTION SHALL, AS FAR AS MAY BE, APPLY TO THE AMALGAMATED OR THE RESULTING COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING OR THE DEMERGED COMPANY IF THE AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE. 8.5. IT IS SEEN THAT SHANTI PROC ESSORS LTD WAS AMALGAMATED WITH THE APPELLANT COMPANY W.E.F. 01/04/2005 AS PER SCHEME APPROVED BY HON'BLE GUJARAT HIGH COURT VIDE ORDER DATED 31/03/2006 AND THE MAJORITY OF PLANT AND MACHINERY I.E. RS.71123416/ - (OUT OF TOTAL ADDITION OF RS.76675468/ - ) WAS ACQUIRED BY AMALGAMATING COMPANY WHICH WAS NOT USED AND WAS SHOWN IN WIP IN THE BALANCE SHEET OF AMALGAMATING CO., WHICH WERE TRANSFERRED TO THE APPELLANT ON AMALGAMATION. THE A.O. HAS PRESUMED THAT ADDITION OF RS. 711234167 - WAS OLD PLANT AND MACHINERY I N THE HANDS OF THE APPELLANT SINCE THE APPELLANT HAD NOT PURCHASED IT, WHICH IS NOT CORRECT INTERPRETATION OF LAW. THE AO HAS NOWHERE STATED THAT THE MACHINERY WHICH WAS PURCHASED IS OLD MEANING THEREBY THAT SHANTI PROCESSORS LTD HAD PURCHASED NEW MACHINER Y AND ALL THE BILLS WERE ALSO SUBMITTED BEFORE THE AO. NEW MACHINERY CANNOT BE TERMED AS OLD MERELY ON ITS TRANSFER DUE TO AN AMALGAMATION BY THE ORDER OF THE HIGH COURT. THE APPELLANT HAS VEHEMENTLY STATED THAT, IF THE INTERPRETATION IS DONE IN THIS MANNE R THEN IN ALL THE AMALGAMATION CASES BENEFIT WILL NOT BE AVAILABLE TO RESULTANT COMPANY AS THERE IS A TRANSFER OF MACHINERY IN ALL THE CASES. FURTHER, A MACHINERY DOES NOT BECOME OLD ON TRANSFER VIDE ORDER OF HIGH COURT AS THE EXISTING COMPANY GETS MERGED WITH THE NEW COMPANY AND THE EXISTENCE OF THE EXISTING COMPANY IS NO MORE. THE A.O. HAS NOT BROUGHT ON RECORD EVIDENCE TO SUBSTANTIATE HIS ARGUMENT BY SHOWING THAT PARTICULARS MACHINERY WAS PURCHASED BY SHANTI PROCESSOR LTD WHICH WAS ALREADY USED. THEREFOR E, NEW MACHINERY ' PURCHASED BY SHANTI PROCESSORS LTD CANNOT BE TERMED AS OLD MACHINERY SINCE DUE TO SCHEME OF AMALGAMATION; APPELLANT IS LEGALLY ENTITLED TO CLAIM DEDUCTION. THEREFORE, ON AMALGAMATION, THE APPELLANT BECAME ENTITLED TO ALL THE BENEFITS WHI CH WERE AVAILABLE TO THE AMALGAMATING COMPANY NAMELY SHANTI PROCESSORS LTD. IT IS ALSO NOTED THAT SIMILAR CLAIM WAS MADE BY THE APPELLANT IN THE ASSESSMENT YEAR 2009 - 10, WHICH WAS FIRST YEAR OF ITS CLAIM AND THE SAME WAS ALLOWED MEANING THEREBY THE A.O. WA S SATISFIED THAT THE APPELLANT HAD FULFILLED ALL THE CONDITIONS. THERE IS NO CHANGE IN FACTS AND THEREFORE, IT IS NOT PROPER TO AGAIN REVISIT THE ELIGIBILITY OF CLAIM MORE SO WHEN THERE IS NO CHANGE IN FACTS. THE DECISION RELIED UPON BY THE A.R. IN THE CA SES OF DYNEMIC PRODUCTS LTD AS WELL AS THAT OF INCOME TAX OFFICER V/S. LAST PEAK DATA PVT. LTD. ITA NO. 154&155/KOL/2013(SUPRA), WHEREIN IT IS HELD AS UNDER: 'AMALGAMATION OF ANOTHER COMPANY WITH ASSESSEE - ADMITTEDLY, AMALGA MATING COMPANY LP LTD. WAS ENJOYING STP UNIT STATUS - THUS THERE IS NO QUESTION OF THE ASSESSEE HAVING BEEN FORMED BY SPLITTING UP OR RECONSTRUCTION OF A UNIT ALREADY IN EXISTENCE - ASSESSEE WAS ALREADY AN EXISTING UNIT - LP LTD. HAD NOT AVAILED DEDUCTION UNDE R S. 10A FOR PERIOD BEYOND TEN YEARS BEFORE AMALGAMATION WITH THE ASSESSEE. THEREFORE, THERE IS NO VIOLATION OF THE CONDITIONS LAID DOWN IN S. 10AA(4)(II) AND (III) BY THE ASSESSEE'. THE RATIO OF THE ABOVE CASE LAWS SUPPORTS THE CASE OF THE APPELLANT. UND ER THESE FACTS, I AM INCLINED WITH THE CONTENTION OF THE A.R. THAT DEDUCTION CLAIMED CANNOT BE DENIED. ACCORDINGLY, I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 5 A.O. IS DIRECTED TO ALLOW THE CLAIM U/S 801 A AS CLAIMED BY THE APPELLANT. THE GROUND OF THE APPEAL IS ALLOWED. 4. DURING THE COURSE OF A PPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL AT THE OUTSET BROUGHT TO OUR NOTICE THAT IDENTICAL ISSUE ON SIMILAR FACTS IN THE CASE OF ASSESSEE ITSELF WAS DECIDED BY TH E CO - ORDINATE BENCH OF THE ITAT VIDE ITA NO. 900/AHD/2016 AND ITA NO. 1547/AHD/2016 FO R THE ASSESSMENT YEAR 2010 - 11 TO 2012 - 13. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE SAME AND NOTHING HAS BROUGHT TO OUR NOTICE SUGGESTING THAT T H E DECISION OF HON BLE ITAT IS NOT APPLICABLE. WITH THE ASSISTANCE OF LD. REPRESENTATIVES , WE HAVE GONE THROUGH THE AFORESAID DECISION OF THE CO - ORDINATE BENCH OF THE ITAT. RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 25. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT WAS UNDISPUTED FACT THAT THAT E NTIRE PLANT WAS NEW ONE AND MACHINERY WERE PURCHASED BY SHANTI PROCESSOR LTD WHICH WAS AMALGAMATING COMPANY AND SINCE THE SAME WERE NOT USED PRIOR TO 01/04/2005 AND IN THE ASSESSMENT ORDER U/S. 143(3) FOR A.Y.2009 - 10 & A.Y.2010 - 11 THE ASSESSING OFFICER HA D ALLOWED THE DEDUCTION ON IDENTICAL ISSUE AND SIMILAR FACTS. THE ASSESSEE HAS STARTED THE GENERATION OF ENERGY IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2006 - 07 AND STARTED CLAIMING DEDUCTION U/S. 80IA(4) OF THE ACT FROM ASSESSMENT YEAR 2009 - 10, WHICH WAS FIRST YEAR OF ITS CLAIMED AND THE SAME WAS ALLOWED MEANING THEREBY THE A.O. WAS SATISFIED THAT THE ASSESSEET HAD FULFILLED ALL THE CONDITIONS. IT IS ALSO NOTICED THAT THE ASSESSEE HAS EXPLAINED ITS ENTITLEMENT FOR THE IMPUGNED CLAIM OF DEDUCTION UNDER SE CTION 80IA(12) AS UNDER: - 'THE POWER PLANT, IN QUESTION, WAS TRANSFERRED TO ASSESSEE COMPANY UNDER THE SCHEME OF AMALGAMATION OF TWO COMPANIES VIZ SHANTI PROCESSORS LTD & CHIRIPAL PETRO CHEMICALS LTD. M/S SHANTI PROCESSORS LTD. WAS AMALGAMATING COMPANY & C HIRIPAL PETRO CHEMICALS LTD. WAS AMALGAMATED COMPANY UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE SCHEME OF AMALGAMATION WAS APPROVED BY HON'BLE HIGH COURT OF GUJARAT, VIDE ITS ORDER DATED 31/03/2006 W.E.F. 01/04/2005. IT IS ALSO ADDED THAT NAME OF THE COMPANY CHIRIPAL PETRO CHEMICALS LTD. WAS CHANGED TO CHIRIPAL INDUSTRIES LTD. AS PER APPROVAL OF REGISTRAR OF COMPANIES OF GUJARAT (A COPY OF BOTH THE ORDERS ARE ENCLOSED HEREWITH FOR YOUR HONOUR'S KIND PERUSAL AND RECORD PURPOSE.) AT THIS POINT, THE ASSESSEE COMPANY WOULD LIKE TO SUBMIT THE DEFINITION OF AMALGAMATION , TAX CONCESSIONS AVAILABLE TO AMALGAMATED COMPANY AND OTHER PROVISIONS, FOR YOUR HONOURS KIND PERUSAL AS UNDER: A. DEFINITION OF AMALGAMATION : ACCORDING TO SECTION 2(1B) OF THE INCOME - T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), AMALGAMATION IN RELATION TO COMPANIES MEANS THE MERGER OF ONE OR MORE COMPANIES WITH ANOTHER COMPANY OR THE MERGER OF TWO OR MORE COMPANIES TO FORM ONE COMPANY (THE COMPANY OR COMPANIES WHICH SO MERGE BEIN G REFERRED TO AS THE AMALGAMATING COMPANY OR COMPANIES AND THE COMPANY WITH WHICH THEY MERGE OR WHICH IS FORMED AS A RESULT OF THE MERGER, AS THE AMALGAMATED COMPANY) IN SUCH A MANNER THAT: - I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 6 A. ALL THE PROPERTY OF THE AMALGAMATING COMPANY OR COMPANIES IMME DIATELY BEFORE THE AMALGAMATION BECOMES THE PROPERTY OF THE AMALGAMATED COMPANY BY VIRTUE OF AMALGAMATION. B. ALL THE LIABILITIES OF THE AMALGAMATING COMPANY OR COMPANIES IMMEDIATELY BEFORE THE AMALGAMATION BECOME THE LIABILITIES OF THE AMALGAMATED COMPAN Y BY VIRTUE OF AMALGAMATION. SHAREHOLDERS HOLDING NOT LESS THAN 3/4 TH IN VALUE OF THE SHARES IN AMALGAMATING COMPANY OR COMPANIES (OTHER THAN SHARES HELD THERE IS IMMEDIATELY BEFORE THE AMALGAMATION OR BY A NOMINEE FOR THE AMALGAMATED COMPANY OR ITS SUBSI DIARY) BECOME SHAREHOLDERS OF THE AMALGAMATED COMPANY BY VIRTUE OF THE AMALGAMATION, OTHERWISE THAN AS A RESULT OF THE ACQUISITION OF THE PROPERTY ONE COMPANY BY ANOTHER COMPANY PURSUANT TO THE PURCHASE OF SUCH PROPERTY BY THE OTHER COMPANY AS A RESULT OF DISTRIBUTION OF SUCH PROPERTY TO THE OTHER COMPANY AFTER THE WINDING UP OF FIRST MENTIONED COMPANY. B. TAX CONCESSIONS TO THE AMALGAMATED COMPANY: THE AMALGAMATED COMPANY SHALL BE ELIGIBLE FOR TAX CONCESSIONS ONLY IF THE FOLLOWING TWO CONDITIONS ARE SATI SFIED: I. THE AMALGAMATION SATISFIES ALL THE THREE CONDITIONS LAID DOWN IN SECTION2(LB) AND II THE AMALGAMATED COMPANY IS AN INDIAN COMPANY. IF THE ABOVE CONDITIONS ARE SATISFIED THE AMALGAMATED COMPANY SHALL BE ELIGIBLE FOR FOLLOWING TAX CONCESSIONS: (A) EXPE NDITURE ON SCIENTIFIC RESEARCH SECTION 35(5): (B) EXPENDITURE ON ACQUISITION OF PATENT RIGHTS OR COPY RIGHTS SECTION 35A(6): (C) EXPENDITURE OF KNOW - HOW SECTION 35AB(3): (D) TREATMENT OF PRELIMINARY EXPENSES SECTION 35D(5): (E) AMORTIZATION OF EXPENDITURE IN CASE OF AMALGAMATION SECTION 35DD (F) TREATMENT OF CAPITAL EXPENDITURE ON FAMILY PLANNING SECTION 36(1)(IX): (G) TREATMENT OF BAD DEBTS SECTION 36(1)(VII): (H) DEDUCTION AVAILABLE U/S 80IA & 80IB: (I) CARRY FORWARD AND SET OFF BUSINESS LOSSES & UNABSOR BED DEPRECIATION OF THE AMALGAMATING COMPANY.' WE OBSERVE THE ASSESSING OFFICER HAS NOT DISPROVED THESE MATERIAL FACTS AND DISALLOWED THE CLAIM OF DEDUCTION ON PRESUMPTION BASIS WITHOUT CONSIDERING THE RELEVANT LEGAL PROVISION AS ELABORATED IN THE FINDING S OF THE LD.CIT(A). THE RELEVANT LEGAL PROVISION HAS ALREADY BEEN ELABORATED BY THE LD. CIT(A) IN HIS FINDINGS THAT AS PER THE PROVISIONS OF SECTION 80IA(12) WHEN ANY UNDERTAKING OF AN INDIAN COMPANY WHICH IS ENTITLED TO DEDUCTION UNDER THIS SECTION IS TR ANSFERRED BEFORE THE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION TO ANOTHER INDIAN COMPANY THEN AS PER CLAUSE (B) THE PROVISION OF THIS SECTION SHALL APPLY TO THE AMALGAMATED COMPANY AS THEY WOULD HAVE APPLIED TO THE AMALGAMATING COMPANY IF THE AMALGAMA TION HAD NOT TAKEN PLACE AND THE PROVISIONS OF SUB SECTION (12) WOULD ONLY APPLY IF THE AMALGAMATING COMPANY WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA. IT IS DEMONSTRATED FROM THE ABOVE FACTS AND CIRCUMSTANCES THAT THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON PRESUMPTION BASIS THAT ADDITION OF RS. 71,12,34,167 - WAS OLD PLANT AND MACHINERY WITHOUT BRINGING ON RECORD EVIDENCE TO SUBSTANTIATE THAT SPECIFIED MACHINERY WAS PURCHASED BY SHANTI PROCESSOR LTD AND THE ASSESSING OFFICER HAS ALSO FAILED TO DISPROVED THE MATERIAL FACT THAT SIMILAR CLAIM WAS ALLOWED TO THE ASSESSEE IN THE ASSESSMENT YEAR 2009 - 10 ON FULFILLING OF ALL THE CONDITIONS. IN THE LIGHT OF THE ABOVE FACTS, LEGAL FINDINGS AND ELABORATED FINDINGS OF THE LD. CIT(A) AS SU PRA IN THIS ORDER WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD.CIT(A), THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 7 RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH AS CITED ABOVE ON SIMILAR ISSUE AND SIMILAR FACTS, WE DO NOT FIND AN Y INFIRMITY IN THE DECISION OF THE LD. CIT(A). THIS GROUND OF REVENUE IS DISMISSED. 2 ND ISSUE OF APPEAL IS PERTAINED TO DISALLOWANCE U/S. 14A 5. DURING THE COURSE OF ASSESSMENT ON VERIFICATION OF BOOKS OF AC COUNT, THE ASSESSING OFFICER NOTICED THAT AS SESSEE HAS R ECEIVED DIVIDEND OF RS. 2 , 13 , 32 , 01 8/ - WHICH WAS EXEMPT F R O M INCOME TAX. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT SHOWN ANY EXPENSES INCURRED FOR EARNING THE AFORESAID EXEMPT INCOME , T HEREFORE, ASSESSEE WAS ISSUED SHOW CAUSE TO EX PLAIN WHY NOT DISALLOWANCE U/S. 14A R.W. RULE 8D SHOULD BE MADE IN RESPECT OF THE EXPENSES INCURRED FOR EA RNING EXEMPT INCOME. THE ASSESSEE EXPLAINED THAT NO PART OF DISALLOWANCE IS REQUIRED TO BE MADE AS INVESTMENTS WERE MADE OUT OF OWNED FUNDS. IT WAS ALSO STATED THAT MAJOR INVESTMENT WAS MADE IN THE SHARES OF NANDAN EXIM LTD. TO COMPLY WITH THE PROVISION OF ELECTRICITY ACT. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICER HAS STATED THAT ASSESSEE WAS UNAB LE TO FURNISH ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THAT NO EXPENDITURE WAS INCURRED IN RELATION TO EARING OF EXEMPT INCOME. CONSEQUENTLY , THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE TO THE AMOUNT OF RS. 9421047/ - AS PER SECTION 14A R.W . RULE 8D OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLO WED THE APPEAL OF THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO THE EXTENT OF RS. 2,00,000/ - I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 8 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY . THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 9421047/ - AFTER INVOKING THE PROVISION FOR SECTION 14A. THE ASSESSEE HAS EXPLAINED THAT IT HAD HUGE BALANCE IN SHARE CAPITAL AND RESERVES AND SURPLUS, THEREFORE NO DISALLOWANCE WAS REQUIRED TO BE MADE. THE ASSESSEE HAS PLACED IN THE PAPER BOOK THE AUDITED FINANCIAL STATEMENT ALONG WITH P & L A/C, COPY OF INCOME RETURN OF THE ASSESSEE. WITH THE ASSISTANCE, THE LD. REPRESENTATIVES, WE HAVE GONE THE MATERIAL ON RECORD AND IT IS NOTICED THAT ASSESSEE WAS HAVING SHARE CAP ITAL AND RESERVES AND SURPLUS OF RS. 263.96 CRORES WHEREAS INVESTMENT IN SHARES WAS MADE ONLY AT RS. 34.26 CROES. THE ASSESSEE HAD SUBMITTED THAT IT HAD NOT U S ED BORR OWED FUND FOR MAKING INVESTMENT AND ACCORDINGLY NO PART OF INTEREST WAS REQUIRED TO BE DISALLOWED BY INVOKING THE PROVISION OF SECTION 14A. AFTER CONSIDERATION OF ABOVE FACTS AND DETAILED FINDINGS IN THE ORDER OF TH E LD. CIT(A) , WE ARE OF THE VIEW THAT LD . CIT(A) HAS RIGHTLY HELD THAT ASSESSEE WAS HAVING AMPLE INTEREST FREE FUND, THEREFORE , NO DISALLOWANCE IN RESPECT OF INTEREST EXPENDITURE IS TO BE MADE IN THE CASE OF ASSESSEE BY INVOKING THE PROVISION OF SECTION 14A OF THE ACT. T H E LD. CIT(A) HAS RESTR ICTED THE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENDITURE TO THE EXTENT OF RS. 2 LACS A FTER TAKING INTO CONSIDERATION THE CLAIM OF THE ASSESSEE THAT NO ADMINISTRATIVE EXPENDITURE HAS BEEN INCURRED IN EARING THE EXEMPT INCOME. ON THIS ISSUE DURING THE COURS E OF APPELLATE PROCEEDINGS BEFORE US , THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF SUPREME COURT IN THE CASE OF PR. CIT VS. SINTE X INDUSTRIES LTD. (2018) 93 TAXMAN.COM 24(SC) DATED 23 RD MARCH, 201 8. IN THE LIGHT OF THE ABOVE FACTS AND FINDI NGS , WE OBSERVE THAT LD. CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE TO THE AMOUNT OF RS. 2 LACS AFTER I.T.A NO. 2582 /AHD/20 1 7 A.Y. 2014 - 15 PAGE NO D CIT VS. M/S. CHIRIPAL INDUSTRIES LTD. 9 TAKING INTO CONSIDERATION THE NATURE OF INVESTMENT MADE BY THE ASSESSEE AND THE NATURE OF EXPENSES INCURRED. ACCORDINGL Y , WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE, THEREFORE, THE SAME IS DISMISSED. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 7 - 03 - 201 9 SD/ - SD/ - ( MADHUMITA ROY ) ( AMA RJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 27 /03 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUAR D FILE. BY ORDER/ , / ,