DCIT, New Delhi V. M/s. Cheviot International Ltd., New Delhi

ITA 2623/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86687 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RELATES TO ASSESSMENT YEAR; LD CITA VI NEW DELHI
• Keywords: Depreciation; Earning of tax free income
• Section: 14A

Judgement Text

DELHI BENCH B : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 2623 /DEL/ 2013 (ASSESSMENT YEAR: 2008 - 09 ) DY. COMMISSIONER OF INCOME TAX, CIRCLE - 3(1), NEW DELHI VS. M/S. CHEVIOT INTERNATIONAL LTD. B - 19/2, CHEVIOT HOUSE, OKHLA PHASE - II, NEW DELHI - 110020 (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE, AGAINST THE ORDER DATED 08 TH FEBRUARY 2013 PASSED BY LD CIT(A) - VI, NEW DELHI AND RELATES TO ASSESSMENT YEAR 2008 - 09. 2. GROUND NO.1 RELATES TO DEPRECIATION ON COMPUTER PERIPHE RAL . 3. THE LD CIT(A) HAS DELETED THE DISALLOWANCE BY HOLDING AS UNDER: - 6.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT DURING THE RELEVANT ASSESSMENT YEAR, THE APPELLANT COMPANY HAD MADE ADDITIONS TO FIXED ASSETS UNDER THE HEAD 'COMPUTER ACCESSORIES AND PERIPHERALS' AMOUNTING TO RS.15,166/ - AND HAD CLAIMED DEPRECIATION @ 60% ON THE SAME. HOWEVER, THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT HAS ALLOWED DEPRECIATION ON 'C OMPUTER ACCESSORIES AND PERIPHERALS' @ 15% AS AGAINST 60% CLAIMED BY THE ASSESSEE COMPANY, THEREBY MAKING A DISALLOWANCE OF RS.6,480/ - . THE ID. AR SUBMITTED BEFORE ME THAT COMPUTER PERIPHERALS ARE ELIGIBLE FOR DEPRECIATION @ 60%. IN THIS REGARD HE PLACED R ELIANCE ON THE DECISION OF THE HIGH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD. ITA 1266/2010 DATED 31.08.2010. 3. SINCE THE ISSUE IS NO LONGER RES - INTEGRA, IT IS HELD THAT T HE LD CIT(A) HAS CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE BY FOLL OWING THE JUDGEMENT OF APPELLANT BY : PARWINDER KAUR, SR. DR RESPONDENT BY : PRADEEP DINODIA & R.K. KAPOOR, ADV HONBLE DELHI HIGH COURT IN BSES YAMUNA POWER LTD 2010 - TIOL - 636 HIGH COURT DELHI THEREFORE THE GROUND IS DI SM ISSED. 4. GROUND NO. 2 RELATES TO ADDITION OF RS. 13 LAKHS BEING COMMISSION PAID TO MRS. MALATI KANO RIA U/S 36(1)(II) OF TH E INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT). THE LD CIT(A) HAS DELETED THE ADDITION FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE COMPANY FOR ASSESSMENT YEAR 2002 - 03. THE LD CIT(A) HAS HELD THAT THE FACTS OF THE INSTANT YEAR ARE IDENTICAL TO THE ASSESSMENT YEAR 2002 - 03, INASMUCH AS THE PERSON TO WHOM COMMISSION HAS BEEN PAID AND THE BASIS OF PAYMENTS REMAINS THE SAME. 5. THE LD DR COULD NOT POINT OUT ANY FRESH FACT OR DISTINGUISHING FEATURES SO AS TO MAKE US TAKE A DIFFERENT OPINION. ON T HE CONTRARY THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL, STANDS DISMISSED BY AN ORDER OF THE HONBLE HIGH COURT DATED 18 TH FEBRUARY 2011 IN ITA NO.776/2010. IN SUCH A SCENARIO, WE FIND NO INFIRMITY IN THE ORDER IMPUGNED. SO WE DISMISS THIS GROUND OF APPEAL OF REVENUE. 6. GROUND NO.3 RELATES TO DISALLOWANCE U/S 14A OF THE ACT. THE LD CIT(A) ON THE FACTS OF THE CASE AND AFTER PERUSING THE ORDER OF THE AO HAS HELD AS UNDER: - 4.4 NOW ADVERTING TO THE CASE OF THE APPELLANT COMPANY, IT IS SEEN THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF EXPENDITURE U/S 14A READ WITH RULE 8D OF THE I.T. RULES WITHOUT RECORDING ANY REASON FOR DOING SO. IT IS FURTHER OBSERVED THAT THE APPELL ANT COMPANY HAS SUO MOTTO DISALLOWED RS.97,604/ - U/S 14A OF THE I.T. ACT. THE AO HAS NOT RECORDED ANY REASON FOR NON ACCEPTANCE OF THE CLAIM OF THE APPELLANT COMPANY OF DISALLOWANCE OF RS.97,604/ - . IT IS FURTHER SEEN THAT NO COGENT MATERIAL/ EVIDENCE WAS B ROUGHT ON RECORD BY THE ASSESSING OFFICER TO ATTRIBUTE ANY INDIRECT EXPENDITURE WHICH WAS RELATABLE FOR THE EARNING OF THE EXEMPT INCOME. IT IS ALSO SEEN THAT THE AO HAS APPLIED RULE 8D R.W.S.14A IN THE CASE OF THE APPELLANT COMPANY WITHOUT CONTROVERTING T HE CLAIM OF THE APPELLANT COMPANY. THEREFORE, IN MY HUMBLE OPINION, THE AO HAS ERRED IN APPLYING RULE 8D IN THE CASE OF APPELLANT COMPANY. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE ITAT, DELHI IN THE CASE OF M/S JINDAL PHOTO LTD. VS. DCI T (2011 - TIOL - 653 - ITAT - DEL) WHEREIN IT WAS HELD THAT RULE 8D CANNOT BE INVOKED IN THE CASE OF AN ASSESSEE WITHOUT RECORDING ANY SATISFACTION ABOUT THE INCORRECTNESS OF THE CLAIM OF THAT ASSESSEE. ON THESE FACTS AND CIRCUMSTANCES OF THE CASES THE AO IS DIREC TED TO DELETE THE ADDITION MADE U/S. 14A READ WITH RULE 8D OF THE I.T. ACT OF RS.5,24,320/ - . 7. HAVING CONSIDERED THE RIVAL SUBMISSION WE FIND THAT THE AO HAS INVOKED RULE 8D OF THE INCOME TAX RULES, 1962 (HEREIN AFTER THE RULES) AND ENHANCED THE DISAL LOWANCE MADE BY THE ASSESSEE OF RS.1,23,940/ - TO RS.6,48,260/ - WITHOUT RECORDING ANY SATISFACTION U/S 14A(2) OF THE ACT , WHICH AS HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT LTD. VS. COMMISSIONER OF INCOME - TAX (2012) 347 ITR 272 (DELHI). WE ALSO FIND IN THE CASE OF CIT VS. HERO MANAGEMENT SERVICE LTD. 360 ITR 68 (DELHI) THE HONBLE HIGH COURT HAS AGAIN REITERATED THAT: - IN ORDER TO INVOKE RULE 8D OF THE INCOME TAX RULES, 1962, THE ASSESSING OFFICER HAS TO FIRST RECORD A F INDING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM FOR EXPENDITURE MADE BY THE ASSESSEE IN RELATION TO INCOME, WHICH DID NOT FORM PART OF THE TOTAL INCOME UNDER THE INCOME TAX ACT, 1961. 8. IN VIEW OF THE ABOVE THE GROUND RAISED BY THE REVENUE LACKS MERITS AND SO IS REJECTED. 9. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 . 01 . 2015 . - SD/ - - SD/ - ( S.V. MEHROTRA ) (A. T. VARK EY) A CCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 / 01 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI