M/s. Multibase India Ltd. ( Formely known as M/s. Synergy Multibase Ltd. ), Nani Daman V. The ACIT.,Vapi Circle, Vapi

ITA 2707/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2225 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 24-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R MEENA
• Assessee Lawyers: S K KABRA
• Keywords: Depreciation; Bad and doubtful debts; TDS
• Section: 32; 143(3); 80IB

Judgement Text

MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 1 OF 10 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A NO.2707/AHD/2015/SRT /ASSESSMENT YEAR : 2005-06 MULTIBASE INDIA LTD., (FORMERLY KNOWN AS M/S.SYNERGY MULTIBASE LTD.) 74/5-6, DAMAN INDUSTRIAL ESTATE, KADAIYA VILLAGE, NANI DAMAN 396 210. [PAN: AAECS 4121 K] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI. APPELLANT /RESPONDENT /ASSESSEE BY SHRI S.K.KABRA CA /REVENUE BY SHRI S.R.MEENA SR.DR / DATE OF HEARING: 10 .0 8 .2018 /PRONOUNCEMENT ON 07 .0 9 . 2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VALSAD, VALSAD(IN SHORT THE CIT (A)) DATED 28.09.2008 PERTAINING TO ASSESSMENT YEAR 2005-06, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI(IN SHORT THE AO) DATED 22.11.2007 UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 2 OF 10 2. GROUND RAISED BY THE ASSESSEE READ AS UNDER : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION OF RS.5,02,735/- OUT OF THE DEPRECIATION CLAIM BY ASSESSEE. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.48,632/- PAID ON ACCOUNT OF INTEREST ON DELAYED PAYMENT OF TDS. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.12,78,887/- IN RESPECT OF BAD DEBTS WRITTEN BACK IN ACCOUNTS EVEN THOUGH AMOUNT IS NOT ALLOWED IN EARLIER ASSESSMENT YEAR AS DEDUCTION. 3. GROUND NO.1 RELATES TO DISALLOWANCE OF DEPRECIATION OF RS.5,02,735/- OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.62,71,081/- FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THE AO HAS CALCULATED THE DEPRECIATION AFTER CONSIDERING THE WDV FROM THE ASSESSMENT YEAR 2001-02 TO 2005-06 AFTER TAKING INTO ACCOUNT THE DEEMED DEPRECIATION WHICH THE ASSESSEE HAS NOT CLAIMED AS THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB OF THE ACT. ACCORDINGLY, THE AO HAS WORKED OUT THE DEPRECIATION ALLOWABLE AT RS.57,68,346/-. CONSEQUENTLY, THE DIFFERENCE OF RS.5,02,735/- OF EXCESS DEPRECIATION WAS DISALLOWED. THE CIT(A) RELYING ON THE DECISION OF SPECIAL BENCH OF AHMEDABAD IN THE CASE OF VAHID PAPER MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 3 OF 10 CONVERTERS VS. ITO [2007] 289 ITR (80) (AHD) (SB) HELD THAT THE DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING THE INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER CHAPTER VIA EVEN PRIOR TO THE AMENDMENT I.E. INSERTION OF EXPLANATION-5 TO SECTION 32 BY THE FINANCE ACT 2001 W.E.F. 01.04.2012. 5. BEING AGGRIEVED, THE ASSESSEE FILED THE APPEAL BEFORE THIS TRIBUNAL. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE WDV IS TO BE ARRIVED AT AFTER DEDUCTION THE ACTUAL DEPRECIATION ALLOWED DURING THE RELEVANT ASSESSMENT YEAR AND NOT AFTER REDUCING THE DEEMED DEPRECIATION ALLOWABLE. THE AR HAS FURTHER DRAWN OUR ATTENTION TO THE DEFINITION OF DEPRECIATION AS CONTAINED U/S.32(1)(II) R.W.S. 43(6)(B) OF THE ACT WHICH DEFINES WRITTEN DOWN VALUE AND SUBMITTED THAT ONLY DEPRECIATION ACTUALLY ALLOWED HAS TO BE CONSIDERED FOR WORKING OUT OF THE WRITTEN DOWN VALUE AND ON WHICH THE CLAIM OF DEPRECIATION HAS TO BE ALLOWED. THE LD.AR FURTHER PLACED RELIANCE IN THE CASE OF KANDLA PORT TRUST VS. ACIT [2007] 104 ITD 1, (RAJKOT) WHEREIN IT WAS HELD THAT DEPRECIATION DEEMED TO HAVE BEEN ALLOWED OR WHICH MIGHT HAVE BEEN ALLOWED IF THE PROFIT AND GAINS OF BUSINESS HAD BEEN ASSESSED TO INCOME TAX IN PREVIOUS YEAR IS CERTAINLY NOT DEPRECIATION ACTUALLY ALLOWED AND CANNOT BE DEDUCTED FROM THE ORIGINAL COST. THE ONLY DEPRECIATION MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 4 OF 10 ALLOWED UNDER THE ACT IS THE DEPRECIATION ALLOWED BY THE ASSESSEE WHILE COMPUTING THE PROFITS AND GAINS OF BUSINESS FOR ASSESSMENT PURPOSES. ACTUALLY ALLOWED MEANS ALLOWED BY A INCOME TAX AUTHORITY. DEPRECIATION CLAIM BY THE ASSESSEE ITSELF IN ITS OWN ACCOUNT IS NOT DEPRECIATION ALLOWED TO IT. THE LD.AR ALSO PLACED RELIANCE IN THE ASSESSEES OWN CASE IN ITA NO.1953/AHD/2002 FOR A.Y. 1998-99 DATED 13.10.2006 IN WHICH DEPRECIATION DIRECTED TO BE ALLOWED EVEN THOUGH IT WAS NOT CLAIMED BY THE ASSESSEE WAS HELD TO BE NOT ALLOWABLE. IT WAS SUBMITTED THAT THE DEPRECIATION CANNOT BE THRUST UPON THE ASSESSEE. 6. PER CONTRA, THE LD.DR SUBMITTED THAT DEPRECIATION WAS RESTRICTED IN A.Y.2001-02 BY THE CIT(A) IN THE CASE OF ASSESSEE WAS NOT CONTESTED BY THE ASSESSEE IN APPEAL. FURTHER, WHERE TAXABLE INCOME COMPRISES PROFITS DERIVED FROM CERTAIN INDUSTRIAL UNDERTAKINGS U/S.80IA OR 80IB THEN SUCH PROFITS HAVE TO BE COMPUTED SEPARATELY AS LAID DOWN BY THE SUPREME COURT OF INDIA IN THE CASE OF CAMBAY ELECTRICITY SUPPLY CO. [1978] 113 ITR 84 IN WHICH IT WAS LAID DOWN THAT DEPRECIATION HAVE TO BE DEDUCTED IN ARRIVING AT THE FIGURE WHICH SHOULD BE ELIGIBLE U/S.80IA OR 80IB. FURTHER, AS PER EXPLANATION-5 TO SECTION 32 BY FINANCE ACT 2001 W.E.F. 01.04.2002 THE DEPRECIATION ALLOWABLE HAS TO BE COMPUTED MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 5 OF 10 WHILE COMPUTING THE INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION CHAPTER VIA. 7. ON CAREFUL CONSIDERATION, WE OBSERVED THAT THE CONTROVERSY RELATES TO ALLOWANCE OF DEPRECIATION WHETHER WRITTEN DOWN VALUE AS PER BOOKS OF ACCOUNT TREATING ALL THE DEPRECIATION PROVIDED IN THE BOOKS, BY TREATING THE SAME AS ACTUALLY ALLOWED OR IT SHOULD BE TAKEN AT THE ORIGINAL COST OF THE ASSET AS REDUCED BY THE DEPRECIATION ACTUALLY ALLOWED UNDER THE ACT. WE FIND THAT SECTION 43(6)(B) SPEAKS OF DEPRECIATION ACTUALLY ALLOWED AND NOT THE DEPRECIATION ALLOWABLE. THE CONNOTATION OF PHRASE ACTUALLY ALLOWED IS THUS LIMITED DEPRECIATION ACTUALLY TAKEN INTO ACCOUNT OR GRANT AND GIVEN EFFECT TO I.E. DEBITED BY THE AO AGAINST THE INCOME OF THE BUSINESS WHILE COMPUTING THE TAXABLE INCOME OF THE ASSESSEE. IT CANNOT BE STRESSED TO MEAN NOTIONALLY ALLOWED FOR MERELY ALLOWABLE OF A NOTIONAL BASIS OR PROVIDED IN THE BOOKS OF ACCOUNTS BY HAVING ACCOUNTING ENTRY. THE QUESTION OF ALLOWING DEPRECIATION ARISES WHETHER WHEN FOR THE PURPOSE OF ARISING INCOME TAX THE PROFIT AND GAINS OF THE BUSINESS ARE TO BE COMPUTED. IF NO INCOME TAX IS PAYABLE WHETHER ON ACCOUNT OF EXEMPTION OR OTHERWISE, PROFITS AND GAINS OF BUSINESS ARE REQUIRED TO BE COMPUTED AND THERE IS NO ACTION FOR ALLOWING DEPRECIATION. MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 6 OF 10 IN THE CASE OF VAHID PAPER CONVERTERS (SUPRA) IT WAS HELD THAT DEPRECIATION WHICH IS THOUGH ALLOWABLE BUT NOT CLAIM IN THE RETURN FOR NORMAL COMPUTATION OF INCOME, HAS TO BE ALLOWED WHILE COMPUTING THE DEDUCTIONS UNDER CHAPTER VIA WHICH SECTION 80HH, 80IA, 80IB ETC., OF AN INDUSTRIAL UNDERTAKING. THUS, THERE IS A CLEAR DISTINCTION BETWEEN DEPRECIATION ACTUALLY ALLOWED AND DEPRECIATION WHICH WOULD HAVE BEEN ALLOWED IF THE PROFITS AND GAINS OF THE BUSINESS HAD TO BE COMPUTED FOR THE ASSESSMENT OF INCOME TAX AND WRITTEN DOWN VALUE IS CALCULATED AFTER DEDUCTION FROM THE ORIGINAL COST NOT ONLY WITH DEPRECIATION THAT AS ACTUALLY BEEN ALLOWED IN THE COMPUTATION OF PROFITS AND GAINS OF THE BUSINESS DURING THE PROCEEDINGS FOR THE ASSESSMENT OF INCOME TAX IN THE EARLIER YEAR. THE WORD USED IN SECTION 43(6) WAS NOT WRITTEN DOWN VALUE AND MUST BE GIVEN ITS FULL EFFECT DEPRECIATION DEEMED TO HAVE BEEN ALLOWED WHICH MIGHT HAVE BEEN ALLOWED IF THE PROFITS AN GAINS OF BUSINESS HAD BEEN ASSESSED TO INCOME TAX IN PREVIOUS YEAR IS NOT CERTAINLY DEPRECIATION ACTUALLY ALLOWED AND CANNOT BE DEDUCTED FROM THE ORIGINAL COST. 8. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT WDV HAS TO BE DETERMINED AFTER DEDUCTION OF DEPRECIATION WHICH HAS BEEN ACTUALLY ALLOWED WHILE COMPUTING THE INCOME OF MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 7 OF 10 THE ASSESSEE UNDER REGULAR PROVISION OF THE ACT AND NOT THE NOTIONAL OR DEEMED DEPRECIATION ALLOWABLE. IN THE PRESENT CASE, WE FIND THAT THE AO HAS REDUCED THE WDV BY CONSIDERING THE DEEMED DEPRECIATION AND NOT THE DEPRECIATION ACTUALLY ALLOWED. THEREFORE, THE DISALLOWANCE OF EXCESS DEPRECIATION MADE BY THE AO ARE NOT JUSTIFIED, HENCE DIRECTED TO BE DELETED. 9. GROUND NO.2 RELATES TO CONFIRMING THE DISALLOWANCE OF RS.48,632/- PAID ON ACCOUNT OF INTEREST ON DELAYED PAYMENT OF TDS. THE ASSESSEE HAS DEBIED AN AMOUNT OF RS.48,632/- UNDER THE HEAD INTEREST OF DELAYED PAYMENT OF TDS. THE AO WAS OF THE VIEW THE INTEREST ON DELAYED PAYMENT OF THE TAX IS PART AND PARCEL OF LIABILITY TO PAY INCOME TAX AND THEREFORE NOT ALLOWABLE DEDUCTION. THE AO HAS ALSO SUPPORTED HIS VIEW BY PLACING RELIANCE IN THE CASE OF ASSAM FOREST PRODUCTS PVT. LTD. VS. CIT [1989] 180 ITR 478 (GUWAHATI) WHEREIN IT HAS BEEN HELD THAT PAYMENT OF INCOME TAX IS NOT DEDUCTIBLE AS PER SECTION 40(A)(II) AND SO INTEREST THEREON WHICH HAS TO REGARDED AS ACCRETION TO TAX ALSO CANNOT BE ALLOWED. 10. IN APPEAL THE CIT(A) OBSERVED THAT INTEREST PAID ON DELAYED PAYMENT OF TDS BECOMES PART OF TAX DUE TO THE DEPARTMENT AND HENCE CANNOT BE ALLOWED AS DEDUCTION U/S.37(1) OF THE ACT. MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 8 OF 10 11. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. THE LD.AR PLACING RELIANCE ON THE DECISION IN THE CASE OF DCIT, CIRCLE-3(1), KOLKATA VS. M/S.NARAYANI PVT LTD. IN ITA NO.2127/KOL/2014 DATED 30.08.2017 61 ITR (T) 371 (KOL) SUBMITTED THAT INTEREST PAID FOR DELAYED PAYMENT OF SERVICE TAX AND TDS IS COMPENSATORY IN NATURE AS SUCH THE INTEREST ON DELAYED PAYMENT IS NOT IN THE NATURE OF PENALTY. THEREFORE, THE SAME INTEREST EXPENSES LEVIED ON ACCOUNT OF DELAYED PAYMENT ON TDS AS IT RELATES TO EXPENSES CLAIMED BY THE ASSESSEE WHICH ARE SUBJECT TO TDS PROVISIONS. THE AMOUNT OF TDS REPRESENTS THE AMOUNT OF INCOME TAX OF THE PARTY ON WHOSE BEHALF THE PAYMENT WAS DEDUCTED AND PAID TO THE GOVERNMENT EX-CHEQUER. THUS, THE TDS AMOUNT DOES NOT REPRESENT THE TAX WITH THE PARTY WHICH HAS BEEN PAID BY THE ASSESSEE. THUS, ANY DELAY IN PAYMENT OF TDS BY THE ASSESSEE CANNOT BE LINKED TO THE INCOME TAX OF THE ASSESSEE AND CONSEQUENTLY THE PRINCIPLE LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF BHARAT COMMERCE INDUSTRIES LTD. VS. CIT [1998] 230 ITR 733 (SC) CANNOT BE APPLIED TO THE CASE IN HAND. THEREFORE, IT WAS REQUESTED THAT INTEREST ON DELAYED PAYMENT OF TDS ARE ALLOWABLE EXPENSES U/S.37(1) OF THE ACT. MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 9 OF 10 12. ON THE OTHER HAND, THE LD.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AMOUNT OF TDS REPRESENTS THE AMOUNT OF INCOME TAX OF THE PARTY ON WHOSE BEHALF THE PAYMENT WAS DEDUCTED AND PAID TO THE GOVERNMENT EX-CHEQUER. THUS, THE TDS AMOUNT DOES NOT REPRESENT THE TAX OF THE ASSESSEE, BUT THE TAX OF THE PARTY WHICH HAS BEEN PAID BY THE ASSESSEE. THUS, ANY DELAY IN THE PAYMENT OF TDS BY THE ASSESSEE CANNOT BE LINKED TO THE INCOME TAX OF THE ASSESSEE AND CONSEQUENTLY THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF DELAYED DEPOSIT OF TDS OR LIABILITY ARE THEREFORE ALLOWABLE EXPENSES U/S.37(1) OF THE ACT. THIS VIEW IS ALSO SUPPORTED BY THE DECISION ON HON'BLE SUPREME COURT IN THE CASE OF LAXMAN DAS MATHURA VS. CIT 254 ITR 799 (SC) IN WHICH THE DEDUCTION ON ACCOUNT OF INTEREST OF LATE DEPOSIT ON SALES TAX U/S.37(1) OF THE ACT WAS ALLOWED. 14. IN VIEW OF THESE, WE ARE OF THE VIEW THAT LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF INTEREST ON DELAYED PAYMENT OF TDS, ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. MULTIBASE INDIA LTD. VS. ACIT, VAPI CIRCLE, VAPI/I.T.A. NO.2707/AHD/2015/SRT/A.Y.:2005-06 PAGE 10 OF 10 15. GROUND NO.3 RELATES CONFIRMING THE ADDITION OF RS.12,78,887/- IN RESPECT OF BAD DEBTS WRITTEN BACK IN ACCOUNTS, EVEN THOUGH AMOUNT IS NOT ALLOWED IN EARLIER ASSESSMENT YEAR HAS TAKEN. 16. WE HAVE HEARD THE RIVAL SUBMISSION IT WAS POINTED OUT BY THE LD.AR THAT THE CIT(A) HAS ALLOWED THIS AS A DEDUCTION IN THE ORDER PASSED U/S.154 OF THE ACT [PB 37], HENCE THIS GROUND BECOMES INFRUCTUOUS, THEREFORE IT IS TREATED AS DISMISSED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 18. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07-09-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED : 7 TH SEP , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT