DCIT, Central Circle , Noida V. International Cylinders P. Ltd., New Delhi

ITA 3765/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9408 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 18-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Earning of tax free income
• Section: 14A; 80IC; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.3765/DEL/2018 ASSESSMENT YEAR: 2013-14 DCIT SECTOR-33 NOIDA VS INTERNATIONAL CYLINDERS P. LTD. E-14, PREET VIHAR, NEW DELHI-110092 PAN NO. AAACI7605J (RESPONDENT) APPELLANT BY MS. ANIMA BARNWAL, SR. DR RESPONDENT BY SH.NIPUN MITTAL, CA DATE OF HEARING: 29/07/2021 DATE OF PRONOUNCEMENT: 29/07/2021 ORDER PER N. K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)-4, DELHI DATED 15.01.2018 PERTAINING TO A.Y.2013-14. 2. THE GRIEVANCE OF THE REVENUE READ AS UNDER :- 2 1 W HETHER, THE LD CIT(A) WAS CORRECT IN HOLDING THAT T HE PROVISION OF SECTION 80IC OF THE I.T. ACT, 1961 ALLOWED EXISTENC E OF MULTIPLE INITIAL ASSESSMENT YEARS AND CONSEQUENTLY DEDUCTI ON @ 100% OF THE PROFIT WHERE, IT WAS OTHERWISE ALLOWABLE @ 30% ONLY. 2 WHETHER, THE INTERPRETATION OF SECTION 80IC OF I.T. ACT, BY THE LD CIT(A)DOES NOT AMOUNT TO RE- WRITING THE PROVISION OF LAW SO AS TO ALLOW THE DEDUCTION TO AN UNDERTAKING EXISTING AND ACHIEVING SUBSTANTIAL EXPANSION DURING THE PREVIOUS YEAR. 3 THE LD CIT( A) FAILED TO APPRECIATE THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF M/S CIT VS UNITED GENE RAL TRUST LTD 200ITR 488/SC) IN WHICH IT WAS HELD THAT EXPENDITUR E IN RELATION TO EARNING OF THE EXEMPT INCOME ARE EMBEDDED IN THE INDIRECT EXPENDITURES. 4 THE LD CIT(A) FAILED TO APPRECIATE THAT CIRCULAR NO 5/2014 OF MINISTRY OF FINANCE CBDT WHICH PROVIDES FOR DISALLO WANCE OF EXPENDITURE EVEN WHERE TAX PAYER IN THE PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME. 5 THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEOUS IN LAW AND ON FACTS WHICH NEEDS TO BE VACATED AND THE ORDER OF TH E AO BE RESTORED. 6 THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUND OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS THE AO NOTIC ED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IC OF THE ACT AMOUNTING TO RS.95273997/-. WHILE EXAMINING THE DETAILS THE AO NOTICED THAT THE BUSINESS OF MANUFACTURING AND TRADING OF L PG CYLINDERS HAS BEEN ESTABLISHED IN THE YEAR 2003-04 RELEVANT T O A.Y.04-05. 3 THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE IS ENTITLED FOR 100% DEDUCTION U/S.80IC OF THE ACT FOR INITIAL FIVE YEARS I.E. 04-05 TO 08-09 AND THEREAFTER FOR ANOTHER FIVE YEARS I.E. A.Y. 2009-10 TO 13-14 @ 30%. THE AO ACCORDINGLY RESTRICTED THE CLAI M OF DEDUCTION TO 30% AND DISALLOWED RS.65691800/-. 4. PROCEEDING FURTHER THE AO NOTICED THAT THE ASSES SEE HAS EARNED EXEMPT INCOME ON WHICH EXPENSES NEED TO BE D ISALLOWED U/S.14A R.W.R. 8D. ACCORDINGLY THE AO COMPUTED THE DISALLOWANCE AT RS.1343086/-. 5. THE ASSESSEE ASSAILED THE ADDITIONS BEFORE THE C IT(A). IT WAS BROUGHT TO THE NOTICE OF THE CIT(A) THAT DUE TO SUB STANTIAL EXPANSION IN A.Y.2009-10 THE ASSESSEE BECAME ELIGIB LE FOR 100% DEDUCTION U/S. 80IC OF THE ACT FOR FIVE YEARS STARI NG FROM A.Y.2009-10. THE ASSESSEE EXPLAINED THE AMENDED PR OVISIONS OF SECTION 80IC AND STRONGLY CONTENDED FOR 100% DEDUCT ION. 6. THE CIT(A) AFTER CONSIDERING THE FACTS AND THE S UBMISSIONS AND DRAWING SUPPORT FROM VARIOUS JUDICIAL DECISIONS ALLOWED THE CLAIM OF 100% DEDUCTION. 7. ON THE DISALLOWANCE MADE U/S. 14A OF THE ACT THE CIT(A) FOUND THAT ASSESSEE HAD SUFFICIENT OWN FUNDS TO MEE T THE INVESTMENT AND THEREFORE, THERE WAS NO REASON FOR T HE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL AND AC CORDINGLY DELETED THE DISALLOWANCE. 8. BEFORE US THE DR STRONGLY SUPPORTED THE ASSESSME NT ORDER. IT IS THE SAY OF THE DR THAT THERE CANNOT BE TWO IN ITIAL ASSESSMENT YEARS FOR THE ELIGIBILITY OF DEDUCTION U/S. 80IC OF THE ACT. ON THE 4 DISALLOWANCE MADE U/S. 14A, THE DR READ THE RELEVAN T FINDINGS OF THE AO. 9. THE COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS DISALLOWED THE CLAI M OF DEDUCTION OF 100% U/S. 80IC OF THE ACT ON THE GROUND THAT THE INITIAL ASSESSMENT YEAR IS A.Y. 2004-05 AND THEREFORE, FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE IS ELIGIBLE FOR ONLY 30% DEDUCTION. WE FIND THAT THE AO HAS SIMPLY MISUNDERSTOOD THE AMEND MENT BROUGHT U/S. 80IC AND FURTHER MISUNDERSTOOD THE SU BSTANTIAL EXPANSION BROUGHT BY THE ASSESSEE FROM A.Y.2009- 10. IN OUR CONSIDERED OPINION IN THE LIGHT OF THE NOTIFICATION ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY AND IN THE LIGHT OF THE AMENDMENT BROUGHT IN THE ACT U/S. 80IC OF THE ACT, THE ELIGIBILITY OF 100% DEDUCTION WOULD START FROM INITIAL A.Y. 200 9-10. 11. WE FURTHER FIND THAT THE AO HAS ALLOWED THE DED UCTION FROM A.Y.2009-10 TO 2012-13 WHICH IS EVIDENT FROM THE AS SESSMENT ORDERS OF THE RELEVANT ASSESSMENT YEARS ON RECORD. IN OUR CONSIDERED VIEW THE AO WAS NOT CORRECT IN DISTURBIN G THE CLAIM IN THE 5 TH YEAR WHEN EARLIER ASSESSMENT YEARS HAS NOT BEEN DISTURBED. 12. MOREOVER, THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. AARHAM SOFTRONICS (2019) 102 TAXMAN.COM 343 HAS DEC IDED THIS CONTROVERSY IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. THE OPERATIVE PART OF THE JUDGMENT IS EXTRACTED AS UNDER :- 5 6 13. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT (SUPRA) WE DECLINE TO INTERFERE WITH THE FIND INGS OF THE CIT(A), GROUND NO. 1 AND 2 TAKEN TOGETHER ARE DISMI SSED. 14. COMING TO THE GRIEVANCE RELATING TO THE DELETIO N OF THE DISALLOWANCE U/S.14A OF THE ACT WE FIND THAT THE IN TEREST FREE FUNDS (OWN FUNDS) AVAILABLE WITH THE ASSESSEE IS FA R IN EXCESS OF THE INVESTMENT IN SHARE. THEREFORE, FOLLOWING THE RATIO LAID-DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDF C BANK LIMITED 366 ITR 505 AND RELIANCE UTILITIES AND POWE R LIMITED 313 ITR 340, WE DO NOT FIND ANY ERROR OR INFIRMITY IN T HE FINDINGS OF THE CIT(A) GROUND NO. 3 AND 5 ARE DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7 16. DECISION ANNOUNCED IN THE OPEN COURT IN THE PRE SENCE OF BOTH THE REPRESENTATIVES ON 29.07.2021. SD/- SD/- (K.NARASIMHA CHARY) (N. K. BILLAIYA) JUDICIAL MEMBER ACCO UNTANT MEMBER *NEHA* DATE:-29.07.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 29 .07.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29 .07.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 29 .07.2021 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 29 .07.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 29 .07.2021 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 29 .07.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 29 .07.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER