DCIT CC 6(2), MUMBAI V. DIMPLE DRUMS & BARRELS P.LTD, MUMBAI

ITA 4047/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9820 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: BIHARI LAL
• Keywords: Depreciation; Question of law
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 4047 / MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CC 8(2) ERSTWHILE DCIT CC 35 R.NO.1903, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POIN T MUMBAI 400 021 VS. M/S. DIMPLE DRUMS & BARRELS PVT. LTD., 516, MAKERS CHAMBERS V, 5 TH FLOOR, 221 JAMNALAL BAJAJ MARG NARIMAN POINT, MUMBAI 400 021 PAN/GIR NO. AAACD4604L APPELLANT ) .. RESPONDENT ) ITA NO. 3446/ MUM/20 16 ( ASSES SMENT YEAR : 2011 - 12 ) M/S. DIMPLE DRUMS & BARRELS PVT. LTD., 516, MAKERS CHAMBERS V, 5 TH FLOOR, 221 JAMNALAL BAJAJ MARG NARIMAN POINT, MUMBAI 400 021 VS. ACIT - CC - 35 (NEW CENTRAL CIRCLE 6(2) MUMBAI 400 020 PAN/GIR NO. AAACD4604L APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI V. JUSTIN ASSESSEE BY SHRI BIHARILAL DATE OF HEARING 22 / 12 /201 7 DATE OF PRONOUNCEME NT 19 / 03 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 40, MUMBAI DATED 16/03/2016 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. ITA NO. 4047/MUM/2016 & 3446/MUM/2016 M/S. DIMPLE DRUMS BARRELS PVT. LTD., 2 2. THE FOLLOWING GROUNDS HA VE BEEN TAKEN BY THE REVENUE: - 1. THE HON'BLE TRIBUNAL FAILED TO INTERPRET THE PROVISIONS OF SECTION 145A OF INCOME TAX ACT, 1961 IN ITS RIGHT PERSPECTIVE AND TRUE MEANING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE TRIBUNAL IN LAW, ERRED IN DIRECTING THE A.O. TO DELETE THE ADDITIONS OF RS. 16704085/ - FOR THE AY 2011 - 12 BY INVOKING THE PROVISIONS OF SECTION 145A OF THE INCOME TAX ACT 1961 ON THE GROUND THAT THE AMOUNTS WERE NOT CLAIMED IN THE TRADING ACCOUNT, AS THE SAME WERE INCLUDE D IN THE PURCHASES, AS THIS AMOUNT HAD ALREADY BEEN TAXED AND IS ALREADY INCLUDED IN THE PURCHASES, SO IF THE SAME IS ADDED TO THE CLOSING STOCK, IT WOULD AMOUNT TO DOUBLE TAXATION OF THE AMOUNTS OF RS. 16704085/ - . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SUBSTANTIAL QUESTION OF LAW INVOLVED IS CORRECT IN THE INTERPRETATION OF SECTION 145A OF THE I.T. ACT 1961 AS WELL AS APPLICATION OF THE HON'BLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF MELMOULD CORPORATION VS CIT 202 ITR 789(BOM.) 4. THE APPELLANT STATES AND SUBMITS THAT THE REVENUE HAS NOT ACCEPTED THE DECISION OF THE HON'BLE ITAT FOR A.Y. 2000 - 01, 2003 - 04, 2004 - 05, 2006 - 07, 2007 - 08 & 2008 - 09 AND FILED APPEAL BEFORE HON'BLE HIGH COURT. 3. THE GROUNDS TAKEN BY ASSESSEE ARE AS UNDER: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 52, (CIT - A) MUMBAI, ERRED IN LAW AS WELL AS ON FACTS, IN CONFIRMING THE DISALLOWANCE OF RS. 7,96,592 / - UNDER SECTION 14A, READ WITH RULE 8D. 1.2 THE RE ASONS ASSIGNED BY THE CIT(A, FOR CONFIRMING THE ADDITIONS ARE WRONG AND INCORRECT. 1.3 THE LEARNED CIT(A) FACTUALLY ERRED IN OBSERVING IN PARA 6.2 TO THE EFFECT THAT (I) AR FAILED TO PRODUCE EVIDENCE OF UTILIZATION OF BORROWED FUNDS AND (II) FAILURE TO ESTABLISH AVAILABILITY OF INTEREST FREE FUND. 1.4 THE RELIANCE WAS PLACED BY CIT(A) ON CASE REPORTED 328 ITR 81 IN RESPECT OF GROUND WHICH NOT AGITATED, IN PREFERENCE TO THE CONCLUSION OF THE HON'BLE COURT ON GROUND AGITATED. THE APPELLANT RELIES ON T HE SAME DECISION, WHICH IS IN FAVOUR OF THE APPELLANT. 2. THE APPELLANT NEXT OBJECTS TO CONFIRMING THE DISALLOWANCE OF VEHICLE EXPENSES AND DEPRECIATION, TOTALLING TO RS. 80,595 / - WHICH WAS BASED ON EARLIER YEARS FACTS WHICH WERE SUBSTANTIALLY DIFFERENT. ITA NO. 4047/MUM/2016 & 3446/MUM/2016 M/S. DIMPLE DRUMS BARRELS PVT. LTD., 3 2 .2 THE CIT(A) FAILED TO APPRECIATE THAT THERE CANNOT BE AN ELEMENT OF PERSONAL EXPENSES IN CASE OF A COMPANY, PARTICULARLY BECAUSE TO PERQUISITE VALUE OF CAR BY DIRECTOR IS INCLUDED IN INCOME OF DIRECTOR. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND AT THE TIME OF HEARING OR BEFORE THAT. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF DRUMS AND BARRELS. DURING THE COURSE OF ASSESSMENT, AO INVOKED PROVISIONS OF SECTION 145A AND MADE A TRADING ADDITION OF RS.1,67,04,085/ - . 6. BY THE IMPUGNED ORDER, CIT(A) DELETED THE SAME AFTER RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2003 - 04 TO 2009 - 10 AT PARA 5.3 TO 5.5. PRECISE OB SERVATION OF THE CIT(A) WAS AS UNDER: - 5.3 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE MATERIALS ON RECORD INCLUDING COPIES OF THE ORDERS OF HONBLE ITAT, MUMBAI BENCH IN THE CASE OF THE APPELLANT , WHEREIN THE HONBL E TRIBUNAL HAD DE CIDED THIS ISSUE IN FAVOUR OF THE APPELLANT FOR A.YS.2001 - 01 TO 2005 - 06. THE RELEVANT PART OF THE ORDER OF HONBLE ITAT DATED 0 8 - 12 - 2006 FOR A.Y.2000 - 01{ITA NO.5100/MUM/2003) IS EXTRACTED AS UNDER: -- 'IN THE PRESENT CASE, THE CREDIT AVAILABLE I N THE MODUAT BALANCE REMAINING AS AMOUNT DUE FROM CENTRAL EXCISE AUTHORITIES ACCOUNT WAS RS.93,22,232/ - . THIS AMOUNT WAS NOT CLAIMED IN THE TRADING ACCOUNT, AS THE THE SAME HAD NOT BEEN INCLUDED IN THE PURCHASE. IT SHOWS THAT HIS AMOUNT HAD ALREADY BEEN TA XED AND IF THE SAME WAS ADDED TO THE CLOSING STOCK, IT WOULD AMOUNT TO DOUBLE TAXATION OF THE AMOUNT OF RS. 93,22, 332/ - . AFTER TAKING ALL FACTS INTO CONSIDERATION, WE ARE OF THE VIEW THAT THE ADDITION OF RS. 93 ,22,232 / - MADE BY THE AO TO THE CLOSING STO CK IS UNJUSTIFIED, AS THE SAME RESULTED INTO DOUBLE TAXATION OF THE SAME AMOUNT', 5.4 SIMILAR FINDINGS HAVE BEEN GIVEN BY THE HONBLE ITAT VIDE ORDER DATED 28 - 02 - 2008 FOR A.Y.2002 - 03 (ITA NO.4270/MUM/2005) . THE ITA NO. 4047/MUM/2016 & 3446/MUM/2016 M/S. DIMPLE DRUMS BARRELS PVT. LTD., 4 OPERATIVE PART OF ORDER OF THE ORDER OF THE HONBLE ITAT DATED 28 - 02 - 2008 FOR A.Y.2002 - 03 IS SIMILARLY REPRODUCED AS UNDER: - 'IT IS NOTED FROM THE PERUSAL OF RECORDS THAT ASSESSEE IS MAINTAINING ITS BOOKS OF ACCOUNT ON EXCLUSIVE METHOD OF ACCOUNTING AND, THEREFORE, ADJUSTMENTS ARE TO BE MADE AS P ER THE PROVISIONS OF SECTION 145A OF THE ACT, IN RESPECT OF INVENTORIES (BOTH CLOSING AND OPENING PURCHASE AND SALES AND NOT ONLY TO THE CLOSING STOCK. THEREFORE, IT WOULD BE HAVING NO IMPACT ON THE PROFITS OF THE YEAR UNDER CONSIDERATION BECAUSE THE SAME AMOUNT WOULD BE ADDED TO THE CLOSING STOCK AND TO THE PURCHASES/ OPENING STOCK AS THE CASE MAY BE. ALTHOUGH THIS SHOULD BE DONE IN VIEW OF SPECIFIC PROVISIONS OF SECTION 1 45A, HOWEVER, TO AVOID THE MULTIPLICITY OF PROCEEDINGS HAVING NO IMPACT ON THE ULTIM ATE PROFIT SHOWN BY THE ASSESSEE, WE DISMISS THIS GROUND OF THE REVENUE. 5.5 IT IS OBSERVED THAT THE A.O HAS MADE THE IMPUGNED ADDITION ONLY WITH A VIEW TO KEEP THE ISSUE ALIVE AS THE DEPARTMENT HAS FILED APPEALS U/S.260A IN EARLIER YEARS BEFORE THE HONB LE BOMBAY HIGH COURT WHICH ARE PENDING ADJUDICATION, DESPITE THE FACT THAT BOTH THE FIRST APPELLATE AUTHORITY AS ALSO THE HONBLE ITAT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOR DIFFERENT YEARS AS DISCUSSED ABOVE .THEREFORE, RESPECTFULLY FOLLOWIN G THE ORDER OF HONBLE ITAT DATED 08 - 12 - 2006 FOR A.Y.2000 - 01(ITA NO.5100/MUM/2003) AND ORDER DATED 28 - 02 - 2008 FOR A.Y.2002 - 03 (ITA NO.4270/MUM/2005), IT IS IS HELD THAT THE ADDITION OF RS.1,67,04,085/ - MADE BY THE AO ON ACCOUNT OF UNUTILIZED MODVAT/CENVAT CREDIT IS NOT SUSTAINABLE . THEREFORE, THE SAME IS DIRECTED TO BE DELETED. THESE GROUNDS ARE DECIDED IN FAVOUR OF THE ASSESSEE . 7. IT IS CLEAR FROM THE ORDER OF CIT(A) THAT HE HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y .2003 - 04 TO 2009 - 10. THE DEPARTMENT HAS TAKEN THIS GROUND ON THE PLEA THAT DEPARTMENT HAS FILED AN APPEAL BEFORE THE HIGH COURT AGAINST THE ORDER OF CIT(A) U/S.260A OF THE IT ACT. 8. WE HAD ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL AND FOUND THAT THE ISS UE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN IT WAS OBSERVED THAT NO ADDITION CAN BE MADE ON ITA NO. 4047/MUM/2016 & 3446/MUM/2016 M/S. DIMPLE DRUMS BARRELS PVT. LTD., 5 ACCOUNT OF UNUTILIZED CENVAT CREDIT. THIS IS WITH REGARD TO THE SECTION AMENDMENT ( 2A ) W.E.F. 01/04/199 7 . 9. RESPECTFULLY FO LLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). IN THE APPEAL FILED BY ASSESSEE, ASSESSEE IS AGGRIEVED FOR CONFIRMING THE ADDITION OF RS.7,96,592/ - U/S.14A R.W.R. 8D OF THE IT ACT. 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT W HILE COMPLETING THE ASSESSMENT , THE AO OBSERVED THAT ASSESSEE HAD EARNED EXEMPTED INCOME TO THE TUNE OF RS.1,02,27,669/ - DURING THE YEAR, COMPRISING OF THE DIVIDEND INCOME OF RS. 64,693, INCOME FROM MU TUAL FUNDS OF RS. 46,40,339/ - (CLAIMED EXEMPT U/S. 10(35)) AND LONG TERM CAPITAL GAIN CLAIMED AS EXEMPT U/S. 10(38). IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAD ITSELF MADE A DISALLOWANCE OF RS. 1,97,790/ - U/S.14A WHILE FILING RETURN OF INCOME, WHICH COMP RISED OF SALARY OF RS.1,87,790/ - PAID TO ONE EMPLOYEE MR. RAVINDRA H.S.SHINGARE AND RS. 10,000/ - AS FURTHER DISALLOWANCE U/S 14A . THE AO ACCORDINGLY HELD THAT THE PROVISIONS OF SECTION 14A ARE CLEARLY APPL ICABLE TO THE FACTS OF THE CASE . HE THEREFORE WHIL E COMPLETING THE ASSESSMENT, WORKED OUT THE DISALLOWANCE U/S.!4A R.W.S. RULE 8D OF THE IT RULES AT RS. 7,96,592/ - . 11. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 12. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE FOR INVESTMENT. SUCH FUND WAS MUCH MORE THAN THE AMOUNT INVESTED IN INVESTMENT, THEREFORE, DISALLOWANCE OF INTEREST AMOUNTING TO RS. 31,480/ - IS NOT WARRANTED. SO FAR ITA NO. 4047/MUM/2016 & 3446/MUM/2016 M/S. DIMPLE DRUMS BARRELS PVT. LTD., 6 AS DISALLOWANCE COMPUTED BY THE AO UNDER RULE 8D IS CONCERNED, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR UPHOLDING DISALLOWANCE OF RS.7,65,112/ - WHICH HAS BEEN WORKED OUT AS PER RULE 8D. 13. THE ASSESSEE IS ALSO AGGRIEVED FOR CONFIRMING THE DISALLOWANCE ON VEHICLE EXPENSES AND DEPRECIATION AMOUNTING TO RS.80,595/ - . SINCE ASSESSEE IS A CORPORATE ENTITY, IN VIEW OF THE DECISION OF THE GUJARAT HIGH COURT IN CASE OF SAYAJI IRON AND ENGINEERING WORKS, WE DO NOT FIND ANY MERIT FOR THE DISALLOWANCE MADE ON ACCOUNT OF VEHICLE EXPENSES FOR PERSONAL USE BY THE DIRECTORS. ACCORDINGLY, ADDITION OF RS.80,595/ - IS DELETED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 19 / 03 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 19 / 03 /201 8 K ARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3 . THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//