DCIT, Circle-10(1), New Delhi V. Genesis Color Pvt. Ltd., New Delhi

ITA 4019/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8030 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 25-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Depreciation; Earning of tax free income; Revenue expenditure; TDS; Set aside
• Section: 14A; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A. NO.4019/DEL/2018 ASSESSMENT YEAR 2014-15 DCIT, CIRCLE-10(1), FARIDABAD. V. GENESIS COLOR PVT. LTD., 3A/1, RAO TULA RAM MARG, NEW DELHI. TAN/PAN: AABCG4825H (APPELLANT) (RESPONDENT) APPELLANT BY: MS. ANIMA BARNWAL, SR.D.R. RESPONDENT BY: SHRI VED JAIN, CA AND SHRI ASHISH GOEL, CA DATE OF HEARING: 25 08 2021 DATE OF PRONOUNCEMENT: 25 08 2021 O R D E R PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19 TH MARCH, 2018 BY COMMISSIONER OF INCOME TAX (APPEALS)-XXXV, NEW DELHI FOR THE ASSESSMENT YEAR 2 014-15. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, LD. CIT (A) HAS ERRED IN DELETING THE ADDIT ION OF RS. 1,96,81,853/- MADE BY THE AO IGNORING THE PROVISION OF SECTION 14A R.W.R. 8D OF THE ACT. 2. WHETHER FOR APPLICATION OF SECTION 14A(1) OF TH E INCOME TAX ACT, 1961 (THE ACT) THE PURPOSE FOR MAKI NG INVESTMENT AND EARNING TAX EXEMPT INCOME THEREON IS AN ESSENTIAL LEGAL REQUIREMENT? I.T.A. NO.4019/DEL/2018 2 3. WHETHER THE TERM IN RELATION TO AS USED IN SE CTION 14A OF THE ACT CONTEMPLATES A DIRECT AND PROXIMATE NEXUS BETWEEN EXPENDITURE INCURRED AND EARNING OF EXEM PT INCOME? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE IN LAW, LD. CIT (A) HAS ERRED IN NOT UPHOLDING DISA LLOWANCE U/S 14A OF THE ACT WITHOUT CONSIDERING LEGISLATIVE INTENT OF INTRODUCING SECTION 14A BY THE WITHOUT CONSIDERING LEGISLATIVE INTENT OF INTRODUCING SECTION 14A BY TH E FINANCE ACT, 2001 AS CLARIFIED BY CBDT CIRCULAR NO. 5/2014 DATED 10.02.2014? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE IN LAW, LD. CIT (A) HAS ERRED IN DELETING THEADDITION OF RS. 1,99,920/- MADE BY THE ASSESSING OFFICER HOLDING TH E SAME AS CAPITAL IN NATURE? 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE IN LAW, LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.80,850/- MADE BY THE ASSESSING OFFICER U/S 40(A) (IA) FOR NON-DEDUCTION OF TDS IN RESPECT OF JOB WORK CHARGES ? 7. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AM END ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF TH E HEARING. 2. GROUNDS NO. 1 TO 4 ARE REGARDING DISALLOWANCE MA DE BY THE ASSESSING OFFICER U/S.14A OF INCOME TAX ACT R.W .S. 8D OF THE INCOME TAX RULES, WHICH WAS DELETED BY THE LD. CIT(A). 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASS ESSING OFFICER HAS ADMITTED THE FACT THAT DURING THE YEAR UNDER I.T.A. NO.4019/DEL/2018 3 CONSIDERATION, THE ASSESSEE HAS NOT EARNED ANY DIVI DEND INCOME. THIS FACT IS RECORDED BY THE ASSESSING OFFI CER IN PARAGRAPH 3.4 OF THE ASSESSMENT ORDER AS UNDER: 3.4 ALTHOUGH THE ASSESSEE HAS NOT EARNED ANY DIVI DEND INCOME DURING THE YEAR UNDER CONSIDERATION, DISALLO WANCE OUGHT TO BE MADE U/S.14A. IN THIS REGARD, RELIANCE IS ALSO PLACED ON THE CIRCULAR NO.5/2014 DATED 11.02.2014 I SSUED BY CENTRAL BOARD OF DIRECT TAXES. 4. LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF HON BLE DELHI HIGH COURT IN PARAGRAPH 4.3.3 OF THE APPELLATE ORDE R AS UNDER: 4.3.3. IN VIEW OF SUBMISSION OF APPELLANT AND JUDI CIAL PRONOUNCEMENT IT IS OBSERVED THAT THE DECISION BY T HE HONBLE ITAT DELHI HAS BEEN REVERSED BY THE HON'BLE DELHI HIGH COURT IN THE SAME CASE I.E. CHEMNIVEST LTD. VS. CIT-IV 61 TAXMANN.COM 118 (DELHI) VIDE ORDER DATED 02.09.2015 HOLDING THAT 'THE THE EXPRESSION DOES NOT FORM PAR T OF THE TOTAL INCOME' IN SECTION 14A ENVISAGES THAT THERE S HOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBL E IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WIL L NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURIN G THE RELEVANT PREVIOUS YEAR. [PARA 23].' IN THE SAID JUD GMENT THE HON'BLE DELHI HIGH COURT FOLLOWED THE CASE OF CIT VS. HOLCIM INDIA P. LTD. 57 TAXMANN.COM 28 (2015) DELHI AND DISTINGUISHED THE DECISION OF MAXOPP INVESTMENT LTD. I.T.A. NO.4019/DEL/2018 4 347 ITR 272. APPELLANT HAS ALSO RELIED UPON VARIOUS JUDGMENTS IN HIS FAVOUR ON THE SAME LINES. SINCE, T HERE IS NO CLAIM OF EXEMPT INCOME DURING THE YEAR, THE RATIO L AID DOWN BY HON'BLE DELHI HIGH COURT IS SQUARELY APPLICABLE IN THE CASE OF APPELLANT AND ACCORDINGLY, NO ADDITIONS ARE CALLED FOR. HENCE, GROUND NOS. 2 & 3 ARE ALLOWED. 5. THUS, IT IS CLEAR THAT WHEN ASSESSEE HAS NOT EAR NED ANY DIVIDEND INCOME IN THE YEAR UNDER CONSIDERATION, TH EN THE ISSUE OF DISALLOWANCE U/S.14A IS COVERED BY THE BIN DING PRECEDENTS. NO CONTRARY DECISION HAS BEEN BROUGHT T O OUR NOTICE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR IL LEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE. GR OUNDS NO.1 TO 4 OF THE REVENUES APPEAL STANDS DISMISSED. 6. GROUND NO.5 IS REGARDING THE ADDITION OF RS.1,99 ,920/- MADE BY THE ASSESSING OFFICER BY TREATING CERTAIN E XPENSES AS CAPITAL IN NATURE. 7. LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF THE EXPENDITURE INCURRED BY TH E ASSESSEE WHICH WERE CLAIMED BY THE ASSESSEE UNDER THE HEAD REPAIR AND MAINTENANCE. HOWEVER BY THE NATURE OF THESE EX PENSES, IT FALLS IN THE CAPITAL FIELD AND NOT IN THE REVENU E FIELD. LD. DR HAS POINTED OUT THAT SOME OF THE EXPENSES ARE NOT E VEN IN THE CATEGORY OF REPAIR AND MAINTENANCE BUT THESE ARE THE ACCESSORIES, PURCHASED BY THE ASSESSEE, THEREFORE, THESE EXPENSES CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THE ASSESSING OFFICER HAS RIGHTLY ALLOWED DEPRECIATION ON THESE I.T.A. NO.4019/DEL/2018 5 EXPENSES AFTER TREATING THE SAME AS CAPITAL IN NATU RE. SHE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS SU BMITTED THAT AN IDENTICAL NATURE OF EXPENDITURE WERE DISALL OWED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2010-11 T O 2012- 13 BUT THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THOSE ASSESSMENT YEARS. HE HAS ALSO POINTED OUT THAT ALL THE EXPENDITURE IS EITHER THE REPAIR AND MAINTENANCE OR THE CONSUMABLE ITEMS, AND THEREFORE, THE SAME ARE REVENUE IN NATURE AND ALLOWABLE IN FULL. T HE PRINTING CARTRIDGE ETC. OF THE COMPUTER AND PRINTER ARE CONS UMABLE ITEMS, AND THEREFORE, THE SAME CANNOT BE TREATED AS CAPITAL IN NATURE. SOME OF THE EXPENDITURE IS IN RESPECT OF RE PLACEMENT OF THE COMPUTER COMPONENTS, AND THEREFORE, THE SAME CANNOT BE TREATED AS CAPITAL IN NATURE BUT IT FALLS WITHIN THE AMBIT OF REPAIR AND MAINTENANCE. HE HAS SUPPORTED THE IMPUGN ED ORDER OF THE LD. CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS MATERIAL ON RECORD. FROM THE DETAILS OF THE EXPENDI TURE AS REPRODUCED BY THE ASSESSING OFFICER, WE NOTED THAT THE MAJORITY OF THE EXPENDITURE IS INCURRED EITHER IN CO NSUMABLE ITEMS OR THE FUNCTIONING OF THE COMPUTER AND PRINTE RS OR SOME REPAIR/REPLACEMENT OF THE COMPONENTS OF THE COMPUTE RS, THEREFORE, TO THAT EXTENT, THE EXPENDITURE CANNOT B E TREATED AS CAPITAL IN NATURE BUT THE SAME WOULD FALL IN THE RE VENUE FIELD. ONLY IF AN EXPENDITURE IS INCURRED FOR PURCHASE OF NEW COMPUTER OR PRINTER, THE SAME WILL FALL IN THE FIEL D OF CAPITAL I.T.A. NO.4019/DEL/2018 6 EXPENDITURE. THE LD. CIT(A) HAS DECIDED THIS ISSUE IN PARAGRAPH 4.4.3 OF APPELLATE ORDER AS UNDER: 4.4.3 IN THE PRESENT CASE, DURING THE INSTANT ASSESSMENT YEAR, THE APPELLANT HAS CLAIMED REPAIR A ND MAINTENANCE EXPENSES OF RS.4,36,71,352/-. THE APPEL LANT HAS STATED THAT THE APPEAL OF APPELLANT WAS ALLOWED BY LD. CITS(A) IN RESPECT OF SAME ISSUE OF DISALLOWANCE I N APPELLANTS OWN CASE FOR A.Y. 2010-11, 2011-12, 201 2-13 AND 2013-14. THEREFORE, MAINTAINING JUDICIAL DISCIP LINE AND RESPECTFULLY FOLLOWING THE DECISIONS OF LD. CIT(A), THE APPEAL ON THIS GROUND IS ALLOWED. 10. THUS, IT IS CLEAR THAT THE LD. CIT(A) HAS ALLOW ED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE EARLIER ORDER OF T HE LD. CIT(A) FOR THE ASSESSMENT YEARS 2010-11 TO 2013-14. THE RE VENUE HAS NOT BROUGHT ANY MATERIAL OR FACT ON RECORD TO S HOW THAT THE EARLIER YEARS OF THE LD. CIT(A) EITHER HAVE BEE N REVERSED OR SET ASIDE BY THIS TRIBUNAL OR ANY HIGHER COURT. ACC ORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). HENCE, THE SAME IS UPHELD. 11. GROUND NO.6 IS REGARDING DISALLOWANCE MADE BY T HE ASSESSING OFFICER U/S.40A(IA) OF THE INCOME TAX FOR WANT OF TDS. THE ASSESSING OFFICER HAS NOTED THAT THE ASSES SEE HAS INCURRED EXPENDITURE ON JOB WORK CHARGES TO THE TUN E OF RS.12,21,68,693/- OUT OF WHICH, PAYMENT OF RS.80,85 0/- WAS MADE WITHOUT DEDUCTING TAX AT SOURCE. ACCORDINGLY, THE ASSESSING OFFICER HAS HELD THAT WHEN JOB CHARGES ARE LIABLE FOR I.T.A. NO.4019/DEL/2018 7 TDS U/S.194C OF THE ACT AND ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE, THEN THE SAID CLAIM OF THE ASSES SEE IS NOT ALLOWABLE AS PER PROVISION OF SECTION 40A(IA). THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND CONTENDED THAT THE AMOUNT OF RS.8085 0/- WAS NOT PAID TOWARDS JOB CHARGES BUT THE SAME IS PAID TO WARDS THE PURCHASE OF THE GARMENTS FROM MASQUE. THE LD. C IT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND CONSEQU ENTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER BY HOLDING THAT THE PAYMENT WAS MADE BY THE ASSESSEE F OR PURCHASE OF GARMENTS AND HENCE NO TDS IS APPLICABLE ON IT. 12. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE LD . CIT(A) HAS ACCEPTED THE PLEA OF THE ASSESSEE WITHOUT VERIF YING THE FACT THAT A PARTICULAR EXPENDITURE WAS NOT INCURRED FOR JOB CHARGES BUT FOR PURCHASE OF GARMENTS. THE ASSESSING OFFICER HAS CLEARLY STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS MADE TOTAL PAYMENT OF RS.12,21,68,693/- AND IT IS THE CASE OF THE ASSESSEE WHO HAS CLAIMED THIS EXPENDITU RE UNDER THE HEAD JOB WORK CHARGES THEREFORE, THE ASSESSIN G OFFICER WERE JUSTIFIED IN DISALLOWING THE PAYMENT MADE BY T HE ASSESSEE WITHOUT DEDUCTING THE TDS. SHE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 13. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS S UBMITTED THAT IN RESPONSE TO THE QUERY OF THE ASSESSING OFFI CER, THE ASSESSEE PRODUCED THE DETAILS RELATING TO THE JOB C HARGES ALONG WITH REPLY DATED 09.09.2016 AND EXPLAINED THA T OUT OF THIS, TOTAL AMOUNT OF RS.12,21,68,693/-, THE PAYMEN T OF I.T.A. NO.4019/DEL/2018 8 RS.80850/- WAS MADE TO MASQUE FOR PURCHASE OF GARME NTS. THEREFORE, THE SAID PAYMENT IS NOT LIABLE FOR DEDUC TION OF TAX AT SOURCE. HE HAS ALSO SHOWN THE INVOICE ISSUED BY THE MASQUE FOR SUPPLY OF GARMENTS. HE HAS SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. IT APPEARS THAT THE EN TIRE EXPENDITURE HAS BEEN SHOWN BY THE ASSESSEE UNDER TH E HEAD JOB WORK CHARGES AND THEREFORE, THE ASSESSING OFFI CER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF TDS IN RESPE CT OF JOB CHARGES WHICH WERE FURNISHED BY THE ASSESSEE. THE A SSESSING OFFICER NOTED THAT NO TDS HAS BEEN DEDUCTED ON THE PAYMENT OF RS.80,850/- TO MASQUE. THE ASSESSING OFFICER ACC ORDINGLY DISALLOWED THE SAID AMOUNT U/S.40A(IA) OF THE ACT. THE ASSESSING OFFICER TREATED THE SAID PAYMENT AS PART OF THE JOB CHARGES. HOWEVER, THE ASSESSEE HAS CONTENDED BEFORE THE LD. CIT(A) THAT THE SAID PAYMENT IS NOT TOWARDS THE JOB CHARGES BUT IT IS FOR PURCHASE OF GARMENTS. THE LD. CIT(A) ACCEPTED THIS SUBMISSION OF THE ASSESSEE AND DELETED THE ADD ITION. SINCE, THE FACT WHETHER THE PAYMENT IS MADE FOR PUR CHASE OF GARMENTS OR NOT, IS NEITHER VERIFIED BY THE ASSESSI NG OFFICER NOR BY THE LD. CIT(A) AND PARTICULARLY WHEN THE ASS ESSEE HAS SHOWN THE ENTIRE PAYMENT UNDER THE HEAD JOB WORK C HARGES THEN EVEN IF THE ASSESSEE HAS PRODUCED ANY INVOICE REGARDING THE PAYMENT OF RS.80,850/- WHICH REFLECTS THE PURCH ASE OF GARMENTS, THE SAME WAS NOT SUBJECTED TO VERIFICATIO N. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE I.T.A. NO.4019/DEL/2018 9 DIRECT THE ASSESSING OFFICER TO VERIFY THE FACT OF PURCHASE OF THE GARMENTS AS SHOWN IN THE INVOICE ISSUED BY MASQ UE AND THEN ALLOW THE CLAIM. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST, 2021. SD/- SD/- [R.K. PANDA] [VIJAY PAL RAO] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH AUGUST, 2021 PRABHAT: