DCIT, CHENNAI V. M/s. Harita Seating Systems Ltd., CHENNAI

ITA 3172/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7857 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R DURAIPANDIAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation; Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , .. ' #$, & '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.3172/MDS/2016 * +* / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI - 600 034. V. M/S HARITA SEATING SYSTEMS LTD., NO.29, JAYALAKSHMI ESTATES, HADDOWS ROAD, CHENNAI - 600 006. PAN : AAACH 2492 N (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI R. DURAI PANDIAN, JCIT /0-. 1 2 / RESPONDENT BY : SH. R. VIJAYARAGHAVAN, ADVOCAT E ' 1 3& / DATE OF HEARING : 03.01.2017 45+ 1 3& / DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 6, CHENN AI, DATED 28.09.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF 2 I.T.A. NO.3172/MDS/16 THE INCOME-TAX ACT, 1961 READ WITH RULE 8D OF THE I NCOME-TAX RULES, 1962. 3. SHRI R. DURAI PANDIAN, THE LD. DEPARTMENTAL REPR ESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER COMPUTED THE D ISALLOWANCE UNDER RULE 8D(2). THE ASSESSING OFFICER FOUND THAT THERE WAS NO DIRECT EXPENDITURE FOR EARNING EXEMPT INCOME. THE ASSESSEE ADMITTEDLY BORROWED FUNDS FOR THE PURPOSE OF BUSINE SS AND PAYMENT OF INTEREST, WHICH DOES NOT RELATE TO ANY PARTICULA R INCOME, WAS CONSIDERED BY THE ASSESSING OFFICER UNDER RULE 8D(2 ). ACCORDING TO THE LD. D.R., DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE INVESTED FUNDS FOR EARNING EXEMPT INCOME. THEREFOR E, 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME, AS APPEARING IN THE BALANCE S HEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, WAS ALSO CONSIDERED BY THE ASSESSING OFFICER. ULTIMATE LY, THE DISALLOWANCE WAS COMPUTED AT ` 1,23,80,285/-. ACCORDING TO THE LD. D.R., THE DISALLOWANCE MADE BY THE ASSESSEE ITSELF WAS REDUCED AND THE BALANCE AMOUNT WAS DISALLOWED BY THE ASSESS ING OFFICER. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS ) FOUND THAT THE INVESTMENT MADE IN THE SUBSIDIARY COMPANY WAS N OT FOR THE PURPOSE OF EARNING CAPITAL GAIN OR DIVIDEND INCOME. ACCORDING TO 3 I.T.A. NO.3172/MDS/16 THE LD. D.R., IT IS NOT KNOWN WHAT WAS THE BUSINESS PURPOSE FOR WHICH THE INVESTMENT WAS MADE. IT IS ALSO NOT KNOW N HOW THE INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANY. THE SHAREHOLDING PATTERN OF THE COMPANY IN WHICH THE INVESTMENT WAS MADE IS NOT AVAILABLE ON RECORD. MOREOVER, RULE 8D DOES NOT PR OVIDE FOR ANY EXEMPTION IN RESPECT OF THE INVESTMENT MADE IN THE SUBSIDIARY COMPANIES. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 4. ON THE CONTRARY, SH. R. VIJAYARAGHAVAN, THE LD.C OUNSEL FOR THE ASSESSEE, SUBMITTED THAT INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANIES. ON A QUERY FROM THE BENCH, WHAT IS THE SHAREHOLDING PATTERN OF THE SUBSIDIARY COMPANY? THE LD.COUNSEL C OULD NOT PRODUCE ANY DETAILS. IN FACT, THE CIT(APPEALS) PLA CED HIS RELIANCE ON THE ORDER OF THIS TRIBUNAL, THEREFORE, NO INTERF ERENCE IS CALLED FOR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. EVEN THOUGH THE ASSESSEE CLAIMS THAT THE INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANIES AND FOR BUSINESS EXPEDIENCY, IT IS NOT KN OWN HOW THE COMPANY IN WHICH THE INVESTMENT WAS MADE WAS SUBSID IARY COMPANY TO THE ASSESSEE. THE SHAREHOLDING PATTERN OF THE COMPANY IN WHICH THE INVESTMENT WAS MADE IS NOT AVA ILABLE ON 4 I.T.A. NO.3172/MDS/16 RECORD. MOREOVER, THE BUSINESS EXPEDIENCY IS ALSO NOT DEMONSTRATED BY THE ASSESSEE. MERE CLAIM THAT INVE STMENT WAS MADE FOR BUSINESS EXPEDIENCY DOES NOT SERVE ANY PUR POSE. IT IS FOR THE ASSESSEE TO DEMONSTRATE THE BUSINESS EXPEDIENCY TO MAKE INVESTMENT IN THE SUBSIDIARY COMPANY. IN THE ABSEN CE OF THESE DETAILS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE OF DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSI NG OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRES H IN THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING A RE ASONABLE OPPORTUNITY TO THE ASSESSEE. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. 7. SHRI R. DURAI PANDIAN, THE LD. DEPARTMENTAL REPR ESENTATIVE, SUBMITTED THAT THERE IS NO PROVISION IN THE INCOME- TAX ACT TO CARRY FORWARD THE DEPRECIATION FOR THE PURPOSE OF ALLOWIN G THE SAME IN THE PREVIOUS YEAR. SINCE THE ASSESSEE HAS USED MACHINE RY FOR LESS THAN 180 DAYS, THE ASSESSING OFFICER ALLOWED THE DE PRECIATION AT THE 5 I.T.A. NO.3172/MDS/16 RATE OF 50%. NOW THE ASSESSEE CLAIMS REMAINING 50% TO BE CARRIED FORWARD AND ALLOWED DURING THE YEAR UNDER CONSIDERA TION. IN THE ABSENCE OF ANY SPECIFIC PROVISION TO CARRY FORWARD ADDITIONAL DEPRECIATION, ACCORDING TO THE LD. D.R., THE SAME C ANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. 8. ON THE CONTRARY, SH. R. VIJAYARAGHAVAN, THE LD.C OUNSEL FOR THE ASSESSEE, SUBMITTED THAT IT IS NOT IN DISPUTE T HAT THE ASSESSEE PURCHASED A NEW MACHINERY AND THE SAME WAS PUT TO U SE FOR LESS THAN 180 DAYS. THE ASSESSEE IS ENTITLED FOR ADDITI ONAL DEPRECIATION AT THE RATE OF 20%. SINCE THE MACHINERY WAS USED F OR LESS THAN 180 DAYS, THE ASSESSING OFFICER ALLOWED ADDITIONAL DEPR ECIATION AT THE RATE OF 10%. THE ASSESSEE NOW CLAIMS THE BALANCE D URING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. HOWE VER, THE CIT(APPEALS) BY PLACING RELIANCE ON THE ORDER OF DE LHI BENCH OF THIS TRIBUNAL IN DEVI POLYMERS LIMITED AND JUDGMENT OF K ARNATAKA HIGH COURT IN CIT V. RITTAL INDIA PVT. LTD. (2016) 380 I TR 423, ALLOWED THE CLAIM OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(APPEALS) BY PLACING RELIANCE ON THE JUDGMENT OF KARNATAKA HIGH 6 I.T.A. NO.3172/MDS/16 COURT IN RITTAL INDIA PVT. LTD. (SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO ADDITIONAL DEPRECIATION. S INCE THE KARNATAKA HIGH COURT AFTER EXAMINING THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, FOUND THAT THE ADDITIONAL DE PRECIATION CAN BE ALLOWED IN THE SUBSEQUENT YEAR, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOLLOWED THE JUDGMENT OF HIGH COURT IN RITTAL INDIA PVT. LTD. (SUPRA). THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 31 ST JANUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 31 ST JANUARY, 2017. KRI. 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. ' :3 () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT-2, CHENNAI 5. 8; /3 /DR 6. * < /GF.