The ACIT, Central Circle-2(3), Ahmedabad V. M/s. Ratnamani Metals & Tubes Ltd., Ahmedabad

ITA 2704/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8880 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MY PREDECESSOR A.Y.
• Keywords: Capital asset; Depreciation; Proportionate interest
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 80IA; 208; 113

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 2704/AHD/2013 / A.Y. 2010-11 ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD VS M/S. RATNAMANI METALS & TUBES LTD, 17, RAJMUGAT SOCIETY, NARANGPURA CHAR RASTA, NARANPURA, AHMEDABAD PAN : AABCR 1742 E ! / (APPELLANT) '# ! / (RESPONDENT) BY REVENUE : SHRI K. MADHUSUDAN, SR DR BY ASSESSEE : SHRI P.D. SHAH, AR / DATE OF HEARING : 25/11/2016 /DATE OF PRONOUNCEMENT: 23/12/2016 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11, ARISES AGAINST CIT(A)-III, AHMEDABADS ORDER DATED 30.09.2 013 PASSED IN CASE NO.CIT(A)-III/14/DCIT/CC-2(3)/13-14, IN PROCEE DINGS U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT). 2. THE REVENUES FIRST SUBSTANTIVE GROUND SEEKS TO REVIVE SECTION 36(1)(III) DISALLOWANCE/ADDITION OF INTEREST AMOUNT OF RS.60,983/- AS MADE BY THE ASSESSING OFFICER AND DELETED IN LOWER APPELLATE PROCEEDINGS. 3. THE ASSESSEE-COMPANY MANUFACTURES STEEL TUBES AN D PIPES. IT ALSO GENERATES WIND-MILL POWER. THE ASSESSING OFFI CER NOTICED THE ITA NO.2704/AHD/2013 ACIT VS. M/S. RATNAMANI METALS & TUBES LTD A.Y. 2010-11 - 2 - ASSESSEE TO HAVE CREATED CAPITAL WORK IN PROGRESS O F RS.2,97,12,276/-. THE ASSESSEE PLEADED TO HAVE CREATED THE SAME FROM INTERNALLY GENERATED INTEREST FREE FUNDS. THE ASSESSING OFFIC ER QUOTED ITS FAILURE IN NOT PRODUCING CASH FLOW STATEMENT TO DIS ALLOW THE IMPUGNED SECTION 36(1)(III) PROPORTIONATE INTEREST AMOUNT OUT OF TOTAL INTEREST EXPENDITURE OF RS.1,74,98,421/-; COMING TO RS.60,983/- THEREBY MAKING THE ADDITION IN QUESTION. 4. THE CIT(A) REVERSES ASSESSING OFFICERS FINDINGS AS FOLLOWS:- 7. FROM THE PERUSAL OF RECORDS IT IS FOUND THAT TH E SAME ISSUE WAS CONSIDERED IN THE CASE OF APPELLANT BY MY PREDECESS OR FOR A.Y. 2009-10. VIDE ORDER DATED 28/11/2011 IN APPEAL NO.CIT(A)-XI/ 413/ADDL.CIT R- 5/10-11 MY PREDECESSOR ALLOWED CLAIM OF APPELLANT W ITH THE FOLLOWING OBSERVATION: '3. I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE ID. AR. AS PER THE UNAMBIGUOUS PREVISIONS OF PROVISO TO SECTIO N 36(1)(III), FOR MAKING DISALLOWANCE OF INTEREST FOLLOWING CONDI TIONS ARE REQUIRED TO BE SATISFIED. (I) CAPITAL IS BORROWED FOR ACQUIRING CAPITAL ASSET, (II) INTEREST IS PAID IN RESPECT OF CAPITA/BORROWED. (III) THE ACQUISITION OF ASSETS SHOULD BE FOR TH E PURPOSE OF EXPANSION OF AN EXISTING BUSINESS OR PROFESSION, (IV) INTEREST LIABILITY MAY OR MAY NOT BE CAPITA LIZED. DISALLOWANCE AS PER THE PROVISIONS OF PROVISO TO SE CTION 36(1)(III) HAS TO FULFILL THE ABOVE SAID CONDITIONS FOR SUSTAINABLE DISALLOWANCE. IT IS SEEN THAT A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO INDICATE THAT CAPITAL WAS BORROWED FOR IN VESTMENT IN CAPITAL WORK IN PROGRESS. THIS WAY, THE FIRST ENABL ING CONDITION AS MENTIONED ABOVE IS NOT FULFILLED, ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O, IS UNTENABLE, THE A.O, HAS MADE PR OPORTIONATE DISALLOWANCE OF INTEREST, IN MY CONSIDERED VIEW, TH IS DISALLOWANCE IS NOT MANDATED BY PROVISIONS OF PROVISO TO SECTION 36(1)(III). IN ITA NO.2704/AHD/2013 ACIT VS. M/S. RATNAMANI METALS & TUBES LTD A.Y. 2010-11 - 3 - VIEW OF THE ABOVE, DISALLOWANCE OF RS.46,73,553/-IS DELETED, THIS GROUND OF APPEAL IS ALLOWED.' SINCE FACTS OF THE CASE ARE IDENTICAL FOR THIS YEAR , I DO NOT SEE ANY REASON TO COME TO A DIFFERENT CONCLUSION. I THEREFO RE, HOLD THAT DISALLOWANCE OF RS.60,983/- IS NOT JUSTIFIED AND TH E SAME IS DIRECTED TO BE DELETED. GROUND NO.2 OF THE APPEAL IS THUS ALLOWED. 5. WE HAVE HEARD RIVAL SUBMISSIONS. CASE FILE PERU SED. LEARNED AUTHORIZED REPRESENTATIVE POINTS OUT AT THE OUTSET THAT A CO-ORDINATE BENCH IN ASSESSEES CASE FOR PRECEDING ASSESSMENT Y EAR ITA NO.274/AHD/2012 DECIDED ON 11.12.2015 HAS ALREADY A DJUDICATED THE VERY ISSUE AGAINST THE REVENUE. LEARNED DEPARTMENT AL REPRESENTATIVE FAILS TO REBUT THIS FACTUAL AND LEGA L POSITION. WE THUS FIND NO REASON TO INTERFERE IN THE ABOVE EXTRACTED LOWER APPELLATE FINDINGS DELETING THE IMPUGNED INTEREST DISALLOWANC E. THIS FIRST SUBSTANTIVE GROUND FAILS. 6. THE REVENUES NEXT SUBSTANTIVE GROUND SEEKS TO R EVIVE DISALLOWANCE OF SECTION 80IA(4)(IV) DEDUCTION OF RS .1,62,48,244/- AS MADE BY THE ASSESSING OFFICER. WE FIND THAT THE CI T(A) DISCUSSES ASSESSING OFFICERS FINDINGS ALONG WITH RELEVANT BA CKDROP OF FACTS AS UNDER:- 10. APPELLANT IN ITS WRITTEN SUBMISSIONS ARGUED THA T 'GROUND NO.3- DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IA(4)(IV) 1) THAT THE LEARNED AO HAS ERRED IN LAW AND FACTS B Y MAKING DISALLOWANCES OF CLAIM OF DEDUCTION U/S 80IA(4)(IV) RS.1,62,48,244/- AND THEREFORE THE LEARNED AO BE DI RECTED TO ALLOW THE DEDUCTION, WHILE COMPUTING THE TOTAL INCOME . ITA NO.2704/AHD/2013 ACIT VS. M/S. RATNAMANI METALS & TUBES LTD A.Y. 2010-11 - 4 - 2) IN REGARD TO OUR CLAIM WE WOULD LIKE TO SUBMIT TH AT UNDER SIMILAR FACTS AND CIRCUMSTANCES YOUR HONOR HAS ALLO WED OUR CLAIM U/S 80IA(4)(IV) IN A.Y. 2009-10 AND HENCE WE R EQUEST YOUR HONOR THAT AS THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES COMPARED TO A.Y. 2009-10 TO ALLOW OUR CLAIM FOR A. Y. 2010-11 ALSO. COPY OF CIT(A) ORDER FOR A. Y. 2009-10 IS SUBMITTED HEREWITH AS ANNEXURE 1. (REFER PARA NO 4.3 OF THE SAID ORDER)' 11. THIS ISSUE HAS BEEN ALSO CONSIDERED BY MY PREDE CESSOR IN THE CASE OF APPELLANT FOR A.Y. 2009-10. DEDUCTION U/S. 80IA( 4)(IV) WAS ALLOWED IN THE EARLIER YEAR BY MY PREDECESSOR WITH THE FOLLO WING OBSERVATION: '4.2 I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS, I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIO NS MADE BY THE LD. A.R. I HAVE ALSO PERUSED THE CASE LAWS RE LIED UPON BY THE LD. A.R. IT IS SEEN THAT IN THE CASE OF DEDUCTI ON U/S. 801A, PROVISIONS OF SECTION 80IA(5) WHICH STARTS WITH NON OBSTINATE CLAUSE THAT PROFITS PURPOSE OF SECTION 80IA IS TO B E WORKED OUT AS IF ELIGIBLE INDUSTRIAL PREVIOUS YEAR, THE EXPRESS P ROVISIONS OF THE ACT MAKES IT VERY DEAR THAT ELIGIBLE PROFITS FOR DE DUCTION U/S. 801A IS TO BE COMPUTED FOR THE ELIGIBLE INDUSTRIAL UNDERTAKING INDIVIDUALLY. IT SIMPLY MEANS THAT IF SUCH INDUSTRI AL UNDERTAKING HAD SUFFERED TOSSES IN THE EARLIER YEAR S, THESE LOSSES HAS TO BE SET OFF AGAINST INCOME OF THE CURRENT YEA R. AFTER THIS SET OFF, IF THERE ARE SOME PROFITS, THE SAME IS ELIGIBL E FOR DEDUCTION U/S. 80IA(IV), IN THIS REGARD, IT WILL BE-PERTINENT TO QUOTE THE CONCLUDING PARA IN THE CASE OF AGIT V/S. GOLDMINE S HARES AND FINANCE PVT LTD, (2008) 113 ITD 209 (AHD) OR 302 IT R 208 (AHD.) 'TO CONCLUDE WE ANSWER THE QUESTION REFERRED IN THE AFFIRMATIVE, IN THE FAVOUR OF THE REVENUE AND AGAINST THE ASSESS EE, IN THE TERMS THAT IN VIEW OF THE SPECIFIC PROVISIONS OF SE CTION 80IA(S) OF THE INCOME-TAX ACT, 1961 THE PROFIT FROM THE ELI GIBLE BUSINESS FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDUCTION U/S.801A OF THE ACT HAS TO BE COMPUTED AFTER DEDUCT ION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EARLIER YEARS.' ITA NO.2704/AHD/2013 ACIT VS. M/S. RATNAMANI METALS & TUBES LTD A.Y. 2010-11 - 5 - 4.3 THE ABOVE FACTS MAKES IT VERY CLEAR THAT NOTIO NAL BROUGHT FORWARD LOSS, DEPRECIATION, OF THE EARLIER YEARS, IF ANY, PERTAINING TO THE ELIGIBLE BUSINESS NEEDS TO BE SET OFF AGAINS T PROFITS OF CURRENT YEAR, TO REACH TO CORRECT FIGURE OF ELIGIBL E PROFITS FOR DEDUCTION U/S.80IA(IV). IN THIS CASE A.O. HAD ANNEX ED DETAILS OF PROFIT AND LOSS ACCOUNT SINCE AY. 2004-05 ALONGWITH ASSESSMENT ORDER, PERUSAL OF THESE DETAILS REVEALS THAT, THE APPELLANT HAS SUFFERED LOSS OF. RS.3,58,17,980/- (2 ,13,15,198 + 1,43,02,784) FOR THE A.YRS. 2004-05 & 2005-08. PERU SAL OF THIS CHART FURTHER REVEALS THAT FOR A.YS.2008-07,2007-08 & 2008-09, THE APPELLANT HAD EARNED A PROFIT OF RS.3,09,96,800 /-(68,90,448 + 1,21,53,374 + 1,19,52,978). THIS WAY, AT THE END O F A.Y. 2008-09, THE APPELLANT WAS HAVING OF BROUGHT FORWARD BUSINESS LOSS OF ELIGIBLE UNIT AT RS.46,21,180/- (3,58,17,98 0 - 3,09,98,800., DURING THE YEAR UNDER CONSIDERATION, APPELLANT HAS DECLARED PROFIT FROM WIND MILLS AT RS.1,30,26,9 67/-. AS PER THE ABOVE DISCUSSIONS, ELIGIBLE PROFITS FOR DEDUCTI ON U/S.80IA(IV) CAN BE COMPUTED AFTER SET OFF OF NOT FORWARD LOSS OF RS.46,21,180/- AGAINST THIS PROFIT. THIS WAY ELIGIB LE PROFIT U/S.80IA(IV) IS WORKED OUT AT RS.84,05,787/-. (1,30, 26,967- 46,21,180). APPELLANT HAS CLAIMED DEDUCTION U/S.80I A(IV) ON A PROFIT OF RS.84,05,787/- ONLY AND IN MY CONSIDERED VIEW, APPELLANT'S COMPUTATION FOR ELIGIBLE PROFITS FOR TH E PURPOSE OF DEDUCTION U/S.801A(IV) IS STRICT AS PER PROVISIONS OF I.T. ACT. IN VIEW OF THIS, DEDUCTION U/S 80IA(IV) OF RS.84,05,787 /- IS ORDERED TO BE ALLOWED. THIS GROUND OF APPEAL IS ALLOWED. ' 12. FROM THE PERUSAL OF RECORDS IT IS FOUND THAT TH E APPELLANT HAS CLAIMED DEDUCTION U/S. 80IA AFTER CONSIDERING THE N OTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION EVEN THOUGH THE SAME HAVE BEEN SET OFF AGAINST INCOME OF OTHER UNITS IN THE EARLIER YEARS. FOR SHIKHARPUR UNIT THE PROFIT DURING THE YEAR IS RS. 50,84,176/-. APPE LLANT HAS CLAIMED DEDUCTION TO THE EXTENT OF RS. 33,60,127/- ONLY. TH IS AMOUNT HAS BEEN ARRIVED AT AFTER SET OFF OF BROUGHT FORWARD LOSSES AND DEPRECATION. I THEREFORE, HOLD THAT APPELLANT IS ELIGIBLE FOR DEDU CTION OF RS.1,62,48,244/- U/S.80IA(4)(IV). THIS VIEW DERIVES SUPPORT FORM DECISION OF HON'BLE ITAT, SPL. BENCH, AHMEDABAD IN THE CASE OF GOLDMINE SHARES AND FINANCE PVT. LTD. AND THE DECISI ON OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPIN NING MILLS (P) LTD [38 DTR 57]. THE DISALLOWANCE OF RS.1,62,4 8,244/- MADE BY AO IS THEREFORE, DIRECTED TO BE DELETED. ITA NO.2704/AHD/2013 ACIT VS. M/S. RATNAMANI METALS & TUBES LTD A.Y. 2010-11 - 6 - 7. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUS ED. WE NOTICE HEREIN AS WELL THAT THIS TRIBUNAL HAS ALREADY UPHEL D CIT(A) IDENTICAL FINDINGS DELETING THE VERY DISALLOWANCE IN PRECEDIN G ASSESSMENT YEAR. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT INDICATE ANY DISTINCTION ON FACTS INVOLVED IN THE IMPUGNED ASSES SMENT YEAR. WE THUS DRAW SUPPORT FROM THE ABOVE CO-ORDINATE BENCH S ORDER UPHOLDING SIMILAR FINDINGS TO DECIDE THE VERY ISSUE AGAINST THE REVENUE. ITS LATTER SUBSTANTIVE GROUND ALSO FAILS. 8. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 23 RD DECEMBER , 2016 AT AHMEDABAD SD/- SD/- (PRADIP KUMAR KEDIA) (S.S. GODAR A) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD, DATED 23/12/2016 *BT & '() *) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' $ / CONCERNED CIT 4. $ ( ) / THE CIT(A) 5. ' **' , ' , / DR, ITAT, AHMEDABAD 6. / / GUARD FILE. TRUE COPY / BY ORDER, TRUE COPY / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD