DCIT- 3(1)(1), MUMBAI V. BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHA SUGAR LTD.), MUMBAI

ITA 2780/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0704 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 03-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PARTH ACHWAL
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Rule 8D
• Section: 143(3); 14A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2780/MUM/2018 ASSESSMENT YEAR : 2011-12 DCIT 3(1)(1), MUMBAI VS. BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHAN SUGAR LTD.), BAJAJ BHAVAN, 2 ND FLOOR, JAMNALAL BAJAJ MARG, 226, NARIMAN POINT, MUMBAI 400 021. PAN AACCB8572B (APPELLANT) (RESPONDENT) APPELLANT BY : SMT JOTHILAKSHMI NAYAK RESPONDENT BY : S/SHRI KIRIT KAMDAR & PARTH ACHWAL DATE OF HEARING : 1 6 .0 5 .201 9 DATE OF PRONOUNCEMENT : 27 .06 . 201 9 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-8, MUMBAI, DATED 05.02.2018, WHICH IN TURN ARISES OUT OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE I.T. ACT, 1961 FOR A.Y. 2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF RS.2,46,53,359/ - BEING DEPRECIATION CLAIMED BY THE ASSESSEE ON CIVIL WORK OF FACTORY BUILDING, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE GENUINENESS OF ADDITION TO FI XED ASSET ON ACCOUNT OF CIVIL WORK OF FACTORY BUILDING ON WHICH DEPRECIATIO N WAS CLAIMED ? ITA 2780/MUM/2018 BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHAN SUGAR LTD. 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ID. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. OF JTE.19,46,225/- BEING EXPENDITURE INCURRED ON EARNING THE EXEMPT INCOME B Y INVOKING PROVISION OF SECTION 14A OF THE I. T. ACT READ WITH RULE 8D? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN NOT CONSIDERING THE FACT THAT THE AMOUNT OF DISALLOWANCE U/S 14A TO THE AMOUNT O/RS.5,27,18,701/- MADE BY THE AO WAS ON THE BASIS OF CBDT CIRCULAR NO. 5 OF 2014 DAT ED 11.O2.2014? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE AMOUNT OF DISALLOWANCE U/S 14A TO THE AMOUNT O/RS.5,27,18,701/- HOLDING THAT DISALLOWANCE U/S.14A CANNOT BE MADE IN RESPECT OF INVESTMENT MADE IN SUB SIDIARY AND RELATED COMPANIES WHEREAS IN THE RECENT JUDGEMENT OF THE AP EX COURT IN THE CASE OF M/S. MAXOPP INVESTMENT LTD. VS. CIT IN CIVI L APPEAL NO. 104-109 OF 2015 DATED 12/02/2018, IT HAS BEEN HELD THAT SEC TION 14A APPLIES IRRESPECTIVE OF WHETHER THE SHARES ARE HELD TO GAIN CONTROL OR AS STOCK-IN- TRADE? 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE D ELETION OF ADDITION OF ` 2,46,53,359/- BY THE CIT(A) AS MADE BY THE AO ON A CCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON CIVIL WO RK OF FACTORY BUILDING. FACTS IN BRIEF ARE THAT DURING THE ASSESSMENT PROCE EDINGS, THE AO OBSERVED THAT ASSESSEE HAS CLAIMED DEPRECIATION OF ` 2,54,04,399/- COMPRISING OF DEP ` 2,46,53,329/- ON CIVIL WORK OF FACTORY AND ` 7,51,070/- ON PLANT AND MACHINERY. THE AO DISALLOWED DEPRECIATION ON THESE ASSETS ON THE GROUND THAT THE ADDITIONS ON THESE ASSETS WERE HELD TO BE NON-GENUINE IN A.Y. 2009- 10. 4. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) , FOLLOWING THE DECISION OF HIS PREDECESSOR, DELETED THE DISALLOWANCE OF DEP RECIATION OF ITA 2780/MUM/2018 BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHAN SUGAR LTD. 3 ` 2,46,53,359/- ON CIVIL WORKS ON FACTORY BUILDING. BUT CONFIRMED THE DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY AMOUNTING TO ` 7,51,070/-. 5. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 948/MUM/2015 FOR A.Y. 2009-10, WHER EIN THE TRIBUNAL VIDE ORDER DATED 08.04.2017, RESTORED THE ISSUE TO THE F ILE OF THE ASSESSING OFFICER. THE LEARNED AR THEREFORE SUBMITTED THAT THE ISSUE F OR THE YEAR UNDER CONSIDERATION MAY ALSO BE RESTORED TO THE ASSESSING OFFICER FOLLOWING THE COORDINATE BENCH DECISION. THE LEARNED DR FAIRLY A GREED TO THIS CONTENTION OF THE LEARNED AR. 5. WE HAVE HEAD BOTH THE PARTIES AND PERUSED THE RE CORD INCLUDING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE F OR A.Y. 2009-10 (SUPRA). THE OPERATIVE PART OF THE SAID ORDER IS REPRODUCED AS UNDER: 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. SINCE, PRIMA FACIE, THE ADDITIO NAL EVIDENCES SUBMITTED BY ASSESSEE BEFORE LD. FIRST APPELLATE AUTHORITY WE RE NEVER CONFRONTED TO LD. AO AND NO REMAND REPORT WAS CALLED AGAINST THE SAME, WE REMIT THE MATTER BACK TO THE FILE OF LD. AO TO RE-APPRECIATE THE CONTENTIONS OF THE ASSESSEE AND DECIDE AS PER LAW AFTER AFFORDING ADEQ UATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE, IN TURN, IS DIRECTED TO SUBSTANTIATE HIS CLAIM IN THIS REGARD. THIS GROUND OF REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA 2780/MUM/2018 BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHAN SUGAR LTD. 4 FACTS AND CIRCUMSTANCES BEING IDENTICAL, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE IT AFR ESH AS PER FACT AND LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, GROUND NO.1 IS PARTLY ALLOWED FOR STATISTICAL PURPO SE. 7. THE ISSUE IN GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF ` 19,46,225/- BEING EXPENDITURE INCURRED ON EARNING THE EXEMPT INCOME AS MADE BY THE AO UNDER SECTION 14A R.W.R. 8D AND THE ISSUE RAISED IN GROUND NOS. 3 & 4 IS AGAINST THE DELETION OF DISALLOWANCE RELATING TO THE EXPENSES AS MADE U/S. 14A ON THE GROUND THAT THE INVESTMENTS WE RE IN THE SUBSIDIARY COMPANIES. 8. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE POINTED OUT THAT DURING THE YEAR THE ASSESSEE HAS NOT EARNED ANY INC OME. HE DREW OUR ATTENTION TO PAGE 10 OF THE ASSESSMENT ORDER, WHERE IN THE ASSESSEE VIDE LETTER DATED 07.03.2014 BROUGHT TO THE NOTICE OF TH E ASSESSING OFFICER THAT ASSESSEE HAS NOT CLAIMED ANY INCOME EXEMPTION DURIN G THE YEAR AND SUBMITTED THAT NO DISALLOWANCE U/S. 14A READ WITH R ULE 8D IS CALLED FOR. 9. THE LEARNED DR ON THE OTHER HAND RELIED ON THE G ROUNDS OF APPEAL AND THE ASSESSMENT ORDER. 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE FACTS ON RECORDS , WE OBSERVE THAT DURING THE YEAR THE ASSESSEE HAS NOT C LAIMED ANY INCOME AS ITA 2780/MUM/2018 BAJAJ ECO TECH PRODUCT LTD. (NOW MERGED WITH BAJAJ HINDUSTHAN SUGAR LTD. 5 EXEMPT IN THE COMPUTATION OF INCOME AND, THUS, WE F IND MERIT IN THE CONTENTION OF THE ASSESSEE THAT NO DISALLOWANCE U/S . 14A READ WITH RULE 8D CAN BE MADE AS HAS BEEN HELD BY NAGPUR BENCH OF HON BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. BALLARPUR INDUSTRIES LTD. IN INCOME TAX APPEAL NO. 51 OF 2016. WE, THEREFORE, RESPECTFULLY FOLLOW ING THE SAID DECISION, DISMISS THE GROUNDS RAISED BY THE REVENUE IN RESPEC T OF DISALLOWANCE U/S. 14A. 11. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7 TH JUNE, 2019 SD/- SD/- (SANDEEP GOSAIN) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 27 TH JUNE,2019 SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI