Appeal details
Counselvise Citation
357420114 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-11-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
07-10-2014
Assessment Year
2005-2006
Appeal Filed On
04-06-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 3574/DEL/2013 ASSTT. YR: 2005-06 FEDERAL MOGUL GOETZE INDIA LTD., VS. ACIT, CENTRAL CIRCLE-3, (FORMERLY GOETZE(INDIA) LTD., NEW DELHI. 7870-77, F-1, ROSHNARA PLAZA BUILDING, ROSHNARA ROAD, NEW DELHI. PAN: AAACG 3769 M ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI PRADEEP DINODIA FCA RESPONDENT BY : SMT. PARMINDER KAUR SR. DR DATE OF HEARING : 07-10-2014 DATE OF ORDER : 14-11-2014. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECT ED AGAINST THE ORDER OF CIT(APPEALS)-II, NEW DELHI DATED 31-10-2014 IN APPE AL NO. 188/07-08 FOR A.Y. 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MAN UFACTURING AND TRADING OF AUTOMOBILE PARTS AND ALSO DERIVED INCOME FROM OTHER SOURCES. IT HAD FILED ITS RETURN OF INCOME, DECLARING A TOTAL I NCOME OF RS. 4,73,45,999/-. THE ASSESSMENT WAS MADE UNDER NORMAL PROVISION AT N IL INCOME AND 2 ITA 3574/DEL/13 FEDERAL MOGUL GOETZE INDIA LTD. COMPUTATION U/S 115JB WAS MADE, DETERMINING THE BOO K PROFIT AT RS. 35,85,70,888/-. THE AO NOTICED THAT ASSESSEE COMPAN Y HAD SHOWN DIVIDEND INCOME OF RS. 122.40 LACS. THE AO OBSERVED THAT OUT OF THE TOTAL EXPENDITURE, FOLLOWING EXPENSES COULD BE SAID TO HA VE A DIRECT NEXUS FOR EARNING OF THE EXEMPTED INCOME, WHICH WAS TO BE DIS ALLOWED U/S 14A: RS. (IN LAKHS) ADMINISTRATIVE EXPENSES 223.28 TOTAL INCOME 1073.81 EXEMPTED INCOME 122.40 2.1. FURTHER, WHILE COMPUTING BOOK PROFITS U/S 115J B, THE AO HAD MADE AN ADDITION OF RS. 2,50,00,000/- IN REGARD TO PROVISIO N FOR DIMINUTION IN VALUE OF INVESTMENT. BOTH THESE ADDITIONS WERE CONFIRMED BY LD. CIT(A). BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.0 THAT THE ORDER OF ASSESSMENT PASSED BY THE AO AND UPHELD BY CIT(A) IS BAD IN LAW. 2.0 THAT THE CIT(A) HAS ERRED IN LAW ON THE FACTS A ND CIRCUMSTANCES OF THE ASSESSEES CASE IN UPHOLDING T HE ADDITION OF RS. 25,45,000/- ON ESTIMATED BASIS U/S 14A OF TH E INCOME TAX ACT. 2.1 THAT THE CIT(A) HAS ERRED IN LAW ON THE FACTS A ND CIRCUMSTANCES OF THE ASSESSEES CASE IN UPHOLDING T HE AOS CONTENTION THAT THERE EXISTED A NEXUS BETWEEN THE A DMINISTRATIVE EXPENSES AND THE DIVIDEND INCOME. 2.2 THAT THE CIT(A) HAS ERRED IN LAW ON THE FACTS A ND CIRCUMSTANCES OF THE ASSESSEES CASE IN CONCLUDING THAT THE APPORTIONMENT OF ADMINISTRATIVE EXPENSES ON PROPORT IONATE BASIS OF THE TAXABLE AND NON-TAXABLE INCOME IS REAS ONABLY FAIR. 3 ITA 3574/DEL/13 FEDERAL MOGUL GOETZE INDIA LTD. 2.3 THAT THE LD. CIT(A) FAILED TO FOLLOW THE ORDERS OF ITAT IN ASSESSEES OWN CASE & EARLIER ORDERS OF AO WHERE 1% OF DIVIDEND INCOME HAS BEEN HELD TO BE SUFFICIENT AS A TTRIBUTABLE TO EARNING OF EXEMPT INCOME U/S 14A OF THE ACT. 3 THAT THE CIT(A) HAS ERRED IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE IN UPHOLDING T HE ADDITION OF RS. 2,50,00,000/- ON ACCOUNT OF ALLEGED PROVISIO N FOR DIMINUTION IN THE VALUE OF THE ASSETS WHILE COMPUTI NG BOOK PROFITS U/S 115JB. 3.1 THAT THE CIT(A) HAS ERRED IN LAW ON THE FACTS A ND CIRCUMSTANCES OF THE ASSESSEES CASE IN NOT CONSIDE RING THE FACT THAT THE AMOUNT OF RS. 2,50,00,000/- HAS ACTUALLY B EEN WRITTEN OFF IN THE BOOKS AND WAS NOT A PROVISION FOR DIMINU TION IN THE VALUE OF ASSETS AS OBSERVED BY THE AO. 4. THAT THE CIT(A) GROSSLY ERRED IN CONFIRMING THE ENHANCEMENT OF BOOKS PROFITS WITH THE DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, WHICH IS CONTRARY TO ITAT JUDGM ENT IN ASSESSEES OWN CASE FOR AY 2001-02 AND IS BAD IN LA W. 3. GROUND NO. 1 IS GENERAL IN NATURE AND REQUIRES N O ADJUDICATION. GROUND NO. 4 HAS NOT BEEN PRESSED AND STANDS DISMIS SED ACCORDINGLY. 4. APROPOS GROUND NO. 2 TO 2.3, LD. COUNSEL FOR THE ASSESSEE REFERRED TO TRIBUNALS ORDER DATED 27-11-2009, IN ASSESSEES OW N CASE FOR A.Y. 2001-02, CONTAINED AT PAGE 5 OF THE PB, WHEREIN THE TRIBUNAL HAD DELETED THE ADDITION ON THIS COUNT. LD. COUNSEL SUBMITTED THAT THE INVES TMENTS WERE MADE FROM AY 1984-85 TO 1997-98 AND NO INVESTMENT HAD BEEN MA DE IN THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE ENTIRE INVESTMENT HAD BEEN RECOUPED OVER THE YEARS. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE CASE. IT IS TRUE THAT IN A.Y.2001 -02 THE TRIBUNAL HAD DELETED THE ADDITION BUT SUBSEQUENT TO THAT THE DISALLOWANC E @ 1% OF RETURNED 4 ITA 3574/DEL/13 FEDERAL MOGUL GOETZE INDIA LTD. INCOME HAS BEEN HELD TO BE SUFFICIENT AS ATTRIBUTAB LE TO EARNING OF EXEMPTED INCOME U/S 14A, WHICH IS EVIDENT FROM GROUND NO. 2. 3 TAKEN BY THE ASSESSEE. THEREFORE, CONSISTENT WITH THE VIEW TAKEN IN EARLIE R YEARS, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 1% OF DIVIDEND INCO ME. IN THE RESULT, GROUND NO. 2 TO 2.3 IS PARTLY ALLOWED. 6. BRIEF FACTS APROPOS GROUND NO. 3 & 3.1 ARE THAT WHILE COMPUTING THE BOOK PROFITS U/S 115JB, THE AO MADE ADDITION OF RS. 2,50,00,000/- ON ACCOUNT OF PROVISION FOR DIMINUTION IN VALUE OF IN VESTMENT, WHICH WAS CONFIRMED BY LD. CIT(A). 6.1. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 31 OF PAPER BOOK, WHEREIN THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDI NG 31-3-2005 IS CONTAINED AND POINTED OUT THAT THE AMOUNT HAD ONLY BEEN DEBIT ED TO P&L A/C UNDER THE HEAD DIMINUTION IN VALUE OF ASSETS HELD FOR DISPOSA L AND NOT AS PROVISION. 6.2 LD. DR REFERRED TO SCHEDULES 1-15 AT PAGE 41 OF PB AND REFERRED TO SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUN T AND POINTED OUT THAT PARA 4 READS AS UNDER: INVESTMENTS LONG TERM INVESTMENTS ARE CARRIED AT COST, AFTER PROVIDING FOR ANY DIMINUTION IN VALUE, IF SUCH DIMI NUTION IS OTHER THAN TEMPORARY IN NATURE. 6.3. HE THUS SUBMITTED THAT IT IS PURELY IN THE NAT URE OF PROVISION FOR DIMINUTION IN VALUE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY THE AMOU NT HAS BEEN DEBITED TO P&L A/C, WHICH IS IN THE NATURE OF PROVISION ONLY A ND IN VIEW OF THE AMENDMENT OF SECTION 115JB BY THE FINANCE (NO.2) AC T, 2009, WITH 5 ITA 3574/DEL/13 FEDERAL MOGUL GOETZE INDIA LTD. RETROSPECTIVE EFFECT FROM 1-4-2001, THE IMPUGNED AM OUNT WAS RIGHTLY ADDED BY THE AO WHILE COMPUTING THE BOOK PROFITS. WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS COUNT IN VIEW OF TH E SETTLED PROPOSITIONS. THE AMOUNT DEBITED TO P&L A/C IS IN THE NATURE OF PROVI SION FOR DIMINUTION IN VALUE OF ASSET AS IS EVIDENT FROM NOTES TO ACCOUNT ALSO. GROUND IS DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 14-11-2014. SD/- SD/- (H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14-11-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR
