ELOF HANSON (INDIA) PVT. LTD., MUMBAI V. DCIT -1(1), MUMBAI

ITA 3589/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62527 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 31-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SAMUEL
• Assessee Lawyers: R MURALIDHAR
• Section: 43B; 14A

Judgement Text

ITA NO.3589 OF 2010 ELOF HANSON INDIA PVT LTD MUMBA I-J BENCH PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO.3589/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S ELOF HANSON (INDIA) PVT.LTD 5-F COURT CHAMBERS, 35 NEW MARINE LINES VS DY. COMMISSIONER OF INCOME TAX 1(1) RANGE-1(1) ROOM NO. 533, 5 TH FLOOR,AAYAKAR BHAVAN MUMBAI 400020 MK ROAD, PAN AAACE 2664 H MUMBAI 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI R. MURALIDHAR DEPARTMENT BY: SHRI V.S. SAMUEL, JCIT DATE OF HEARING: 31/05/2012 DATE OF PRONOUNCEMENT: 06/06/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDERS OF THE CIT(A)-1 MUMBAI DATED 27.1.2010. ASSESSEE RAISED THE FOLLOWI NG THREE GROUNDS: 1. THE COMMISSIONER OF INCOME TAX (APPEALS)-1 MUMBAI (HEREINAFTER REFERRED TO AS THE CIT (A) ERRE D IN CONFIRMING THE ADDITION TO THE TOTAL INCOME A SUM O F ` .3,30,213/- BEING AMOUNT STANDING AS UNUTILIZED MODVAT CREDIT BALANCE AT THE YEAR END. 2. THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF CONTRIBUTION TO SUPERANNUATION FUND OF ` .5,26,093/- RELATING TO THE PERIOD APRIL, 2006 TO NOVEMBER, 200 6 HAVING FAILED TO APPRECIATE THE FACTS THAT THE APPE LLANT COMPANY HAS AN ARRANGEMENT WITH LIFE INSURANCE CORPORATION OF INDIA TO ADMINISTER ITS SUPERANNUATI ON FUND. THE CONTRIBUTION TO SUPERANNUATION FUND IS DEBITED TO THE PROFIT AND LOSS ACCOUNT, CONSISTENTL Y ON AN ACCRUAL BASIS ON THE RENEWAL DATE. ITA NO.3589 OF 2010 ELOF HANSON INDIA PVT LTD MUMBA I-J BENCH PAGE 2 OF 5 3. THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF ` .1,27,563/- BEING EXPENDITURE ATTRIBUTABLE TO EXEMPT DIVIDEND INCOME. 2. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D R IN DETAIL. WE ALSO PERUSED THE PAPER BOOK AND THE CASE LAW PLACED ON RECORD. 3. GROUND NO. 1 PERTAINS TO THE ISSUE OF CONFIRMING TH E ADDITION OF SUM OF ` .3,30,213/- BEING AMOUNT STANDING AS UNUTILIZED MOD VAT CREDIT BALANCE AT THE YEAR END. IT WAS FAIRLY ADMI TTED THAT AO RELIED ON THE EARLIER YEARS ORDERS AND THIS ISSUE WAS ADJU DICATED BY THE ITAT IN ITA NO.5479/MUM/2006 FOR ASSESSMENT YEAR 20 03-04 AND ITA NO.3721/MUM/2008 FOR ASSESSMENT YEAR 2004-05 AN D ITA NO.315/MUM/2009 FOR ASSESSMENT YEAR 2005-06 DATED 1 7-6-2011. THE ITAT ON THE SAME ISSUE HAS DIRECTED AO TO WORKO UT AS UNDER VIDE PARA 4.2: 4.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING ADDITI ON ON ACCOUNT OF UN-UTILIZED MODVAT CREDIT. THE ASSESSEE IS FOLLOWING THE EXCLUSIVE METHOD. THEREFORE MODVAT ACCOUNT IS NOT ROUTED THROUGH TRADING ACCOUNT. UNDE R THE PROVISIONS OF SECTION 145A, ADJUSTMENT IS REQUIRED TO BE MADE ON ACCOUNT OF ANY AMOUNT PAID AS TAX, DUTY, CE SS OR FEES ETC. HOWEVER, THE ADJUSTMENT HAS TO BE MADE AT EACH STAGE WHEN THE MODVAT IS REQUIRED TO BE DEBITE D /CREDITED INCLUDING ADJUSTMENT IN CLOSING STOCK. SI MILAR ADJUSTMENT IS ALSO REQUIRED TO BE MADE TO THE OPENI NG STOCK IN VIEW OF JUDGMENT OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF MAHAVIR ALUMINUM LIMITED (297 ITR 77). WE THEREFORE, DIRECT THE ASSESSING OFFICER TO MAKE ADJUSTMENT ON ACCOUNT OF MODVAT AT EACH STAGE INCLU DING OPENING AND CLOSING STOCK BY FOLLOWING THE INCLUSIV E METHOD SO AS TO WORK OUT NET ADDITION IF ANY WHICH COULD BE MADE TO THE TOTAL INCOME. THE ASSESSING OFFICER WILL GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE MAKING ADJUSTMENT. ITA NO.3589 OF 2010 ELOF HANSON INDIA PVT LTD MUMBA I-J BENCH PAGE 3 OF 5 4. SINCE THE FACTS ARE SIMILAR AND THE ISSUE BEING SIM ILAR, WE ALSO DIRECT AO TO FOLLOW THE ABOVE DIRECTIONS AND W ORK OUT THE DISALLOWANCE IF ANY, ACCORDINGLY IN THIS YEAR. WITH THESE DIRECTIONS, THE GROUND IS CONSIDERED ALLOWED. 5. GROUND NO.2 PERTAINS TO THE ISSUE OF CONTRIBUTION T O SUPERANNUATION FUND OF ` .5,26,093/- RELATING THE PERIOD APRIL, 2006 TO NOVEMBER, 2006. ASSESSEE USUALLY MAKES PAYMENT O F SUPER- ANNUATION FUND TO LIC ON 30 TH NOVEMBER OF THE RELEVANT YEAR WHICH IS THE RENEWAL DATE OF THE POLICY. AO ALLOWED ONLY PROPORTIONATE PAYMENT FOR THE PERIOD FROM 30 TH NOVEMBER TO 31 ST MARCH AND HELD THAT THE BALANCE PAYMENT RELATING TO NEXT YEAR WAS NOT ALLOWABLE. IN APPEAL, THE CIT (A) CONFIRMED THE ADDITIONS MADE BY AO. 6. THIS ISSUE IS ALSO DECIDED BY THE ITAT IN THE ABOVE REFERRED ORDER VIDE PARA 3.2 AS UNDER: 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING THE DEDU CTION ON ACCOUNT OF ANNUAL CONTRIBUTION TO LIC IN RELATIO N TO SUPERANNUATION FUND. CONTRIBUTION TO SUPERANNUATION FUND IS ALLOWABLE AS DEDUCTION (1)(IV) UNDER SECTIO N 36 OF THE ACT. THE CONTRIBUTION IS PAYABLE ANNUALLY ON 30 TH NOVEMBER OF EACH YEAR AND THEREFORE ON THAT DAY THE ENTIRE AMOUNT FOR THE YEAR BECOMES PAYABLE. WE THEREFORE DO NOT AGREE WITH THE AUTHORITIES BELOW T HAT PROPORTIONATE PAYMENT IS TO BE ALLOWED AS ENTIRE CONTRIBUTION FOR THE YEAR BECAME PAYABLE DURING THE YEAR. HOWEVER, SECTION 43B ALLOWS ONLY ACTUAL AMOUN T PAID DURING THE YEAR. WE THEREFORE DIRECT THE ASSES SING OFFICER TO WORK OUT THE DEDUCTION ACCORDINGLY AFTER NECESSARY VERIFICATION AND AFTER HEARING ASSESSEE. SIMILAR DIRECTIONS ALSO APPLY TO THIS YEAR. FURTHER , SINCE AMOUNT IS ALSO PAYABLE UNDER SECTION 43B ON ACTUAL PAYMENT BA SIS AND AS AO DID NOT ALLOW THE AMOUNT WHICH WAS DISALLOWED IN ON E YEAR AS THE DEDUCTION IN OTHER YEAR, WE ARE OF THE OPINION THAT THE ACTION OF AO ITA NO.3589 OF 2010 ELOF HANSON INDIA PVT LTD MUMBA I-J BENCH PAGE 4 OF 5 IS NOT ACCORDING TO THE PROVISIONS OF THE ACT. WE T HEREFORE, DIRECT AO TO ALLOW THE AMOUNT AS CLAIMED, AFTER DUE VERIFICAT ION. 7. GROUND NO.3 PERTAINS TO THE ISSUE OF DISALLOWANCE U NDER SECTION 14A OF ` .1,27,563/-. AO HAVING NOTICED THAT ASSESSEE HAD EARNED DIVIDEND INCOME OF ` .6,49,487/- AND CLAIMED EXEMPTION, INVOKING THE PROVISIONS OF SECTION 14A / RULE 8D DI SALLOWED THE AMOUNT OF ` .1,27,563/-. THE CIT (A) FOLLOWING HIS ORDER IN EAR LIER YEAR UPHELD THE DISALLOWANCE ON THE ABOVE. THIS ISS UE WAS ALSO CONSIDERED BY THE ITAT VIDE PARA 5.2 OF THE ABOVE R EFERRED ORDER WHEREIN CONSIDERING THE FACTS OF THE CASE THE EXPEN DITURE WAS REASONABLY ESTIMATED AT 5% OF THE DIVIDEND INCOME. THE LEARNED COUNSEL SUBMITTED THAT DURING THE YEAR APPLICATION OF RULE 8D IS NOT CORRECT AS HELD BY THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (323 ITR 81)( BOM.) AND FURTHER THERE ARE ONLY TWO INVESTMENTS MADE BY THE ASSESSEE COMPANY IN EARLIER YEARS AND THERE ARE NO FRESH INV ESTMENTS AS IN EARLIER YEARS AND FURTHER ONLY TWO DIVIDEND CHEQUES HAVE BEEN RECEIVED AND NO EXPENDITURE IS INCURRED, ESTIMATION OF 5% AS WAS DONE IN EARLIER YEAR IS ON HIGHER SIDE. HE SUBMITTE D THAT ITAT IS HOLDING THAT 1% OF THE EXPENDITURE AS JUSTIFIED. LE ARNED DR SUBMITTED THAT EVEN THOUGH THERE ARE NO INVESTMENTS OR INVESTMENTS DUE DURING THE YEAR, THE DIVIDEND INCOM E HAS GONE UP AND THEREFORE, THERE IS NO NEED FOR REDUCING THE AM OUNT FROM 5% OF THE DIVIDEND INCOME. 8. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE RECORD S. ON AN AMOUNT OF ` .4.69 LAKHS DIVIDEND EARNED IN EARLIER YEAR, THE IT AT UPHELD REASONABLE ESTIMATION AT 5% OF THE INCOME AS EXPENDITURE DISALLOWABLE UNDER SECTION 14A. ITAT IN A NUMBER O F CASES IS CONSISTENTLY ESTIMATING 2% OF THE DIVIDEND INCOME A S REASONABLE EXPENDITURE. CONSIDERING THE FACT THAT THE INVESTME NTS HAVE CAME ITA NO.3589 OF 2010 ELOF HANSON INDIA PVT LTD MUMBA I-J BENCH PAGE 5 OF 5 DOWN DURING THE YEAR AND NO FRESH INVESTMENTS HAVE BEEN MADE DURING THE YEAR AND ONLY DIVIDEND CHEQUES WERE RECE IVED, WE ESTIMATE THE EXPENDITURE AT 2% OF THE DIVIDEND INCO ME RECEIVED BY ASSESSEE. AO IS DIRECTED TO MODIFY THE DISALLOWANCE UNDER SECTION 14A ACCORDINGLY. GROUND IS PARTLY ALLOWED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JUNE, 2012. SD/- SD/- (S.S.GODARA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 6 TH JUNE, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI